Strong earnings continue to power this market rally

Covestor model: Market Comparables

The month of April started with my stock market model (available at www.theastuteinvestor.com on the Charts page) calling for a minimal exposure to stocks of only 10%. As the month progressed and the market suffered a small correction, I increased my exposure somewhat and ended the month in the 40% to 50% range.

The most bullish market factor is still the upward trend in earnings estimates for the S&P 500 in 2012. Earnings results for the first quarter have been mostly positive and that fact has allowed analysts to further increase their 2012 estimates. In spite of European recessions and slow growth domestically, it seems that American companies are able to continue to grow their profits.

While sentiment factors certainly improved a bit last month, they are the most troubling of the factors I look at to judge market possibilities. Small investors and speculators generally remain very positive on the prospects for the stock market and are not at all fearful of the future. The market strength of the last couple of weeks will only fortify their positive attitude.

Valuation improved a bit during the correction but not significantly so. I would classify this factor as neutral at the current time. Technical factors remain positive because the stock market is still in an uptrend.

I am still using the SPDR S&P 500 ETF (SPY) in order to obtain my preferred market exposure, electing to keep my risk low until my desired exposure increases to above 50%. That could certainly happen soon but it would most likely require further market weakness or consolidation to do so.

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