Major Trend Index

The Major Trend Index reverted to negative territory based on data through last week, dropping 0.10 points to close at a ratio of 0.88. We assume that a cyclical bear market remains underway, and have reduced net equity exposure to 38% (from 42%) in both the Leuthold Core and Global Funds via a 4% short position in the SPDR S&P 500 ETF Trust (SPY). We’d view any further advance in U.S. blue chip stocks as an opportunity to increase hedges even further, provided the rally maintains its internally weak character.

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The Major Trend Index ticked up 0.02 points to a ratio of 0.98 with the latest tally, extending its streak of neutral readings to five weeks. The Momentum, Supply/Demand, and Valuation work all remain on the negative side of the ledger, and we suspect the Economic work is near its peak for this cycle. Overall, the analysis supports a cautious stance on the stock market, and our tactical funds remain positioned with net equity exposure of 41-42%.

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Despite a pickup in volatility across its categories, the Major Trend Index was unchanged at 0.96 using data for the week ended November 20th. The failure of the MTI to bounce in response to last week’s 3%+ market gain reinforces what we’ve been saying for more than three months: the backdrop for stocks remains a fragile one, and portfolios with the requisite flexibility should remain significantly underweight equities. 

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In the latest week, the Major Trend Index declined 0.01 to a low-neutral reading of 0.96, with little action among the five categories for the second week in a row.  We consider it a “tell” that the best reading the MTI could manage in response to the S&P 500’s recent 13% rally was a score of 0.97 on Nov. 6th.  With the S&P 500 still trading within a few percentage points of its May 21st all-time high, we can’t rule out that it (along with the DJIA and NASDAQ) could poke out to  new nominal highs in the days or weeks ahead.

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The Major Trend Index ticked up 0.01 in the latest week to a low-neutral reading of 0.97, with no major swings within the five categories. While the prior week’s initial improvement to neutral zone forced us to cover a few hedges, the weight of the evidence still points to high stock market risks. Our tactical funds are positioned defensively with net equity exposure of 42%.

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The Major Trend Index rose 0.05 to a neutral reading of 0.96 in the final week of October, following a 2 1/2-month period in the negative zone.

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The Major Trend Index jumped 0.11 to 0.91 using data for the week ended Oct. 23rd.  The increase came on the heels of a large gain in the Momentum/Breadth/Divergence category, and puts the ratio closer to its 0.95-1.05 neutral zone than at any time since its initial negative reading in early August. 

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The Major Trend Index fell 0.02 to 0.80 using data for the week ended October 16th, with a solid gain in the Momentum/Breadth/Divergence category overshadowed by losses in three other categories.

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The Major Trend Index rose a solid 0.10 to a ratio of 0.82 using data for the week ended October 9th; the improvement entirely reflecting a predictable bounce in the Momentum/Breadth/Divergence category in the wake of last week’s market rebound.

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The Major Trend Index defied the wild swings of the past few weeks, remaining within a tight range deep in its bearish zone, before closing the week of October 2nd at 0.72.

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The Major Trend Index broke into negative territory shortly after the August Green Book was released, with an initial bearish reading of 0.90, based on data for the week ended August 7th. That move prompted us to cut net equity exposure in tactical accounts to 38% (down from 48%); ensuing market action trimmed net exposure in the Leuthold Core and Global Funds to about 35% by September 8th.

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Based on data for the week ended August 7th, the Major Trend Index dropped to a NEGATIVE reading of 0.90, led by declines in both the Attitudinal and Momentum/Breadth/Divergence work.

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The MTI is holding just above the Negative zone and net equity exposure was reduced to 48-49% in the Leuthold Core and Global Portfolios (from 55% in early July, and 61-62% in June).

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