Back from a two week vacation and, during the time I was gone, not much happened. The market has started to slip but we still have a tug of war between the still-in-tact uptrend and the poor sentiment data:
Earnings estimates for the S & P 500 were unavailable at my data provider but I'm very sure that they will still be in an uptrend this week. Exposure remains the same this week at 100% because the weighted average is increasing as 2013 estimates are factored into the mix.
Investors in the Rydex Funds continued to hold extremely bullish positions that are at record levels.
Exposure = -10%, maximum bearish position.
NAAIM investors became a bit less bullish but they are still optimistic.
Exposure = 20%, up from 5% last week.
Small option buyers trimmed back their bullishness just a bit but they are still very bullish. Exposure = 5%, same as last week.
When one of my sentiment indicators is maximum bearish and each of the others is neutral or bearish I assign an overall sentiment exposure of 0%.
Percentage of value represented by net current assets increased last week.
Exposure = 60%, up from 40% last week.
Comparison of bond yields to stock earnings yields were unavailable but I assume they did not change last week.
Exposure = 50%, same as last week.
Total valuation factor exposure = 55%, up from 45% last week.
I combine these three factors by multiplying them together and then taking the cube root.
These factors, therefore, lead to a 0% exposure, same as last week.
The trend in high yield bonds compared to treasuries is still in an uptrend so I add 10%.
NH-NL is still positive but acting poorly. I add 20% when they are positive.
Total technical adjustments are +30% and exposure = 30%, same as last week.
Two week moving average is 30%, up from 25% last week.
Richard Moore, CFA
With my wife in Hawaii