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Author: roguecfa One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 252144  
Subject: Four Factor Model Weekly Update Date: 10/14/2012 5:51 PM
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This model was introduced at message 235565.
Graphs are available at http://theastuteinvestor.com/_wsn/page4.html

The market has started to slip but we still have a tug of war between the still-in-tact uptrend and the poor sentiment data:

Earnings:
Earnings estimates for the S & P 500 were unavailable at my data provider but I'm very sure that they will still be in an uptrend this week. Exposure remains the same this week at 100% because the weighted average is increasing as 2013 estimates are factored into the mix.
Sentiment Factors:
Investors in the Rydex Funds continued to hold extremely bullish positions that are at record levels. Exposure = -10%, maximum bearish position.
NAAIM investors became a bit less bullish but they are still optimistic. Exposure = 20%, up from 5% last week.
Small option buyers trimmed back their bullishness just a bit but they are still very bullish. Exposure = 5%, same as last week.

When one of my sentiment indicators is maximum bearish and each of the others is neutral or bearish I assign an overall sentiment exposure of 0%.
Valuation:
Percentage of value represented by net current assets increased last week. Exposure = 60%, up from 40% last week.
Comparison of bond yields to stock earnings yields were unavailable but I assume they did not change last week. Exposure = 50%, same as last week. Total valuation factor exposure = 55%, up from 45% last week.

I combine these three factors by multiplying them together and then taking the cube root. These factors, therefore, lead to a 0% exposure, same as last week.

Technicals:
The trend in high yield bonds compared to treasuries is still in an uptrend so I add 10%.
NH-NL is still positive but acting poorly. I add 20% when they are positive.
Total technical adjustments are +30% and exposure = 30%, same as last week.

Two week moving average is 30%, up from 25% last week.

Year to date, my model is up 1.5%, way below the 13.6% advance of the S & P 500.
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