From Chief Investment Officer Tom Veale,
Is there reason to “give thanks” this week? If we were invested strictly in the big three indexes, we would say Yes as all three are up nicely from the start of 2023. But, we must remember those three indexes (NYSE, S&P500 and NASDAQ Composite) are all designed as “Cap Weighted” indexes. When we look at broader indexes such as the S&P 500 Equal Weight Index there are gains, but not nearly as generous. In other words, so far in 2023 this has been a top heavy market advance.
Markets will be fighting an uphill battle from a seasonality point of view. Those stocks that have not done well in 2023 will be under distribution pressure as we come to the end of the tax year. This may funnel more cash into those stocks that did do well this year. This pressure can be recognized this week on SignalPoint’s Divergence Index which shows a lot of new 52 week highs and lows occurring simultaneously. This bipolar condition generally isn’t healthy for the markets on the shorter term. However, it is our belief it reflects the tax selling season more than it does a longer term sentiment.
The rest of the Market Risk Indicator’s components are quite passive right now with two showing proactive signals. Only Divergence is currently showing caution. It provided enough upward risk pressure to cause the MRI to rise slightly this week. Overall, the MRI is still below its Median value for the 5th week.
The majority of the U.S. business sectors we follow remain at or above their 26 week moving averages. The exceptions are Energy, Staples and Healthcare. Even the Real Estate sector, which is down for the year-to-date, has managed to recover to its moving average price in recent weeks. (note Energy is ‘up’ for the YTD while the other two are ‘down’)
SignalPoint’s MRI rose a point to 24 this week with two components falling in their risk range, one unchanged and one rising. The MRI Oscillator now shows a Plus 2 indicating mild upward risk pressure.