Still Hedged

The sloppy market last week caused investors to take a second look at their growing bullish sentiment and some of them backed off just a bit.  Technically some damage was done, though, so my model shows no change to stock market exposure this week.  The market continues to look very vulnerable and I continue my fully hedged position.

Earnings:
I am adding in 2015 earnings expectations now that we are in the final half of the year.  This
weighted estimate for 2014-2015 is still in an uptrend.
As long as this continues, my first earnings indicator is positive.
Looking at earnings 52 weeks ahead, estimates are also in  a clear uptrend.
With both indicators positive, earnings exposure remains at 100%, same as last week.
Looking at the gap between last twelve month earnings and future 52 week projections, the
gap remains at negative levels and that gap is increasing.
The large and widening gap dictates a reduction in the earnings factor by 25%.
Total earnings factor exposure and maximum total exposure remains at 75%, same as last week.

Sentiment: 
The equity put/call ratio stalled out last week at bearish, but not extreme, levels.
Exposure remains at 20%, same as last week.
Small option buyers also continue to mostly keep buying calls.
Exposure remains at 5%, same as last week.
NAAIM managers got just a bit concerned last week and increased their cash position.
Exposure increases to 5%, up from -10% last week.
Average sentiment exposure is 10% this week, up from 0% last week.

Valuation:
My long term valuation indicator remains negative as expected stock returns over the next 10 years are still below the yield on the ten year treasury and are now back below 2%.  
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 0%, same as last week. 
Comparison of stock earnings yield to ten year treasury yield remained the same last week.
Exposure stays at 50%, same as last week.
Total valuation exposure is 17%, same as last week.

To get a combined exposure for these three factors, I multiply them together and then take the cube root.
This week, that number is 23%, up from 0% last week.

Technicals:
My comparison of yields on treasury bonds compared to lower quality corporates remained in a  
decline last week.
I subtract 10% to account for this factor. 
New highs - new lows on the Nasdaq remained positive last week. 
I add 20% to account for this factor.
My trend indicator for new highs - new lows on the Nasdaq slipped into negative territory last week.
I subtract 25% to account for this factor.
Total technical adjustments this week are -15%, down from +10% last week.

After adjustments, total exposure for the week is 8% or, after rounding, 0%.
This level of exposure does not exceed the current earnings cap and is the same as last week.