Reflecting some worisome economic data, last week's market action reversed the previous week's gains. There are not any serious cracks in the earnings estimate picture but most of my sentiment indicators suggest continuing caution.
Earnings results continue to be flat to down as they are reported. The gap between last twelve month
results and future twelve month expectations is now more than 27% 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 as the year goes along.
This indicator is still positive at this point with 100% exposure.
2013 estimates are my third indicator and they have been pretty flat recently. They are still in an
This indicator continues to call for 100% exposure.
Total exposure from the earnings factor is 67%, same as last week.
Rydex leveraged fund investors remained very bullish last week in spite of the weakness.
Exposure from this indicator remains at -10%, same as last week.
Small option buyers were shaken by the decline last week and moved further to the bearish side of neutral.
Exposure increases to 80% from 65% last week.
NAAIM managers continued to be very optimistic but they have gotten just a bit less so.
Exposure remains at 5% this week, same as last week.
Average sentiment factor exposure this week is 25%, up from 20% 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 remained the same last week.
Exposure remains at 50%, same as last week.
Total valuation exposure is 35%, same as last week.
To combine these three factors, I multiply them together and then take the cube root. This week, that number is 39%, up from 36% 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 declining sharply but 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 69% or, after rounding, 75% compared to 75% last
Richard Moore, CFA
With my wife in Hawaii