Conclusion, Investment Implications, Strategy
Table 1 below shows that, as of the close on Tuesday December 6th, four of the Asbury 6 constituent metrics have shifted to negative (red) . This turns the “A6” Model to a Negative status, from Positive on October 18th, as four or more metrics in one direction indicate a directional bias.
Table 1
Chart 1 below highlights the Asbury 6’s signals over the past 13 months
Chart 1
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), Negative (red), and sometimes equally balanced (3 positive/3 negative) readings. We call this phenomenon “blinking”. Blinking indicates temporary investor indecision, and the market level where the blinking occurs typically becomes the starting point of the market’s next sustained directional move.
Q: Why use quantitative models?
A: Because they provide us with the tools to be disciplined and consistent 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 repeatable methodology to participate in the stock market and capture most of its gains, over time, with significantly less risk.