The 2021 Uptrend Resumes: Where To Invest?
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There are two primary questions that all investors have to ask themselves:
- should I be invested? And, if the answer is yes,
- what should I be invested in?
For us, the ultimate is to be in the parts of the market that are outperforming the S&P 500 when it’s going up, and to be either underinvested or out of the market when it’s going down.
#1: Should I Be Invested?
Our Asbury 6 risk management model is one way that we answer Question #1. In our previous October 10th bi-weekly market update, we said that the Asbury 6 had been on a Negative status since September 14th — and that this indicated the US stock market was in a corrective (bearish) phase. During these negative “Risk Off” periods, we suggest that clients consider paring back market exposure by tightening protective stops, exiting the poorest performers in their portfolios, or just simply moving a portion of their assets to cash.
The Asbury 6 actually moved back to a Positive status on October 14th, indicating that the previous correction was over and the larger 2021 Strategic advance had resumed. During these positive “Risk On” periods, we suggest that clients consider increasing their market exposure by reestablishing previous positions and/or adding new ideas to their portfolios.
Table 1 below shows that, through Friday Oct 22nd, all of the Asbury 6 constituent metrics are positive (green). which keeps the model itself on its October 14th Risk On status.
How To Interpret The Asbury 6: Four or more metrics in one direction, either Positive (green) or Negative (red), indicate a Tactical bias. Accordingly, it would take a shift back to four or more green metrics to move the “A6” back to a Positive status. The dates in each cell indicate when each individual constituent of the A6 turned either positive (green) or negative (red). 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.
As long as this Risk On status remains intact, we will suggest that subscribers maintain current levels of market exposure or add risk to portfolios.
#2: What Should I Be Invested In?
We have a number of in-house quantitative models to help answer that question. One of them is our SEAF Model, which stands for Sector ETF Asset Flows.
The SEAF Model is unique because it measures relative investor asset flows (rather than relative price performance) in three different time frames:
- Trading (5 days)
- Tactical (21 days), and
- Strategic (63 days).
This model is updated weekly, over the weekend when the markets are closed, through the closing date shown on the table. Its purpose is to “follow the money” in sector rotation because investor asset flows consistently lead price.
Table 2 below displays the latest status of the SEAF Model. The green highlights show that Energy and Financials are current buy/overweight signals: Energy since September 16th and Financials since October 7th.
Since September 16th, the Energy Select Sector SPDR Fund (XLE) has risen by 22.7% while outperforming the SPDR S&P 500 ETF Trust (SPY) by 17.5%.
Since 10/11, the Financial Select Sector SPDR Fund (XLF) has risen by 5.2% while outperforming the SPDR S&P 500 ETF Trust (SPY) by 0.9%.
As long as Energy and Financials retain their current bullish status according to the model, we will suggest that subscribers maintain long/overweight positions in them. When the model indicates that investor assets are moving out of these sectors and shifting to other sectors, we will “follow the money” by closing out these positions and moving those assets into the new sector or sectors as indicated by the model.
Our latest video below shows how we have navigated these recent market conditions for client portfolios in real-time.
Asbury Investment Management (AIM): Our Latest Video
Asbury Research Ideas, Expertly Managed
Here is our October 22nd Video Review, which explains how we have recently utilized Asbury Research’s market analysis and investment ideas to professionally manage client portfolios.
Bonus Video: AIM Explained
This new video talks about the typical client that Asbury Investment Management (AIM) works with, and specifically explains our process in managing these accounts.
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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.