From Chief Investment Officer Tom Veale,
Two components of SignalPoint’s Market Risk Indicator (MRI) are cautionary this week. Both the Relative Valuation and Divergence Indexes are showing signs of market stress.
These components are indicating a need to consolidate the gains seen so far in 2023. Our Speculation Index sits above its median value but is still short of being cautious and the total number of stock issues being traded weekly is still contracting slightly (proactive).
Our Portfolio Strategies have not, as of yet, been very active in either accumulating or distributing much inventory. It usually takes larger movements in the stock indexes for those activities to increase. Competition from interest rates on the 10 Year down to the 13 Week Treasuries is taxing the stock market with its yields. Yield plus the potential for price appreciation for the average stock in the Value Line 1700 can still challenge those treasury bonds, however.
This week the MRI comes in at 33 and crosses the cautionary threshold for market risk. The MRI Oscillator dropped to +2, down 2, showing that risk pressure is moderating with the market’s pause. Two components show caution, one is neutral and one is modestly proactive.