Conclusion, Investment Implications, Strategy

This Special Report is intended to quickly bring subscribers back up to speed following our holiday break.  The US stock market begins 2020 in good internal condition according to our tactical models (CPM, Asbury 6).  However, our recently-met upside targets in the NASDAQ Indexes and some influential stocks like Apple (AAPL), a seasonally weak 1st Quarter, and too-bullish investors warn of the market’s vulnerability to a corrective decline later this quarter.

Asbury 6 Remains Positive As Of October 15th

Table 1 below shows that all Asbury 6 key market internals finished 2019 in Positive (bullish) territory, after initially turning to a Positive bias on October 15th.  

Table 1

When all Asbury 6 are Positive, market internals are the most conducive to adding risk to portfolios.

Correction Protection Model (CPM) Remains Positive As Of October 17th

The green (Risk On) and red (Risk Off) arrows in Chart 1 below show CPM’s signals since 2019, and that it remains on an October 17th Risk On signal.

Chart 1

Earlier this morning, we published updated performance data for CPM through 2019.

AAPL Meets Our $291.00 Upside Target

Chart 2 below shows that Apple Inc. (AAPL) met our $291.00 upside target, as published in our September 16th Keys To This Week, on December 27th to capture a 32% gain in a little over 3 months.

Chart 2

Financial asset prices often begin corrective declines once major upside targets like this one are met.  AAPL has maintained a tight and stable long term positive correlation to both the S&P 500 (SPX) and NASDAQ Composite (COMP) and 100 (NDX) Indexes.

 

Editor’s Note: This recently-met price target in AAPL is a good example of the many investment ideas we provide, in addition to those that appear in the top section of the table in the Stock and ETF Ideas page of the Research Center.  To clarify, in the top section of this table, Asbury Research uses a quantitative, repeatable, multi-step process to identify trending stocks with favorable market internals, low initial risk, and exceptional risk/reward ratios by scanning over 6,000 US stocks and about 200 ETFs after the market close every business day.  Of those identified by our scans, we only consider the ones 1) with a market capitalization greater than $2 billion, 2) with an initial risk of 5% or less, and 3) with a risk/reward ratio of 1:3 or greater.  However, we also provide a constant stream of price targets for many more stocks and ETFs, like those that appear every week in Table 2 of our Keys To This Week for US Stock Market Sectors & Industry Groups, as well as for global stock indexes as they appear in the middle section of our Asbury Research Trade Ideas table.  The difference is, in the latter, these ideas provide price targets but do not meet our strict risk/reward parameters, so investors are advised to implement their own parameters as they pertain to their own risk appetite and financial condition.

S&P 500: Newly-Updated Levels To Watch

Chart 1 plots the benchmark S&P 500 daily since April 2019 with its 200-and 50-day moving averages, widely-watched major and minor trend proxies.  The chart identifies initial support at 3212 to 3192, which is 1% below the market.  The current minor (tactical) uptrend remains valid above primary support at 3154 to 3125, which is 3% below the market.

Chart 3

The major uptrend remains intact above 2970 to 2941, which is 9% below the market.

Seasonality Weakens Later This Month

Chart 4 below, a quarterly chart based on data since 1957, shows that SPX seasonally peaks for the 1st Quarter during the first week of January (this week) before weakening into late February.

Chart 4

The pink highlights show that the second and third weeks of January are the 5th and 3rd seasonally weakest of the entire 1st Quarter.

Investor Sentiment Remains At Too-Bullish Extremes

Chart 5 below shows that a survey of near to intermediate term oriented individual futures traders is hovering at multi-year most bullish extreme on the S&P 500 that, as a contrary indicator, has previously coincided with or closely led every significant peak and subsequent multi-month decline in the broad market index since 2018.

Chart 5

However, it’s important to note this is a strategic metric rather than a tactical one.  This metric, along with 1st Quarter seasonality, suggests the 2019 uptrend is — in baseball terms — in the 8th or 9th inning.  However, these strategic metrics would not become actionable unless/until our tactical models (CPM, Asbury 6) turned to Risk Off/Negative.