An Over-Extended Market Found A Catalyst
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In our February 7th Stock Market Update, we pointed out that the S&P 500 (SPX) had declined into important underlying support at 3212 to 3205 as of January 31st. That support held, and the US broad market index subsequently rebounded to new all time highs.
In that Update, we said:
“So, while the stock market appears to have just avoided a downside correction, its historically overextended condition remains intact and our models still indicate some investor apprehension. We see this as an environment to … keep a close eye on your holdings and have to an exit plan already in place — just in case this investor apprehension turns into another sharp market decline.”
The chart below shows that SPX set a set all-time high at 3394 on Feb 19th before collapsing again, by 416 points or 12.3%, into yesterday’s lows at 2977. The red highlights show that three days earlier, on Monday Feb 24th, our tactical models — the Correction Protection Model and the Asbury 6 — simultaneously shifted to Risk Off/Negative, which has helped us avoid the big decline since then.
S&P 500 daily since July 2019
This past week has certainly been a tough time for investors, but provides us with an opportunity to explain exactly what we do. Our market analysis and quantitative models cannot see into the future. What they can do, though, is to objectively measure the internal,”under the hood” strength or weakness of the US stock market on a day-to-day basis, which we use to identify investment opportunity from excessive risk. We are completely data driven, which keeps us agnostic of all the opinion, emotion, and after-the-fact explanation of market moves that regularly appear in the financial press — which, in our view, hurts investors more than it helps them.
There are many different investment time horizons one can invest in, and investors need to know what their own particular time frame is. As as research firm that provides market intelligence to a broad clientele, from multi-billion dollar hedge funds to retirees trying to manage their own life savings, we keep our tactical (actionable) time frame at one business month — big enough so that everyone within that spectrum of investors can use it.
For our sister firm Asbury Investment Management (AIM), however, we can can be much more proactive and agile. For our managed accounts, we actually started moving money out of the market for clients on Thursday, Feb 20th, and by the open on Feb 24th client assets were completely out of the market. We use the same metrics and tools and adhere to the same investment philosophy as our research product, but simply execute them at a quicker speed because we are actually managing the money.
Our latest video below shows how we do this in real time.
Asbury Investment Management (AIM): Our Latest Video
Asbury Research Ideas, Expertly Managed
Click Here for our February 27th 2020 Video Review, which explains how we have recently utilized Asbury Research’s market analysis and investment ideas to professionally manage client portfolios.
AIM offers a unique approach to investment management that is data driven, dynamic, and solely based on the current technical condition and quantitative risk/reward profile of the financial markets.
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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 therefore carefully consider whether such trading is suitable for you in light of your financial condition.