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Asbury 6 Warns Of More Weakness
The benchmark S&P 500 (SPX) finished last Friday’s (February 11th) session at 4419, down 82 points or 1.8% for the week which more than wiped out the previous week’s gains. The US broad market index is currently down 348 points or 7.3% for 2022.
Market Internals Remain Weak
Table 1 below shows that, through last week, five of the Asbury 6 constituent metrics are negative (red).
The “A6” model itself has been on a Negative status since January 14th and the S&P 500 has declined by as much as 9.5% since then.
Editor’s Note: The Asbury 6 is our own quantitative risk management tool which is updated daily in our Research Center. The “A6” is a combination of six diverse market metrics that we grouped together 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 that a doctor first checks the patient’s vital signs during an office visit. Four or more metrics in one direction, either Positive (green) or Negative (red), indicate a Tactical market 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.
Key Index Levels To Watch
Chart 1 below shows that SPX finished last week below its 200-day moving average, a widely-watched major trend proxy currently situated at 4452, after temporarily rising back above it since Jan 31st. This decline back below the average warns the early February rally is just a minor rebound in an emerging major downtrend and is supported by the Negative status of our Asbury 6.
Primary Tactical overhead resistance next week exists less than 2.0% above the market at 4452 to 4495 and represents the 200-day MA and Dec 3rd benchmark low. As long as this area is not broken, it will support the argument that the US broad market is in the midst of an emerging major downtrend. Primary Tactical support is 4.0% below the market at 4279 to 4238 and represents the May 2020 benchmark high and Jly 19th and Oct 1st lows, which contained the index on the downside in late January. A sustained decline below there would clear the way for a much deeper move lower.
Sector Selection Via Our SEAF Model
The flow of money is one of the only metrics we know of that actually leads price movement. The SEAF Model “follows the money” to determine where investor assets are going, and where they are coming from, in US stock market sectors. SEAF stands for Sector ETF Asset Flows. This model tracks the total net assets invested in 11 Sector ETFs, in 3 different time frames, to determine the best opportunities to capture outright and relative performance in the sector space.
The latest data in multiple time frames indicate a continued trend of inflows into Energy (since 1/6) and a resumption of the Jan 27th trend of inflows into Financials. This is where the money is currently going in the sector space.
The latest data also indicate an existing trend of outflows from Consumer Discretionary (since 1/13) and a resumption of the 1/6 trend of outflows from Technology. This is where the money is coming from.
The SEAF Model’s two current sector picks, Energy (XLE) and Financials (XLF), are the two best 2022 year-to-date sector performers, both outright and relative to the S&P 500, according to SectorSPDR.com, They are also the only two sectors that are in positive territory for the year. From January 1st through Friday Feb 11th, XLE has risen by 26.86% on an outright basis and has outperformed the S&P 500 by 34.15%. During the same period, XLF has risen by 2.71% on an outright basis and has outperformed the S&P 500 by 10.00%.
Learn more about the SEAF Model Here
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Asbury Research Ideas, Expertly Managed
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