The model score today is -47.  This is a slight improvement compared to Friday.  This means that the market is still weak internally.  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. This means that all significant rallies can still be sold short with impunity.

 

Unless price first rallies and then stabilizes at much higher levels, the asset spreads utilized in the model suggest this will be a temporary reprieve, with much worse to come eventually.

 

Owners of CPB, PSA & SHW 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.

EN
ES EN