I came across a very interesting article this morning which argues that the proliferation of quant trading in combination with QE and a flattening yield curve over the past decade has largely favored momentum stocks to the detriment of value stocks.
Gauging market momentum is as much art as a science in that you’ll probably always find charts that satisfy a particular directional bias. The trick lies in remaining as objective as humanly possible and to collect evidence from a diversity of sources. As many traders are starting to return from their summer vacations I thought it a good idea to get everyone a jump start on what’s going on.
We’re past the half-month mark and since the current gyrations aren’t exactly conducive to anything outside of playing the swings I thought it would be a good idea to go over our momentum charts. What I found is rather worrisome on a medium to long term basis, albeit there is grounds for optimism more short term.
In case you wonder, despite new meds I still feel like crap. But then again nobody likes a whiner plus as the saying goes: the show must go on. Alright, the month of July is finally nearing its sweaty end (yes I hate summer) which reminds me that I probably owe you a new market momentum update. And I may as well have called it a VIX update as most of my charts today revolve around our favorite and most misunderstood volatility index.