Monday, February 11, 2013

Last week we thought all the low risk members of the top 10 may be signaling a correction.  Friday gave us the storm we expected but also another higher high to the stock market’s mountain chart.  Today’s top rank is held by a fund that has been leading that climb, the iShares Russell 1000 Fund (IWB), and guess what, its Risk Rating is a low 3.55.

This isn’t one of those laggards that are increasingly showing up in the elite ranks on high Fundamental Scores, although it has a very high 81.5.  It also has a very solid 73.5 Behavioral Score that is well balanced between technicals at 75.7 and sentiment at 71.3.  That sentiment score gets a boost from a 91.8 put/call score that has been bouncing this fund in and out of the top ranks.  Readers may remember us warning not to interpret its 52nd place rank on January 28 as a sell signal because it resulted from a zero put/call score.  Now the fund holding the 1000 largest US companies is celebrating atop its year to date mountain chart and ahead of the S&P 500’s similar circumstance.

Our thoughts on Friday show the limitations of the human mind where bias is inextricable from one's analysis. Fortunately we have a well calibrated quantitative model to avoid that. While we may occasionally mistake its message, the model hasn't had too many mistakes in ranking the best performers. Whether we go higher or lower from here, Quant says you will be happy to go there with IWB and its 9.83 Green Diamond Reward Rating. We'll let you decide for yourself what the low risk message means, good luck this week.

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