Crosscurrents

Increased volatility has improved my indicators a little as some investors get ready for a perceived correction.  We have an improving situation but only if you feel comfortable with the earnings outlook: 
  
Earnings:
Earnings results for the last twelve months have now been essentially flat for 15 months.  People like Larry Kudlow keep saying that the earnings picture is improving but that observation only pertains to expectations - not actual results.  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 last week.  This indicator is still positive at this point with 100% exposure.
2013 estimates are my third indicator and they are being increased as are 2014 estimates.  Given the supposed economic problems caused by the sequester, I don't know where these optimistic analysts are coming from.
This indicator, though, continues to call for 100% exposure. 
Total exposure from  the earnings factor is 67%, same as last week.
  
Sentiment:
Rydex leveraged fund investors backed off their very bullish posture last week.  The indicator is still bearish but no longer extremely so.  
Exposure from this indicator increases to 5%, up from -10% last week.
Small option buyers continued to do a little more put buying last week, indicating their growing concern.
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, up from 15% 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 improved last week. 
Exposure increases to 50%, up from 30% last week.
Total valuation exposure is 35%, up from 25% last week.

To combine these three factors, I multiply them together and then take the cube root.  This week, that number is 36%, up from 29% 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 66% or, after
rounding, 75% compared to 50% last week.

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