Welcome to your latest issue of Launch Conditions from GoNoGo Research for the week ended October 1, 2021. After posting small gains in the previous week, the major U.S. stock indexes turned downward, and selling momentum returned to the stock market. In the wake of a mostly positive summer, volatility perked up over concerns of rising rates and valuations. The Nasdaq Composite fell 3.2%, the S&P 500 fell 2.2%, the Dow Jones Industrial Average fell 1.4%, and the Russell 5000 fell just 0.3%. Encouragingly, after coming under pressure for much of last week, a Friday rally left the market just 4% below all-time highs.
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Capital Lending, Crude, and Consumer Discretionary
Outperformance on a relative basis continued for consumer discretionary stocks in the $XLY, though largely buoyed by $TSLA shares’ resilient trend. The large moves this week in relative trends were found in the Energy $XLE and Financials $XLF sector. See the GoNoGo RelMap below for the relative performance of the equity sectors against the benchmark $SPX.
Frustrating Chop? Choose to Zoom Out
This week also brought us the close of September’s trading session on Thursday.
Tomes have been written on trend following investment strategies and the persistent anomaly of momentum. Buying strength, buying breakouts, momentum trading, are all ways to describe this style. While simple, this style is not easy. Emotions supplant the rules of most human investors forcing them to cut winners too early, while averaging down losing trades. Understanding the dominant and durable trends is critical to positioning shorter term investment ideas in context.
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Better Charts.
Better Decisions.
