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Stock Market At A Tactical Decision Point

S&P 500 Balancing On Tactical Support

The red arrow in Chart 1 below shows that the benchmark S&P 500 (SPX) is beginning this week right in the middle of an important band of underlying support at 4494 to 4417 which represents the 200- and 50-day moving averages  (widely-watched major and minor trend proxies) and the Mar 3rd high.  We view this as primary Tactical support, which simply means this is where the current rally from the index’s late February lows must resume if is still valid.

Chart 1

Put another way, a sustained decline below this band of support would suggest that SPX’s larger Jan 4th decline is resuming.

The Asbury 6: Still Positive, But Also At An Inflection Point

The Asbury 6 is our in-house Tactical model that indicates whether the US stock market is in a Risk On (staying invested or adding additional risk) or Risk Off (tightening protective stops on existing positions or reducing risk) environment.  Through Friday April 8th, Table 1 below shows that the “A6” remains on a March 17th  Risk On status after previously being Risk Off since January 14th.

Table 1

Not shown, however,  is that — like the S&P 500 itself — many of these constituent metrics are at decision points from which they must strengthen again to remain in bullish territory.  Therefore, we are going to be paying special attention to the S&P 500’s reaction to 4494 to 4417 support this week, and the response from the Asbury 6, to determine whether this is a new place to add equity risk or time to reduce equity exposure and prepare for a potential decline to new lows.

Editor’s Note: The Asbury 6 is our own quantitative risk management model 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.

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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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