At the same time I've updated the iBox to present a dividend yield based Ladder rather than the FT100 price Ladder used previously. The Dividend Yield ladder is more universal as for instance in the US where yields are typically lower (due to taxation) that same Ladder might be adapted by perhaps subtracting 2 from each of the yield levels (shifting the yield ladder downwards). This new Ladder raises the current indicated cash reserves compared to that of the previous method, but does so in a manner that reasonably aligns with the current vWave indicated cash reserve.
The Relative Valuation this week shows that the down-run that started in November 2008 has taken a breather. As a result the 200 day moving average is starting to catch the current price level - which arises out of the moving average effect where older higher values drop out of the set and are replaced with lower values.
Having the current price encounter or cross the 200 day moving average is taken by some to be a potential turning point. In other cases another down-leg run can resume after what technical analayst's call "consolidation". Generally it just means that after a period of relatively low volatility (sideways price movement) another sharp rise or fall is potentially likely (increase in volatility) as lots of trades 'read into' a particular pattern.
Over the short term the change in indicated cash reserve from 20% under the previous method to the 44% as indicated by this new Ladder will prove to either have been a good or bad choice, depending on which way the next price jump occurs. In consideration of vWave also showing rising cash reserves it seems timing that switch to now is a reasonable action to take.
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