Momentum Deteriorating in Some Cyclical Industries, Staying Strong in DefensivesSeptember 08, 2014
One of the simplest ways to measure whether a stock is an uptrend or downtrend is to see whether the 50-day moving average price is greater than the 200-day moving average price. If yes, the trend is positive and if no it is negative. Similarly, we can measure the trend, or momentum, of a group of stocks by calculating the percent of issues in the group for which the 50-day moving average price is greater than the 200-day moving average price.
We are posting on this topic today because we’ve noticed that the momentum for some of the more cyclical industries has taken a hit recently, but momentum for most of the defensive groups has held in there. This fits with our thesis that Fed tapering of asset purchases should favor defensive areas of the markets and it also fits with a stronger dollar.
Some cyclical industries:
Some defensive industries: