Market Model Recently Hit Low End of Correction Range
The CCM 80-20 Correction Index recently closed at 555 using our daily scoring system. Roughly 9% of the 56 corrections we studied (1981-2010) occurred with 80-20 scores under 555. Stated another way, 91% of the corrections occurred from more extended market conditions (or higher 80-20 scores). This morning, we are studying the cases where a correction began with a score of 555 or lower. We will take the historical market conditions (market & economic cycle) into account as we assess the possible importance of the recent level of the 80-20 Correction Index. Depending on what we find, using all our tools and models, we are open to reducing some exposure to risk today. We do not believe the risks of a bear market are all that high, but the risks of a prolonged correction (a few weeks) have at least reached a threshold where it makes sense to consider some relatively small adjustments to our allocations.
