Each week we test major asset classes for the strength of their momentum. We check:
- is current price above 20-day moving average?
- is current price above 50-day moving average?
- is 20-day moving average above the 50-day moving average?
- does the 20-day moving average have a positive slope (i.e. is it rising)?
- does the 50-day moving average have a positive slope (i.e. is it rising)?
If the answer is yes, we give one point. If all conditions are fulfilled then the asset class has five points. This is considered a very strong momentum. Investors believing in strong trends would invest in assets showing a strong (positive) momentum.
We also track weekly price change (%) and the change in points.
Here is the latest table:
Observations:
- Momentum remains very weak across all sectors
- Defensive sectors such as Consumer Staples, Health Care and Utilities each lost 1 point
- Home Builders gained one point due to strong performance, but this could be short-lived
- Large caps declined while mid- and small-caps slightly advanced
- Cyclical sectors performed better than defensive sectors
- Value slightly underperformed growth
Conclusion:
- Momentum-oriented investors should abstain from going long any sectors of the stock market.