Market Risk Report as of January 18, 2021

From Chief Investment Officer Tom Veale, “A half year of bearish signals from our Market Risk Indicator has yet to be reflected in the major market indexes. The party has moved out on the balcony and nobody seems concerned. Are there detectable cracks in the anchors holding the party suspended at its current elevation? The MRI suggests there are. It comes in at 39 this week, up a point from last week and the highest it has been since late in 2018. The MRI Oscillator is now +5 indicating upward risk pressure is continuing. The MRI’s three bearish components rose in their own risk ranges this week. The one sentiment indicator, Divergence Index, was unchanged and still bullish – the party continues. The stresses showing between our Divergence Index and the three bearish components (Relative Valuation, Speculation and IPO Activity indexes) became a bit more apparent this last week as the major indexes struggled to continue their climb to new heights.”

“Right now it takes a price gain over the latest 13 weeks of over 86% for a company’s stock to make Value Line’s “Best Performers” list. Compare that to what is needed to make the “Worst” list, a drop of just 14%, and we see there seems to be little concern about downside risk. Absolute Breadth of the Nasdaq Composite and NYSE continued to be positive thru last week, also indicating reluctance by investors to recognize market risk. We continue to evaluate our portfolio strategies relative to the perceived market risk, the value of current positions and the insurance policy of holding cash. Capturing profits while maintaining a proper Equity/Cash ratio continues to be a challenging exercise.”