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Here’s an example of just how disparate underlying market action has become: with the S&P 500 only 2% away from a cycle high, several major U.S. and foreign market indexes have already moved into an oversold position on the basis of our Very Long Term (VLT) algorithm—with a few (including EAFE, Chart 1) actually triggering “long-term, low-risk” BUY signals in the last two months! We are not sure what to make of this action.

Is there a statistical relationship between the height scaled by a given bull market and its subsequent decline? That correlation is in fact pretty tenuous, we’ve found.

In regards to fixed time cycles, Richard Russell—who died last month at 91—used to complain, “Where are they when you need them?” We agree, and present 2015 as just the latest example.

After nearly six years, the Industrials sector has reclaimed a top three spot among the GS Score’s Broad Sector Composite rankings—six of the sector’s 18 groups rank Attractive and two are in High Neutral. Construction & Engineering, an Industrials sector group, offers diversity in several ways—from the nature of its underlying businesses, and through areas of strength supporting the GS Score factor categories.

Despite Large Cap Growth lagging in November, it has been a much better year for Growth stocks. All three Value segments remain in negative territory YTD.

At this point, the worst outcome for the risk markets would be no hike in December.

When we introduced this thematic equity group in September 2012, we projected that it was poised to deliver above average returns. These companies have enjoyed many advantages atypical of most other industries, and performance-wise, this group did not disappoint. A large subset of the theme, Data Processing & Outsourced Services, is rated Attractive by our GS Scores, and has been a portfolio holding for 50 months.

For the third consecutive year (thus far), quantitative factors worked best within the Materials sector. Energy also saw success as the decline in oil hurt the same stocks as in 2014. Factors were least effective in Health Care and Telecom.

After three dramatic months, the S&P 500 held in a narrower range in November. Big Tech names like Microsoft (+3%), Google (+4%), and Amazon (+6%) outperformed once again and our Cap Weighted measurement continued to roll—it has beat the Equal Weighted Average in eight of the last nine months.

Fewer uncertainties surrounding the Fed’s policy decision probably helped, but the renewed sell-off in oil is a big concern for all credit classes. We recommend caution and a neutral stance towards credits at this juncture.

A snapshot of Automotive Parts & Equipment, Large Cap Biotechnology, and Reinsurance.

We believe higher quality Corporate bonds should be able to weather the higher volatility expected from a rate hike and oil sell-off. Maintain Favorable.

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%.

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. 

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.

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%.

Our AdvantHedge gross composite lost 9.3% in October, lagging the inverse performance of the S&P 500 (+8.4%) and Russell 2000 (+5.6%), but about on par with the inverse of the NASDAQ (+9.4%).

Select Industries gross composite gained 5.1% in October and is up 2.8% YTD. Global Industries (based on Global Industries, L.P. gross return) gained 5.4% in October, lagging the MSCI ACWI (7.9%).

Up/Down Earnings: Worst Start In Six Years