Market Risk Report as of April 13, 2020

From Chief Investment Officer Tom Veale,
As the trading days pass we are seeing far most selectivity by active traders and also long term investors. The number of both new 52 Week Highs and Lows has shriveled. This suggests a transition from the undifferentiated selling we had back in March to something of longer term thinking. The SignalPoint Market Risk Indicator (black line on the histogram) dropped another point this week to an indicated 9. This is the lowest indication in more than a decade and shows extremely low downside risk compared to investment potential.

The MRI Oscillator is minus 5 showing risk continues to decline as the markets sort themselves out. Two of the MRI’s components were unchanged this week while one each rose and fell slightly. Three remain in their own bullish territories while one is neutral.

With last week’s recovery rally we saw a number of our strategy portfolio’s ETFs rise to the point they are no longer at Buy target prices. In fact, some are now within 10% of their first Sell target prices. Looking at Year over Year data the major stock indexes are now just about even from 12 months ago. Year To Date data improved nicely last week cutting losses by nearly half.

Some of the predictions of what the health crisis has done and is doing to the world economy are gristly. However, it seems too early to know exactly where things will be 1-3 quarters from now. Analysts have a hard time predicting such things even in the best of times.”

The Market Risk Indicator is an assessment tool that serves as a guide through all markets as to the prudent use of a liquid cash cushion. It helps determine an approximation of the amount of cash reserve relative to a diversified equity portfolio. (this is depicted by the graph above)
At times of high risk in the market, the MRI will suggest a higher level of cash reserve. At times of low market risk, the MRI will suggest a lower level of cash reserve. This investment process helps to measure and manage market risk.
Because of this, the fear associated with the uncertainty of the market can be replaced by the security of a sound investment strategy.




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