Read the recent article about Caliber and Affinity in Modern Trader magazine.
ALERT: The caliber of this market fell sharply last week and the correlation between returns and affinity continued to be negative. Both of these results suggest this market is becoming more risky. See the two graphs below.
NYSE Update For The Week Of March 20th 2017
The 60-day Caliber has fallen sharply from 913 to 788 which suggests that conditions in this market are deteriorating. The number 788 means that over the last 60 trading days the NYSE behaved as if it was made up of 788 completely independent stocks, after individual stock trends were removed. The current Caliber is at the 96th percentile of Calibers over the last 25 years. Higher Calibers sometimes coincided with better market conditions in the past but this might not be the case in the future.
The correlation between a stock's return and it's Affinity rose slightly last week but continues to be in negative terroritory so this market is becoming increasingly difficult to navigate. When this correlation is rising, investors could consider stocks that have higher Affinity rankings. When this correlation is falling, investors might consider stocks with lower Affinity rankings. In general, the market appears to oscillate between favoring high or low Affinity stocks and the correlation tells you where the market is in that cycle. The overall market can rise or fall for any value of this correlation but the periods when this correlation is rising might be the most comfortable for investors.