MAJOR TREND INDEX
By Doug Ramsey, CFA, CMT
REPORT DATE: August 19, 2015
MTI DECLINES to NEGATIVE
Ratio: 0.88...down 0.02
S&P 500 P/E on Normalized EPS = 21.1x
(84th percentile, 1926 To Date)
DATA FOR WEEK ENDING: August 14, 2015
POTENTIAL
WEIGHT
+
1200
1200
1100
1100
1200
1200
600
600
1800
1800
Intrinsic Value
Economic/Interest Rates/Inflation
Attitudinal
Supply/Demand
Momentum/Breadth/Divergence
Gain 7
Gain 16
Loss 17
Gain 32
Loss 73
LATEST NET READING
+
62
457
477
190
211
253
78
139
526
507
1354
1546
Net
-395
287
-42
-61
19
-192
BALANCE : -192 (-157 Last Week)
*RATIO: 0.88 (0.90 Last Week)
*Total Positive Points : Total Negative Points. (0.95 to 1.05 is a "Neutral" reading.)
The Major Trend Index fell a bit further into negative territory in the week ended August 14th, dropping
0.02 to 0.88. The Momentum/Breadth/Divergence category again took the largest hit, with a major momentum submodel moving to a maximum bearish positive for the first time since the second half of 2011.
Net equity exposure in both the Core and Global Funds remains unchanged after last week’s reduction to
38%. We wouldn’t rule out a move to an even more defensive posture in the weeks ahead (to 30-33% exposure), but
we’ll need a little more evidence before doing so. Regardless of whether the indicators afford us that opportunity,
stock market risks have shot up significantly.
The Momentum/Breadth/Divergence category remains incredibly weak (+19) given that the S&P 500 now
trades within 2% of its May 21st all-time high. Contrast this action to the week of the October 9, 2007 market top,
when this category enjoyed a solid reading of +750 (… although the overall MTI had turned negative three months
earlier). In other words, our 40-plus metrics relating to breadth, industry leadership, market momentum, and trend
now rate significantly worse than at the last major market top. We can’t rule out a false alarm (and a bull market as
long as this one is bound to sound a few of them), but the deterioration across other MTI categories amplifies this
particular alarm.
We’ve noted that the market has made several important intermediate-term lows coincident with a fleeting
move by our Attitudinal composite into net positive territory. However, the market has so far had a tepid response to
the net positive readings recorded the last two weeks of July, and the net reading is again in the negative zone—
though not yet troublesome at –42. In any event, the market’s failure to bounce on this development is another
change in market character.
Clients who have questions regarding any of the components
or indicators should call Doug Ramsey at 612-332-1567.
Published By The Leuthold Group, LLC; Distributed By Weeden & Co., L.P.
The Leuthold Group, LLC provides research to institutional investors. The material herein is based on data from sources we considered to be reliable, but it is not guaranteed as to accuracy and does not purport to be complete. Any opinions expressed are subject to change.
Weeden Investors, L.P., Weeden & Co., L.P.'s parent company, owns 22% of Leuthold Group’s securities. An Executive Managing Director of
Weeden & Co., L.P. is a member of The Leuthold Group, LLC board of directors. Weeden & Co., L.P. member FINRA, NASDAQ, and SIPC.
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