From Chief Investment Officer Tom Veale,
How do you know when the market bottom has been found? It’s as difficult as calling a market top, to be sure. However, Bear markets tend to be severe and quick by comparison to euphoria Bulls. Of note this week is that our Equal Weight ETFs in three of our main strategies are doing pretty well compared to the cap weighted indexes. Here’s a graphic on that subject:
The 13 Week Treasury Coupon Rate crossed above 1.0%/Yr interest for the first time in quite a while. The 10 Year Treasury rate is 2.875, again better than in a long time. Rising rates has the effect of depressing bond fund share prices. That gives us the opportunity to average down in bond fund share price and average up in effective yield. That trend has been evident in our Income strategies for a while as we have been in accumulation mode for bond fund shares.
Even the mighty Apple Inc (APPL) has now declined enough to trigger our Process to accumulate some additional shares in Equity Signal. Some of the specialty companies represented in our Renewable Energy and Water & Beverage strategies have also been triggering accumulation targets. Our International Signal ETF strategy has added to several positions as well. Overall, these purchases could be a different sort of signal that we’re approaching a market bottom. Financial publications are over-loaded with bearish headlines and articles. Another bottoming signal?
Overall, our SignalPoint Strategies are still holding reasonable levels of cash considering the markets’ recent direction. The accumulation targets remain close to current prices so, if needed, we will continue buying.
As mentioned in previous weeks, Energy related stocks have been doing very well in the current economic environment. About half of the “41 Best Performers – Latest 13 Weeks” in Value Line are from this sector alone. In that regard, our SignalPoint Process has been approaching another inventory reduction for shares of our Energy ETF with the strong price rise.
This week the MRI falls yet another two points to 30. The MRI Oscillator shows minus 3 or slight downward risk pressure persisting. Our Relative Valuation Index remains bearish if we use the current Inflation rate in its calculation. If we switch to the short Treasury rate, it’s currently neutral. Overall, the MRI is neutral again this week with two components bullish, one neutral and one slightly bearish.