After a hiatus of several years, we are re-introducing one of our favorite analytical tools. A thematic basket is a custom-designed set of assets which are exposed to, and will react similarly to, a common theme. Our first new thematic basket is “Capital Spending Beneficiaries.”

With the dollar index breaking below the 2017 low, we believe the dollar bull market that started in 2011 (based on the trade-weighted dollar index) is most likely over.

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While we’re not calling for an imminent market top, we are keeping a diligent watch from the crow’s nest for signs of a coming market correction.

The latest Core CPI number beat expectations but the yield curve flattened. The market shows more conviction about the Fed’s rate hikes than longer term inflation. We recommend patience and we don’t believe missing out on the first few months of higher inflation will cost us dearly.

In previous studies, we looked at two classic factors for employing a country rotation strategy: valuation and momentum.

For nearly three decades The Leuthold Group has tracked hypothetical portfolios composed of the previous year’s industry group “Dreams” and “Nightmares.”

We are contrarians at heart, but learned quickly that successful contrarian investing is far more complicated than simply buying assets that are down the most in price.

Of the 110 industries in our framework, the top seven are all Consumer Discretionary.

No volatility and only one (barely) down month—it was easy living for the S&P 500 in 2017. It was also a top-heavy year for the index. The largest five firms: AAPL, MSFT, AMZN, FB, and GOOG accounted for nearly a quarter of the index’s gain.

While we still believe flattening is the more likely scenario over the medium term, we do feel the recent flattening move is a bit overdone and there are several divergences that suggest a short-term steepening correction is in store.

Tax cuts, a strong economy, and daily stock market records have lifted measures of investor sentiment to levels not seen in two decades. But sentiment is only a slightly better timing tool than valuations (which is not saying much), and there’s plenty of room for excitement to build before a final top is at hand.

Read this week's Major Trend Index...

With the northern U.S. stuck in a deep-freeze, there could hardly be a worse time for the nation’s utilities to fail. But conventional chart work suggests that is exactly what’s happened. The Dow Jones Utility Average fell below its 40-week moving average last Friday, dropping the simple four-indicator model, shown in the chart, into third gear after it had spent most of the year with “four on the floor.”

While investors look high and low for signs of excess that might portend the next bear market, they should pause and consider the excesses that have recently gone away.

We observed in July that at an age when most bull markets are prepared to see the mortician, this one still seems to need a pediatrician. And five months later, the bull is acting as immature as ever!

The stock market has disregarded any and all caution flags throughout 2017, and the consensus is that it will continue do so through year-end.

We reconstituted the November and October “Bounce” screens back to 1986 and compared their average performance versus the “non-bounce” companies. Compared with the October list, the November list shows a much weaker bounce effect.

The Fed has long claimed itself to be “data dependent” while providing less and less information on those data points it considers most relevant. We can’t know what’s on that list, but we certainly know what isn’t: the ISM Manufacturing Composite, which (prior to the current cycle) provided an excellent gauge of the Fed’s policy bias.

Economic and momentum considerations have kept us mostly aboard this bull for much longer than our value-seeking inner selves would have otherwise allowed.