Monthly Investment Compass - Charting The Course Of The Markets April 10th, 2021 - Asbury Research
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Monthly Investment Compass
Charting The Course Of The Markets
April 10th, 2021
Monthly Investment Compass
1) Executive Summary: April 10th, 2021
• U.S. Stock Market: The November 2020 Tactical advance in the US broad market has recently
resumed following what we would call a relative performance correction that began in mid
February. This resumption is being led by Semiconductors and Technology, perennial market
leaders that had previously been underperforming for about six weeks. These market leaders
target an additional 5% to 7% rise from their current levels, which would suggest perhaps a bit
less from the broad market S&P 500 (SPX). Bigger picture, however, over‐extended price
momentum, too‐bullish investor sentiment, and May through September seasonality warn of mid
to late 2nd Quarter correction.
• Size: Large Cap has been outperforming Small Cap since on a Strategic basis Mar 22nd, after
previously underperforming since October 2020.
• Style: The S&P 500 Value ETF’s (SPYV) Nov 9th trend of Strategic relative outperformance versus
the SPDR S&P 500 ETF (SPY) is being tested and must resume from current levels if still valid.
• Cross Asset: Our CARP Model suggests that the market’s previous Q4 2020 trend of increasing
risk appetite may be resuming as High Beta, Big Cap Technology, and Growth stocks are starting
to outperform again.
1
Monthly Investment Compass
2) Executive Summary: April 10th, 2021
• Global Relative Performance: Our model indicates this is not an opportune time to diversify into
overseas markets as, of the 24 foreign stock markets we track, just three are outperforming the
US (SPY) on a Strategic (quarterly) basis.
• Sector & Industry Group Performance: The latest data in multiple time frames show a continued
trend of inflows into Financials (since 11/12) and a new trend of inflows into Technology (since
4/8). This is where the money is currently going in the sector space.
• Individual Stocks & ETFs: There are current long/overweight ideas in L, SLX, HAE, and FOCS.
• US Interest Rates: The yield of the benchmark 10‐Year Treasury Note is testing Tactical
overhead resistance at 1.70% which, if broken, would clear the way for a rise to 2.05%.
2
US Stock Market
Price & Trend (1): Technology Indexes Target 5% to 7% Advances
The Apr 1st breakout from investor A coincident bullish breakout in the Large
indecision in market‐leading Tech Cap Tech NASDAQ 100 targets an
bellwether NASDAQ Composite targets additional 5% rise to 14,370 that will
an additional 7% rise to 14,700. remain valid above 13,209.
3
US Stock Market
Price & Trend (2): Semis Target 5% Rise, Small Cap Struggling
The Mar 31st breakout from investor The market‐leading Small Cap Russell 2000
indecision in the Technology‐leading PHLX has been drifting sideways since February
Semiconductor Index targets an and is struggling to hold above Tactical
additional 5% rise to 3450. support at its 50‐day MA. A weak link?
4
US Stock Market
Price & Trend (3): S&P 500 Resilient At Tactical Support
Despite recent weakness in Semiconductors, Technology, and Small Cap, the
benchmark S&P 500 (SPX) has been resilient at its 2020 uptrend line and 50‐day MA.
This is Tactical support and is currently 3% to 5% below the market. 5
US Stock Market
Relative Performance (1): Semis, Technology Starting To Outperform Again
As of late March the Tech‐leading PHLX Tech bellwether NASDAQ Composite is in
Semiconductor Index has started to the midst of an emerging trend of
outperform the S&P 500 on both a monthly relative outperformance vs. the
Tactical and Strategic basis. Bullish. S&P 500. Tactical decision point.
6
US Stock Market Relative Performance (2): Defensive Dow 30 Weakening, Small Cap Lagging Meanwhile, the defensive Blue Chip Dow The laggard in this shift back to a relative Industrials shifted back to a Tactical trend Risk On environment is the Small Cap of relative underperformance vs. the S&P Russell 2000 which remains in a Mar 23rd 500 as of Apr 1st. Broad market bullish. trend of Strategic underperformance. 7
Asbury’s Correction Protection Model (CPM)
Wealth Preservation: When To Be Invested
Purpose & Key Features
• Protects investors against significant market
declines
• without sacrificing long term performance
under a variety of market conditions,
• while greatly reducing market risk as
measured by actual time invested and by
volatility of returns (low beta).
Performance Highlights Since 2011
• CPM has a beta of 0.33 vs. 1.0 for SPX.
• CPM has averaged 5 signals per year.
• CPM has only been in the market 66% of the
time, significantly reducing risk.
• CPM has had a maximum drawdown of 9.5%
compared to 17.9% for SPX.
8
Asbury’s Correction Protection Model (CPM)
Wealth Preservation: “Risk On” As Of April 1st
About CPM CPM Since Q4 2019
• The Correction Protection Model (CPM) is our
own proprietary defensive model for the S&P
500. It is quantitative, objective, and data driven.
• CPM is binary: it is either Risk On or Risk Off.
• CPM is not a returns‐driven model, but rather a
wealth preservation tool. It was designed to
protect investor assets during potentially
dangerous market conditions while also taking
advantage of the market’s historical upward bias.
• We use CPM as a key indication of when to
increase market exposure (Risk On) and when to
be risk‐averse (Risk Off).
9The Asbury 6 Key Market Internals
Risk Management: When To Be Invested
The Asbury 6: “A6” Signals Since Q1 2020
• the monthly rate of change in the
S&P 500
• the relative performance of
equity prices versus high yield
bond prices,
• investor asset flows
• corporate bond spreads
• trading volume
• market breadth
10The Asbury 6 Key Market Internals
Risk Management: Positive Since March 11th
Four or more metrics in one direction, either Positive
(green) or Negative (red), indicate a tactical bias.
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 existing or new investment ideas.
11The Asbury 6 Key Market Internals
Momentum: Near Term Positive
SPX’s 1‐month rate of change, a Tactical momentum gauge,
has essentially been positive since Nov 4th.
12The Asbury 6 Key Market Internals
Relative Performance: Near Term Positive
The red highlights show the S&P 500 (SPY) has essentially been in a trend of monthly
relative outperformance versus junk bond prices (JNK) since Mar 8th. This has
historically coincided with Tactical stock market advances.
13The Asbury 6 Key Market Internals
ETF Asset Flows: Near Term Positive
The total net assets invested in the SPDR S&P 500 ETF have essentially been in a trend
of monthly expansion since Mar 11th. Monthly expansion in these assets is
characteristic of Tactical market advances.
14The Asbury 6 Key Market Internals
Corporate Bond Spreads: Near Term Positive
High yield corporate bonds have been in a trend of monthly narrowing since Mar 24th.
This indicates near term complacency in the bond market that has historically
coincided with Tactical stock market advances.
15The Asbury 6 Key Market Internals
Volume: Near Term Positive
On Balance Volume (OBV) has essentially been back above its 21‐day moving
average since April 5th, indicating an emerging trend of monthly expansion that is
characteristic of Tactical stock market advances.
16The Asbury 6 Key Market Internals
Market Breadth: Near Term Positive
The NYSE Composite’s A/D line moved above its 21‐day MA on Apr 1st to indicate a
monthly trend of improving market breadth that is characteristic of
Tactical stock market advances.
17Asbury Research Stock & ETFs Ideas
Quantitative Stock Selection
Asbury Research uses a quantitative, repeatable, multi‐step process to identify trending stocks
with favorable market internals, low initial risk, and exceptional risk/reward ratios.
We use our own proprietary models, Asbury Momentum which buys strength and Asbury Value
which buys weakness, to scan over 6,000 US stocks and about 200 ETFs every business day. Of
those identified as trade candidates, we only consider those:
• with a market capitalization greater than $2 billion
• with an initial risk of 5% or less
• with a risk/reward ratio of 1:3 or greater (the reward must be 3 times the risk).
We then adjust the protective stop throughout the trade to either further mitigate risk or to lock
in open trade profits. Protective stops are only moved in the direction of the trade.
18Asbury Research Stock & ETFs Ideas
Quantitative Stock Selection: Our Current Stock & ETF Picks
19Asbury Research Stock & ETFs Ideas
Loews (L), Steel ETF (SLX) Closing In On Our Upside Targets
Financial Services stocks Loews Corp has The VanEck Vectors Steel ETF has risen
risen by 8% since our Mar 2nd buy idea. by 6% since our Mar 26th buy idea. Our
Our $57.00 upside target is an additional $57.00 initial upside target was met
6% above the market. on Apr 5th.
20US Stock Market
Asset Flows: Near Term Positive
The daily total net assets invested in the Invesco QQQ ETF, which tracks the market‐
leading NASDAQ 100 (NDX), shifted to a trend of monthly expansion on Mar 16th. This
is characteristic of Tactical advances in this market‐leading ETF.
21US Stock Market
Stocks vs Bonds: Near Term Positive
The SPDR S&P 500 ETF (SPY) has been in a monthly trend of relative outperformance
versus the iShares 20+ Year Treasury Bond ETF (TLT) since Nov 5th. Relative
outperformance by equities has historically been positive for US stocks.
22US Stock Market
Strategic Momentum: Intermediate Term Negative
SPX is currently hovering at an historically over‐extended extreme of more than 14%
above its 200‐day MA. This is a Strategic warning of the broad market index’s
vulnerability to an overdue corrective decline.
23US Stock Market
Overbought/Oversold: Near Term, Intermediate Term Negative
The S&P 500 has reached monthly Meanwhile, SPX is also hovering at
overbought extremes that are quarterly overbought extreme that are
characteristic of Tactical US broad characteristic of Strategic US broad
market declines. market declines.
24US Stock Market
Market Breadth: Near Term, Intermediate Term Negative
The percentage of NYSE stocks trading above The percentage of NYSE stocks trading above
their 40‐day MA is contracting from a Feb 9th their 200‐day MA is contracting from a
peak while the S&P 500 continues to rise. December high extreme that has historically
This warns of an upcoming Tactical decline. coincided with Strategic market tops.
25US Stock Market
Investor Sentiment: Near Term, Intermediate Term Negative
A survey of near to intermediate term A survey of intermediate to long term
oriented retail futures traders has reached a newsletter writers is retracting from a
multi‐year most bullish extreme that is January most bullish extreme that is
characteristic of Tactical market peaks. characteristic of Strategic market peaks.
26US Stock Market
Seasonality: Near Term Positive, Intermediate Term Negative
This annual chart shows that, based on This quarterly chart shows that the first
data since 1957, April is the seasonally three weeks of April include 3 of the four
strongest month of the year in the S&P seasonally strongest of the entire
500, and that the May through 2nd Quarter.
September period includes 4 of the 5
seasonally weakest months of the year.
27US Stock Market
Style: Mid‐ February Trend Of Relative Outperformance By Value Being Tested
The Feb 19th trend of Strategic relative outperformance by the S&P 500 Value (SPYV)
ETF is still intact but is being tested. If this trend does not hold, it will suggest that the
previous 2020 trend of Strategic relative outperformance by Growth is resuming.
28Cross Asset Investing
The CARP (Cross Asset Relative Performance) Model
The table above highlights which segments of the US financial market are outperforming in both equities and
fixed income. The green highlights identify changes in trend, and the date they occurred, in 3 different time
frames:
• TRADING (weekly, yellow column), the most sensitive to changes in relative market direction
• TACTICAL (monthly, blue column), which we use to enter or exit an investment strategy
• STRATEGIC (quarterly, red column), which we use to identify intermediate term opportunity.
29Cross Asset Investing
Stocks Outperforming Bonds, Emerging Markets Outperforming US
The green highlights show that the S&P The green highlights show that the
500 (SPY) has outperformed the iShares Vanguard FTSE Emerging Markets Index
Core U.S. Aggregate Bond ETF (AGG) by ETF (VWO) has outperformed the S&P
42% since May 2020. 500 (SPY) by 6% since Mar 5th. 30Global Equity Investing
The US vs. The World Model
Of the nine global markets that are currently outperforming the US on a Tactical and
Strategic basis, seven are from the Pacific Region. Of these, six are in the Top 10 Best
Places To Be During Covid according to Bloomberg News.
31Global Equity Investing
The US Is Outperforming The World
The red highlights show that the SPDR Portfolio Developed World ex‐US ETF (SPDW)
shifted to a trend of Strategic relative underperformance on Feb 3rd, and has
underperformed the S&P 500 by 3% since Mar 19th.
This indicates the US market is currently outperforming the rest of the world.
32US Market Sectors: SEAF Model
Following The Money In US Market Sectors
Trends in investor asset flows, across multiple time periods typically coincide with, and often
lead, directional moves in outright and relative performance.
The latest data in multiple time frames show a continued trend of inflows into Financials
(since 11/12) and a new trend of inflows into Technology (since 4/8). This is where the
money is currently going in the sector space. The latest data also show a continued trend of
outflows from Consumer Staples (since 11/25) and Health Care (since 3/25), and a new trend
of outflows from Energy (since 4/8). This is where the money is coming from.
33US Market Sectors: SEAF Model
Energy Closed Out For A Profit, Financials Buy/Overweight Still Intact
The SEAF Model closed out its Nov 12th SEAF’s Nov 12th buy/overweight signal in
buy/overweight signal in the Energy the Financial SPDR ETF is still open and
Sector SPDR ETF with a 47.6% gain and showing a 32.2% outright gain with
26.5% of outperformance versus SPY. 13.5% outperformance versus SPY.
34US Market Sectors & Industry Groups
Asbury’s Current Price Targets
The green highlights indicate ETFs with positive (bullish) price targets.
The red highlights indicate ETFs with negative (bearish) price targets.
35US Market Sectors & Industry Groups
Housing Rising/Outperforming, Metals & Mining Hovering Above Support
The PHLX Housing Sector (HGX) has risen The SPDR S&P Metals and Mining ETF
by 11 % since Feb 8th while outperforming (XME) has risen by 3 % since Feb 22nd.
the benchmark S&P 500 by 5%.
36US Interest Rates
Benchmark 10‐Year Note Testing 1.70%. 2.05% Next?
This monthly chart shows the yield of the This weekly chart shows that 1.70% yield
US 10‐Year Note is testing and rising resistance is being tested. Above there,
above historic lows at 1.46% to 1.55%, the next significant level is 2.05%. Major
from a February 2020 extreme of 0.55%. yield support is at 1.47% to 1.37%.
37Contact Us:
Phone: 1‐888‐960‐0005
Email: info@asburyresearch.com
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