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Asbury 6, Volatility Support More Market Strength
In our previous July 24th Stock Market Update & Asbury Investment Management Video, we pointed out that our Asbury 6 risk management model shifted back to a Positive (bullish) status on July 19th. We said this confirmed at least a Tactical bottom at the mid-June lows and indicated favorable market conditions for more upcoming strength. The benchmark S&P 500 has risen by an additional 231 points or 6% since then.
Table 1 below shows that the Asbury 6 remains on a Positive status heading into this week.
The Asbury 6 looks at market internals — the stock market’s real under-the-hood condition — rather than focusing on the day-to-day up and down market noise that is primarily driven by algorithmic (computerized) trading. This “noise” can really get investors into trouble because it pushes their “fear and greed buttons” to act on every erratic move, rather than just focusing on the actual condition of the market.
How To Interpret The Asbury 6: The Asbury 6 is our own quantitative risk management model which is updated daily in our Research Center. The “A6” is a combination of six diverse market metrics that we grouped together to look beyond the day-to-day, up-and-down noise of the stock market to determine its actual health — in much the same way that a doctor checks the patient’s vital signs during an office visit. Four or more metrics in one direction, either Positive (green) or Negative (red), indicate a Tactical market bias. 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.
In addition to the Asbury 6, another key to the sustainability of the current stock market rally is volatility. The blue bars in the lower panel of Chart 1 plot the CBOE Volatility Index (VIX) daily since March with a corresponding chart of the S&P 500 in the upper panel. The colored highlights in the lower panel show that the VIX moved back below 24.00 as of Jly 20th (green) after previously being above it since Apr 22nd (red). We view 24.00 as the line of demarcation between a Tactical buying opportunity in the benchmark S&P 500 and a sustainable market decline.
The Jly 20th move back below 24.00 indicated the market was complacent enough to facilitate a Tactical rally — and it still is heading into this week.
As long as the VIX remains below 24.00 and the Asbury 6 remains on a Positive status, the current mid-June rally is likely to continue, and could eventually evolve into a major bullish trend change.
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Disclaimer: This is provided for information purposes only and is not intended to be a solicitation to buy or sell securities. The performance indicated from back-testing or historical track record may not be typical of future performance. 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.