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The MTI dropped to 1.08 in May, despite a move by the DJIA and S&P 500 to new cycle highs. Net equity exposure remains around 61% in the Core and Global Funds.

· The higher-highs/higher-lows pattern since the 10-year yield trough in January is encouraging but the bigger test is the 225-230 area.

While we view the industry group selection as the most important decision, looking at the sector level rankings also helps us identify broad trends. Here we highlight the top two rated sectors, currently, which also represent a combined >40% weight in our Select Industries Portfolio.

The steepening move in the yield curve is prevalent across many countries and is primarily driven by higher inflation expectations.

Until now, this group has been out of favor per our quantitative disciplines for the entirety of the bull market, making its newfound attractiveness particularly interesting. Even an 80% return in 2013 hasn’t brought relative performance back to levels achieved during the previous bull market.

While we acknowledge the volatile market environment, we still favor credits within the fixed income space.

While our stock market disciplines (including the Major Trend Index) are nominally bullish, we’re mentally gearing up to do something in the near future that was once considered ill-advised: Fighting the Fed.

Up front, we need to remind readers that the Major Trend Index is bullish at 1.08, and our tactical funds remain well-exposed to equities with net exposure of 60-61% (versus a range of between 30% minimum up to a maximum of 70%). That being said, we’re focused on the likelihood of a major defensive portfolio move in the near future, which probably comes as no surprise to Green Book readers (...what with us publishing a prepackaged obituary for the bull market just a month ago).

The Dow Jones Transports lagged the market badly again in May, and continues to stand tallest among the red flags we’re now monitoring.

The Dow Transports and Dow Utilities both triggered major sell signals in May when their 50-day moving averages fell below their 200-day moving averages… known by some as a “Death Cross.”

Market technicians continue to argue that a bull market peak is unlikely to form with the majority of U.S. stocks (and global ones, for that matter) still participating in the new highs of the blue chip indexes.

It now goes almost without saying that whenever the stock market moves to a new cycle extreme, so does the MTI’s Intrinsic Value category. In late May, this reading dropped below –400 for the first time in this bull market, and is now within 150 points of its 2007 extreme.

It’s generally a bad idea to roll out new valuation readings that one doesn’t fully understand late in a cyclical bull market. But we’re going to do it anyway, recognizing that a similar practice proved to be the undoing of dozens of fund managers and Tech analysts at the turn of the millennium.

Cable & Satellite, Education Services, Human Resources & Employment Services

Last year seemed to cement the view that stocks have entered a new secular bull market, and today we’re not going to offer our dissent—what with the S&P 500 trading about a third above its 2000 and 2007 “Twin Peaks”.

Our “Early Cyclicals” composite continues to perform so well—and at such a late stage in the market cycle—that we should probably consider changing its name. This group, which consists of retail, housing, and auto-related industries, is up 29% in the last eight months after stalling out for the first three quarters of 2014. Its “Late Cyclical” counterpart is up just +5% over the same time frame.

Despite record low mortgage rates and pressure to re-loosen down payment and lending requirements, single family housing starts have yet to recover to levels consistent with even the average recession trough.

Even though the ten EM sectors are growing at a much stronger pace than corresponding U.S. sectors on the Top-Line, only a small margin exceed the U.S. in terms of EPS growth.

Net inflows turned into net outflows as investors deem the spread cushion inadequate.