Wall Street Model
  • Welcome
  • Model Fundamentals
  • Blog
  • Stock Screen
  • Market Timer
  • Contact Me

Sentiment Is As Bad As It Gets

12/22/2013

0 Comments

 
Picture
   It takes less and less weakness to bring buyers into the market and maybe the blowoff will continue but my model has gotten as negative as it can get with earnings estimates still moving higher.  I know most speculators think they will continue to ride this trend until it shows evidence of a reversal but, when the reversal comes, it may be more violent than they expect.  Because of seasonal factors I may not actually go short before the end of the year.  However, I remain fully hedged and recommend caution.

Earnings:
Estimates for both 2013 and 2014 remain in flat or downward trends but the fact that I am shifting weight from this year to next is allowing my first earnings indicator to remain positive.
Looking at earnings 52 weeks ahead, estimates are still in an upward trend as optimistic analysts
stay very positive.
With both earnings indicators positive, my maximum earnings exposure is 100%.
Looking at the gap between last twelve month earnings and future 52 week projections, the gap remains large but it is slowly shrinking.
There is no adjustment for this gap now since it is decreasing.
Total earnings factor exposure and maximum total exposure is therefore 100%, same as
last week.

Sentiment: 
Odd lot investors remain extremely bullish and have reduced shorting to very low levels.  
Exposure remains at -10%, same as last week.
Small option buyers finally went all in last week and bought calls heavily.
Exposure declines to -10%,  down from 5% last week.
NAAIM managers continue to be virtually fully invested in stocks.  
They remain in an extreme bullish position. 
Exposure remains at -10%, same as last week.
Total sentiment factor exposure this week enters an unusual phase as all three of my sentiment indicators are maximum bearish.  When this occurs, I assign an exposure of -20% to my overall model.

Valuation:
My long term valuation indicator remains negative as expected stock returns over the next 5-10 years are below the level of the ten year treasury bond yield.  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 20%, same as last week.
Comparison of stock earnings yield to ten year treasury yield remained the same last week.
Exposure remains at 30%, same as last week.
Total valuation exposure is 17%, same as last week.

With my sentiment indicators at maximum negative, I assign an overall reading for the above three factors of -20%.  This is down from -10% 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.
My trend indicator for new highs - new lows on the Nasdaq remained just slightly negative last week in spite of the rally.
I subtract 25% to account for this factor.
Total technical adjustments this week are +5%, same as last week.

After adjustments, total exposure for the week is -15% or, after rounding, -25%.
This level of exposure does not exceed the current earnings cap and is down from 0% last week.


 

0 Comments



Leave a Reply.

    Picture
    ​

    With my wife on Aruba
    December 2019

    Categories

    All

    RSS Feed

    Archives

    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012

Powered by Create your own unique website with customizable templates.