Market Risk update

The overall picture remains neutral with 3 out of 6 charts bearish with the rest bullish or neutral. Since the last post, both SPY/TLT and the VIX             chart changed short term trend to bearish , making both of those charts bearish on all 3 trend definitions. Risk is starting to come out of the market in some areas, but no panic yet. On the contrary, IWM/SPY ratio remaining bullish short term tells me that investors could be positioning themselves for a reversal coming and trying to capitalize.

As always, a work in progress. Again, I have notations on each chart such that my own interpretation is more clear.
The concept is to look for signs of rotation to safety. As such, we look at rotation out of small cap (risky) stocks into large cap stocks via IWM/SPY; rotation from growth into dividend (SPY/PFM); rotation from stocks into treasuries (SPY/TLT); rotation from stocks into gold             (SPY/GLD). The VIX             chart measures investors purchasing puts for protection/hedging/speculation. The DOW percent chart is measuring stocks being able to maintain their uptrend, with the notion that the weak stocks will start to fall before the overall trend, as defined by large cap stocks follows.
  • I define the short term as renko green boxes, vs red boxes. Again, renko looks at trend without the time component.
  • I define the intermediate trend as prices coming off a new high, or not. For the DOW percent chart, I use the moving average being in bullish , bearish , or neutral territory.
  • I define the long term trend as the slope of linear regression rising, or not.
  • The VIX             chart is inverse for these interpretations.
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