All Clear?

It is certainly possible that the market correction is over and higher prices are ahead.  However, my model is not ready to move to a bullish position.  Technicals are still negative and earnings estimates could be turning lower.  Further market strength will turn my sentiment indicators negative but, for now, they remain positive.  After a good rally last week, my model is suggesting a lower exposure is the most prudent course of action.

Earnings:
I am adding in 2015 earnings expectations now that we are in the final half of the year. This
weighted estimate for 2014-2015 is still in an uptrend although estimate reductions could change that.
As long as the uptrend continues, my first earnings indicator is positive.
Looking at earnings 52 weeks ahead, estimates are also in an uptrend but looking like they could reverse.
With both indicators positive, earnings exposure remains at 100%, same as last week.
Looking at the gap between last twelve month earnings and future 52 week projections, the gap remains at negative levels but the gap is no longer increasing.
The shrinking gap means that there is no adjustment to be factored in.
Total earnings factor exposure and maximum total exposure remains at 100%, same as last week.

Sentiment:
The equity put/call ratio stayed basically the same last week.
Exposure remains at 80%, same as last week.
Small option buyers have also stayed in the same position.
Exposure remains at 50%, same as last week.
NAAIM managers started putting money back to work but my 2 week moving average didn't change.
Exposure remains at 95%, same as last week.
Average sentiment exposure is 75% this week, same as last week.

Valuation:
My long term valuation indicator remains negative as expected stock returns over the next 10 years are now back below the yield on the ten year treasury bond.
This factor continues to call for 0 equity exposure.
Percentage of stock prices represented by net current assets declined last week.
Exposure decreases to 0%, down from 20% last week.
Comparison of stock earnings yield to ten year treasury yield declined last week.
Exposure declines to 70%, down from 90% last week.
Total valuation exposure is 23%, down from 37% last week.

To get a combined exposure for these three factors, I multiply them together and then take the cube root.
This week, that number is 56%, down from 65% last week.

Technicals:
My comparison of yields on treasury bonds compared to lower quality corporates remained in a
decline last week. In fact, the decline is accelerating.
I subtract 10% to account for this factor.
New highs - new lows on the Nasdaq stayed negative last week.
I subtract 10% to account for this factor.
My trend indicator for new highs - new lows on the Nasdaq is not operative now since the previous indicator is negative.
Total technical adjustments this week are -20%, same as last week.

After adjustments, total exposure for the week is 36% or, after rounding, 25%.
This level of exposure does not exceed the current earnings cap and is down from 50% last week.