Market At Tactical Decision Point. Our Models Point Lower.
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In our previous August 29th update, entitled The Lights Are Blinking – Last Call For The March Rally?, we said that — despite the Federal Reserve’s implicit message to continue supporting asset prices no matter what — history still matters. Specifically, we were talking about the benchmark S&P 500’s (SPX) historically overextended 13.8% rise above its 200-day moving average at that time, which was a 20-year high. That metric actually extended a bit higher, to 15.9% on September 2nd as SPX rose by another 2.1% into the September 2nd high — right before collapsing by 6.7% into Friday’s low.
Chart 1 below shows that this recent collapse has positioned SPX right on top of its 50-day moving average, a widely-watched minor trend proxy currently at 3322.
We view this as a major decision point for the US broad market, from which the late March advance should resume — IF still valid.
Since no one can predict the future, the next best thing we can do, at an inflection point like this one, is to take a look “under the hood” of the market — to see which way it may be leaning.
The Asbury 6
Table 1 below displays the current reading of the Asbury 6, our own model which uses six different metrics to determine the day-to-day internal strength of the US stock market. The “A6” is one of two in-house tactical models we use to determine whether we should be on offense or defense — that is, adding more risk to portfolios or protecting our capital.
The table shows that five of the Asbury 6 constituents finished Friday’s session in Negative territory — with just Trading Volume still Positive. The “A6” has been on a Negative status since September 8th, after previously being Positive since July 2nd. It would take a shift back to Positive by four or more constituents to turn the A6 back to a Risk On status.
So, while the S&P 500 negotiates the 3322 area to determine whether its March advance is still valid and intact, under the hood our Asbury 6 indicates the market’s engine is sputtering. If these market internals continue to remain weak and are confirmed by a decline by SPX below 3322 support, it will indicate a long-awaited corrective US broad market decline is beginning.
Our latest video below shows how we have navigated these recent market conditions in real time.
Asbury Investment Management (AIM): Our Latest Video
Asbury Research Ideas, Expertly Managed
Here is our September 11th Video Review, which explains how we have recently utilized Asbury Research’s market analysis and investment ideas to professionally manage client portfolios.
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