From Chief Investment Officer Tom Veale,
“Some shifting of investment dollars has been seen in recent weeks as the Dow and S&P 500 have shown some strength compared to the NASDAQ Composite. This has helped to level the YTD and Year Over Year performances of these three indexes. Even so, our SignalPoint Market Risk Indicator remains bearish and unchanged this week at 45. The MRI Oscillator comes in at zero indicating no upward or downward pressure on market risk.
While the MRI peaked in March and has remained relatively flat since, the overall bearishness comes from our Relative Valuation and New Issues Indexes. Generous earnings reports to date has helped to contain the bearishness of Relative Valuation. Those reports have not been good enough to bring that component back to neutral, however. The surge in IPOs and other New Issues has started to flatten its trajectory as well but the New Issues Index remains bearish.
Some sector differentiation has also been occurring with specialty sectors like Renewable Energy receding from previous high levels. Looking at our Signal 10 domestic sector ETF portfolio we see all components but one within 90% of their “next sell” target prices. Only the Energy sector remains below that threshold even though it has risen almost 42% in share price since the start of this year.
The difference between the Capitalization Weighted index and the Equal Weight variety has become apparent recently and accounts for some of the variance seen in the three major indexes. Dollars have been shifting toward smaller cap weightings as well as toward stocks that could be classified more as ‘value’ holdings. We are watching these trends and are prepared to take appropriate actions to moderate portfolio risk and position our various strategies for current market conditions.”