This two year chart shows the excellent performance of my current model over this time period.  Last week was another pretty good week, especially considering that the average stock is underperforming again.  I believe the market is continuing to discount a substantial cut in the corporate tax rate and a hopefully better economic climate.  Earnings estimates and unemployment are both positive.  Valuation is poor but not horrible if the tax cuts are passed.  Sentiment is still mixed but I think more negative than positive.  Going into the last week of the year, I would expect more upside bias and my model continues to recommend a 60% net long position.

I should go on vacation more often.  The market continues to act well and smaller companies are leading the way.  Earnings estimates remain in an increasing trend and the unemployment rate has continued to improve.  Sentiment is mixed.  Valuation is very interesting.  I have assumed that there will be a major reduction in the corporate tax rate next year.  That reduction leads me to assume an improvement in valuation of 10%.  Even with the adjustment, stocks are certainly not cheap but they are not unattractive enough to cause a major reduction in stock exposure.  Until the actual bill is passed or at least available for analysis I am going to continue this adjustment.  When it happens, earnings estimates will be raised and past valuation norms will be appropriate again.  Currently my model calls for a 60% net long position.