The model score today is -52. This is a 6 point improvement from yesterday despite the market making new closing lows – an interesting short term development. While the market is now deeply oversold, rallies even to 2800 would probably have very little effect on the spreads and the model score. We are in a very delicate position, still. And not looking like we will have any lasting reprieve.
Unless price first rallies and then stabilizes at much higher levels, the asset spreads utilized in the model suggest that any bounce will be a temporary reprieve, with much worse to come eventually.
Owners of OMC, CCI, EOG, CNP & ADSK should examine whether it is worth holding these stocks, as the position is rapidly deteriorating in those names.
Our asset allocation is today still 100% TLT and 0% SPY. The monthly model gave us the sell signal at October month end. All 3 models are now aligned in risk off. The fact that the model keeps on being negative into price rallies is a potent tell of what might be ahead. I would advise extreme caution and lightening up of individual names which are under-performing the market into rallies.