Equity Risk Index

Our stock market risk index did not change this week and remains at 25%. In simple terms the lower the reading the more bearish we are and the higher the reading the more bullish we are. As you can see in the chart we have been fairly bearish for most of the year.

Stock market risk gauge

If you have read our previous posts you know our active beta approach to managing some of the model portfolio. The risk index is one of the primary inputs as to how much to invest. Our complete model is a bit different but essentially you X% of your account depending upon how bullish or bearish the model is. Using this risk index you would only have 25% of your money at risk right now. Since it dynamically changes depending upon what it expects out of the market it is not only a useful timing gauge but also helps measure the proper position size and asset allocation.

Hopefully this short explanation helps some of the answers that we have received lately regarding the risk index. If you have more questions feel free to e-mail us.

Happy Trading,

The Macro Trader

P.S. If you want to ensure that you receive every update make sure and subscribe by RSS or E-mail by clicking on the RSS button on the right hand side of the page.

P.S.S. This is usually posted by Monday of each week but due to travel delays it was late this week.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *