Sunday, August 8, 2010

More about the “risk on, risk off” monitor

Last week, I noted that shorter duration “risk-on” (bullish) and “risk-off” (bearish) investment phases will likely replace the persistent bull market (1980s through October 1997). While stock picking and asset selection remain critically important skills, it is equally important to understand the current market risk phase.

MY TAKE: As of Friday’s market close, the S&P 500 and FTSE 100 remained in “risk-off” (bearish) mode for medium to long term investors, while maintaining a “risk on” (bullish) status for short term traders. The risk monitor (which incorporates a broad set of market data) was helpful in identifying the most recent “risk off” phase that developed during April, along with several other significant turns in the market. As always, please be aware that market conditions are subject to change.

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