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It usually takes an extended bull market to push “Monthly Momentum” to lofty levels. The above 2-pack looks at the S&P 500 and the DJ Transports on a monthly basis, back to the early 1980’s. The upper lines represents monthly momentum.

As you can see momentum reached lofty levels back in 1987, 2000 and 2007, before turning lower in the months to come.

The rally off the 2009 lows in price and momentum now has ole mo reaching levels not seen too many times on a monthly basis over the past 30-years! At the same time Momentum is high, both index’s could be near some resistance that could become influential to buyers and sellers. 

In my humble opinion, Monthly momentum is NOT a very good “timing” tool, as momentum can stay high for a period of time….it can give you though an idea of when investments are getting a little long or short in the tooth on a long term basis. Knowing this can be very beneficial when it comes to portfolio positioning for long-term monies.

 

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