Major Trend Index

Based on data through last Friday, the Major Trend Index rose 0.07 points to a ratio of 0.80. It benefited from a huge jump (115-points) in the Attitudinal category and a solid gain in the Intrinsic Value work. Steady improvement in these countertrend categories, combined with deeply negative readings in the Momentum/Breadth/Divergence work, is characteristic of an ongoing cyclical bear market; the body of evidence suggests it’s still too early to hit a major low in equities.

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The Major Trend Index fell 0.06 points to a ratio of 0.73, using last week’s data (week ended Friday, January 15th). Essentially all of our trend-following work is now confirming that a cyclical bear market is underway. In fact, the new closing low this week, on January 20th, confirmed our suspicion that the S&P 500 decline from its high close on November 3rd represented the second leg of the bear market decline from the bull market high May 21st.

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The Major Trend Index dropped 0.13 points to a ratio of 0.79 using data through January 8th. Several trend-following sub-models confirmed what our other "anticipatory" tools have been telling us for many months: a cyclical bear market is underway. Bearish market action to open 2016 has driven our tactical funds’ net equity exposure down to the 34-35% range. We’ll consider covering a portion of the equity hedge if evidence of a short-term low appears.

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Leuthold Core and Global Funds’ net equity exposure trimmed back to 38%. It is now our opinion that the early January sell-off constitutes part of a second downleg in a cyclical bear market that began in May 2015.

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The Major Trend Index rose 0.03 in the latest week’s data to 0.92. The Momentum/Breadth/Divergence category, with a moderate gain, is primarily responsible for the improvement. Our shortest-term indicators are solid enough that we wouldn’t rule out a narrow move to new cycle highs in the DJIA and S&P 500 during the first week or two of 2016, but our longer-term work still points toward considerable cyclical risks for equities. The Core and Global Funds both remain positioned defensively with net equity exposure of 39%.

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The Major Trend Index inched up 0.01 in the latest week’s data to a ratio of 0.89, with several sizable swings within its five indicator groupings largely cancelling one another out. This work remains consistent with a high-risk environment for equities, and both our Core and Global Funds are positioned defensively with net equity exposure of 38%.

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The Major Trend Index reverted to negative territory based on data through last week, dropping 0.10 points to close at a ratio of 0.88. We assume that a cyclical bear market remains underway, and have reduced net equity exposure to 38% (from 42%) in both the Leuthold Core and Global Funds via a 4% short position in the SPDR S&P 500 ETF Trust (SPY). We’d view any further advance in U.S. blue chip stocks as an opportunity to increase hedges even further, provided the rally maintains its internally weak character.

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The Major Trend Index ticked up 0.02 points to a ratio of 0.98 with the latest tally, extending its streak of neutral readings to five weeks. The Momentum, Supply/Demand, and Valuation work all remain on the negative side of the ledger, and we suspect the Economic work is near its peak for this cycle. Overall, the analysis supports a cautious stance on the stock market, and our tactical funds remain positioned with net equity exposure of 41-42%.

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Despite a pickup in volatility across its categories, the Major Trend Index was unchanged at 0.96 using data for the week ended November 20th. The failure of the MTI to bounce in response to last week’s 3%+ market gain reinforces what we’ve been saying for more than three months: the backdrop for stocks remains a fragile one, and portfolios with the requisite flexibility should remain significantly underweight equities. 

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In the latest week, the Major Trend Index declined 0.01 to a low-neutral reading of 0.96, with little action among the five categories for the second week in a row.  We consider it a “tell” that the best reading the MTI could manage in response to the S&P 500’s recent 13% rally was a score of 0.97 on Nov. 6th.  With the S&P 500 still trading within a few percentage points of its May 21st all-time high, we can’t rule out that it (along with the DJIA and NASDAQ) could poke out to  new nominal highs in the days or weeks ahead.

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The Major Trend Index ticked up 0.01 in the latest week to a low-neutral reading of 0.97, with no major swings within the five categories. While the prior week’s initial improvement to neutral zone forced us to cover a few hedges, the weight of the evidence still points to high stock market risks. Our tactical funds are positioned defensively with net equity exposure of 42%.

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The Major Trend Index rose 0.05 to a neutral reading of 0.96 in the final week of October, following a 2 1/2-month period in the negative zone.

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The Major Trend Index jumped 0.11 to 0.91 using data for the week ended Oct. 23rd.  The increase came on the heels of a large gain in the Momentum/Breadth/Divergence category, and puts the ratio closer to its 0.95-1.05 neutral zone than at any time since its initial negative reading in early August. 

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The Major Trend Index fell 0.02 to 0.80 using data for the week ended October 16th, with a solid gain in the Momentum/Breadth/Divergence category overshadowed by losses in three other categories.

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The Major Trend Index rose a solid 0.10 to a ratio of 0.82 using data for the week ended October 9th; the improvement entirely reflecting a predictable bounce in the Momentum/Breadth/Divergence category in the wake of last week’s market rebound.

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The Major Trend Index defied the wild swings of the past few weeks, remaining within a tight range deep in its bearish zone, before closing the week of October 2nd at 0.72.

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