Stock Market Breaking Major Support Amid Weak Internals

From our October 8th Keys To This Week report (access requires subscription):

“The benchmark S&P 500 (SPX) begins this week right on top of minor underlying support at 2873 to 2863 while 3 of our Asbury 6 market internals have moved into negative (bearish) territory.  Moreover, anther two of our Asbury 6 appear to be just another weak session or two away from also turning negative. 

This means SPX must recover from 2873 to 2863 immediately, on improving market internals, or will slip into a corrective phase and a potential test of major support at 2802 to 2763, which is an additional 3% to 4% below the market.”

A little more than 2 weeks later, the benchmark S&P 500 (SPX) has since collapsed by 234 points or 8.1.% and is now up just 1.2% for the year.

Is this the buying opportunity we’ve been waiting for, or just the beginning of a very bad 4th Quarter?

The good news is that SPX is currently testing underlying support at 2692, a level that we previously identified in our October 7th US Stock Market UpdateThese support levels are potential places for significant market bottoms to emerge. 

The bad news is that all of our Asbury 6 key market internals, per Table 1 one below, are in negative (bearish) territory.

Table 1

Our Asbury 6, which we update and make available daily in our research products, and are also a key component in our investment management decisions, measure the stock market’s internal strength in 6 different ways.

As long as all Asbury 6 remain in negative territory, it suggests a “risk off” environment where we focus on protecting investor assets rather than putting new money to work.

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