Momentum Models Remain Bullish USD and Global Equities

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 up +0.2% over the past week, with equity models up 1.1% WoW, and FX models and rates models flat WoW.
• Momentum models are down -0.1% in aggregate over a three-month time frame, with equity models the best performing (+1.9%).

Market Implications

• Momentum models are very bullish USD/CAD – we closed our short position in the pair this week.

Latest Signals

Equity momentum model signals are all bullish, with slight shifts over the past week. S&P 500 signals remain very bullish, with the Nikkei also unchanged (modestly bullish). Meanwhile, Dax and FTSE biases shifted from modestly bullish to very bullish (Chart 1).

Rates momentum model signals also saw slight shifts. US 5Y and 10Y signals shifted from very bearish to modestly bearish, while the US long bond and gilt signals were unchanged at modestly bearish. The JGB signal was also unchanged (very bearish), with bunds flipping from modestly bullish to modestly bearish (Chart 1).

FX momentum models remain bullish USD, and mostly unchanged from last week. The USD/JPY signal was unchanged (modestly bullish) as were EUR/USD, AUD/USD, NZD/USD (very bearish) and GBP/USD (modestly bearish), while USD/CAD remains very bullish. EUR/CHF and EUR/SEK signals were also steady from last week (modestly bearish and modestly bullish, respectively). The week’s only shift was in EUR/NOK, becoming modestly bearish after being very bearish (Chart 2).

Model Performance

• Momentum models were up +0.2% over the past week, with equity models up 1.1% WoW, and FX models and rates models flat WoW.

*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).

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)