The seven factors used are categorized as macroeconomic, momentum, value, and growth metrics as as follows:
- 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. As an example, the Covered Calls Advisor will briefly explain how the first macro metric (Bank Lending) is determined. The Federal Reserve Board conducts a quarterly survey via questionnaire of U.S. banks in which they measure both supply and demand information. For corporate America, the supply side represents the banks' availability of capital to make loans to large commercial and industrial clients and also whether the trend is improving (greater funds availability) or deteriorating (tightening funds availability). On the demand side, the survey provides information on both the volume and trend (rate of change) of large commercial and industrial companies loan applications. Currently, the banks liquidity to make loans (supply side) is Slightly Bullish, but the value of large companies loan applications are now declining somewhat which is Slightly Bearish. So, the current overall result for the Bank Lending metric, as shown below, is Neutral (the average value between Slightly Bullish and Slightly Bearish).
The current Market Meter average of 2.71 (see blue line at the bottom of the chart above) is unchanged from the prior analysis six months ago, so the Overall Market Meter remains in the Slightly Bearish range (Note: the Slightly Bearish range is from 2.35 to 3.09).
So what is our current Covered Calls investing strategy? Based on the Covered Calls Advisor's "Slightly Bearish" Overall Market Meter (see right sidebar), the corresponding strategy is to "on-average sell 1% in-the-money Covered Calls for the next options expiration month".
As always, your comments or questions regarding this post are welcomed. Email me at the address shown in the upper-right sidebar.
Regards and Godspeed,
Jeff
