Conclusion, Investment Implications, Strategy

The benchmark S&P 500 will begin today’s session at a very important Tactical decision point / inflection point from which a 3% rise to formidable overhead resistance at 4637 or a decline to major underlying support near 4200 is likely to begin.

Analysis and Rationale

Heading into the US stock market open this morning, a pretty convincing list of indexes, indicators, and relative relationships overwhelmingly indicate that this is a very important Tactical decision point for the benchmark S&P 500 (SPX) from which its next significant directional move, either 3% higher to test the 4637 March 2022 benchmark high or 6% lower to test major underlying support near 4200, is likely to begin.

You can see this Tactical indecision in a pretty compelling list of metrics that includes volume, volatility, ETF asset flows, a comprehensive list of important relative performance relationships that determine whether the market is positioned offensively or defensively (SPX, DJIA, COMP, NDX), and the relationship between Small (SPSM), Medium (SPMD) and Large Cap (SPLG) stocks versus the S&P 1500 (SPTM).

You can also clearly see this Tactical indecision in the Asbury 6 below, which retains its current Aug 4th Negative status but is now deadlocked at 3 red and 3 green constituent metrics through the close yesterday, August 29th.

The Asbury 6 through 08-29-2023

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 constituent metrics 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.

The chart below shows that this inflection point is situated between 4461 and 4510 in the S&P 500 and represents the 50-day moving average (minor trend proxy) and the 50.0% and 61.8% retracements of the Jly 27th to Aug 18th decline at 4477 to 4510.

S&P 500 daily for the past 12 months

A sustained rise above SPX 4510, corroborated by a Positive shift in the Asbury 6, a sub-16.00 CBOE Volatility Index (VIX), and monthly expansion in the Cumulative Volume Index (CVI) would indicate that the larger October 2022 major uptrend has resumed and would clear the way for a test of the next important resistance level at 4637.

Conversely, a sustained decline below SPX 4461, corroborated by a Negative status in the Asbury 6, a sustained rise above 16.00 in the VIX, and the resumption of the current trend of monthly contraction in the (CVI) would indicate that the current corrective decline in the S&P 500 remains intact and is resuming, setting the stage for a test of major support near 4200.