How Sustainable Is This Rally?

In our previous March 24th Stock Market Update, entitled Searching For A Bottom, we pointed out that the late February stock market collapse had positioned the S&P 500 (SPX) right on top of formidable underlying support at 2193, which represents the August 2016 high. 

Chart 1 below, an updated version of the one from that report, shows that 2193 held like a rock (green highlights) and SPX quickly rebounded back up through its 2009 secular trend line at 2489 (blue) and— as of today — is now testing initial overhead resistance at 2722 to 2729 (red) which represents the March and June 2019 lows.

(Click on image to enlarge)

Chart 1

This test of overhead resistance sets up another near term decision point for the US broad market.

Chart 1 identifies the key inflection points in the benchmark S&P 500, both above and below the market. We use it as a dynamic game board, to help determine where to potentially move capital in and out of the market. Asbury Research’s tactical models, Correction Protection Model (CPM) and Asbury 6 help us determine what to do at those levels, and when.

Table 1 below shows that, through the close on Monday (April 6th), three of the Asbury 6 key market internals have moved back to a Positive reading. Four or more metrics in one direction, either Positive (green) or Negative (red), are necessary to indicate a tactical bias. The model is currently on a Negative status as of February 24th.

Table 1

The Asbury 6’s currently equally balanced status, while SPX is testing overhead resistance at SPX 2822 to 2856, indicates that this is a near term decision point for the market — and a preliminary test of the health and sustainability of the rally from underlying support at 2193.  How our tactical models react over the next several days will give us a good idea of what the market’s next move will be — either higher or lower.