US Stock Market At A Major Decision Point

In our previous June 18th Stock Market Update, we pointed out that the benchmark S&P 500 (SPX) had tested overhead resistance at 3215 on June 8th and failed there before collapsing by 8% into a cluster of major underlying support at 3017 to 2927. 

Chart 1 below is an updated version of the one from that report. It shows that this cluster of major support, which has since been adjusted upward to 3022 to 2955, has been tested twice — on June 15th and 30th — as the market attempts to recover from it.

(Click on image to enlarge)

Chart 1

Our work suggests that the 3022 to 2955 area is likely to become the starting point of SPX’s next significant directional move, either up or down. 

Our tactical models (Correction Protection ModelAsbury 6) have recently shifted to a Risk Off (decreasing market exposure) status, from Risk On (increasing market exposure) on April 7th. Table 1 below shows that, through June 20th, four of the Asbury 6’s constituent metrics are Negative. This indicates market internals have been weakening.

Editor’s Note: 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.

(Click on image to enlarge)

Table 1

What the table does not show, however, is that the Asbury 6 constituents have since June 11th been atypically moving back and forth between green (positive) and red (bearish). We call this “blinking”. It indicates the market is at a Tactical balance point, and at a likely place for its next significant directional move to begin. The reason for this blinking is investor indecision on whether major support at SPX 3022 to 2955 will hold the market up.

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Disclosure: None.

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