US Stock Market: Recovering From An 11% October Correction
In our October 25th report, we said that our Asbury 6 key market internals — as well as our Correction Protection Model (CPM) — were all in Negative territory as of early October, indicating a “risk-off environment” and a market that was vulnerable to a corrective decline. The benchmark S&P 500 (SPX) did indeed correct lower, by 11% between October 3rd and October 29th but, due to these timely signals from our metrics, we were able to 1) identify the danger for Asbury Research subscribers and 2) actually avoid most of the decline for Asbury Investment Management (AIM) clients.
As it stands right now, however, both CPM and our Asbury 6 are indicating the internal condition of the market has significantly improved. One of our Asbury 6, ETF asset flows, is shown in the lower panel of the chart below.
The rightmost green highlights show that the daily total net assets invested in the SPDR S&P 500 Trust ETF (SPY, which tracks the S&P 500) have moved back above their 21-day (monthly, our tactical time frame) moving average as of Wednesday, November 7th. This indicates an emerging trend of monthly expansion, similar to that which fueled higher prices in the S&P 500 (upper panel) from mid September to early October, and also from early July to late August.
Expanding investor assets indicate investor conviction in higher prices. As long as this emerging new trend of monthly expansion continues, the current broad market rally from the late October lows is likely to continue.
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