Conclusion, Investment Implications, Strategy
Table 1 below shows that, as of the close on December 15th, five of the Asbury 6 constituent metrics have quickly moved back to a positive (green) reading. This turns the “A6” Model itself back to a Positive status as four or more metrics in one direction, either positive or negative, indicate a Tactical bias.
Recent quick signal changes indicate temporary investor indecision, and this indecision typically becomes the springboard for SPX’s next Tactical trend. The triangular chart pattern this recent sideways price activity has created, as shown in Chart 2 below, is suggesting a bullish resolution to recent indecision.
Chart 1 below highlights the Asbury 6’s signals over the past 12 months
SPX Coiling For It’s Next Move
Despite yesterday’s huge post-Fed announcement rally, the benchmark S&P 500 is essentially right where it was in early November. The red highlights in Chart 2 show that this recent sideways, choppy trade has traced out a triangular pattern on the chart. A sustained rise above the upper boundary of the pattern at 4705 would confirm a bullish breakout and target an additional 5% rise to 4930.
Asbury 6 FAQ
Q: What is The Asbury 6?
A: The Asbury 6 is a combination of six diverse market metrics that we have combined as a tool 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 as a doctor first checks the patient’s vital signs during an office visit. We view the A6 as a lie detector test for the market. It helps us to identify real, sustainable market advances or declines from computer-driven traps for investors — the latter which we believe are often generated by algorithmic (computer) trading, which now comprises about 80% of daily trading volume.
Q: How should I interpret and use the Asbury 6?
A: The “A6” is updated daily in our Research Center and includes data through the previous day’s market close. Four or more metrics in one direction, either Positive (green) or Negative (red), indicate a tactical 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.
When the market is at a Tactical inflection point, we will often see the Asbury 6 constituents move quickly and erratically back and forth between Positive (green) and Negative (red) readings. We call this phenomenon “blinking”. This is what is occurring now. Blinking indicates temporary investor indecision and is often the precursor to the market’s next sustained directional move. The price area that the A6 is currently blinking at is between SPX 4744 (Nov 22nd high) and SPX 4495 (Dec 3rd low).
Q: Why use quantitative models?
A: Because they provide us with the tools to be disciplined in our investment approach, rather than chasing the market’s latest twitch. Another key reason is to help keep drawdowns (losing periods in our portfolios) small and relatively short-lived. There is no perfect model that will catch every trend because no one can see the future. But we are convinced that a disciplined, data-driven market approach can provide investors with a methodology to participate in the stock market and capture most of its gains, over time, with much less risk.