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The recent strength in the dollar coincided with a spike in volatility and weakness in risky assets, but the relationship over the last couple years has been tenuous at best.

A summary of the GS Score strength for Airlines, Health Care Distributors, and Hypermarkets & Super Centers.

The dramatic turn-around in risk appetite triggered a new “Lower Risk” signal. It also marks the beginning of a very favorable seasonal window.

We continue to like “safe spreads” and remain favorable on these bonds.

Up/Down Earnings: Best One Month Reading Since Q2 2011

During another volatile month for the market, factor performance remained fairly consistent, with Profitability, Quality, and Momentum all working again. Value struggled for the second consecutive month and performed poorly during both the decline and reversal in October.

Small Cap Premium Spikes Back To 20%

Large Cap Value Left Out Of October Surge

S&P 500: Equal Weighted Index Bounces Back

The S&P 500 gained 2.3% (price only) in October. Based on the 1957-to-date valuation metrics presented below, downside to its historical average remains at 14%.

Bond mutual funds have seen persistent negative net cash flows, and YTD flows are now about $40 billion lighter versus tallies recorded just one month ago.

The Major Trend Index rose 0.04 to 0.93 in the week ended October 24th, just two ticks below its neutral band. The technical category scored a significant gain after last week’s market surge, while Supply/Demand dynamics became somewhat less negative. Nonetheless, the work taken as a whole continues to support a defensive stance towards equities in the immediate term, and net equity exposure in both the Leuthold Core Fund (38%) and Leuthold Global Fund (40%) remains on the low end of its normal range.

The Major Trend Index rose 0.06 to 0.89 in the week ended October 17th, remaining within its negative zone for a third consecutive week. This work remains consistent with further corrective action in the stock market, and our tactical funds remain positioned with below-average net equity exposure of 40%.

Bond mutual funds have seen persistent negative net cash flows, and YTD flows are now about $40 billion lighter versus tallies recorded just one month ago.

Despite dismal equity market performance, domestic equity ETFs saw positive cash flows for the week ended 10/15. Alternatively, domestic equity mutual funds and foreign-focused equity ETFs experienced net cash outflows.

Major Trend Bearish at 0.83

Net cash outflows continued this week for domestic equity funds, while bond and money market funds captured net inflows.

As we progress through 2014, a shift in fund flow trends established midway through 2013 is still intact—just more subtly so.

In Q3 the High P/E Tier was the best performing subset, up 2.1%. However, the High P/E Tier has lagged the other two segments significantly YTD—up only 3.1% compared to +10.1% and +11.8% for the Mid and Low Tiers, respectively.

The S&P 500 lost 1.6% (price only) in September. Based on the 1957-to-date valuation metrics presented below, downside to its historical average narrowed to 14%, about 2% less than last month’s reading.