Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Stocks

Overbought Conditions Reflect Strength and Said Strength Drives Momentum Rotation Strategies

by March 30, 2024
March 30, 2024
Overbought Conditions Reflect Strength and Said Strength Drives Momentum Rotation Strategies

Momentum and trend strategies are off to a roaring start here in 2024. More often than not, these strategies buy leading stocks that appear overbought. Buying stocks that appear overbought often goes against our “gut feel”, but overbought conditions reflect strong buying pressure and this is clearly more bullish than bearish. Let’s look at recent examples using the broader market and UBER.

Stocks surged in early November with an S&P 1500 Zweig Breadth Thrust signal and seemed to be overbought by the end of November. The S&P 500 and Nasdaq 100 were up 8.9 and 11.4 percent, respectively. TrendInvestorPro’s Composite Breadth Model then turned bullish in early December and stocks again appeared overbought in late December. The S&P 500 was up 4.4% and the Nasdaq 100 was up 5.5% in December. Note that the Composite Breadth Model is 14 indicator breadth model used for broad market timing a TrendInvestorPro.

Despite big moves in November and December, stocks did not stop rising at the end of 2023. Instead, the advance continued in January-February with the Nasdaq 100 leading. This advance then broadened out in March with the S&P 500 taking the lead. The Nasdaq 100 rose 1.2% in March and the S&P 500 surged 3.1% this month. Again, the market appears to be overbought and ripe for a correction period. While I cannot argue with this assessment, I cannot predict a pullback, especially in a strong uptrend. There will be a correction at some point, but I do not know when. Perhaps we should stop using the term “overbought” when the trend is up and accept overbought conditions at face value. Overbought is really just another way of saying “strong”.

Dual Momentum Rotation strategies are designed to take advantage of leading stocks with strong price moves. The methodology buys the top performing stocks and sells when they drop below a certain rank. The chart below shows a trade example using Uber Technologies (UBER). UBER entered the model portfolio as a top ranked stock on February 5th, and RSI was above 70 (green vertical line). RSI is considered overbought when above 70. In truth, a move above 70 reflects strong upside momentum and this is more bullish than bearish. Price moved higher and UBER’s rank then dropped by the end of March (red line). UBER no longer made the cut and this triggered an exit signal.

Focusing on the strongest stocks within the Nasdaq 100 and S&P 500, the Dual Momentum Rotation Strategies at TrendInvestorPro are up double digits so far this year. Be careful chasing performance because it is not all roses when trading the leaders and there will be drawdowns along the way. These strategies were down in 2022, they recovered nicely in 2023 and there were also drawdowns in 2023 (September). These strategies are fully systematic and trade on a weekly basis. Rankings and signals are posted every Saturday morning for subscribers. Click here to see performance metrics and learn more.

//////////////////////////////////////////////////

0
FacebookTwitterGoogle +Pinterest
previous post
Biden says he is working to secure release of Evan Gershkovich on 1-year anniversary of detention in Russia
next post
8 Essentials That Every Office Should Have

You may also like

Key Support Levels for Gold

November 14, 2024

MEM TV: New BULLISH THRUST in the S&P...

November 3, 2023

Sector Spotlight: AMZN & TSLA Causing Weak XLY...

November 22, 2022

Here’s My Most-Likely Scenario for QQQ

September 13, 2024

Scanning Made Easy: A Beginner’s Guide to Custom...

April 7, 2023

Stock Market Hinges on the Ten Year Interest...

October 31, 2023

Equities Remain in “Go” Trend as We See...

October 21, 2024

How to Pick the Best Technical Indicator for...

July 14, 2023

Momentum vs. Price: Is the Stock Market Rally...

January 24, 2023

SCTR Report: Vistra Energy Soars, Reaches New All-Time...

October 3, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • HMRC inheritance tax investigations surge 37% as treasury seeks to plug revenue gap

      June 9, 2025
    • Believ secures £300m to roll out 30,000 public EV charge points across the UK

      June 9, 2025
    • US and China hold London talks to ease trade war tensions

      June 9, 2025
    • British fathers urged to join landmark ‘dad strike’ over poor paternity leave

      June 9, 2025
    • IVF parents should have right to paid fertility leave, says GMB union

      June 9, 2025
    • Reform UK clashes with Bank of England over interest payments to lenders

      June 9, 2025

    Categories

    • Business (8,158)
    • Investing (2,019)
    • Politics (15,571)
    • Stocks (3,136)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved