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MLR - Q&A: I joined mainly for the Market Direction Model, but it has not performed very well in the last three months.

If you are only looking at 3-month periods then your time horizon is too short. The 3 months prior to that showed some of the best performance for the model in its history, so it is more a matter of when you started with the model rather than the model itself.


Note, the model has had its share of difficult periods during choppy trendless environments. Such periods result in a number of false signals. One such period was Oct-Dec 2011. Over the long run, the Market Direction Model has always well outperformed since it makes up its small losses with its gains. After a period of trendless months met with false signals, we noticed that most all members stay on but the very few that cancel, such as in July 2011 after the model had 5 false signals in a row (though losses were kept to typically less than 1% using the NASDAQ Composite as benchmark), missed the 5 true signals the model had starting August 2. Some of them then rejoined later in the year, when the market went back to being trendless, and more false signals occurred.


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