Today, the Covered Calls Advisor recalculated the current values for each of the seven factors used to determine the "Overall Market Meter" rating. The result is that the Covered Calls Advisor's current market viewpoint remains at Slightly Bearish. A graphical representation of the "Overall Market Meter" is shown in the right sidebar on this page.
The seven factors used can be categorized as:
- macroeconomic (the first two indicators in the chart below),
- momentum (next two indicators in the chart),
- value (next two indicators), and
- growth (the last indicator).
The rating for each of these factors is not subjective. Each factor is
calculated using objective, quantifiable measures.
The current Market Meter average of 3.00 (see blue line at the bottom of
the chart above) is in the Slightly Bearish range (Note: the Slightly
Bearish range is from 2.35 to 3.09).
Both of the
value-related factors are now Very Bearish. The current P/E ratio for
the S&P 500 (based on the average of the Operating and As
Reported earnings for the past year) is very high at 23.9. This is much
higher than the expected current P/E ratio of 18.6 (based on the
current 2.1% CPI-U inflation rate for the past year). The market would
have to decline by 22.2% from its current level to reach a P/E ratio of
18.6. Despite the fact that most other factors are Bullish, these two
Very Bearish value factors (i.e. P/E Ratio and the Total Market to GDP
Ratio) coupled with an expectation of modest sales and earnings growth
over the next year explains why the Covered Calls Advisor Portfolio is
currently 25% invested and 75% in cash at this time.
shown in the right sidebar, the covered calls investing strategy
corresponding to this overall Slightly Bearish sentiment is to
"on-average sell 1% in-the-money covered calls for the next options
Your comments or questions regarding
this post (or the details related to any of the seven factors used in
this model) are welcomed. Please email me at the address shown in the
Regards and Godspeed,