US Market Vulnerable To A Much Deeper Decline

In our previous February 21st Stock Market Update & Asbury Investment Management Video, entitled Beware Of February-March Seasonality, we pointed out that the final week of February and the first and fourth weeks of March were the three seasonally weakest of the entire 1st Quarter.

Chart 1 below shows that SPX actually peaked 5 days before that report, on February 16th, and subsequently collapsed by 227 points or 6% into Thursdays (Mar 4th) low. This decline actually broke the 50-day moving average (blue line), a widely-watched minor trend proxy, which warns of an emerging corrective decline. 

S&P 500 daily since October 2020

Meanwhile, our Asbury 6, one of two in-house Tactical models we use to indicate when to be investedturned Negative on March 3rd. The “A6”, shown below through March 5th, is is an objective, data-driven daily assessment of the internal health of the US stock market.

Asbury 6 Tactical Model through March 5, 2021

We think of the “A6” as the stock market equivalent of the shortlist of routine evaluations your doctor performs at a regular office visit. The doctor typically takes your pulse, checks your blood pressure, takes your temperature, listens to your heart and lungs, evaluates your blood, and checks your reflexes— all to establish a baseline assessment of your current condition. From there, the doctor can either send you home with a good report or elect to do additional testing if any of these metrics raises a red flag. In much the same way, the A6 helps to differentiate between healthy internal conditions that fuel sustainable market advances and weakening conditions that typically coincide with or lead market declines.

So, bottom line heading into next week, the benchmark S&P 500 itself is still holding onto Tactical support by its fingernails as shown in Chart 1 above. But 60 years of seasonality data and our Asbury 6 Tactical model warn of a much deeper decline.

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.