Monday, January 17, 2011

Overall Market Meter Rating Remains "Neutral"

Each month during expiration week, the Covered Calls Advisor re-calculates each of the current values for the nine factors used to determine the "Overall Market Meter" rating. As shown in the chart below, the new Overall Market Meter Average rating (blue bar at the bottom of the chart) remains unchanged at "Neutral":

The current Market Meter Average of 3.33 is a Neutral rating, and is identical to the 3.33 of last month. Furthermore, all nine of the factors used remained unchanged from last month. Note: The range for Neutral is between 2.5 and 3.5.
As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Neutral sentiment is to "on-average sell 1% out-of-the-money covered calls for the nearest expiration month." Thus, new positions for Feb2011 expiration will be established in accordance with this guideline.

For a more detailed explanation of each of the Covered Calls Advisor's nine indicators, please refer to this prior blog post on that topic -- link. These nine factors can be categorized into macroeconomic (the first 3 indicators in the chart above), momentum (next 2 indicators in the chart), value (next 3 indicators), and growth (the last indicator).

The Covered Calls Advisor is currently tracking two additional factors: (1) The Conference Board's Leading Economic Index; and (2) Estimated Future Inflation -- four sub-factors being tracked here are the money multiplier, the velocity of money, capacity utilization, and the 10-Year T-Bond minus 10-Year TIPS 'Breakeven Rate'. A decision on whether or not to add these two factors into the Overall Market Meter rating system will be made within the next several months.

Your comments or questions/clarifications regarding this post are welcomed.
Please click on the "comments" link below. If you prefer to remain anonymous, email me at the address shown in the upper-right sidebar.

Regards and Godspeed,