The model score today is -79, the worst score since the correction started. This means that the market is collapsing internally. Nothing has changed in the spreads, despite the massive intra-day rally. It is still correct to avoid risk assets.
Unless the market now stabilizes at higher levels, the asset spreads utilized in the model suggest this will be a temporary reprieve, with much worse to come eventually.
Owners of CAN & GRMN 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 still advise extreme caution and lightening up of individual names which are under-performing the market into rallies.
That’s quite surprising with the strength in tech and discretionary today.
Not really. The spreads are trading a long way below the relevant MAs, so quite large movements can still leave the score completely unchanged. What the model does is register the bulk of the negative score when MAs in the spreads are broken, indicating momentum. That is why you got the massive shift into negative score when SPX was still above 2700. The market then simply caught up.