Latest Research

The Major Trend Index rose 0.01 to a ratio of 1.24 based on data through the week ended August 19th. This is comfortably above the MTI neutral zone of 0.95-1.05 and supports our tactical funds’ 60% exposure to equities.

The Major Trend Index increased 0.01 to a ratio of 1.23, based on data for the week ended August 12th; a big gain in the Economic category was mostly offset by small losses elsewhere. Overall, we’re impressed that the MTI has been able to carry as far as it has into the positive zone despite the increasing resistance provided by both the Intrinsic Value and Attitudinal categories.

The S&P 500 gained 3.7% in July. Based on the 1957-to-date valuation metrics presented, downside to its historical average widened by about 3% from last month’s –19% reading.

Our AdvantHedge gross composite fell 7.0% in July, lagging the inverse performance of the S&P 500 (+3.7%), Russell 2000 (+6.0%), and NASDAQ (+6.7%).

Select Industries gross composite gained 4.5% in July, outpacing the S&P 500 gain of +3.7%.

Following a short stay in the neutral zone, the MTI ratio popped back up to positive territory in early July.

The Major Trend Index jumped 0.08 to a new recovery-high ratio of 1.22 based on data for the week ended August 5th; the improvement was led by another big gain in the Momentum/Breadth/Divergence category. All sub-models relating to Financial industry groups were upgraded in the past week, and Low Volatility stocks’ grip on market leadership has weakened somewhat over the past several trading days. Both are viewed as market positives.

Tactical equity exposure raised to 60-61%, however, our enthusiasm is tempered by high domestic valuations and other evidence that the expansion and associated 7 1/2-year bull market are very mature.

A military coup was staged in Turkey on Friday, July 15th, but it was quickly suppressed. The damage, however, was done.

Performance and valuation of the three Quality factors are diverging. From a valuation standpoint, we might see a reversal in performance, with the Stability factor weakening and the Leverage factor strengthening.

Commodities have enjoyed a strong year thus far, and the GS Scores on the Materials sector have followed suit (albeit with a slight lag), as highlighted in June’s “Of Special Interest” section.

Despite putting in lows in January, the Energy sector has been stuck at the bottom of the GS rankings, and the sector has given up more than half its relative gain over the last several weeks. Perhaps the GS Scores will highlight a better entry point in the months ahead.

There was a major cyclical BUY signal (VLT Momentum) for the S&P 500 in late-May, and as of July’s close, that bullish development was reinforced by a new VLT BUY signal on the Russell 2000.

The number of NYSE 52-Week Highs typically peaks during the bull market’s strongest leg, before contracting into the final top. Last month, Net New Highs made a three-year high—implying more upside.

Despite the market’s strong rebound from February lows, four of the seven “Red Flag Indicator” components have failed to confirm the July new-cycle S&P 500 highs.

Market breadth measures have been so strong since the February low that we wonder whether something might be wrong with them.

While cap-weighted U.S. indexes remain far below their 2000 valuation highs, in some ways today’s market presents an even more difficult hurdle for value managers.

To revisit the all-time valuation peak of March 2000, the S&P 500 would have to reach 3455 (not a forecast!). A reversion to 1957-to-date median valuations implies an S&P 500 loss of 22%. That’s a serious loss, but hardly on the order of a “busted bubble.”

In the wake of the tech wreck and the housing bust, usage of the term bubble by the media and market pundits has become increasingly liberal.

On August 31st, Real Estate will become the newest GICS sector and the first Level 1 addition since the framework was unveiled in 1999—REITs had been classified as an industry under the Financials sector.