Bear Market Rally Or Emerging Bullish Trend?

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A May 26 bullish turnaround in Stock Market Internals, along with very bearish investor sentiment, suggests that the S&P has at least one strategic (monthly) bottom and potentially one strategic (one-to-one) bottom, according to The Asbury 6. several quarters) down. 500 at its May 20 low. However, a sustained rise above the S&P 500 4157, which is currently being tested, helped confirm the current US stock market rebound, amid continued declines in the CBOE Volatility Index (VIX) below 24.00. Will be necessary, this is not just a temporary bear market. Rally.

Market insiders have turned positive

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The table below shows Asbury 6, which is the risk management model of my firm Asbury Research. The Asbury 6 uses six diverse market metrics to look beyond the day-to-day, up and down noise of the stock market to determine their true health – just like a doctor first checking a patient’s vital signs Is. office visit. We look at “A6” as a lie detector test for the stock market.

The table shows that, as of Tuesday June 8, all Asbury 6 component metrics are positive (green). The “A6” model has been in a positive position since May 26 and has since gained 5% in the S&P 500.

Asbury 6 has identified the May 20 low of the stock market as a tactical bottom. Furthermore, as long as “A6” remains in a positive position, the current uptrend in the market is likely to continue.

How to interpret Asbury 6: Four or more metrics in one direction, either positive (green) or negative (red), indicate a strategic bias. The dates in each cell indicate that each individual component of A6 turned either positive (green) or negative (red). When all Asbury 6s are positive, market internals are most favorable for adding equity risk to a portfolio. Each negative reading adds an additional element of risk to participating in current or new investment ideas.

Investor Sentiment: Major Bottom Emerging?

The lower panel of the chart below plots weekly investor stock market sentiment as per the Investors Intelligence Survey (www.investorsintelligence.com) with the upper panel corresponding to the S&P 500 (SPX) chart. This is a survey of intermediate to long term oriented stock market newsletter writers (which actually includes Asbury Research).

The green highlights show this survey is 12 years old at least bullish The extreme is that, as a contrast indicator, the benchmark coincided with or closely led to arguably the most important bottoms in the S&P 500 during this period.

We interpret this as a sign that the US stock market is either already down or within a month or several quarters strategically.

What’s Still Missing: Low Volatility

The lower panel of the next chart plots the CBOE Volatility Index (VIX) daily since January, with the upper panel containing the corresponding chart of the S&P 500. The VIX is a real-time index that represents the market’s expectations for the relative strength of near-term price changes in the S&P 500.

The highlighted ellipsis in the lower panel shows that the VIX has been above 24.00 since April 22, which closely coincides with the recent stock market decline, and has been hovering above 24.00 for the past four sessions. Is. We view the 24.00 area as the line of demarcation between a bearish trend or a strategic buying opportunity in the S&P 500. A continued decline below 24.00 would take the S&P 500’s May 20 low to confirm it is an important market bottom.

S&P 500: Key Levels to Watch

The next chart plots the S&P 500 daily since 2021 with its 200- and 50-day moving averages, a widely watched major and minor trend proxy. The lowest red highlights show that the index is testing overhead resistance at 4115 to 4157, representing lows for the past eight sessions on February 24 and March 8. The market clearly “sees” this level as important, and we see it as a potential starting point for the index’s next strategic move – either up or down.

it will continue to grow above This resistance area amid continuous decline below The VIX has 24.00, as shown in the chart above, to indicate that there is a more important bottom on the S&P 500’s May 20 low. However, if the index continues to rise at the level of 4115-4157 while the VIX remains above 24.00, would suggest that the current stock market decline is still sustained and may resume.

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Credit: www.forbes.com /

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