Holding Steady

The market is sending mixed messages and my model is holding steady at 50% exposure.  The momentum is clearly still to the upside and sentiment measures have not turned negative - yet - but market internals have started to weaken again as the Russell 2000 was flat last week.  Valuation remains a major concern and earnings are continuing to weaken somewhat.  A move either way would not surprise me so I'm taking a wait and see approach.

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 have reversed and are still marginally negative. This indicator is still rated neutral.
With one indicator positive and the other neutral, the earnings indicator remains at 75%, the 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 75%, same as last week.

Sentiment:
The equity put/call ratio declined somewhat last week as call buying continued to pick up.
Exposure declines to 50%, down from 65% last week.
Small option buyers have remained in a neutral position.
Exposure remains at 50%, same as last week.
NAAIM managers continued to put cash to work last week.
Exposure declines to 5% this week, down from 35% last week.
Average sentiment exposure is 35% this week, down from 50% 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 and are now back below 2%.
This factor continues to call for 0 equity exposure.
Percentage of stock prices represented by net current assets remained the same last week.
Exposure remains at 0%, same as last week.
Comparison of stock earnings yield to ten year treasury yield remained the same last week.
Exposure remains at 50%, same as last week.
Total valuation exposure is 17%, same as 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 35%, down from 40% last week.

Technicals:
My comparison of yields on treasury bonds compared to lower quality corporates remained in a
decline last week.
I subtract 10% to account for this factor.
New highs - new lows on the Nasdaq stayed positive last week.
I add 20% to account for this factor.
My trend indicator for new highs - new lows on the Nasdaq is also positive so there is no further adjustment necessary.
Total technical adjustments this week are +10%, same as last week.

After adjustments, total exposure for the week is 45% or, after rounding, 50%.
This level of exposure does not exceed the current earnings cap and is the same as last week.