Dow and Fedex find support

By Colin Twiggs
August 5th, 2014 5:00 am EDT (7:00 pm AEST)

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Research & Investment: Performance update

ASX200 Prime Momentum strategy returned +20.35%* for the 12 months ended 31st July 2014, outperforming the benchmark ASX200 Accumulation Index by +3.81%.

ASX200 Prime Momentum

Returns for July 2014 were 4.67%, so why the decline in rolling 12-month performance? Because performance for July 2013 (11.00%) is now excluded from the last 12 months. Another exceptional month was January 2014 (9.04%). Momentum performance tends to concentrate in a few good months each year which is why we are so averse to timing secondary corrections — if you miss one good month, it will hurt your annual performance.

The S&P 500 Prime Momentum strategy has been running nine months, since November 2013, and returned 8.92%* for the period, compared to 11.63% for the S&P 500 Total Return Index. A sell-off of momentum stocks affected performance since April, but macroeconomic and volatility filters indicate low risk typical of a bull market and we maintain full exposure to equities.

* Results are unaudited and subject to revision.

Dow and Fedex

Dow Jones Industrial Average is testing medium-term support at the December high of 16500. Respect of this line would indicate a healthy up-trend, while breach would warn of a correction to the primary trendline. Failure of primary support at 15400/15600 remains unlikely, but would warn of reversal to a down-trend. Completion of a 13-week Twiggs Money Flow trough above zero would suggest long-term buying pressure and another primary advance.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 - 15500 ) = 17500

The CBOE Volatility Index (VIX) remains below 20, suggesting continuation of the bull market.

VIX Index

Bellwether transport stock Fedex is also testing support at its December high ($144/$145). Respect would confirm a healthy up-trend — for both the stock and the economy. Likewise, a 13-week Twiggs Money Flow trough above zero would suggest long-term buying pressure and another primary advance. Breach of support is unlikely, but would warn of a test of primary support at $129/$130.


* Target calculation: 145 + ( 145 - 130 ) = 160

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