US Stock Market: Most Of Our Key Market Internals Remain Positive
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In our October 16th Stock Market Update & Asbury Investment Management Video, we said the US market’s larger 2019 advance appeared to be resuming following month of choppy, sideways trading activity. Since then the benchmark S&P 500 (SPX) has risen as expected, by an additional 113.00 points or 4%. The US broad market index is now up 24% for the year.
One of the key reasons for our recent shift back to a bullish market outlook was the October 15th shift back to a Positive bias in our Asbury 6 Model. The latest status of the model, which we update daily, is shown in the table below.
We created the Asbury 6 Model primarily because algorithmic trading now accounts for about 80% of the daily volume in the US stock market. We believe these computer-generated trading programs are often designed to prey on human investors by causing quick, sharp spikes and collapses in financial asset prices. This provokes people to make emotionally driven, ill-timed decisions to enter or exit the market at the worst possible times and places, often to see prices move right back to where they started just a few days later.
The Asbury 6, by design, includes only one price-based metric. The other five are based on non-price based metrics like relative performance, investor asset flows, trading volume, and corporate bond yields. We use the Asbury 6 as a lie detector test for the market that helps us identify real, sustainable market advances or declines from computer-driven traps for real investors.
When all Asbury 6 are positive, market internals are the most conducive to adding risk to portfolios. Each negative reading adds an additional element of risk to participating in current or new investment ideas.
Daily updates to the Asbury 6 are available to Asbury Research subscribers, and are also a valuable input in the management of client accounts via Asbury Investment Management (AIM).
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This communication is for informational purposes only. It is not intended as investment advice, or as an offer or solicitation for the purchase or sale of any financial asset. No inferences may be made and no guarantees of profitability are being stated by Asbury Research LLC. The risk of loss trading in financial assets can be substantial. Therefore, you should therefore carefully consider whether such trading is suitable for you in light of your financial condition.