Weekly Risk Signals

While the four signals remain unchanged yet again, the internals are starting to shift. The Treasuries signal is much closer to neutral territory today than it has been in recent months. The utilities signal, however, is weakening. The lumber/gold signal is pretty clear and decisive here as lumber prices continue to fall sharply.

The risk signals are still indicating mostly risk-off conditions, but still not hitting the levels that would suggest a bottom is in. The past two weeks still look like a bear market rally that might only be a brief reprieve from a longer-term downtrend. Conditions remain challenging, but I feel like there’s another major leg down that we haven’t experienced yet.

Last week’s monster bear market rally shouldn’t be all that surprising. This still looks like a product of market volatility to me. The overall market fundamentals, however, are what you should be watching. Conditions are continuing to deteriorate here and I remain convinced that the longer-term trend will remain down until we see a major catalyst - Fed pivot, end to the war in Ukraine - to change the narrative.