From Chief Investment Officer Tom Veale,
Last week’s rather dramatic reversal in market index direction surprised many shorter term stock traders. Even as SignalPoint was suggesting the markets were oversold and risk had diminished we didn’t expect the immediate turnaround. Here’s this week’s Market Risk Indicator:
There is some data lag involved in the MRI’s calculation. Much of the MRI’s internals are based in “Weekly” data rather than real time. With that in mind, we see the MRI coming in down a bit more with this week’s report even as the S&P 500 Index reversed direction. At this juncture it is undecided as to whether we’ll see more upside stock price movement or if fundamental and technical pressures will win out. As the year end approaches we’re bound to see forecasts for 2024 of both bullish and bearish tones.
SignalPoint’s own market risk measures are benefitting from lower Price to Earnings data. Some of that is gained from good Q3, 2023 earnings and some from the declines seen in share prices. Our Relative Valuation Index is lower than any time since June of 2020 and giving the feel of reasonable valuations not felt since then. A decidedly bullish signal has been seen in SignalPoint’s Speculation Index as mentioned in last week’s report. We also note that Value Line’s Median Dividend Yield is now 2.5%/yr and up nicely from the start of 2023. While still short of the 13 Week Treasury Coupon Rate (5.488%/yr) it suggests stock prices compared to dividends is below average (2.1%/yr is Value Line’s long term average yield for stocks).
We remain vigilant in watching for profitable opportunities in the various business sectors and bond markets.
The MRI dropped another point this week to 23 and is accompanied by the MRI Oscillator showing minus 3, slight downward risk pressure. Two components are listed as Proactive with two showing Neutral.