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Thursday, February 16, 2012

Overall Market Meter Rating Remains "Slightly Bullish"

Each month during options expiration week, the Covered Calls Advisor recalculates the current values for each of the eight factors used to determine the "Overall Market Meter" rating. This month, the Overall Market Meter rating is unchanged at Slightly Bullish.

The eight factors used can be categorized as:
- macroeconomic (the first two indicators in the chart below),
- momentum (next two indicators in the chart),
- value (next three indicators), and
- growth (the last indicator).
















The current Market Meter Average of 3.63 (see blue line in chart above) is slightly lower than the 3.75 of last month. The 3.63 is a Slightly Bullish rating (range from 3.5 to 4.5), which is unchanged from the prior month. Five of the eight factors used to determine the Overall Market Meter rating changed from the prior analysis last month. These changes were:
- Bank Lending improved from Neutral to Slightly Bullish
- Business Cycle and Unemployment declined from Neutral to Slightly Bearish
- Total Market Index/GDP declined from Neutral to Slightly Bearish
- P/E Ratios declined from Bullish to Slightly Bullish
- Future Earnings improved from Neutral to Slightly Bullish

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Slightly Bullish sentiment is to "on-average sell 2% out-of-the-money covered calls for the nearest expiration month." So with the February 2012 options expiration this week, newly established positions for March 2012 expiration will be established in accordance with this guideline.

Your comments or questions regarding this post (or the details related to any of the eight factors used in this model) are welcomed. Please click on the "comments" link below or email me at the address shown in the upper-right sidebar.

Godspeed,
Jeff

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