Weak Market Internals Warn Of A Deeper Decline

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Introduction

In our previous September 12th update, entitled “Market At Tactical Decision Point. Our Models Point Lower.”,  we said that — even though the S&P 500 (SPX)  was situated right on top of minor support near 3351 — the market’s “engine was sputtering” according to our Asbury 6 tactical model. 

SPX broke down below that support level 5 days later and subsequently declined by another 132 points or 4% into the next support level at 3233 — which Chart 1 below shows is currently being tested.

Chart 1

Meanwhile, Table 1 below shows that our Asbury 6 model is still Negative, or Risk-Off.  This warns that SPX 3233 support will be broken, just like 3351 support was two weeks ago.

Table 1

Editor’s Note: The Asbury 6 is a combination of six diverse market metrics that we use as a lie detector test for the market — to help identify real, sustainable market advances or declines from computer-driven traps for investors. It is updated daily in our Research Center. We created the Asbury 6 primarily because algorithmic trading now accounts for about 80% of the daily volume in the US stock market. Many of these computer-generated trading programs are designed to prey on human investors by causing quick, sharp moves in financial asset prices that provoke people to make emotionally driven, ill-timed trading decisions to enter or exit the market at the worst possible times and places. The Asbury 6 is designed to look past the day-to-day noise of the market to determine its real “under-the-hood” condition.

The bottom line is that, as long as market internals remain weak — as indicated by the Asbury 6 — the market is likely to continue declining. 

One might ask why these small moves, like the 4% decline in the S&P 500 that occurred since our last update, even matter.  The answer is because small moves often turn into big ones.  When the Asbury 6 shifted to a Negative status on February 24th, we had no idea it was going to lead into an additional 1,034 point, 32% decline into the late March lows, but it did.  And knowing that weakness was coming helped us and our clients avoid most of that nasty decline.

Our latest video below shows how we have navigated these recent market conditions in real-time.


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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 carefully consider whether such trading is suitable for you in light of your financial condition.

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