Jim, I don't believe it is so much that the algorithm fails or "implodes", but that at times, such as we have seen since ~ mid-Jan, the market becomes so sensitized that the least little bit of news, good or bad, can make it react so erratically and unpredictably that any sort of effort to divine its movement is no better than a coin flip. In other words, an event driven market is no more predictable that the events themselves, or how the market will react to them. The situation can even be made worse if you have a good following system that is "right" statistically based on yesterday's data, and then if the market is driven the other direction by Bennie passing wind loudly or some other spurious event, and that repeats itself for several days in a row, you can quickly rack up a string of wrong signals (your signals may be precisely "right", just one day behind) that can put a serious dent in any equity curve, especially if you are trading full positions at 100% margin or more. There will be times, of course, that market forces will still prevail, i.e. the snap back rally last week, but even those can be torpedoed with more bad news. If you are a permabear and never expect anything but bad news, you are golden, but the ones I know were wrong for a *long* time before the market finally caught up with their perpetual prophecies of gloom and doom. The only safe thing to do in these conditions is to reduce significantly position size and/or stay in Cash.
