From Chief Investment Officer Tom Veale,
The trend toward increasing market risk continued thru the end of last week. SignalPoint’s Market Risk Indicator (MRI) rose enough to move it up a point as the markets stalled. While still below our Caution threshold it did move in that direction. This could be just investor fatigue and the need to have some consolidation after the nice gains seen so far this summer.
Looking a bit deeper into the MRI’s components we see three of them rising this week. Our Speculation Index rose but is also shy of its “caution” threshold. We saw investor sentiment become a bit more confused in the rising Divergence Index. A mix of buy and sell targets have been reached in our various Strategies and this, too, shows there is some divergence in investor thinking. There was even a small rise in our IPO/New Issues Index but it still remains in its own proactive range. That leaves our Relative Valuation Index which dropped some this week but remains in its cautious range. Good earnings reports helped to bring down the average Price/Earnings we see in Value Line.
The energy sector we note has remained rather sensitive to international politics. The price of fuel at the pump has risen faster than the barrel price of oil. Unrest in the Ukraine and Russian conflict as well as the usual summer consumption strain with travel may keep prices elevated for a while.
The MRI comes in at 32 this week, up a point from the previous five weeks. The MRI Oscillator shows upward movement at +4, indicating mild rising push on market risk. Currently one component is cautious, two are neutral and one is proactive.