Beware Of February-March Seasonality

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One of the things that differentiates Asbury Research from other investment research firms is that we are completely data driven.  That simply means we aren’t anywhere near as interested in trying to read the tea leaves and forecasting the next big market move as we are in just reading the data we have and following the money.  One of the main ways we do this is via our two in-house models, the Asbury 6 and the Correction Protection Model (CPM). 

Chart 1 below shows that, with the exception of a quick blip between January 29th and February 2nd, the Asbury 6 has been on a Positive bias since November 4th while the benchmark S&P 500 has risen by 13.6%.  When our models turned back to Positive / Bullish in early November it was very difficult for some to put additional money into the market because the S&P 500 had already risen by a whopping 57% from the March 23rd low. 

But the data-driven nature of our approach kept us focused on the right thing.  That is, what the condition of the market is today, and not what it did last week or last month.

Chart 1: The Asbury 6 since Q4 2019

However, this is not to say that we don’t pay attention to history, because we do.  History does repeat.  And history warns that a big stock market speed bump may be right around the corner.

Chart 2 below displays 1st Quarter weekly seasonality in the S&P 500 based on data since 1957 and highlights the month of February in black.  The chart shows that the final week of February, which is next week, and the first and fourth weeks of March include the three seasonally weakest of the entire 1st Quarter.

Chart 2:  1st Quarter Seasonality in the S&P 500

Especially considering the market’s historically overextended condition, these data warn of the US broad market’s susceptibility to a significant corrective decline — perhaps in the 10% plus range — over the next month or so. 

What we won’t do, however, is to proactively start selling — at least not until our Tactical models indicate that today’s data is matching up with this historical tendency for seasonal weakness.  Until then, we will just keep following the money.

Our latest video below shows how we have navigated these recent market conditions for client portfolios in real-time.

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This communication is for informational purposes only. It is not intended as investment advice, or as an offer or solicitation for the purchase or sale of any financial asset.  No inferences may be made and no guarantees of profitability are being stated by Asbury Research LLC.  The risk of loss trading in financial assets can be substantial. Therefore, you should carefully consider whether such trading is suitable for you in light of your financial condition.

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