Research Excerpts

The Asbury 6: How We Determine Risk On From Risk Off Environments

Posted on: Thursday, January 31st, 2019

As we see it, one of our primary roles at Asbury Research is keep our subscribers from losing money in the market.  We do this by analyzing market conditions every day because, most of the time, you can spot emerging trouble before it becomes apparent in the major indexes.  That is, if you know where to look.

One of the ways we do this is via our Asbury 6, six key market internals. 

We think of the Asbury 6 as the cylinders of a six cylinder car.  When all six are firing, the car continues moving down the road, over hills and around obstacles.  However, if these cylinders stop functioning, then one-by-one, little-by-little, the car loses its ability to continue moving forward. 

The following are recent examples of how this metric works in both Risk Off and Risk On Environments.

The table below shows that, as of October 10th of last year, four of our Asbury 6 had moved into negative territory to indicate an emerging Risk Off Environment.  (Note: The Asbury 6 is updated daily and is accessible to subscribers in our password-protected Research Center.)

Asbury 6 Key Market Internals Through October 10th

This negative shift in stock market internals, which occurred just 13 days after the S&P 500 (SPX) set its all-time high on September 21st, preceded a 438.00 point, 16% decline by SPX into the December 26th lows.

More recently, on January 9th, the table below shows that four of the Asbury 6 moved back into positive territory to indicate an emerging Risk On Environment.  The S&P 500 has since risen by 123.00 points or 5%.

Asbury 6 Key Market Internals Through January 9th

The final table below shows that, as of today, all six of the Asbury 6 are in positive territory.

Asbury 6 Key Market Internals Through January 30th

As long as the Asbury 6 remain positive, the current rally will continue.  If they start to turn negative, however, it will indicate the market’s vulnerability to another decline. Moreover, the longer the Asbury 6 remain negative, the longer the decline will last.

And, most important, based on past performance, our clients should know that the next market decline is coming before it has a chance to do serious damage to their portfolios.


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