Market Health Slips

This past week as the market drifted our health indicators have been slipping. The majority are a long way away from a signal, but our measures of the economy are a whisper away from going negative. This increases the likelihood that we’ll be raising some cash next week and/or adding a small hedge to the portfolios…but as always we’ll wait for a signal before making any changes.

Our measures of risk abated this week with our core risk indicator sitting right on the edge of being over bought. It is painting a negative divergence with the peak it made in June. This is something I’m watching carefully, because this type of action often precedes a 10% decline in the market. Our market risk indicator is showing signs of market participants dancing close to the door. This is at odds with our core risk indicator and adds some instability. It appears that it won’t take a lot of downside in price to create a risk signal. Nevertheless, the current conditions are all positive so we’re still 100% long in all portfolios.