Why subscribe?

The Risk Index is a number that sums up 92 indicators of market health, from the BTP spread to Spanish car sales to equity put/call ratios. It seeks to identify points, within a 6-month timescale, of excess risk of 20%+ selloffs in the S&P. It also seeks to identify potential bottoms within a 2-month timescale.

A reading over 85 indicates greater risk of a sell off. If the indicator hits 95, a correction of around 20% (or larger) is highly likely. I.e. at any point in the last 25 years when this was the case, a significant correction ensued within the next 6 months (parts of the index uses data further back but accurate data for many indicators only began in the late 90’s).

A reading under 30 indicates a market bottom may be forming within the next few months.

Therefore, rather than a traditional index like the Vix that shows its greatest ‘fear’ when the market bottoms, this Risk Index should show ‘fear’ when traders and investors should actually be fearful - near market tops - and ‘greed’ when we should be greedy; near market bottoms.

Every week, alongside the read, I post a few key indicators that lend most colour to the weekly outlook with some explanations.

There is also a brief FX summary and relative strength summary of equity indices, sectors and factors.

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