This week we added a new indicator to our Equity and Fixed Income Risk Indexes. Because of this the percent value has changed but the chart looks the same. For stocks we actually dropped from being 31.25% bullish to 27.78% bullish.

The new timing indicator that we added to the model is based on the relative strength between stocks and bonds. In future issues of The Macro Trader newsletter we will be sharing our research findings with our subscribers.

Some of the bullish factors are that valuations are decent, breadth has been improving, sentiment is fairly bullish, and rates are low. On the bear side we have horrid economic data, declining earnings, and the biggest one is that the long term trend is still down. As the market tries to figure out what it is doing we are managing our risk with position sizing and stops.

Happy Trading,
The Macro Trader

P.S. If you would like to learn more about our risk indexes for US equities, fixed income, and precious metals as well as have access to our research on US Equities, Fixed Income, Precious Metals, Foreign Equities, and Currencies then request a free trial to The Macro Trader. Simply e-mail us at Editor@TheMacroTrader.com and put trial in the subject line.

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This week we had the first uptick in the equity risk index in a month. The primary reason that it moved up was due to some sentiment indicators such as the Investors Intelligence Bull Bear Ratio hitting levels that historically have provided good buying opportunities.

Of course if you look at the chart you can tell that it is still very low. A low level in the risk index signifies a market that is very unattractive, whereas a very high level is bullish. Right now there is a ton of bad data out there and only a few things that are bullish. While we have not ruled it out we do not feel like this is the second coming. Eventually US Equities will start to look attractive again and we will allocate accordingly. We gauge risk first and then look at return.

Happy Trading,
The Macro Trader

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Our US equity risk index has been at the same level for three weeks now.  Not too much has changed.  We have a few valuation and sentiment indicators that are bullish and everything else is bearish which does not bode well for the market.  As we have stated in our newsletter we are short term positive and long term bearish.

Again the higher the index level the more bullish we get and conversely the lower the level gets the more bearish we get.

We hope that you find the weekly equity risk index useful.  In our newsletter we also provide risk indexes for fixed income and precious metals.  These are but a few of our proprietary models that we use to help guide us in our trading.

Happy Trading,

The Macro Trader

P.S. We are currently running a 1-Month free trial offer.  Simply e-mail editor@themacrotrader.com with trial in the subject line.

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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.

Most of the economic indicators we follow are very bearish, the trend is down, breadth is poor, and money flows are negative.  On the bullish side sentiment is at extreme lows and valuations continue to improve.  We expect a rally here in the next few days but long term are still fairly bearish.

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.

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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.

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 would invest 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.

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Our Equity Risk Meter essentially measures how bullish or bearish we are towards the US Markets.   The higher the reading the less risk there is in the market and the lower it goes the more risk there is.

Right now for instance the meter is reading 12.5%, which is very bearish.  As you can see we have been bearish for some time now and very bearish since mid June, enabling us to avoid almost all of the downturn in the stock market.  When the meter starts to climb we become more and more bullish and look towards the longside.  For now we are essentially on the sidelines sitting in cash.

We will be posting our risk meter for US equities each week.  If you would like to follow it you can either come to the site each week or simply subscribe to our RSS feed.  Using RSS you will be able to either receive our posts as an e-mail or in your RSS reader.

Happy Trading,

The Macro Trader

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