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The Major Trend Index fell 0.02 to 1.07 in the latest week, led by moderate losses in the Supply/Demand and Momentum/Breadth/Divergence work. Net equity exposure in both the Core and Global Funds continues to target the 55% level.

The Major Trend Index continues to levitate just above its neutral zone, closing the week of March 20th up 0.03 to 1.09. While this work is not as emphatic as we would like, it remains enough to keep us postured with net equity exposure of 55% in both the Core and Global Funds.

MTI Down 0.01 to 1.06 - Just Above Neutral Zone

The S&P 500 gained 5.5% (price only) in February. Based on the 1957-to-date valuation metrics presented below, downside to its historical average widened by about 5% from the prior month’s reading of –14%.

Using “Analyst Score” to measure sentiment and our Group Selection (GS) Scores, we present what appear to be the most quantitatively Attractive, yet disliked equity groups.

Performance of this thematic group has been strong but the domestic Big Four networks are facing increasing competition overseas. However, there is still a much better growth profile compared to many other industries.

This is the first time in the last year or so the 10-year yield has broken through, re-tested, and held above the 50-day moving average.

Up/Down Earnings: Ratio Still Above Average

Inflation and inflation expectations are key inputs to central banks’ policy decision process. Divergent policies have very different impacts on inflation.

Lower energy prices will benefit the paper industry as it is among the most energy intensive of Materials groups. Yet, global implications may produce a headwind, offsetting the benefit of lower oil costs.

Small Cap Premium Plunges To 5%

Factor performance reversed course in February, with most factors performing the opposite of how they have over the last six months.

An already overvalued stock market is likely to become more overvalued in the short to intermediateterm. If the market peaks out here, it will have pulled a fast one on virtually all of stock market history.

We are leaning towards a more favorable outcome for risky assets but staying alert.

Advertising, Health Care Services, Auto Parts & Equipment

Growth Stocks Dominating Value

The stock market generated enough positive evidence by the second week of February to knock us from our comfortable perch on the fence. We covered a portion of our equity hedges on February 12th, bringing net equity exposure in the Core and Global Funds up to 58% from the 50% level that had prevailed since November.

The bull’s 72-month lifespan now rates as the fourth-longest among all 23 DJIA bull markets since 1900, and the cumulative price gain of +179% ranks sixth.

Our longer-term bear market forecast and a temporarily positive stock market stance aren’t mutually exclusive.