Market Risk Report as of October 30, 2023

From Chief Investment Officer Tom Veale,

Similar to the leaves this season, stock prices have been falling at a steady pace. What sort of leaf blower do we need to clear away all the mess so far? How many more leaves are there left to litter our portfolios?

If we take a look at the markets’ internals we see there is reason to be hopeful the decline from the 2023 highs may be coming to its conclusion. Note this is the lowest the SignalPoint Market Risk Indicator (MRI) has been since the summer of 2020. Also note the S&P 500 Index has gained over 35% since June of 2020 (the NASDAQ Comp is up 31.8%). Can we hope the MRI will be correct again?

We now have three of the four MRI components in their own “proactive” ranges. The fourth, Relative Valuation Index, is down quite a bit and in its neutral territory but still slightly above its median. Investors are busy raking and bagging their losses for 2023 which keeps “distribution” pressure on this year’s poorer performers. Yet, so far Q3, 2023 has shown good earnings strength. Will investors take this good news and reinvest their cash or will the fear of future recession and other worries have them hoard their acorns for Winter?

The market decline is now in its 4th month. This may not be the end, but we should start to see some bottoming over the next month or so.

Best regards,

Tom Veale

Again this week we find the MRI down another point to 24 and below its median value. The MRI Oscillator shows minus 4 and indicates continuing downward risk pressure. Our Divergence Index shows investors are rather cautious right now which is bullish looking out around 3 months.

The SignalPoint Speculation Index is also giving a pretty strong bullish signal right now.

It takes a decline in share price over the latest 13 weeks of over 45% to make it onto the Value Line “Worst Performers” list. Compare that to only a 20% rise needed to place one’s stock on their “Best” list and we see shadows of low speculation and negative cash flow by investors. This has been a bullish signal looking out 3 to 6 months.

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