Latest Research

Over the last few months, we’ve presented a couple of simple quantitative studies meant to encapsulate the factors driving our Major Trend Index to the brink of bear territory. The chart and table might provide the best summary yet.

Deteriorating stock market breadth and worrisome leadership trends both suggest liquidity has already tightened; whether the Fed follows suit in September may now be just a formality.

We’ve detailed the growing degree of stock market bifurcation, but the problem for would-be bears is that such bifurcation can reach astonishing levels (witness 1999-2000) before the market is set to peak out.

The Chinese government’s repeated stock market intervention attempts over the past several weeks have been remarkable, and obviously antithetical to the country’s move toward a more laissez faire corporate environment.

The S&P 500 Energy sector’s latest plunge puts it down by almost a third in the last 14 months. It now belongs to an exclusive list of sectors which have declined 30% on both an absolute basis and relative to the S&P 500!

We would like to see a stabilization in oil prices before we turn favorable to Corporate credits. For now, we maintain a Neutral view on these bonds.

The recent capitulation of the Chinese domestic equity market (or A-shares) makes headlines almost every day. Different theories, circulating in both China and overseas, pop up frequently to explain the daily movement of A-shares. It seems the investment community gets excited when the Chinese market is on the decline (but not so much when the market is on the upswing); many investors are quite reactive to any negative news coming out of China.

Conventional measures of market action, like breadth and industry leadership, point to the formation of a bull market top. Divergences abound.

Up/Down Earnings: Dismal Start To Q2

Small Cap Premium Drops to 8%

Growth Showing No Mercy To Value

S&P 500: Largest Firms In Charge

The MTI is holding just above the Negative zone and net equity exposure was reduced to 48-49% in the Leuthold Core and Global Portfolios (from 55% in early July, and 61-62% in June).

The Major Trend Index declined 0.02 points to a ratio of 0.98, reflecting small losses in three of its five categories.