Research Excerpts

Everyone’s A Genius When The Market Is Going Up

Posted on: Wednesday, November 5th, 2014

It’s easy to make money when the stock market is going up.  When stock prices are rising, everybody is a genius.  The hardest part of investing is knowing when and where to get out of the way when the market is going down.

In our view, avoiding the downturns is both the most conservative and the most lucrative way to make money over time in the stock market.  Our trend model for the S&P 500 was built to specifically accomplish this.

We help Asbury Research subscribers to avoid the downturns by looking out over the US and global financial landscape to try to identify any upcoming potholes before we hit them.  Our September 16th report, entitled 3 Reasons Why A US Market Peak May Be Emerging, is a good recent example of this and appears below for your review.

We actually discussed this report with CNBC a day later, on September 17th.

Click the image below to view the video.

CNBC_09-17-2014

The bellwether S&P 500 actually peaked 3 days later, at 2019 on September 19th, and subsequently declined by 10% into the 1821 October 15th low before quickly recovering to set a new all-time intraday high earlier this week.  In the process, during the third week of October our trend model signaled  that the larger bullish trend had resumed.

In this particular case, the US broad market had a standard 10% correction that was quickly followed by a rise to new all-time highs and the whole thing only took about 6 weeks.  This means any investor that weathered the storm came away unscathed. No blood, no foul. No worries.

But the thing about corrections is that no one knows how deep they will be until they are overWhat if it was a 20% correction?  Or 30%?   Back in 2008, which wasn’t that long ago, a lot of investors learned the hard way how important it is to protect your assets when the market is going down.

Asbury Research subscribers can view our latest research by clicking here.

Interested professional investors can request subscription information and a sample report by clicking here and providing contact information.


Research Report: What We’re Watching Today
Date: September 16th, 2014
Topic: The US Stock Market

3 Reasons Why A US Market Peak May Be Emerging

there are some significant technical/quantitative headwinds to be aware of this month that, depending on the market’s reaction to them, could give an early indication of an upcoming bearish reversal.”

“One of these is the NASDAQ 100 (NDX), which is testing and reversing from formidable overhead resistance at 4147 this week. Since technology stocks tend to lead the US broad market both higher and lower, we would view continued weakness from NDX 4147 amid a meaningful (below the 21-day moving average) contraction in the daily assets invested in the QQQs as evidence that a September US broad market correction may be emerging, which would be further supported by a decline below 1991 in the bellwether S&P 500.”

From our September 5th report entitled
Technology Critical To September Market Direction

Chart 1 below displays the NASDAQ 100 (NDX) daily since January and shows that the September bearish reversal from 4147 resistance has positioned the index just above 1st support at 3998 to 3980, which represents the July 24th benchmark high and the 50-day moving average (widely watched minor trend proxy).

Chart 1

A breakdown below 3998-3980 would clear the way for a deeper decline, potentially to the August 7th benchmark low at 3845.

The blue line in the lower panel of Chart 2 below shows that the daily assets invested in the PowerShares QQQ ETF contracted below their 21-day moving average yesterday (September 15th), which suggests that a new monthly trend of contraction is beginning.

Chart 2

There are several important nuances on this chart to take notice of:

  • These assets started to contract after reaching $47.56 billion on September 8th and 10th, which has been the highest level that they have reached this year, back on February 25th.
  • The contraction in assets immediately following their February 25th peak led a 9% decline in NDX to its April 15th low.
  • These assets started to contract this month just as NDX tested and failed at 4147 resistance as shown in Chart 1 above.

These daily assets in QQQ would have to expand back above their 21-day moving average, and stay there, to indicate that there is enough bullish near term conviction to fuel another leg higher in both QQQ and NDX. Without this, more weakness is likely.

The blue columns in Chart 3 below display the daily seasonal pattern for the month of September in the S&P 500 (SPX), via its daily average percentage change since 1957. September 2013′s daily closing prices are plotted by the red line.

Chart 3

The teal highlights show that Day 11, which is September 16th (today) this year, is the seasonally strongest day of the month in the US broad market index, after which the index collapses into month end.

Considering what is emerging in the market leading NASDAQ 100 and QQQs as shown in Charts 1 and 2, this seasonality chart may be particularly significant this year.

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