Research Excerpts

US Stocks At (Another) Key Decision Point

Posted on: Tuesday, July 31st, 2012

Our research is essentially a two-step process of: 1) anticipating upcoming market direction 1-2 quarters in advance, and 2) then identifying the potential inflection points in price where the expected move could begin and end.

The (green) text and graphic below, taken from our April 26th US Financial Market Chart Book, is a good example of this.

U.S. Stocks: Although monthly oversold conditions and near term washed‐out extremes in market breadth suggest that the US stock market‘s April rebound from key underlying support levels could continue week-to‐week, our more intermediate term quarterly bias is solidly negative. The recent decline in long term US interest rates, current extremes in investor sentiment, an historic low in market volatility, widening corporate bond spreads, plus 54 years of seasonality data are among the list of market factors which suggest that the October 2011 US stock market advance is in its latter to final stages, and that the next intermediate term quarterly trend in the US market is much more likely to be down than up. We would view a decline below the underlying support levels shown in Slides 3 (below) and 4 as evidence that the decline we are expecting is underway.

US Financial Market Chart Book
Asbury Research

April 26, 2012

The S&P 500 broke down below 1356 support eight business days after our April 26th report and subsequently declined by 89 points or 7% to 1267, slightly below our 1290 to 1274 support level, by June 4th.  That support level held as the S&P 500 has since rallied back to 1392 over the past two months.

The Dow made a clear breakdown through it’s corresponding support level at 12,200 on May 15th and then proceeded to decline by another 597 points or 5% to 12,035 by June 4th, slightly overshooting our 12,200 target.  The Dow has since rallied back to 13,128.

Shifting back to the present, our latest research shows that several key US stock indexes, including the S&P 500, NASDAQ 100 and Dow Industrials, are testing key inflection points this week.  These levels could be particularly pivotal right now with: 1) a slew of US economic data due out this week including Friday’s July jobs data, 2) Wednesday’s FOMC meeting announcement, and 3) Thursday’s monthly updates on monetary policy by the Bank of England and European Central Bank.

Charts and details on our current near term (monthly) and intermediate term (quarterly) outlook for the US stock market, and the specific overhead resistance levels that are currently being tested, are available to Asbury Research subscribers via our Research Center.  Click the big gold button at the upper right corner of this screen to log in.

Interested investors can request further information about our research by clicking here and completing the on-line form, or by calling our office at 1-888-960-0005.