Momentum

Category: Quant Insight

There are a few signs of stress in the stock bull market as breadth is starting to wane. Nearly all markets achieved a new high in the past week, but this did not coincide with new highs in the advance decline line. This might resolve itself in the coming weeks but it is worth noting. Additionally, a commodity bull market seems to be forming particularly in metals and energy.

Momentum measures the rate of acceleration, either positive or negative, in a security’s price and may indicate which markets are positioned for gains or losses. Investing based on momentum entails establishing long positions in securities with positive recent returns and short positions in those with negative recent returns. Momentum in asset classes may illustrate the development of trends in the market.

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