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The S&P 500 lost 3.6% (price only) in January. Based on the valuation metrics presented below, the S&P 500 has 10% downside to its historical average. The S&P Industrials (which excludes Utilities and Financials) now has 23% downside to reach mean valuation.

Bond mutual fund net outflows resumed mid-way through January.  High estimated net inflow this week to domestic equity mutual funds. YTD net outflows across the board for broad ETF categories. 

The Major Trend Index fell 0.01 to 1.11 in the week ended January 24th, remaining on the low end of its bullish zone.

Net inflows aren't too surprising, as mutual fund net inflows in general tend to spike in January.

The Major Trend Index fell 0.03 to 1.12 in the week ended January 17th, a reading that’s on the low end of the tight trading range it’s occupied over the last six months.

Positive estimated net cash flows into bond mutual funds were recorded for a second consecutive week; these are the first net inflows to this fund category since the end of September 2013 (17 weeks ago). This net flow isn't too surprising, however, as mutual fund flows in general tend to spike during January.

The Major Trend Index rose 0.02 to 1.15 in the week ended January 10th, continuing a long streak of moderately bullish readings. Both the Core and Global Funds remain positioned fairly aggressively with net equity exposure of 64%.

Aside from money market funds, the first week of 2014 brought estimated positive net cash flows to all broad mutual fund categories - even bond mutual funds. This is the first weekly positive net cash flow to bond mutual funds since the end of September 2013 (16 weeks ago).

Considering the market’s strength, we are pleased with the performance of our short portfolios.

Select Industries deactivated Specialized Finance. Global Industries deactivated Food & Staples Retail and Road & Rail and purchased Managed Health Care.

The Major Trend Index remains positive and net exposure in both portfolios is 64%. For all of 2013, our average net equity exposure was 60% in each portfolio.

The High P/E Tier is now slightly overvalued, the Middle P/E Tier is overvalued, and the Low P/E Tier continues being quite overvalued.

The S&P 500 gained 2.4% (price only) in December. Based on the valuation metrics presented below, the S&P 500 has 15% downside to its historical average. The S&P Industrials (excludes Utilities and Financials) now has 26% downside to reach mean valuation.

The Major Trend Index continues levitating in moderately bullish territory, closing the week of January 3rd at 1.13. This reading was down 0.02 from the 1.15 recorded in the final weekly reading for November. Net equity exposure in both the Core and Global Portfolios remains around 64%.

For 2013, the Equal Weighted Index bested the Cap Weighted Index by 4%. The Equal Weighted Index has outperformed the Cap Weighted Index in four of the past five years.

Both equity and bond categories set all-time nominal net cash flow records.

Growth Stocks Best In All Three Cap Categories.

All five factor categories did well, and the best performing Attractive industries came from six different sectors and ranged from traditionally defensive to more cyclical groups.

Small Cap Premium Continues Upward To 21%. The red-hot equity market of 2013 was especially good for Small Caps with a +38.8% total return.

Our Tech sector outpaced the S&P 500 Tech sector by  1400 bps and our Materials sector lagged the S&P 500 Materials by 2300 bps. Here’s why…