Market Risk Report as of November 28, 2022

From Chief Investment Officer Tom Veale,

Stock price recovery has continued to outpace earnings increases so far. This puts upward pressure on Price to Earnings ratios and therefore a rising risk posture for our SignalPoint Relative Valuation Index. Valuations relative to the “risk free rate of return” deteriorated this week with both a rise in Value Line’s 1700 stock index P/E and another bump upward in the 13 Week Treasury Coupon rate. With three of the Market Risk Indicator’s components rising this week the overall MRI’s view ticked upward slightly. This rise moves the MRI to the threshold of its cautionary territory.

Relative Valuation along with the sentiment indicator, Divergence Index, are both showing market stress. Opposed to those two are SignalPoint’s Speculation and New Issues indexes which both sit near their “proactive” ranges and are more optimistic looking out around 6 months. We interpret this as showing there’s a lot of cash sitting on the sidelines in investors’ accounts.
Overall market breadth improved last week with advancing stocks outnumbering decliners for the NYSE, NASDAQ and S&P 500 indexes. We have seen more of the various Exchange Traded Funds we use in our various strategies move upward in their trade ranges and are watching for opportunities to capture some profitable volatility trades. In the mean time we see distributions of dividends continue to flow from many of these same ETFs.
Best regards,
Tom Veale
The MRI comes in at 33 this week, the upper threshold of our neutral zone. That is up a point from last week’s read. The MRI Oscillator continues to show modest upward risk pressure with a +4 reading. Two components are cautionary while two remain near the proactive parts of their ranges. Here’s the latest look at our Speculation Index:

Share Article: