Gavekal Capital: Momentum Deteriorating in Some Cyclical Industries, Staying Strong in Defensives

Monday, September 8, 2014

Momentum Deteriorating in Some Cyclical Industries, Staying Strong in Defensives

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:

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
Blogs are posted by our investment team. Find out more about us at here. Read more about our strategy at www.gavekalcapital.com.

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