Our Models Are Back To Risk On, But The Market Remains Vulnerable
The title of our previous June 5th update was This Week’s Market Bounce: New Buying Opportunity Or Place To Further Reduce Risk?
In that report, our focus was on the benchmark S&P 500’s (SPX) successful June 3rd test of underlying support at 2722, as we tried to determine whether that was a sustainable market bottom or just a “dead cat bounce“.
Here is the chart we displayed in that report:
At market inflection points like these, we often defer to Asbury Research’s quantitative models to point the way. In this case, as shown in Chart 2 below, our Correction Protection Model (CPM) moved back to a Risk On (bullish) status on June 11th.
This reversed the previous May 7th Risk Off status, enabling us to avoid almost all of the 8% decline in SPX from the May 1st all-time high.
In addition, all of our Asbury 6 key market internals moved back to a corroborating Positive (bullish) status a day earlier, on June 10th as shown in Table 1 below, after previously being on a Negative (bearish) status since May 7th.
As long as CPM and our Asbury 6 remain on a Risk On, Positive, status, our outlook on the US stock market will remain bullish. However, we are also well aware of the fact — and so should our readers be — that the US stock market is in the 10th year of a bull market that historically only lasts about 4 1/2 years.
This means the market is severely over-extended — and vulnerable — so investors should consider keeping a much closer eye than usual on protecting their downside.
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