Market Risk Report as of November 14, 2022

From Chief Investment Officer

“Another unusual week passed while market indexes rose, overall. SignalPoint’s Market Risk Indicator (MRI) rose slightly in concert with the markets. A quick review of our Domestic Sector ETF strategy (Signal 10) finds 8 out of the 11 positions are now back above their 26 Week Moving Average share prices. Most of them had been below that level after the mid-August rally.

Of note this week in Value Line’s “Best and Worst Stocks, latest 13 Weeks” is it takes a 31% price rise to make their “Best” list while a decline of almost 43% is needed to fit in their “Worst” column. This shows a relatively low level of current speculation going on. More likely we’re seeing the beginning of tax planning as 2022 losers are being sold to offset this year’s winners. As that cash becomes available, investors are searching for replacement stocks. So far in 2022, the Energy Sector has been the biggest gainer. Using rear view mirror analysis, much of that cash has been flowing into the Energy stocks. Of the 41 stocks on Value Line’s “Best” list for the latest 13 weeks 27 are Energy related. This is a very rare and unsustainable percentage of stocks to be from just one sector.

SignalPoint’s Process takes such things into consideration as prices move around. Recently the energy sector ETF we use in our Strategies has been bumping up on goals to distribute small amounts of shares and capture some gains. Always mindful of potential rewards and risks we seek to buffer those with cash reserves. Through both bull and bear market swings our Process adjusts the equity to cash ratio of the various investments.

Best regards,

Tom Veale

This week the SignalPoint MRI rises a point to 32 and carries an Oscillator value of +4 showing mild upward risk pressure. This occurred even with three of the MRI components falling slightly in their own ranges. The Relative Valuation Index remained unchanged for the week and still in a cautious range. The Divergence Index shows there is still a high level of investor confusion about where the markets will go next. That is also a short term signal for caution. Both the Speculation and New Issues Activity Indexes are near their proactive ranges counterbalancing the other two components.”

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