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This group moved back into the Attractive range in September. We like the group’s business model, industry M&A momentum, and stocks’ ability to generate free cash flow. All in all, companies in this group are good candidates for investors hunting for High Quality.

Both models have numerous Information Technology and Financials groups in Attractive territory. Neither model has any Unattractive Tech groups. Alternatively, neither model has any Attractive Utilities groups, while several Utilities rate Unattractive in each.

A look at prior debt ceiling debates and patterns around resolution dates gives no surprises: markets are weaker in the two weeks before but stronger in the month after a resolution is reached.

A look at prior debt ceiling debates and patterns around resolution dates gives no surprises: markets are weaker in the two weeks before but stronger in the month after a resolution is reached.

The large valuation discount on foreign shares has narrowed a bit, reflecting better relative action in foreign shares over the past 14 months and relatively weaker foreign fundamentals.

Sectors that become the object of obsession during one economic cycle tend to remain cyclically depressed in the following one.

Low volatility isn’t a bearish omen in and of itself, and we found stock market volatility levels to provide much near-term directional help.

The historical batting average of this strategy has been decent, with gains in 9 of 18 years along with “excess” returns over the S&P 500 in 10 of 18 years. The best Bounce seasons have occurred when the market was either down for the year through September, or up only modestly.

The Major Trend Index declined 0.05 to 1.16 in the week ended September 27th, but it remains a safe distance above its 0.95-1.05 neutral zone.

Last week’s surge to new bull market highs had a more muted impact than we expected on the Major Trend Index.

The Major Trend Index rose a solid 0.08 to 1.20 in the week ending September 13, with three of the five indicator categories recording gains. Stock markets that are “in gear” are generally not at risk of making an imminent cyclical peak.

The S&P 500 lost 3.1% (price only) in August. Based on the valuation metrics presented in the table below, the S&P 500 is 8% above its historical average. The S&P Industrials (excludes Utilities and Financials) now has 20% downside to reach mean valuation.

The Major Trend Index changed little in the face of August’s market weakness, closing the first week of September at a mildly bullish 1.12. During the month there were no changes to the targeted net equity exposure of 60% in the Core and Global Funds.

Financials (the largest Mid and Small Cap sector) decreased across all three market segments, while Information Technology (the largest Large Cap sector) was boosted for both Large and Small Caps.

The Equal Weighted S&P 500 (-3.0%) slightly outperformed the Cap Weighted S&P 500 (-3.1%). The Equal Weighted index continues outperforming YTD (+17.7% vs. +14.5%).

Growth’s leadership over Value has only been apparent in Large Caps, but this segment had a big short-term reversal in recent months. Large Cap Cyclicals (+7%) significantly lag Large Cap Growth (+17%) YTD.

Large Caps lost 2.9% (total return) in August, just ahead of Small Caps (-3.2%) and Mid Caps (-3.8%). YTD, Small Caps continue to perform ahead of the other two subsets.

Small Caps are selling at a 15% valuation premium relative to Large Caps, using non-normalized trailing operating earnings. This is the same as the past two months’ readings. Using estimated 2013 operating earnings, Small Caps are selling at a higher valuation premium of 23% (24% last month).

EPS growth for Large and Mid Cap companies continues exceeding their top-line growth, but Small and Micro Cap companies saw their EPS growth rates coming in below their top-line growth rates.