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 remains unchanged at Neutral.
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 3.25 (see blue line at the bottom of the chart above) is slightly lower than the 3.38 average of last month. The 3.25 is a Neutral rating (range from 2.51 to 3.50). Five factors of the eight factors remained unchanged from last month. The three factors that changed are as follows:
- Price Trend declined from Slightly Bullish to Neutral
- Interest Rates indicator declined from Neutral to Slightly Bearish
- Price/Earnings Ratio improved from Slightly Bearish 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 1% out-of-the-money covered calls for the nearest expiration month." So with this week's November 2012 options expiration, newly established positions for December 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,