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Select Industries gross composite was nearly flat in November and is up 2.8% YTD.

Global Industries (based on Global Industries, L.P. gross return) gained 0.9% in November, besting the MSCI ACWI (-0.8%).

MTI Remains In Neutral Territory; Equity Exposure At 42%

The blue chip U.S. indexes have gone nowhere in 2015, and we expect bulls will soon write off the year as the “pause that refreshes.” But what’s been refreshed?

While the sequence of index peaks traced out YTD is not exactly a textbook one, the market’s internal diffusion is comparable to that seen at many major tops, including 2000 and 2007.

While the S&P 500 had erased all but 2% of its August loss as of early December, Small Caps and the “average stock” had recouped only about half their correction losses. Not good.

The year has been especially tough on managers who might have shared our cyclical worries over the stock market, but who’ve elected to stay fully invested via seemingly lower risk value approaches.

We tracked the “legal” insider actions of NYSE specialists for many years, until a crackdown on that business model early last decade rendered our old data sets virtually irrelevant.

The S&P 500 Information Technology sector has just broken out to a 15-year relative strength high, and it jumped two spots to the top scoring broad sector position. The breakout in Tech provides a rare example in which foreign market action presaged a major domestic move.

Following August’s market break, we produced a set of potential downside targets derived from a mix of technical retracements, “average” bear market declines, and an assumed reversion-to-the-median in S&P 500 valuations. Little has changed here.

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.