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Consumer Discretionary is heaviest weight in domestic and Global AdvantHedge.

Select Industries slightly increased Department Stores & Health Care Facilities; Global Industries purchased Real Estate Management & Development and Road & Rail.

Major Trend Index turned negative and as of early October, we are now targeting 40% net equity exposure.

After two months in neutral territory, the Major Trend Index finally broke to negative for the week ended October 3rd, with a decline to the 0.90 level.

While the Major Trend Index, at 0.90, is now in its negative zone, it’s not as if all the traditional bearish bellwethers have lined up in a row (… then again, they never do).

September’s small S&P 500 loss of less than 2% disguised a significant breakdown in the “average stock.” In fact, the S&P 500 has been tougher to beat than at any time since the Tech Bubble.

While we’ve noted that damage to any capitalization-weighted stock market measure has so far been limited, three of the five major indexes shown in this chart have nonetheless broken below the major trendlines drawn off their 2009 bear market lows.

Much like the blue-chip indexes themselves, the cap-weighted S&P 500 sector indexes generally resisted the market mayhem erupting beneath the surface in September.

We wrote in May the mid-year months of a mid-term election year are historically the weakest for the stock market from a calendar perspective. Large Caps, however, have mostly bucked that pattern.

With the Fed mulling over a rate increase, investors may have already started to avoid companies with excess leverage. Unfortunately, Small Caps, on average, are in this camp.

During a tumultuous Q3, High Quality stocks proved to be resilient, losing only 2.0% compared to Low Quality stocks’ 7.5% loss in Q3. Low Quality stocks’ prior momentum seems to have broken down, especially in September when they slid by 7.1% for the month.

In the August book we published an article about the Indian equity market and proposed that investing in India is now more of a macro bet. The honeymoon—during which time Indian stocks were bid up from high hopes that the new government would reinvigorate the economy—is over.

Latest MTI calculation deteriorated to Negative (based on data for the week ended October 3rd). We expect further significant losses in the stock market near term and have cut net equity exposure in Core and Global asset allocation portfolios to 40%.

The Attractive range of the Group Selection (GS) Scores outperformed the Unattractive range in the volatile September market.

Highlighted Groups, Consumer Finance, Technology Distributors, Beverages.

Share repurchase activity among U.S. corporations is garnering a lot of negative attention as aggregate dollars spent on share buybacks are nearing the all-time highs last seen leading up to the financial crisis. We take a closer look at the recent activity to see if we are in for a repeat.

Up/Down Earnings: Highest Third Month Reading Since Q1 2012

The recent sudden strength in the dollar is mostly attributable to the divergent central bank policies. This supports a bullish dollar outlook over the medium term.

In September, the Russell 2000 index lost 6% and is down 4.4% YTD. Large Caps widened their YTD performance lead (S&P 500 +8.3%). Small Cap Premium slides to 15%.