Monday, May 14, 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 4.00 (see blue line in chart above) is slightly above the 3.88 of last month. The 4.00 is a Slightly Bullish rating (range from 3.5 to 4.5). Seven of the eight factors used to determine the Overall Market Meter rating were unchanged from the prior analysis last month. The one factor that changed was Bank Lending which changed from Slightly Bullish to 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 May 2012 options expiration at the end of this week, newly established positions for June 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.

Regards and Godspeed,
Jeff

2 comments:

  1. What time period are you looking at price trends? Obviously the trend this past week was down. How much of an impact will that one week trend have on your overall price trend indicator?

    ReplyDelete
  2. A 150-day SMA (simple moving average) with a 5% tolerance. Possible outcomes are Bullish, Bearish, and Neutral.

    ReplyDelete