A little more weakness and continuing volatility have combined to improve my sentiment indicators while the technical picture still looks OK. An increase in exposure is the result:
Earnings results continue to be flat to down as they are reported. Earnings have been essentially flat now for about 18 months. The gap between last twelve month results and future twelve month expectations is still more than 28% and it continues to grow.
This indicator continues to suggest 0% exposure this week.
Twelve month forward earnings are still trending higher as analysts obviously think things will
improve during the first quarter of 2014.
This indicator is still positive at this point with 100% exposure.
2013 estimates are my third indicator and they are trending lower.
This indicator is negative and calls for 0% exposure.
Total exposure from the earnings factor is 33%, same as last week.
Odd lot investors have moved away from an extreme bearish position as they have increased their levels of shorting. This indicator is now neutral.
Exposure increases to 50% this week, up from 20% last week.
Small option buyers don't show any strong bias one way or the other. They remain at a neutral
Exposure stays at 50%, same as last week.ba
NAAIM managers increased their cash position again last week.
Exposure increases to 50% this week, up from 35% last week.
Average sentiment exposure this week is 50%, up from 35% last week.
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 30%, up from 20% last week.
Total valuation exposure is 25%, up from 20% last week.
To combine these three factors, I multiply them together and then take the cube root.
This week, that number is 35%, up from 28% last week.
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 65% or, after rounding, 75% compared to 50% last
Richard Moore, CFA
With my wife in Hawaii