Market Risk Report as of February 7, 2022

From Chief Investment Officer Tom Veale,

“It’s nice to see the Price/Earnings ratio contracting from recent high levels. Unfortunately it’s taken a bit of a market dip for this to occur. Is it the anticipated rise in the Fed interest rates that is causing the dip or is it the rapid increase in annualized inflation? Our Relative Valuation Index doesn’t care as it’s responsive in either case. We are seeing the index dropping in recent weeks so P/Es are dropping faster than Interest Rates/Inflation are rising.

The overall Market Risk Indicator (MRI) continued to fall this week. Downward risk pressure is improving the outlook for the markets going forward.

Still above its median risk value the MRI’s improved outlook is welcome. What will it take to drive the MRI back into the Green territory? Covid 19 gave us a quick and powerful drop in the MRI which proved to be an excellent bullish call.
Compared to a month ago, not as many of our ETF sleeves in the SignalPoint Strategies are in their 90th percentile of target sell trade prices. While most haven’t dropped enough to trigger our buy price targets, they’re now further from generating any sell trades as well. Even so, being locked in the ‘hold zone’ isn’t all that bad. We remain vigilant watching for accumulation signals and profit opportunities.
Best regards,
Tom Veale
The MRI comes in at 36 this week, down another point. The MRI Oscillator is now at -3 indicating continued, but lessening downward risk pressure. Our Speculation Index remains in bullish territory indicating low speculation in traditional and established companies. However, our IPO/New Issues Index remains well above normal levels. That’s a “different” type of speculation that is difficult to appreciate. With the number of traded issues now approaching 10,000 per week for the combination of the NYSE and NASDAQ Composite it’s grown around 3000 issues in the last two+ years. How many of these new issues are producing profitable results at this point?”

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