Market Risk Report as of June 3, 2019

From Chief Investment Officer Tom Veale,

“During the last few weeks we’ve watched our various Exchange Traded Funds flirt with their 26 Week Moving Averages. Most had been above their M.A. for the early part of the year but had fallen enough to return to or even fall below those levels recently. Our Market Risk Indicator has been suggesting 28% cash be held in reserve for three weeks while the markets churned about. Again this week we have the MRI at 28% but the MRI Oscillator has now dropped to minus 3 indicating risk pressure is lower than for several weeks. Three of the four MRI components fell in their own risk ranges with this last week’s trading. Our Divergence Index remains bearish even as the other components are neutral. Both the Relative Valuation and Speculation indexes have fallen to their lowest levels since back in January.”

“In concert with our Divergence Index we note that the market’s absolute breadth and cumulative breadth had soured in May.”

“So far in June we are seeing a bit of improvement in cumulative breadth. It’s our feeling that the Divergence Index will fall back to neutral along with improvement in market breadth.”

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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