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An important feature of this bull market—and a reason for its longevity—is the slow recovery in investor attitudes relative to valuation altitudes...

Performance discontinuities across some of the major indexes are striking. For example, while the NASDAQ Composite is up 12% YTD, the NYSE Composite is down 1%, despite those strong A/D readings for the latter index. Today’s action leaves a similar gap between the Russell 2000 (up 10% YTD) and the DJIA (unchanged).

Annual Producer Price Inflation rose to 4.0% in May, a key threshold above which the S&P 500 has historically delivered essentially flat returns. But the fact that this reading occurs against a backdrop of full employment is cause for even more concern. Context is key...

The decline in the attitudinal work was fairly broad based, with a few indicators even moving back to maximum negative readings.

We found that ETFs with the largest one-month, two-month, and three-month fund inflows underperformed going forward. When further broken down by sub-asset class strategies, this pattern is pronounced among equity ETFs, while fixed income ETFs do not appear to be affected by fund flows.

Quantitative investment firms are increasingly touting the cross-disciplinary backgrounds of their research staffs, with prior high-level experience in areas such as medical research and engineering not uncommon.

The Supply/Demand category carries the smallest weighting among the five factor groupings in the Major Trend Index, and this weighting is further diminished by the fact that its components rarely line up in a way which loudly proclaims that an  “accumulation” or a “distribution” phase is underway. Today is just another of those typically inconclusive times.

The gap between the 10-year Treasury yield and the federal funds rate has narrowed sharply in the last year but remains a long way (~110 basis points) from inverting.

The stock market has narrowed, but not in the way we envisioned—nor in a way that’s consistent with most historical bull market tops. Small Caps and market breadth measures are traditionally the first to wilt when monetary tightening begins to hit the stock market. Instead, they are the leaders.

Old age has certainly put no limitations on the bull’s exploits, so we should be cautious in reading too much into its meandering recovery path. However, it’s possible that action since the February low is not a recovery process but rather a countertrend bounce within a larger downtrend.

Early this year we chatted with the retired founder of a Midwest investment management and research firm. After living and breathing markets for six decades, this bearded and iconoclastic character had avoided financial publications, Bloomberg, CNBC, and the like for more than a year.

While Momentum has worked very well during the last year, the best performance has been concentrated among the most expensive securities within the high Momentum group.

Like a thirty-year-old still living with his parents, the market doesn’t seem to have much direction. Since 1950, the median recovery time (if the market does indeed recover) from an intermediate correction is just 33 trading days. We’re now going on 80 trading days since the low set on February 8th… tick tock.

Analyzing quarterly financial results and developing insights about upcoming periods is always difficult, but the first quarter of 2018 was unusually complicated.

Growth’s year-and-a-half dominance over Value continues to roll on. Growth’s substantial gains have almost erased Value’s long-standing relative valuation premium.

Other than an initial bump in the Small Cap premium in March, Small Caps’ last three months’ outperformance hasn’t manifested itself in this vignette.

After Q1’s record breaking “one-month” figure, our “two-month” reading could only disappoint. Still,  May’s Up/Down Ratio of 2.01 is one of the highest “two-month” figures in 35 years of observations.

Up/Down Earnings: A Little Shrinkage

Read this week's Major Trend Index.

Consumer Discretionary has held on to the highest-rated spot for six consecutive months. Coming in last (again) is Utilities. After rating among the lowest two positions between April 2017 and April 2018, Energy finally improved and now sits in 6th place—the middle of the pack.

Despite Industrials’ underperformance versus the broad equity market, the sector’s Transportation subset has been on the rise recently. In the latest round of our Group Selection (GS) Scores, four of the five Transportation groups rank Attractive, and the fifth one is rated High Neutral.