Weekly Risk Report 12/15/2008
While the rest of the market has been treading water since apparently bottoming out a couple of weeks ago, the 20 Year Treasury fund has been working its way to new highs. This is symptomatic of investors' "flight to safety" during the panic.
The i-Wave has three components rising slightly this week. The slightly higher risk rankings also raise the IW slightly above its all time low seen recently.
The rate at which risk is falling has slowed and should go back to zero soon. The market has been relatively steady now since the week of October 13th (Yes, there's been plenty of inter and intraday volatility, but the weekly closes have been roughly +or- 5% or so.) The number of 52 week "new highs" bottomed a few weeks back and is now starting to show signs of recovery. New lows over the last 52 weeks have also stabilized. Speculation remains very low, but slightly higher with the Smaller Cap stocks.
Relative Valuation remains very low with short term interest rates a non-issue and broad market P/E values lower than we've seen in a very long time. Even with recession and earnings contraction there's a lot of room before Relative Valuation would return to a point of concern.
It would appear the worst of the market storms have passed. There will still be some shock when the end-of-year statements are mailed to investors, but it won't be new news to any of them. Tax selling is coming to an end soon, too. All in all it would appear a foundation is solidifying across all the U.S. exchanges.
We will continue to monitor the various statistics of our i-Wave for signs of market recovery. Many times there will be "too much, too fast" when recoveries start and this, too, shows up nicely in our risk assessment model.
