Weekly Risk Report 3/11/2010
The recent rise in the major securities indexes has helped many portfolios to look better. It has also been creating some upward pressure on our Market Risk Indicator. The moderate rise in market risk has freed up some selling pressure in a variety of our ETF holdings. This has been true of both the larger and smaller cap markets, but there is greater speculation in the smaller cap stocks right now. Fully 32 companies have seen their stocks rise more than 100% since around the first of the year. Are they truly 100% more desirable than 3 months ago?
One of the measures we review is the number of new highs and lows over a 52 week period. Since we’re exactly 52 weeks from the ’09 market lows, it isn’t a surprise that New Highs (1202 stocks) far exceed the number of New Lows this week (just 44 stocks). Such imbalance is only the result of the changes we’ve seen in the last 12 months. We expect to see these two values start to come back to greater equilibrium by the end of the 2nd quarter. Here’s a sampling of some ETFs we follow and where they’ve travelled over the last year:
Note how far many of these have risen in the last 12 months. Also note that many are very close to their current 52 week highs.
We’ve maintained tight controls on our cash build up over the last 6 months. Risk has remained moderate and cash levels have been appropriate for that level of risk. As we see measurable risk start to rise, we will allow cash reserves to keep pace.
