The stock market is meandering around hoping for a positive resolution to earnings expectations but there is no evidence that any improvement is likely.  On the contrary, it seems as though earnings could begin to collapse at any moment and the market would suffer mightily if that occurs.  While earnings expectations continue to decline, the decline so far has been modest and the market has only declined marginally.  The best that can be expected is some stabilization in the outlook but that would not translate into any large move higher.  My other indicators, valuation and sentiment, are both continuing at neutral levels.  I am fully hedged but for those willing to assume more risk, my model remains at 100% net short.

I did have to work through some changes in the way I have been tracking earnings estimates for my modified S & P 500 Index but they were not changes of substantial magnitude.  In fact, the negative character of both my indicators was preserved completely.  When earnings expectations are declining, it is very difficult for the market to advance in a meaningful way so I think upside is very limited here.  My other indicators are both neutral.  Sentiment has deteriorated as the market advanced and valuation is on the verge of going modestly negative again with any further market strength.  The end result is the worst recommended exposure by my model in several years - 100% net short.

I just returned from traveling last week and don't have time to catch up totally right now.  Obviously, I know that both sentiment measures and valuation measures are not as strong as they were a couple of weeks ago.  I have had what looks like a serious problem crop up with regard to earnings estimates for my special universes that don't include commodity companies.  It looks like I was using an incorrect formula and I need to get that corrected as soon  as possible.  For now, for exposure purposes, I am going with a hedged approach of essentially zero net long.  Within a couple of days I should have a complete update of the site.

I am traveling this week but my model deteriorated last week as my second earnings indicator joined the first as being bearish. It could reverse quickly, of course, but it doesn't seem likely. My exposure this week goes from a 30% net short position to a 60% net short position. Be very careful out there.

Investors were feasting last week as the market jumped higher.  As mentioned last week, I was anticipating further strength but the move up was stronger and faster than seemed likely.  Why?  One of my two earnings indicators remains bearish and the other remains neutral as reported earnings continue to slide.  This kind of environment will not support a bull market but bounces can always occur.  The advance is starting to turn my sentiment indicators more neutral so they are becoming less of a factor.  Valuation remains neutral.  It is still an earnings game and I still feel that earnings expectations are too high and will be lowered.  My model still suggests a "hands off"  approach.