Although no longer short, my model is still flashing caution signs and things could turn very negative again depending on how earnings expectations move from here. My new earnings indicator, which excludes commodities, slipped from positive to neutral last week. No other indicators are anywhere near positive and technical factors also slipped last week. Being out or being hedged seems the most prudent course of action for now.
This year's earnings estimate trend (excluding commodity companies)- Neutral
Earnings estimates 52 weeks out - Negative
Gap between future 52 week estimate and latest 12 month results - Neutral
Total earnings exposure and maximum total exposure under these conditions 25%
Equity put/call ratio +50%
Small investor put/call ratio +20%
NAAIM Manager cash position +5%
Average sentiment exposure this week +25%
Long term valuation 0%
Stock prices represented by net current assets 0%
Stock earnings yeild compared to ten year treasury yield +50%
Average valuation exposure this week +17%
Total exposure from above three factors +22%.
Comparison of Treasury Bond yields compared to lower quality corporate bond yields -10%
New highs minus new lows on the NASDAQ +20%
Trend indicator for new highs minus new lows -25%
Total technical adjustments -15%
Total stock exposure for the week +7%
Rounded to the nearest 25th percentile 0%.
Richard Moore, CFA
With my wife in Hawaii