In a world of algos, CTAs and quants conditioned to chasing momentum, and an entire generation of humanoid traders accustomed to buying the dip, recent market conditions have presented a unique quandary: "Where is momentum now?" This can be observed with a quick look at the recent collapse in the MTUM momentum ETF.
And according to BMO's technical analyst Mark Steele, the question "where is momentum" is a query he often gets asked as it’s such a "quantifiable entity."
His answer: currently, zero of the 21 benchmarks he incorporates into Index Constituents have an unblemished positive momentum, and to the contrary, three rank as momentum sells (Trending consistently lower, below falling MAs), or as he puts it "looking for positive momentum is a Where’s Waldo search."
That said, Steele does find one answer, but it won't help traders: "From a global asset allocation perspective, and given downtrends in World ex US equities, and breakdowns in North American markets, and commodities on October 31st, the only positive momentum is found in cash."
Expanding the eligible universe, the BMO strategist notes that from a global industry perspective, only four of 67 are trending higher, above rising 50 and 200d MAs, three utilities and a staples group.
Bottom line: until the market continues to thrash wildly from one extreme to another, while going nowhere, traders who rely on momentum to shape their "investing" strategy are best advised to stick to cash or just put their money in the safest sectors one can find.