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A Little More Volatility

2/24/2013

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Not much change again last week but at least there was some intraweek price volatility to keep things interesting.  My model is turning a little more positive as some investors got a little spooked last week.  Most of them, though, are still very complacent:


Earnings:
Earnings results reverted to previous readings as last twelve month numbers declined substantially.  The gap between last twelve month results and future twelve month expectations is now almost 27% and it is growing again.  My first earnings indicator is back to 0%, down from 100% last week.
Twelve month forward earnings are still trending higher and improved last week as optimistic analysts increase their estimates.
This indicator is still positive at this point with 100% exposure.
2013 estimates are my third indicator and they too continue positive.
They also call for  100% exposure. 
Total exposure from  the earnings factor is back to 67%, down from 100% last week.

Sentiment: 
Rydex leveraged fund investors got still more bullish last week  and this indicator continues in an extreme bearish position. 
Exposure from this indicator continues at  -10%, same as last week.

Small option buyers swung over to put buying last week, indicating their growing concern. 
Exposure increases to 65%, up from 50% last week.

NAAIM managers continued to be very optimistic  and my indicator remains in extreme negative territory.
Exposure remains at -10% this week, the maximum bearish level.

Total sentiment exposure is 15% this week, up from -10% last week.
 
Valuation:
Percentage of stock prices represented by net current assets remained the same last week so
exposure continues at 20%, same as last week.

Comparison of stock earnings yield to ten year  treasury yield stayed the same last week. 
Exposure remains at 30%, same as last week.
Total valuation exposure is 25%, same as last week.

To combine these three factors, I multiply them together and then take the cube root.  This week, that number is 29%, up from -10% last week.

Technicals:

My comparison of yields on treasury bonds compared to lower quality corporates remained positive last week.
I add 10% to account for this factor.

New highs - new lows on the Nasdaq are still positive.
I add 20% to account for this factor.

Total technical adjustments this week are +30%, same as last week.


After adjustments, total exposure for the week is 59% or, after rounding, 50% compared to 25% last week.

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