Hardly a day goes by without a reader asking me which indicators I follow when determining my impeccable market timing.
The short answer is that there are hundreds, and the 50-year accumulation updates real time 24/7 in my head.
However, there is one in particular that is worth mentioning today. That would be the performance of momentum stocks.
Momentum stocks are shares that deliver a larger move in price, or beta, than the market as a whole. They tend to be the shares of high growth companies that deliver a reliable stream of positive earnings surprises.
In fact, they have earned a large following of traders, known as “momentum investors”.
Call them the canaries in the coal mine.
Look at the list of top ten holdings below, and you will find many that you know and love which are often the subject of Mad Hedge Fund Trader Trade Alerts.
Momentum stocks are attractive because they substantially outperform a more sedentary index, like the S&P 500 (SPY).
Momentum stocks can be a great leading indicator for the stock market as a whole.
When momentum stocks take off like a scalded chimp, it is a good idea to adopt a “RISK ON” approach towards all of your asset selections.
When momentum stocks fail to reach new highs, it is a warning signal that the party is about to end and “RISK OFF” assets are about to gain favor.
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