Still Bullish On Balance

Not much movement in stock prices last week as recent gains were consolidated.  The outlook is still basically positive but we are getting very close to some extremes in sentiment.

Earnings:
Estimates for 2013/2014 continued a modest improvement and remain in a positive trend.
Looking at earnings 52 weeks ahead, estimates are still in an upward trend but are
decelerating.  The indicator is still positive, however.
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, while the gap is larger than I would like to see, it is declining now.  Earnings over the last year have finally surpassed their previous peak reached over one year ago.
There is no adjustment for the earnings gap so the earnings factor exposure is 100%, the same as last week.
 
Sentiment: 
Odd lot investors have become more optimistic in view of the positive market and have reduced shorting substantially.  They are very close to an extreme position now.
Exposure remains at 5% this week, same as last week.
Small option buyers remain in a neutral position, with call buying and put buying about at normal levels. 
Exposure remains at 50%,  same as last week.
NAAIM managers have become scared about missing the rally and rushed into stocks last week.  
Exposure declines to 5% this week, down from 50% last week.
Average sentiment exposure this week is 20%, down from 35% last week.

Valuation:
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 remained depressed last week in view of the sharp increase in interest rates.
Exposure remains at 20%, same as last week.
Total valuation exposure is 20%, same as last week.

To combine
these three factors, I multiply them together and then take the cube root. 
This week, that number is 34%, down from 41% 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.
Total technical adjustments this week are +30%, same as last week.

After adjustments, total exposure for the week is 64% or, after rounding, 75%.
This level of exposure does not exceed the current earnings cap and is the same as last week.

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