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 3.88 (see blue line in chart above) is slightly below the 4.00 of last month. The 3.88 is a Slightly Bullish rating (range from 3.5 to 4.5). Five of the eight factors used to determine the Overall Market Meter rating were unchanged from the prior analysis last month. The three factors that changed were: (1) Bank Lending changed from Bullish to Slightly Bullish; (2) Total Market to GDP Ratio changed from Slightly Bearish to Neutral; and (3) P/E Ratios changed from Slightly Bullish to Neutral.
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 June 2012 options expiration at the end of this week, newly established positions for July 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.