![]() It certainly could be a blow-off but my sentiment indicators are not uniformly bearish. My model calls for a continuing exposure to stocks until it becomes more obvious that earnings are turning down: Earnings: Earnings results continue to be flat as they are reported. The gap between last twelve month results and future twelve month expectations is still almost 27% and it continues to grow. This indicator continues to suggest 0% exposure this week. Twelve month forward earnings are still trending higher but declined just marginally again last week. This indicator is still positive at this point with 100% exposure. 2013 estimates are my third indicator and they were decreased just marginally last week. They are still in an uptrend, though. This indicator continues to call for 100% exposure. Total exposure from the earnings factor is 67%, same as last week. Sentiment: Rydex leveraged fund investors maintained their bullish posture last week, but they are not in extreme territory. Exposure from this indicator stays at 5%, same as last week. Small option buyers continued to exhibit some concern but they became a little more bullish. Exposure remains at 65%, same as 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 20% this week, same as 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 declined last week as interest rates jumped up to 2.05%. Exposure decreases to 30%, down from 50% last week. Total valuation exposure is 25%, down from 35% last week. To combine these three factors, I multiply them together and then take the cube root. This week, that number is 32%, down from 36% 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 62% or, after rounding, 50% compared to 75% last week.
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With my wife on Aruba
December 2019 Categories |