Market Risk Report as of March 6, 2023

From Chief Investment Officer Tom Veale,

The data through last Thursday showed the continuation of short term bearish consensus. Friday’s turn upward conflicted with that. As a result, our Divergence Index rose this week with lots of new 52 week Highs and Lows simultaneously. That, however, was the only MRI component that had a move of substance. As shown, the Market Risk Indicator is back at the threshold of its Cautious territory.

The 26 Week U.S. Treasury Coupon rate remained over 5%/yr for the third week in a row with the 13 Week coming in at 4.888%/Yr. The 10 Year remained at 3.50%/yr. Between interest rates and the Value Line Median Price/Earnings ratio it is hard to see the markets advancing much from these levels without share prices becoming over-valued. Even so, some business sectors look to be better value than others. The SignalPoint Process helps to identify where the values are and to favor accumulation in those areas. Further, it helps give reason to harvest profits in the sectors where prices have risen too far, too quickly. We are continuously watching for these opportunities.

A turning point from the 2022 bearish markets can be seen when looking at cumulative Advance/Decline and cumulative New Highs/New Lows. While not predictive, these two histograms show just how 2022 played out and the recent apparent stabilizing of the new data.

Note how both quit declining in the October-November, 2022 period and started to change direction. It’s early yet in the market’s recovery so we’ll be taking its pulse in such fashion over then coming months. Also note the Covid slump in early 2020 and the turn-around that followed. We don’t expect that sort of turn of events this time but do see opportunities as markets consolidate from the latest two years activities.

Best regards,

Tom Veale

The MRI comes in one point higher this week at 33, the “caution” threshold. The MRI Oscillator shows a +4 indicating some upward risk pressure. As noted above most of that upward pressure is from the divergent activity of investors. For now one component each are cautious and proactive with two being neutral.

Share Article: