Our longer-term risk indicator has been in the Risk Off zone since the beginning of the year. Successive rally attempts have taken it closer and closer to a Risk On signal, but so far it has been unable to break through.
More Context: This indicator, which is calculated based on where various intermarket & intramarket asset ratios are relative to their 52-week trading range, was the sole criteria on our Bull Market Re-Birth Checklist that did not turn positive earlier this summer and it continues to offer a cautious message. The persistence of more new lows than new highs adds weight to that view. After the latest rally off of year-to-date index lows, there is still little evidence that a sustained turn higher is in the works. Fear has been relieved but strength is struggling to emerge. Our tactical models suggest that expecting price bounces to persist is defying history. There are pockets of opportunity, but this remains an environment for selective equity exposure not broad buying and longer-term trends are more favorable to bonds than they are to stocks.
We take a Deeper Look at the current breadth data, new leadership, and the message from the market as we move toward the final month of the year.
