Technicals - AIQVM, S&P 500: Growth, Value, Cap & Equal Weight
October 19, 2017
The Arrow Insights Quality Value Momentum Index (AIQVM)1 employs quality and value metrics to select the top 50 stocks from several thousand large–, medium– and small–capitalization weighted (CAP) companies from the Ford Equity Research universe. Over the past five years, AIQVM underperformed the Standard & Poor's 500's CAP and Equal Weight (EqW) Indexes (Figure 1). Since July 2016, AIQVM has bested the CAP and EqW versions of the S&P–this at a time when the S&P Growth index bested the S&P Value Index. Over the past three months, AIQVM has bested CAP, EqW and all S&P equity sectors with the exception of the technology sector (Figure 2).
AIQVM's is a strong buy relative to SPX and SPXEW based upon five short–, four medium– and four long–term technical indicators employed at www.barchart.com. Figures 3–5 chart the five–year performance of AIQVM, the CAP ($SPX) and the EqW ($SPXEW) indexes in the top panel while plotting the index's relative price strength (RSI), true strength (TSI) and its percent price oscillator indicators (PPO) in the bottom panels through October 13, 2017. Equity price trends are strong in 2017. Year–to–date 2017 (YTD), AIQVM leads the EqW but is slightly behind the CAP index.
Figure 1. AIQVM, S&P: Growth, Value, Cap & EqW Indexes – 5 Years, Oct 13, 2017
InFocus Highlights –
- Over the past three months (3M), AIQVM is up 5.2% while CAP and EqW have gained 4.1% and 2.9%, respectively. Technology stocks dominate as they soar 7.1% (Figure 2).
- Since Oct 12, 2012, CAP's cumulative return is 78% while AIQVM is up 84% and EqW rose 84.5% (Figures 3-5).
Figure 2. AIQVM, CAP, EqW & Sector – 3M – Oct 13, 2017
Figure 3. AIQVM Cumulative Return & Technicals – 5 Years, Oct 13, 2017
Figure 4. S&P 500 CAP – Cumulative Return & Technicals – 5 Years, Oct 13, 2017
Figure 5. S&P 500 EqW – Cumulative Return & Technicals – 5 Years, Oct 13, 2017
1 AIQVM is a diversified composite of U.S. stocks. Two sets of twin quality metrics (dividend yield + return on equity and buy-backs + earnings variability) are employed to select the top 50 stocks from an equity universe of about 3,500 firms. Value measures consistency of operating earnings to price ratio over long time periods. Quality + Value factors provide a defensive characteristic to the portfolio that reduces volatility of returns and mitigates losses in market declines. Quality + Value enable the Index to include a mix of undervalued stocks whose prices are exhibiting long term momentum, which increases the potential for equity gains during market advances. Q+V+M are uncorrelated, which offers potential diversification. Equity components are reconstituted in January and July, rebalanced quarterly on an equal weighted basis.
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