Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Stocks Bear Is At The Door, Part 1: Momentum Stocks Getting Crushed

Stock-Markets / Stocks Bear Market Feb 06, 2016 - 12:45 PM GMT

By: John_Rubino

Stock-Markets

One of the common transitions that bull markets go through as they age and die is a narrowing of leadership. As formerly strong sectors begin to stall out, investors shift into whatever is still looking good — that is, whatever still has upward momentum. Eventually capital becomes concentrated in just a few names. Then those stocks roll over and the game ends.

This time around Big Tech was the final category of momentum play, and it ended up attracting astounding amounts of money from both the usual suspects like hedge funds and some new suckers like the Central Bank of Switzerland, now a major holder of Apple shares.


But now Big Tech has lost the Big Mo:

Amazon, for instance, tripled in 2015, and has now given back about half of that move. Google hit an all-time high very recently and is now falling like a stone. But today’s big story is LinkedIn, which is, as this is written, down 40% on disappointing forward guidance.

Here’s a piece from an analyst who offers a strategy for playing this sudden reversal of fortune:

Momentum Stocks Are Broken. How Do We Profit From It?

Momentum is a word that gets thrown around a lot. I personally like to measure momentum using a 14-period relative strength index (see here), but different people have different definitions. Fine. For today, we’ll argue that “momentum” stocks are those listed in the MSCI USA Momentum Index.

https://www.ishares.com/us/literature/fact-sheet/mtum-ishares-msci-usa-momentum-factor-etf-fund-fact-sheet-en-us.pdf Looking at these stocks as a group, I think they are going to continue to get destroyed going forward, particularly relative to the rest of the market.

First of all, forget this whole FANG thing. I don’t know who made that up or why people like to limit it to just 4 stocks. I think it’s stupid. They have nothing to do with one another and there should be others included in the list. In fact, in November I wrote a piece about how FANG stocks are this cycles Four Horseman (See here) http://allstarcharts.com/is-fang-this-cycles-four-horsemen/ and was further evidence at the time that made us very bearish U.S. Stocks heading into December and January. That obviously worked out very well.

Secondly, the list of “Momentum” stocks, includes more than just these 4 FANG names, hence my use of the adjective stupid. Half the index basically consists of technology and consumer discretionary names: Google, Amazon, Facebook, Home Depot, Visa, Starbucks, McDonalds, etc. It’s a list of large and mid-cap stocks with relatively higher momentum characteristics. The way I see it, the last men standing in a bear market for U.S. Stocks.

Anyway, I think the main point I’m trying to make here is that these “momentum” stocks are done for, especially relative to the S&P500. Remember what happened to the Four Horseman in 2008? They all got destroyed. I would expect the destruction in this cycles’ version: FANG, as well as the rest of the momentum stocks to continue well into 2016.

This destruction can also be seen in the individual components. Amazon put in a beautiful failed breakout in late December, Google put in a beautiful failed breakout after its most recent earnings release. It certainly appears that Facebook is doing the same thing. There is an ongoing theme here that I love to see: Momentum stocks failing and breaking down. I believe this trend is here to stay and we want to be shorting momentum stocks very aggressively, particularly relative to the S&P500. I think for every dollar short $MTUM we can be long one dollar of $SPY.

By John Rubino

dollarcollapse.com

Copyright 2016 © John Rubino - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in