Since the beginning of 2018, the ETF MTUM dynamics are noticeably better than the dynamics of the broad US stock market, as expressed by the VTI fund. The difference is 4% for October 17 (MTUM yield is 10.1% versus 6.1% for VTI). And this is undoubtedly an excellent addition to 2017, when the difference in profitability was generally double-digit. But let us pay attention to the fact that in 2018 all advances were reached in Q1, after which the relative dynamics of MTUM / VTI entered the outset (see the diagram above).
So far this does not imply any serious consequences. But the dynamics in October led to the fact that the ratio of MTUM / VTI approached the dangerous line. We mean an important technical level, where the 200-day average and lower consolidation limit coincide. At the same time, MTUM itself tested its 200-day average. True, this test was successful, now the price is already higher, and the absolute uptrend is not damaged yet.
It is very important how the market will behave at these levels. Moreover, the 14-day RSI for MTUM last went below 20% already in 2015. If this oversold again leads to a price reversal, and this, in turn, will lead to the return of the MTUM / VTI ratio to the upper consolidation border, then everything is fine and even leaves good chances to exit the consolidation up and continue the banquet. But if even such a strong oversold is not enough for a reversal, and the MTUM / VTI ratio leaves the corridor not up, but down, this will be a sign of serious weakness. In this case, most likely, the price for the MTUM fund itself will begin to decline faster than the market, and on the horizon of 2019, momentum can be forgotten.
Until the reversal is confirmed, the trend is more likely to continue. But remember this is necessary, forewarned — it means, is armed. Everything is cyclical, and if this cycle screams «I’m over,» then it would be better to hear it.