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A few clients have politely inquired as to whether the ‘old’ 2.0 version of our equities model would also have been long throughout this month’s selloff. The short answer is yes.

You may recall that the new 3.0 version established a long position back in early November at SPx 4680. This was based on a new component, and to be honest I am having second thoughts about this new component. At the least, it seems to have overstayed its welcome and probably should be tightened up a bit.

The older 2.0 version of the model would also have established a long position at an even higher level this month (SPX 4793), so there’s no getting away from this month’s losses. Worth noting that the 2.0 version would be exiting its long position at Wednesday’s close. It’s currently set to record about a 10% hit as of yesterday, we’ll see where the S&P settles today.

The 3.0 model is scheduled to remain in its long position until the end of next week. Do I have confidence that investors should hold on until then? No, to be honest.

Looking back at my original post on the 3.0 version of the model, I’m struck by the fact that I was not happy to have the model in cash during the big rally from early October through mid-November. I was searching, maybe reaching, for a new component that would get the model long because I was bullish. That’s not a good approach to modeling, and in retrospect I should have known better.

I will keep you updated on any changes, and for the time being I will update the status of both the 2.0 and 3.0 versions on the model page.

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