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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 -0.5% over the past week, with rates models down -1.1% WoW, FX models down -0.5% and equity models up +0.3% WoW.
- Momentum models are down -0.6% over a three-month timeframe, with equity models the best performing (flat).
Market Implications
- Momentum models are very bearish EUR/USD – our G10 FX argued that the pair is set to find near-term respite.
Latest Signals
Equity momentum model signals have shifted slightly over the past week. The signals for the S&P 500 remain very bullish, with the DAX also unchanged (modestly bullish). The Nikkei bias shifted from very bullish to modestly bullish, while the FTSE bias flipped from modestly bearish to modestly bullish (Chart 1).
Rates momentum model signals also saw slight shifts. Signals in the US 5Y, 10Y and JGB are unchanged (very bearish), while the US long bond and gilt signals have shifted from very bearish to modestly bearish. Bunds have flipped from very bearish to modestly bullish (Chart 1).
Turning to FX, momentum models are uniformly bullish the USD. The USD/JPY signal has shifted from very bullish to modesty bullish, while USD/CAD remains very bullish. EUR/USD, AUD/USD and NZD/USD stay very bearish, with GBP/USD shifting from very bearish to modestly bearish. In the EUR crosses, EUR/CHF flipped from modestly bullish to modestly bearish, EUR/NOK remained very bearish, and EUR/SEK shifted from very bullish to modestly bullish (Chart 2).
Model Performance
- Momentum models were down -0.5% over the past week, with rates models down -1.1% WoW, FX models down -0.5% and equity models up +0.3% 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.)