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Feeling Around For A Bottom

About a week ago, in our Monday Jun 22nd Keys To This Week: US Stock Market report (access requires subscription), we said that a number of important stock indexes and influential stocks — including the NASDAQ Composite (COMP) and 100 (NDX) Indexes, the Dow Industrials (DJIA), and the NYSE Composite (NYSE) — were all testing important, formidable underlying support levels that could spur a corrective rally.  A week later. the benchmark S&P 500 (SPX) has now risen by 275 points or 7.6% above the 3639 Jun 17th low.

This week, the number one question will be: Is this the beginning of a sustainable market bottom, or just another bear market rally within an uncompleted 2022 market decline?

Our Asbury 6 risk management model was built to answer that question because it looks at market internals — the stock market’s real under-the-hood condition — rather than focusing on the day-to-day up and down market noise that is primarily driven by algorithmic (computerized) trading.  This “noise” can really get investors in trouble because it pushes their “fear and greed buttons” to act on every erratic move, rather than just focusing on the actual condition of the market.

The table below shows that, through Friday Jun 24th, 4 of the Asbury 6 constituent metrics are negative (red).  The “A6” model itself has been on a Negative status since Jun 10th.

The Asbury 6 Risk Management Model

How To Interpret The Asbury 6: 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 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.

The Asbury 6 has been on a Negative status for most of this year, which has helped us to protect both our research subscribers and investment management clients from most of this year’s stock market decline.  However, when we see at least four of its constituent metrics turn green or Positive, we will view it as a leading indicator that a more sustainable and investable market bottom may be in place. 

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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.