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Risk Rises as Market Health Holds Steady

Over the past week most of our core market health indicators held steady. As a result, there are no changes to our core portfolios.  The most significant changes came from our measures of risk and quality.

Market quality fell and looks like it could go negative again over the next couple of weeks if the market doesn’t move to new highs.

Our measures of risk are showing signs of concern with several components of our market risk indicator going negative.  This isn’t surprising considering all of the sabre rattling going on in Washington so I don’t have big concerns for the market yet.

Our sentiment indicators that quantify tweets and StockTwits messages are pretty tame today even with the S&P 500 Index (SPX) down almost 10 points. Twitter is reading -3 and StockTwits +3 going into the last hour of trading.

Bottom line, I’m seeing strength in our core indicators and overall sentiment which indicates market participants are still long, but some are hedging and reducing exposure over a weekend that could bring negative news.  This puts us in a position that our risk indicator is the most likely thing to change our allocations over the next week…which would probably be from a melt down in negotiations (if you can call them that) in Washington.

Below is a chart of our core market health indicator categories.

Update 9/27/13 at 12:27:  One more note that I failed to mention.  The stocks in the Twitter Top 10 Portfolio are all holding up fairly well during the current decline.  In the past it has been a signal that the draw down won’t be severe. Just one more indication that Washington is causing the current draw down.

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