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Market Risk Report - Week Ending August 23rd.

|Includes: SPY

SmartStops Market Risk Report

For the week ending Friday, August 23, 2013

Be Paid For The Risk You Take!

Risk does not remain constant, but instead fluctuates over time. Why expose yourself to periods of elevated risk if you don't have to?

Each day you are long and in the market, you are exposed to risk. Make sure you are being paid for the risk you take. Timely protective action to sidestep periods of elevated risk can maximize your return for each day in the market.

This Weeks Market Risk

After falling in late July and remaining low through much of August, Market Risk is once again on the rise. As of Friday August 23rd, 57% of the S&P 500 components were in an elevated risk state per the SmartStops aggressive risk signals. This is 1.44 times the 100 day ratio average.

S&P 500 Risk Level

Source: SmartStops Market Risk Barometer

The S&P 500 Volatility Index (VIX) has also risen off the lows of early August and is now hovering between 14 and 15 and searching for direction.

VIX Chart

As for sectors, Basic Materials which saw a sharp rise in risk in July has seen risk levels recede over the last 30 days while all other sectors have seen their risk levels on the rise. Utilities in particular have shown a large rise in risk. As of Friday, 92% of the Utility Index components were in the elevated risk state per the SmartStops aggressive risk signals. Utilities, which are primarily viewed as low growth but steady dividend paying income investments are particularly sensitive to interest rates. The recent talk of ending the quantitative easing by the Fed is having a clear impact on the risk of utilities.

Sector - Basic Materials Risk Levels

Sector - Utilities Risk Levels

Source: SmartStops Sector Risk Barometer

Recent Events Impacting Market Risk

Highlighted Stocks & ETFs

Abercrombie & Fitch (NYSE:ANF) and American Apparel (APP)

It was a tough week for the teen apparel retail companies. Both Abercrombie and Fitch and American Apparel disappointed on guidance and their stocks got punished. ANF dropped 17% and APP dropped 18% following their earnings announcements. SmartStops detected abnormal weakness and issued risk alerts for both companies prior to the decline providing an early warning of the trouble ahead.

Abercrombie & Fitch Risk Levels

View full ANF Risk Report

American Apparel Risk Levels

View full APP Risk Report

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.