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With all three months of Q2 earnings reports in, the 1.28 ratio is much stronger than Q1, but remains below the 1.51 historical average ratio.

U.S. Investment Grade Corporate Bonds: Favorable, U.S. High Yield Corporate Bonds: Neutral, U.S. Municipal Bonds: Neutral

Inflation at both consumers’ and producers’ level is still modest. A drawn out government shutdown and debt ceiling debate will hurt the economy, which could further push out the taper timeline.

Our AdvantHedge composite lost 2.6% in September, outperforming the inverse performance of the S&P 500 (+3.0%), the Russell 2000 (+6.4%), and the NASDAQ (+5.1%).

 Construction & Farm Machinery, General Merchandise Stores, Consumer Electronics, and Home Entertainment Software are the Attractive groups that selected to discuss this month.

There was little turnover in the GS Scores this month and no group deactivations. With minimal capital to work with, we added selectively to existing group holdings.

Despite continued question marks surrounding the effects of Health Care Reform, sentiment seems to have shifted for the better, and a number of broad industry drivers are trending in a promising direction. This group currently has three categories rating Excellent in our domestic group model.

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.