4/12 Risk-Off Cleared
The environment has reset
Risk-Off Environment Cleared
Last Tuesday the risk-off criteria effectively reset with two consecutive sessions reading 0/3, Wednesday delivered a significant advance across markets that was sustained through the remainder of the trading week. The risk-off environment we have navigated from late February through early last week has concluded. The bearish thoughts, short trades and all hedges are effectively removed and shelved until such a time where the risk-off alarm is triggered.
If the risk-off alarm and the short trades were considered over the last six weeks it is likely you are entering this shifting environment in a position of outperformance. This affords patience, and removes the need to chase the turn.
Through last week the market has started to pave the path towards an environment that resumes long positioning. Next week and potentially the following are “prove it” weeks that aid in creating fresh risk managed long entries.
Reference: “How I Think About The Risk-Off Alarm”
Risk-Off Alarm Criteria
Triggered when trend, breadth and momentum simultaneously close negative
Signals a risk-off environment
Reduce long exposure, take profit/review closing individual trade ideas, hedge long exposure, consideration for short trades
The environment is defined as risk-off from the confirmed alarm signal to the point where the risk-off criteria record 0/3 for two sessions. Throughout the risk-off period the criteria can oscillate between 1-3