![]() Last week was worse than it looked as the average stock got hit worse than the S & P 500. So far, I would classify this as a correction in an ongoing bull market but my technical indicators are on the verge of going negative with any further weakness. 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 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, while the gap is larger than I would like to see, it is still slowly declining. There is no adjustment for the earnings gap so the earnings factor exposure is 100%, the same as last week. Sentiment: Odd lot investors became a bit more cautious last week. Exposure increases to 20%, up from 5% last week. Small option buyers reversed course and became a little more defensive. Exposure increases to 20%, up from 5% last week. NAAIM managers remained very cautious and held high cash levels. Exposure increases to 80% this week, up from 50% last week. The sentiment factor increases to 40% this week, up from 20% last week. Valuation: 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 increased last week as the market declined and interest rates also declined marginally. Exposure increases to 50%, up from 30% last week. Total valuation exposure is 35%, up from 25% last week. To combine these three factors, I multiply them together and then take the cube root. This week, that number is 52%, up from 37% 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 82% or, after rounding, 75%. This level of exposure does not exceed the current earnings cap and remains the same as last week.
0 Comments
Leave a Reply. |
![]()
With my wife on Aruba
December 2019 Categories |