Over the past week all of our measures of market health except for the economy category got hit even though the market only declined slightly. Our measures of trend were below zero during the week. They have since recovered, but are hanging by a thread. As a result, there are no changes to the portfolio allocations.
Our measures of risk aren’t showing signs of panic or fear. Instead, the overall picture is one where a top is being rounded out or extended choppiness is ahead. Over the past 15 years when the indicators have looked similar the market fell or chopped around (going slightly lower for more than a month) 65% of the time. It resumed its uptrend within a few weeks 35% of time. As a result, we’re still moderately hedged and will need further deterioration in the indicators to raise more cash or increase our hedges.
Below is a chart with readings for our market health categories.