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Strategies & Market Trends : Stock Attack II - A Complete Analysis

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To: Chris who started this subject	3/8/2001 12:04:18 PM
From: bumboo	of 52237

There is some interesting data on a TA site that I subscribe to (Decision Point). There is a chart of what is called the Barnes Market Risk Indicator. It plots the risk to reward ratio of investing in the SP500 (earnings and dividends) relative to long and short term bonds. Now I don't know what mathematical model this Barnes guy uses to determine the relative risk, but according to the chart, the normal range for this indicator is 0 to 100 (where 0 correponds to minimal risk and 100 is asking for trouble). On this scale the SP500 risk index was at around 370 in February. Since then it has come down to around 150 (which is still "high risk"). As a reference, the indicator has stayed between 0 and 100 for the most part between 1973 and 1997, after which it took off parabolically. The only period that it was above 100 during the "sane" years was a few months in 1981-82 (around 120) and right before the Oct 1987 crash (around 170). All this FWIW. EDIT: As far as bottoming out, this indicator went below 0 in the 1973-77 timeframe and dipped below 50 numerous times between 1981 and 1995.

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