Welcome to Asbury Research's
Logic-Over-Emotion Investing Blog
We launched the Logic-Over-Emotion blog in 2008 as a means to stay in touch with members of the investment community that have previously expressed an interest in Asbury Research. The blog contains brief excerpts from our premium research product, Asbury Research, which has been providing professional investors with a unique approach to technical, behavioral and inter-market analysis since 2005.
John Kosar on CNBC’s Street Signs Tomorrow
John Kosar, Director of Research, will be appearing on CNBC’s Street Signs between 2:00 and 2:30 pm ET tomorrow, Tuesday May 15th (1:00-1:30 pm CT, 11:00-11:30 am PT).
John and hosts Brian Sullivan and Mandy Drury will be discussing Asbury Research’s outlook for the US stock market through the remainder of Q2 and into Q3 2012.
2nd Quarter US Stock Market Direction?
Revisiting Our March 27th CNBC Appearance
With the US stock market down hard this week and threatening to move even lower in the wake of massive trading losses at JP Morgan, we thought that this was a good time to revisit our March 27th appearance on CNBC’s Street Signs.
During the interview with hosts Brian Sullivan and Mandy Drury, Director of Research John Kosar said that many of Asbury’s US stock market metrics were directly opposite to where they were back in August 2011 when the US market was bottoming, which suggested an upcoming US stock market decline amid relative underperformance by the Technology Sector.
The S&P 500 actually peaked four days after John’s appearance, on April 2nd, and has since (through May 10th) declined by 79 points or 6% while the NASDAQ 100 has coincidentally underperformed the S&P 500 as expected, by 3%.
The next questions to be answered are obvious, and have been a major point of focus in our research during the past week.
- is the April decline over?
- if the April decline isn’t over, how much deeper is it likely to go?
- what sectors of the market are poised to outperform into Q3 2012?
Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling 224-569-4112.
2nd Quarter US Stock Market Direction?
Revisiting Our March 27th CNBC Appearance:
Appeared on:
May 11th, 2012 at 2:20 pm
Weakness In Japan Last Week
Led Today’s US Market Collapse
The following (green highlights) is an excerpt from our May 1st report entitled How Recent Weakness In Japanese Stocks Should Affect The US.
Asbury Research subscribers can view the entire report by logging into our Research Center via the big gold button at the upper right corner of this page.
Asbury Research’s What We’re Watching Today
How Recent Weakness In Japanese Stocks Should Affect The US
Tuesday, May 1st 2012
Chart 1 plots the Japanese Nikkei 225 daily since 2011 along with its 200-day (orange, major trend proxy) and 50-day (blue, minor trend proxy) moving averages, and highlights the recent bearish minor trend change in the index.
Chart 1
The red highlights show that since late March the Nikkei: 1) first tested and reversed lower from overhead resistance at the 10,208 July 2011 benchmark high, then 2) broke minor underlying support at the 9768 50-day moving average, then 3) rebounded to retest and fail at 9768, which is now minor overhead resistance, then 4) set a fresh near term low to confirm the new minor downtrend.
This recent series of events clears the way for at least another 2% decline to test major underlying support at 9152 to 9051, which represents the October 31st benchmark high and the 200-day moving average.
Although the US stock market has recently rebounded from near term support levels, the positively correlated Japanese stock market has been moving in the opposite direction. This suggests that either: A) the tight and stable long term positive correlation between these two indexes has suddenly and inexplicably stopped working, or B) one of these two series is temporarily mis-priced. We believe it’s the latter.
Moreover, because the more forward looking US bond market has been pricing in upcoming economic weakness via a 44 bps collapse in the yield of the US 10-Year Treasury Note just since March 19th, while the positive correlation between these yields and the Nikkei 255 has remained tight and stable over the past month (+84% since April 1st), of these three series (the Nikkei 255, S&P 500 and US interest rates) the US stock market appears to be the one that is temporarily out of step.
Accordingly, further upcoming weakness in the Nikkei 225 will be expected to coincide with a bearish reversal in the S&P 500.
continued…
The S&P 500 actually peaked on the day of our May 1st report and, during just the past week, has already declined by 68 points or 5%.
The Japanese Nikkei 225 met our 9152 to 9051 initial downside target earlier today, trading as low as 9109 intraday.
Sample copies of the 8 different reports that we produce for subscribers are available by clicking here.
Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling 224-569-4112.
Declining US Interest Rates Not Supporting
The Stock Market’s Recent Enthusiam
The following (green highlights) is an excerpt from our Thursday March 15th Commentary entitled 5 Reasons For A Rebound In US Treasury Prices.
Commentaries, one of 8 different reports that Asbury Research produces for subscribers at various intervals throughout the month, are periodic in-depth reports that provide a comprehensive analysis of specific areas of the US financial landscape for the purpose of identifying emerging intermediate term price trends and the new investment opportunities that they may provide.
Asbury Research Subscribers can view the entire report by logging into our Research Center via the big gold button at the upper right corner of the screen.
Asbury Research Commentary
5 Reasons For A Rebound In US Treasury Prices
Thursday, March 15th 2012
Summary
Favorable, if not ideal, conditions now exist for at least a near term rebound in long dated US Treasury prices as benchmark US interest rates decline. This shifts our January 23rd Negative bias on long dated US Treasury prices to Positive, to capture a +2 17/32nds, +2% gain on short positions basis the CBOT 30-year T-Bond contract in a little less than 2 months.
Introduction
This week’s jump in yields has apparently brought the bond bears out of hibernation as, after months of the market being resigned to the inevitability of lower and lower benchmark US interest rates, analysts have seemingly been lining up on financial television this week to announce that US bond prices have peaked and are now beginning an appreciable decline. We think these analysts’ timing may be a little suspect.
In today’s report, we display and discuss 5 reasons to look for at least a near term bottom to emerge in long dated US Treasury prices.
Reason #3 of 5: Options Volume: The Market Is Too Fearful/Pessimistic
Chart 3 displays a daily bar chart of the CBOT T-Bond since 2005 in the upper panel, while the blue line in the lower panel plots the contract’s call-to-put ratio. This ratio measures extremes in complacency/optimism (red highlights) and fear/pessimism (green highlights) by these futures option traders.
Chart 3
The green vertical highlights between both panels show that these traders have reached a multi-year extreme in fear/pessimism on the future direction of long dated US Treasury prices that, as a contrary indicator, has either coincided with or led what have arguably been some of the most important bottoms in the T-Bond since 2005.
These data suggest favorable conditions for another similarly important bottom to emerge soon, perhaps between now and the end of the month.
continued…
Since this report was posted to our Research Center on March 15th:
- the CBOT 30-year T-Bond contract (US) has risen by +8 13/32nds or+ 6.2% between March 19th and April 27th
- the iShares 20+ Year Treasury Bond Fund (TLT) CBOT 30-year T-Bond contract has risen by +8.72 points or +8.0% between March 19th and April 23rd
- the yield of the US 10-Year Treasury Note has declined by 44 bps to 195 between March 19th and April 30th
A sample copy of our Commentaries, plus as samples of our other 7 reports, are available by clicking here.
Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling 224-569-4112.
A Flattening US Yield Curve &
Upcoming US Stock Market Direction
The following (green highlights) is an excerpt from our Monday April 24th Keys To This Week report.
Keys To This Week, one of 8 different reports that Asbury Research produces for subscribers at various intervals throughout the month, is a detailed weekly outline of key market factors and corresponding charts pertaining to the US stock market and market sectors, US interest rates, and the US Dollar that are most likely to influence US financial market direction during the upcoming week.
Asbury Research Subscribers can view the entire report by logging into our Research Center via the big gold button at the upper right corner of the screen.
Asbury Research’s Keys To This Week
Monday, April 24th 2012
The US Stock Market
Key # 9 of 12: The Yield Curve.
US 2s/10s Curve Is Flattening From Major Resistance:
BOND MARKET BETTING ON WEAKENING ECONOMY.
Chart 2 below plots the US 2-year/10-year yield curve since 2010. The red highlights point out that during the past month the curve has tested, failed at, and is now flattening from major overhead resistance at 188 bps to 199 bps, which represents its 200-day moving average (a widely-watched major trend proxy, orange highlights) and its August 2010 narrow extreme (red highlights). This recent sharp reversal in the 2s/10s curve, which has narrowed to 170 bps through the end of last week, suggests that the forward looking bond market is now starting to price in a weakening US economy in Q2/Q3 2012.
Chart 2
Chart 3, which plots the S&P 500 daily since 2009 in the upper panel (black bars) and US 2 year/10 year yield curve in the lower panel (blue line), shows that a flattening yield curve led US stock market peaks in April 2010 and May 2011.
Chart 3
continued…
A sample copy of Keys To This Week, as well as samples of our other 7 reports, are available by clicking here.
Asbury Research subscribers can view the entire report by logging into our Research Center via the gold button at the upper right corner of this page.
Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling 224-569-4112.
Race Horses, Meerkats, & Stock Market Direction
The statistical relationship between benchmark US interest rates and the US stock market — specifically the correlation between the yield of the 10-Year Treasury Note and the S&P 500 — has unquestionably been unstable over the past decade. However, we have noticed a significant pattern.
- When the US economy is strong and investors are confident, the US stock market typically acts like a race horse on a track , blinders on, charging forward toward the next stock market-specific piece of data that it can see — like quarterly earnings or the next piece of economic data — and is generally oblivious to anything else going on around it.
- Conversely, during periods of economic uncertainty when investors are apprehensive, the US stock market acts like those meerkats on Animal Planet, cautiously taking a quick 360 degree view across the horizon every time they come out of their underground bunkers, in anticipation of imminent danger.
Right now, it looks like we’re in a Meerkat Market.
Statistically, we know this because the positive correlation between the yield of the 10-Year Treasury Note and the S&P 500 has spiked up to 76% since the beginning of the year after being virtually non-existent throughout 2011, on the heels of a race horse-like 32% advance in SPX between October 4th and April 2nd.
Per the correlation, even though recent price action alone would suggest otherwise, the recently ramped-up correlation between these two series indicates that the the market is now apprehensive and skittish — and thus vulnerable. Moreover, the further that the yield of the 10-year declines from its March 19th peak of 2.39%, the more apprehensive investors are likely to be.
Asbury Research subscribers can log into our Research Center (via the big gold button at the upper right corner of this screen) to get more specifics and detail about our current outlook for both the US stock market and US interest rates during Q2 2012, as well as our current US stock market sector picks and directional expectations for the US Dollar.
US Stocks Bounce Off Of 1st Support
The following (green highlights) is an excerpt from our Tuesday April 10th What We’re Watching Today report entitled, US Market Decline Facing It’s First Big Test.
What We’re Watching Today is one of 8 different reports that Asbury Research produces for subscribers at various intervals throughout the month. Sample copies of all of these reports are available by clicking here.
Asbury Research Subscribers can view the entire report by logging into our Research Center via the big gold button at the upper right corner of the screen.
Asbury Research’s What We’re Watching Today
Tuesday, April 10th 2012
US Market Decline Facing It’s First Big Test
In today’s report we will attempt to address the following questions:
- Where is underlying support?
- How deep is this correction likely to be?
- How much can the market decline and still remain in a major bullish trend?
Chart 1 (not shown) displays a daily bar chart of the bellwether S&P 500 since 2011 and highlights three important clusters of underlying support.
The first level, at 1371 to 1356, represents the May 2nd and July 11th 2011 benchmark highs and the 50-day moving average (a minor trend proxy). It represents a 4% to 5% decline from the April 2nd high of 1422 and starts at about 11 points lower than Monday’s close.
continued…
The chart below displays the S&P 500 since January 2012 and highlights, in green, 1356 support.
The teal highlights show that, as of 3:05 ET on April 12th — not quite 2 full days after our April 10th report — the S&P 500 has already rebounded by 30 points or +2.2% from this support.
This is a pretty meaningful 2-day bullish reversal in the index, but the more important question is whether the aggressive rebound in the US stock market this week is the resumption of the October 2011 advance, or just a minor rebound within an emerging, deeper decline.
We discuss this topic in detail in two additional reports that we published this week, one that pertains to the positive correlation between the US stock market and energy-related asset prices.
Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling 224-569-4112.
Updating Our Q1 2012 Market Calls
The following table lists our “closed out” Q1 2012 investment ideas in individual assets. * The table is also available in our new 2012 Market Calls page.
Each of these ideas have appeared in one or more of Asbury Research’s 8 research reports, and are based on our broader macro analysis of the US financial landscape which includes the US stock market, US market sectors, US interest rates, the US Dollar, and economically influential commodity prices like copper and crude oil.
Our current market bias for the broader US stock market, US interest rates, and the US Dollar, as well as our directional bias for the individual sectors of the S&P 500, are all available to Asbury Research subscribers via our Research Center. Subscribers can log into the Research Center via the gold button at the upper right corner of this page.
Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling 224-569-4112.
* These performance data are based on specific market calls taken directly from Asbury Research reports in 2010 and 2011. We acknowledge that hypothetical performance results have many inherent limitations. No representation is being made that subscribers will achieve results similar to those shown. All market calls that appear in Asbury Research reports and are based on “at the close” entries and exits, hours after these reports were issued to subscribers.
John Kosar on CNBC’s Street Signs Today @ 2:30 pm ET
John Kosar, Director of Research, will be appearing on CNBC’s Street Signs at 2:30 pm ET today, Tuesday March 27th (1:30 pm CT, 11:30 am PT).
John and hosts Brian Sullivan and Mandy Drury will be discussing Asbury Research’s call for a bottoming/rising US stock market between August and October 2011, and what we are now expecting for US equities in Q2 2012.
We will be posting the video to our appearance on our website later this week, just as soon as CNBC makes it available, and will announce it via the Asbury Research blog.
Investor Sentiment: Directional Implications For US Stocks In Q2 2012
The following are 2 of the 29 charts that appear in our April 2012 US Financial Market Chart Book, which was distributed to Asbury Research subscribers on March 22nd 2012.
US Financial Market Chart Book is a monthly collection of key charts that focus on a broad array of financial data that collectively convey our best investment ideas for the next one to several months in the US stock market and sectors, US interest rates, the US Dollar, and in economically influential commodities.
It is one of 8 different reports that Asbury Research provides to subscribers at various intervals throughout the month.
A sample copy of US Financial Market Chart Book, as well as samples of our other 7 reports, are available by clicking here. Asbury Research subscribers can view the entire report by logging into our Research Center via the gold button at the upper right corner of this page.
Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling 224-569-4112.
Will The October Stock Market Rally Continue? Watch The Semis.
The following (green font) is an excerpt and a chart from our Monday March 12th Keys To This Week report. Asbury Research subscribers can view the entire report by logging into our Research Center via the gold button at the upper right corner of the screen.
In this report we identified the relative performance of the SOX Index versus the broad market S&P 500 as one of 11 key factors to upcoming US stock market direction.
excerpt from Asbury Research’s Keys To This Week
The US Stock Market
March 12th, 2012
Key #4> Relative Performance: PHLX Semiconductor (SOX) vs. S&P 500 (SPX) Indexes. NEAR TO INTERMEDIATE TERM BEARISH. Chart 2 below displays the daily relative performance of SOX vs. SPX in the upper panel (green line), quarterly overbought and oversold extremes by SOX versus SPX in the middle panel (red line), and SPX by itself in the lower panel (black bars).
Chart 2
The red vertical lines between all three panels show that the market-leading SOX Index has just started to work off mid February quarterly overbought extremes versus the S&P 500, and that previous similar extremes have coincided with or led most of the intermediate term trends of relative underperformance by the SOX since 2006 — and coincident declines by the broad market S&P 500.
continued…
Keys To This Week is one of 8 different reports that Asbury Research produces for subscribers at various intervals throughout the month. A sample copy of Keys To This Week, as well as the other reports, are available by clicking here.
Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling 224-569-4112.
Oil /Energy Prices Hitting Our Upside Targets
In our February 21st Asbury Alert (access requires subscription) we pointed out that our October 25th 2011 call for a rise to $105.00 per barrel in NYMEX crude oil had been met for an $11.82 per barrel, +13% advance in a little less than 4 months (see chart below).
More recently, in our February 28th Asbury Alert (access requires subscription) entitled Recent Strength In Oil Prices, Energy Sector Bode Well For US Stocks In Q1 2012, we pointed out that our January 6th 1350 upside target for the AMEX Oil Index was met for a 103 point, +8% advance in a little less than 2 months. During the same period the S&P 500 rose by 98 points or +8%.
Despite all of the chatter in the financial press this past week about an imminent rise to $5.00 per gallon at the pump, our experience has been that financial asset prices often stabilize, or even reverse direction, once initial upside price targets have been met. No better example of this than two of our energy-related price targets being met within the past two weeks, just as the financial media becomes obsessed on oil prices. Respectfully, we would say that the horse may already out of the barn. Remember the old adage “buy the rumor, sell the news”.
We have been keeping a close eye on oil prices for the past 6 months because of their influence upon other key financial asset prices like US equities, and their overall implications for the US economy. Our latest research pertaining to these relationships is available in our Research Center, which can be accessed by subscribers via the big gold button at the upper right corner of this page.
Crude Oil and the US Economy: Production, Prices & Predictions
The key focus of both the press and the US financial markets this week has been rising oil prices as commentators attempt to identify why crude oil prices have spiked to $109 per barrel as of this morning, and speculate on high oil prices’ implications for an emerging US economic recovery.
Here are a some interesting charts and data that address these issues.
1) US oil production has actually increased by 11% since 2008, following a 15% decrease between 2000 and 2008. This chart suggest that a lack of production is not the reason for this month’s spike in oil prices.
2) On February 19th, The Houston Chronicle stated that:
“The number of rigs in U.S. oil fields has more than quadrupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the United States now has more rigs at work than the entire rest of the world.“
These data help to explain why oil production has risen since 2008 as shown in the first chart, and suggest that this increase in production could continue, if not accelerate, in the years ahead.
3) Finally, regarding the assertion by some that rising oil prices will killing the US economic recovery, the chart below suggests otherwise. It plots NYMEX crude oil daily (red bars) alongside the S&P 500 (black bars), the latter which is often seen as a bellwether of US economic growth, since 2007.
The chart shows that these two series have maintained a tight and stable positive correlation to one another for almost 5 years — actually ever since the US stock market peaked in October 2007. It indicates that, at least over the past 5 years, the US economy — as represented by the S&P 500 — has actually flourished when oil prices were rising and has weakened when US oil prices were declining.
This chart corroborates what Treasury Secretary Tim Geithner said this morning in an interview with CNBC’s Steve Liesman, stating that the current spike in oil prices is primarily attributable to 1) global economic growth and 2) geopolitical tensions coming out of Iran.
So, bottom line, as long as the relationship shown in the chart above remains intact, recent history suggests that rising oil prices, at least from at or near their current level, are unlikely to put a damper on the recent rebound in the US economy.
Asbury Research subscribers can view our latest research and analysis on both crude oil prices and the energy sector, including our February 21st report entitled Crude Oil: Our $105.00 Target Has Been Met, by logging into our Research Center.
Our Initial Upside Target Has Been
Met In The Materials Sector (XLB)
The following (green highlights) is an excerpt from our February 7th Asbury Alert entitled, Initial Upside Target Met In Materials Sector (XLB). Asbury Research subscribers can view the entire report by logging into our Research Center by clicking the big gold button at the upper right corner of this page.
excerpt from Asbury Research’s Asbury Alert
February 7th, 2012
US Stock Market Sectors: The Materials Sector
In our January 9th 2012 Keys To This Week report, we said:
“Chart 6 plots a daily bar chart of the Materials Sector SPDR ETF (XLB) since June 2011 along with its 200-day moving average and highlights a chart pattern indicating temporary investor indecision — which the ETF broke out from to the upside on January 3rd. The pattern targets an initial +9% rise to 38.00.“
The chart below, which is an updated version of the one that appeared in our January 9th report, shows that our 38.00 upside target for XLB was essentially met on Monday as the Materials Sector ETF traded as high as 37.97 intraday.
Materials Sector ETF (XLB) Meets 38.00 Target
This equates to a +9.2% rise in XLB since we first identified this opportunity on January 9th.
Also noteworthy is that the S&P 500 (SPX) coincidentally rose by 5.2%, which means that XLB outperformed its benchmark by +4.0% during that same one-month period, fulfilling our January expectations for upcoming relative outperformance by the Materials Sector.
continued…
Since meeting our target XLB has already pulled back 4% from the highs.
Our US market sector analysis is an integral part of our overall macro outlook for the US financial markets because the constant process of sector rotation tends to lead intermediate term price trends in the broad US market.
We use the table below in our reports to to provide subscribers with a central location to find all of our existing market expectations for relative sector outperformance or underperformance, the month and year that we initiated the call, and how that market call has fared since we issued it. (The table in this report is about a month old. Subscribers can see a newly updated version by logging into our Research Center.)
Interested investors can get more information about our investment research including sample reports, client testimonials and our 2011 and 2010 market calls right here on our website, and can get subscription information by calling 224-569-4112.
John Kosar To Speak at Feb 21st Market Technician’s Association Meeting: Minneapolis
John Kosar, our Director of Research, will be the guest speaker at the Tuesday, February 21st meeting of the Minnesota Chapter of the Market Technician’s Association (MTA). The meeting will be held at the US Bank Building, 800 Nicollet Mall, at the Piper Jaffray offices. 9th floor in downtown Minneapolis at 4:00 pm CST (5:00 pm ET, 2:00 pm PT). This presentation will be given remotely, but live.
John will display and discuss approximately 20-30 charts covering the US stock market, market sectors and US interest rates that reflect Asbury Research’s macro view on the US financial landscape 1-3 months forward. The presentation should last between 30 and 45 minutes and will be followed by a brief Q and A session.
Further details and sign-up info are available by either visiting the Market Technicians Association website, or by calling the MTA’s New York City office at 646-652-3300.
