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:
- Not much divergence to report other than weak financials and home builders while technology and materials outperformed.
- Small caps outperformed large caps.
- Growth outperformed value.
Conclusion:
- Momentum across all sectors still pretty good. Albeit none shows the 20-day moving average above the 50-day moving average.
- Still unconvinced this low-volume rally can be sustained. Would recommend focusing on defensive sectors (if at all).