Courtesy of The Leuthold Group, Based on data for the week ended August 7th, the Major Trend Index dropped to a NEGATIVE reading of 0.90, led by declines in both the Attitudinal and Momentum/Breadth/Divergence work. The topping action evident in the MTI and other disciplines is consistent with either a severe correction, or a cyclical bear in the near future. We’ve therefore cut net equity exposure in both the Leuthold Core and Leuthold Global Funds to 38%, down from 48% in late July, and 61-62% in late June. A further reduction is possible in the days ahead. Sentiment has clearly cooled off from the ebullience seen throughout 2014 and early this year, and some analysts contend there’s a new “wall of worry” for the stock market to climb (concerns over China’s market air pocket, crude’s retest of March lows, and the weak quarterly earnings season now in progress). But the MTI’s Attitudinal category staged a sharp drop last week, reflecting bearish flips in three models tracking investor preferences between stocks and bonds. The Momentum/Breadth/Divergence category also recorded a small loss on the week, reflecting further weakness in market breadth and small losses in the chart scores. Yet the net reading for this category is still positive at +92; the weakness to date has largely been concentrated in “anticipatory” indicator groupings related to momentum, breadth, and industry leadership. We obviously prefer acting on this type of evidence rather than waiting for formal bear signals from indicators based on the major indexes, but the markets don’t always afford us that opportunity. The Supply/Demand category carries the smallest potential weight of the five categories but can be an important swing factor at major turning points. The current category reading is a bearish –93, reflecting evidence of increasing institutional selling across three measures. * * * Full August letter below... Leuthold Group - From August 2015 Green Book