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When evaluating the performance of our momentum models we are considering the average performance across the one-, three-, and 12-month momentum models.
Summary
- Momentum models were down -0.2% over the past week, with FX and rates models both down -0.1% WoW, and equity models down -0.6% WoW.
- Momentum models are up +1.2% in aggregate over a three-month time frame, with rates models the best performing (+2.2%).
Market Implications
- Momentum models are very bearish GBP/USD and very bullish USD/JPY. We look to go short GBP/JPY.
Latest Signals
Equity momentum model signals are bullish, with slight shifts over the past week. The DAX signal remains very bullish, with the S&P 500 shifting to very bullish from modestly bullish. The Nikkei shifted from very bullish to modestly bullish, while the FTSE bias flipped to modestly bullish from modestly bearish (Chart 1).
Rates momentum model signals remain uniformly bearish. Signals in the US 5Y, 10Y and long bond, together with signals in bunds, JGBs, and gilts remain very bearish across-the-board (Chart 1).
Meanwhile, FX momentum models remain very bullish USD, with only small changes from last week. Across most USD pairs (EUR/USD, USD/JPY, GBP/USD and NZD/USD), signals remain very bearish the greenback. AUD/USD shifted from very bearish to modestly bearish, with USD/CAD shifting from very bullish to modestly bullish. In the EUR crosses, the EUR/CHF signal is unchanged (very bullish), as is EUR/SEK (modestly bullish), while EUR/NOK flipped from modestly bullish to modestly bearish (Chart 2).
Model Performance
- Momentum models were down -0.2% over the past week, with FX and rates models both down -0.1% WoW, and equity models down -0.6% WoW.
(Charts 1 and 2: blue bar is last week’s signal; orange bar is this week’s signal.)
*The basic strategy is to use returns (lookback windows) to give buy/sell signals. So, if the US stocks are up over the past three months, you buy, otherwise, you sell (note I use excess returns).