The model score today is -3, little changed from Friday’s -5, despite the market being slightly lower. This means that the market is stabilizing internally. The market is digesting its losses and awaiting earnings. Most people have done their hedging and if the market is going to rotate higher, it will do it soon. The longer we stay here, the higher the risk of a bad breakdown.
I want to remind you that our positioning longs in SPY are now trading longs and will be sold should the market close over 3% lower than the “purchase price”, 5% higher, or, in any case, after 15 days of purchase if neither condition has been met. We will, at some stage within the next 15 days be in a “risk off” position, most likely.
Owners of SCG, AIV, AIZ, AVB, CNP, DFS, EMR & AGN should examine whether it is worth holding these stocks, as the position is rapidly deteriorating in those names.
Our asset allocation is unchanged today, but we will definitely make use of any rally to reduce equity allocations and increase cash.