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Momentum

Jan 15 2019

Incongruities In High Quality

  • Jan 15, 2019

Quality is one of the most popular and successful of the equity market’s quant factors. It is intuitively appealing and serves as a useful defensive strategy in falling markets. Low Volatility and Dividend Growth are also defensive factors, while Momentum and High Beta are viewed as aggressive or bullish factors. These offsetting behaviors would seem to make for excellent diversification opportunities in equity portfolios, and for the most part, that is true. 

Jan 11 2019

Characteristics Of Major Market Lows

  • Jan 11, 2019

We wrote in the January Green Book that the S&P 500 Christmas Eve low did not have the “right look,” in that: (1) there had been no sign of “smart money” accumulation beforehand; and, (2) downside momentum was also at a new low for the entire correction. Smart money buying is measured by the Smart Money Flow Index, which evaluates trends in first half-hour market action (considered to be more emotional and news-driven), and the last hour of trading (viewed to be more informed and institutional in nature).

Jan 08 2019

Read This Before Taking The “Plunge”

  • Jan 8, 2019

After a bad market year like 2018, there’s a natural instinct for allocators to skew portfolios toward assets with poor recent performance. History suggests, though, that one shouldn’t make a habit of buying an asset on the basis of price weakness alone.

Jan 08 2019

December’s Low Didn’t Have The “Right Look”

  • Jan 8, 2019

As the market sunk to a 3% loss on Christmas Eve, we sensed genuine investor panic—at least among the fraction of investors then paying attention.

Jan 08 2019

Momentum Negative In Q4, But Positive For 2018

  • Jan 8, 2019

2018 was frustrating for most investors as Value continued to struggle and positive Momentum performance was difficult to capture. Small Caps, Mid Caps, and ADRs also underperformed.

Dec 07 2018

VLT = Very Lousy Timing?

  • Dec 7, 2018

In the spirit of keeping an open mind, three months ago we observed that our S&P 500 VLT Momentum measure had triggered a “moderate-risk” BUY signal with its August reading.

Dec 07 2018

What’s In Momentum Now?

  • Dec 7, 2018

 Along with market volatility, the composition of Momentum has changed, becoming more defensive and less exposed to cyclicals and commodities.

 

Nov 07 2018

October Factor Performance

  • Nov 7, 2018

Most factor categories reversed performance along with the market in October. During the month, Value had solid results while Growth gave up all of its 2018 gains. Profitability also had a nice bounce-back month. 

Oct 19 2018

Monitoring Mo’s Mojo

  • Oct 19, 2018

Momentum is one of the most successful investment styles over the long run, and does particularly well in the later stages of a bull market during the run-up to an eventual peak.

Sep 08 2018

VLT Turns Up Again??

  • Sep 8, 2018

A “moderate-risk” S&P 500 VLT BUY signal was triggered at the end of August, but it’s not all good news. Any upturn in the VLT while the indicator is in positive territory also sets up a pattern known to veteran market analysts as the “Killer Wave.”

Sep 07 2018

Price Hasn't Mattered

  • Sep 7, 2018

While Momentum continues to work overall, the gains have been skewed to the companies trading at the highest valuation multiples. Extremes, based on both price and valuation, have only been greater a handful of times during the period measured.

May 05 2018

Has The Makeup Of Momentum Changed?

  • May 5, 2018

The makeup of Momentum has stayed surprisingly steady through the volatility in 2018, with Info Tech and Health Care maintaining overexposure. Energy is sneaking in, though, and could be poised to take a much larger share.

Feb 16 2018

Why Is Discretionary Leading?

  • Feb 16, 2018

For at least the last year we have argued that late bull market conditions would tend to reward momentum strategies over mean-reverting ones. That’s played out not only during the market’s melt-up phase, but also (to our surprise) during the recent two-week air-pocket, at a time when we would have expected to see at least a temporary setback in the ratio above.

Feb 07 2018

Implications Of Extreme Momentum

  • Feb 7, 2018

Historically, leadership and breadth accompanying an upside market move is far more predictive than the pure momentum of the move. But when intermediate-term momentum is not just strong but exceptional (as it was until just recently), there has usually been even more upside to follow.

Jan 06 2018

Strength Begets Strength

  • Jan 6, 2018

If stock market breadth and leadership look nothing like they typically do at cyclical peaks, neither does momentum.

Dec 07 2017

Sector Rotation: Momentum Versus Valuation Factor

  • Dec 7, 2017

For sector overweight/underweight decisions, applying a Momentum overweight with both EM and DM countries has been most successful.

Dec 07 2017

The Many Faces Of Mo

  • Dec 7, 2017

Momentum is one of the most widely accepted alpha-generating factors, used by quantitative and fundamental managers alike. Its biggest drawback, however, is high turnover. Herein we explore momentum from the perspective of sector weights.

Nov 07 2017

The Case Of The Disappearing Value Premium

  • Nov 7, 2017

Market history teaches us that investors behave differently in groups than they do as individuals.

Nov 07 2017

A Mysterious Bond BUY Signal…

  • Nov 7, 2017

Sometimes we feel compelled to report findings that conflict with our outlook. And then there are the even rarer times we actually do it.

Nov 07 2017

Stock Market Observations

  • Nov 7, 2017

We remain bullish on stocks but with very limited visibility into 2018.

Oct 06 2017

Too Much Of A Good Thing?

  • Oct 6, 2017

Swings in the stock market and economic momentum are not always synchronized, and the largest price adjustments in either direction tend to occur when they are not.

Sep 08 2017

Momentum-Based Country Rotation: EM Vs. DM

  • Sep 8, 2017

Last month we assessed the effectiveness of using valuation factors as a basis for country allocation. Using 20 years of data, our results showed that they work quite well specifically for Emerging Market (EM) country-rotation, however, the same valuation-based strategy does not appear to be value-added for Developed Market (DM) allocation/rotation.

Aug 05 2017

VLT Goes “Quiet”

  • Aug 5, 2017

Last year’s “low-risk” BUY signals from our Very Long Term (VLT) Momentum algorithm have proven very profitable, but enough time has elapsed that they should no longer be considered an important bullish factor.

Jul 08 2017

“Mo-Mo” Market Ahead?

  • Jul 8, 2017

After laying an egg in 2016, momentum-based stock selection strategies have acquitted themselves better through the year’s first half.

Jul 08 2017

Skies Are Clear, But Travel Not Recommended

  • Jul 8, 2017

Two years ago, we played the role of the bull market’s mortician, preparing it for burial after a six-year run that had taken it to valuations on par with those at the 2007 top.

Jun 07 2017

Stock Market Observations

  • Jun 7, 2017

After a two-month lull, stock market momentum reasserted itself in May bringing our summer S&P 500 target of 2,600 back into focus… Meanwhile, we’ve fielded several media calls about the “FANG” stocks’ large contribution to some YTD returns—but that doesn’t diminish the new highs being made elsewhere by disparate groups… NYSE Weekly A/D Line and New Highs/Lows figures also suggest the stock market isn’t yet top-heavy enough to tip over.

May 05 2017

Stock Market Observations

  • May 5, 2017

The S&P 500 has labored beneath its March 1st bull market high for the last two months while underlying breadth and leadership trends have remained mostly favorable.

Mar 07 2017

Emerging Markets: Momentum-Based Sector Rotation

  • Mar 7, 2017

Momentum factors are effective in differentiating EM sector performance, with High Momentum significantly outperforming Low Momentum. Unfortunately, there is a lack of investable EM sector vehicles.

Feb 07 2017

What Comes After The Momentum Meltdown?

  • Feb 7, 2017

The sell-off into last February’s low did not qualify as a bear market, but subsequent action—including the mayhem in “factor-land”—certainly suggests it was a very significant “psychological” low.

 

Dec 07 2016

Acting Like A “New” Bull Market?

  • Dec 7, 2016

With DJIA and S&P 500 losses in the 2015-16 decline limited to less than –15%, there’s no way we’d argue the episode represented a completed cyclical bear market (and we said so at the time).

Nov 05 2016

Not Much “Lift” From VLT “BUY”

  • Nov 5, 2016

In the June Green Book, we professed some skepticism surrounding the long-term, “low-risk” BUY signal for stocks that was triggered at the end of May by our Very Long Term (VLT) Momentum algorithm (also known as the Coppock Curve).

Aug 05 2016

More Upside For Small Caps?

  • Aug 5, 2016

There was a major cyclical BUY signal (VLT Momentum) for the S&P 500 in late-May, and as of July’s close, that bullish development was reinforced by a new VLT BUY signal on the Russell 2000.

Jun 07 2016

VLT Says “BUY”

  • Jun 7, 2016

Breadth underlying the 4-month upswing has been stronger than that observed during any other rally leg since 2013. Despite just a 14% correction in the S&P 500 from its peak, a new VLT “BUY” signal was triggered. Failed signals are relatively rare, the last one occurred in December 2001.

May 06 2016

MTI Now Bullish, But Doubts Linger

  • May 6, 2016

The Major Trend Index reverted to its bullish zone in the week ended April 15th, following almost ten months in which the work resided in either neutral or negative territory.

Apr 07 2016

A Turn In Leadership?

  • Apr 7, 2016

Last month we wrote that a big March gain would trigger a Very Long Term (VLT) Momentum BUY signal on the S&P 500 (Chart). The month’s 6.8% S&P 500 gain wasn’t quite enough to do the trick, but we’re intrigued that VLT did issue BUY signals for three of the market’s cyclical sectors, including Energy, Materials, and Industrials.

Apr 07 2016

Factor Performance Reverses

  • Apr 7, 2016

With the exception of Value, March was a bad month for quantitative factor performance. Every other factor category we follow underperformed, with Momentum posting its second consecutive –5% spread.

Apr 07 2016

Earnings Momentum

  • Apr 7, 2016

The final month of 2015 earnings reports registered an Up/Down Ratio of 1.07. Once again, we have to go back to the dark days of 2009 to find a lower “three-month” ratio.

Mar 08 2016

Implications Of Oversold VLT Momentum

  • Mar 8, 2016

The S&P 500 decline has yet to come close to a bear threshold, but it’s nonetheless been sufficient to drive the Very Long Term (VLT) Momentum algorithm into oversold territory for the first time since late 2009. In 16 of 21 prior cases, VLT Momentum’s initial oversold reading was a harbinger of a market that was soon to become even more oversold.

Mar 07 2016

Momentum Trouble

  • Mar 7, 2016

Momentum reversed in February, primarily due to rallying Materials stocks. Value and Profitability both performed well.

Mar 07 2016

Earnings Momentum

  • Mar 7, 2016

The second month of Q4 2015 earnings reports registered an Up/Down Ratio of 1.12—up from the post- financial crisis low of 1.11 last quarter. With 51% of the observations in February, the “Up” count edged out the “Down,” but barely.