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:
- Horrible momentum continues in all stock market sectors with the exception of Consumer Staples, Health Care and Utilities (-1 point this week).
- Cyclical sectors managed to slightly outperform due to a 2% bounce in home builders.
- Materials and Energy sectors were the weakest due to decline in oil price and most non-precious raw materials.
- Value slightly underperformed growth.
Conclusion:
- If you have to be invested in stocks, remain in defensive sectors. Otherwise, stay away.
Charts can be found here: