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The S&P 500 gained 0.02% in September. Based on the 1957-to-date valuation metrics presented, downside to its historical average narrowed by about 1% from last month’s –21% reading.

The Major Trend Index edged up 0.02 to a ratio of 1.27 for the week ended September 30th, remaining within a narrow but decisively bullish band between the 1.20-1.30 level for the ninth consecutive week.

Small losses in four of its five categories drove the Major Trend Index down 0.04 to a ratio of 1.25 in the week ended September 23rd. Overall, the weight of the stock market evidence continues to tilt bullish and our tactical portfolios remain fairly aggressive positioned with net equity exposure of 63%.

The Major Trend Index rose 0.05 to a ratio of 1.29 in the week ended September 16th, representing another new high for the rally that began in February. Moderate gains in Supply/Demand and Momentum/Breadth/Divergence categories were behind the improvement.

Last Friday’s stock market air pocket had little impact on the Major Trend Index, which remained in moderately bullish territory at 1.24 after a weekly decline of 0.02. Swings within the five categories were muted despite the rise in stock and bond market volatility.

The S&P 500 gained 0.1% in August. Based on the 1957-to-date valuation metrics presented, downside to its historical average narrowed by about 1% from last month’s –22% reading.

Our AdvantHedge gross composite fell 0.1% in August, performing in-line with the inverse S&P 500 (+0.1%), but it outperformed the inverse Russell 2000 (+1.8%) and NASDAQ (+1.2%).

Select Industries gross composite gained 0.4% in August, besting the S&P 500 gain of +0.1%. Global Industries (based on Global Industries, L.P. gross return) outperformed the MSCI ACWI in August, gaining 0.8% and is down 0.6% YTD.

Major Trend Index Positive: Equity Exposure At 63%

The Momentum/Breadth/Divergence category remains the key driver behind the MTI’s resurgence; that category’s latest net reading of +1028 is the most bullish since May 2010.

The ER price impact has shifted higher post 2008-2009 financial crisis, and the movement has been more pronounced in the Small Cap universe. A look at analyst coverage and accuracy of estimates.

We’ve mentioned that concerns over potential seasonal weakness in September and October seem pronounced this year, perhaps because the year has so far turned out a pleasant surprise following its horrendous start.

Our EM Allocation Model triggered a BUY at the end of August after 5 1/2-years in bear mode. This upgrade is consistent with a cyclical leadership run of one to four years relative to Developed Markets.

The MTI’s subset of Momentum measures entered September at a 6 1/2-year high reading of +1028, with only two of the category’s 40 inputs in bearish territory.

Call off the mortician, and bring on the pediatrician for the bull market’s 7 1/2-year checkup this month.

While the most inflated domestic-valuation readings are found in the Large Cap realm, the market rebound has driven the median 12-month trailing P/E in our Small Cap universe to 22.5x (Chart 1)—less than a point away from the June 2015 all-time high of 23.3x.

Market anxieties have inched up over the last several weeks despite the proximity of all major indexes to cycle highs. The MTI’s Attitudinal category has improved by about 70 points in the past few weeks, and we sense more worry than usual over potential for turmoil in the seasonally-weak months of September and October.

An encouraging break from a 15-month leadership pattern: Low Vol stocks have rolled over since mid-July, while the High Beta cohort has finally eclipsed its late-April highs.

Last month we described ourselves as “long on equities, but light on conviction,” and that description still applies.

The impact of atypically-high current valuations has become a challenge for style-box investing. High quality, mature dividend payers have habitually resided in the Value and Blend boxes, but investors have bid up those valuations as they look for alternatives to low bond yields.