This is the first episode of The Red Line, and it opens with the reason the whole series exists: the trend cuts out the noise. Every day brings another wave of headlines engineered to trigger greed or fear, and acting on them is how portfolios get wrecked. A trend-based approach gives you something steadier to follow.
The clearest illustration is 2023 — what we call “headline horror.” Across the year, major financial outlets warned of a recession that was variously “inevitable,” “a whopper,” “long and ugly,” and in one case “100%” certain. What actually happened: there were only two brief windows where hedging was worth considering, and the S&P 500 finished the year up 26%, closing at its highs. Anyone following the headlines was terrified all year. Anyone following the trend simply stayed invested.
The long-term trend is the 200-day moving average — the red line the series is named for. When price sits above it, the long-term picture is favorable. This month, both the S&P 500 and the Nasdaq 100 were clearly above it.
The momentum trend is shorter-term: the 21-day moving average above the 50-day, with price above both. It was firmly positive this month as well. Its real value is timing — ahead of the prior year’s decline, the momentum trend rolled over before the worst of the drop arrived. That early warning is exactly what a defensive process needs.
The theme worth noting is rotation. Several technology names that had led for a long stretch were beginning to lose momentum, while healthcare and financials strengthened — the kind of shift a momentum-driven process is designed to detect and follow, rather than predict.
Blake Flanders earned his CFP® certification and now leads our financial planning team, including our relationship with Foundation Planning and our Trust & Will partnership. Estate documents through Trust & Will are available to clients at a discount; Momentum receives no compensation from that relationship — we offer it purely as a value-add. Financial planning is available at no additional cost to clients we manage assets for.
David Flanders: Hi everybody, and welcome to our inaugural Above the Red Line webcast. I’m your host David Flanders, and this of course is Blake Flanders.
Blake Flanders: Hi everyone. Good to be here.
David: We’ve gotten great feedback on the Above the Red Line newsletter — everybody seems to like it. So we wanted to expand it a little and do this short webcast, walking through the charts, especially when we see changes taking place or something noteworthy.
One of the big reasons we want you to see Above the Red Line is because we follow the trend. We invest with momentum, and one of the reasons we invest in trend is because it cuts out all the noise. Every day we’re completely inundated with headlines — from the media, from the newspapers — and everybody’s got a headline to promote, whether it be greed or fear. The trend cuts out all of that noise.
Anybody who’s been to one of our dinner meetings knows our segment called “headline horror,” which we all get a real kick out of. It shows you that the headlines typically don’t line up with the trend.
Before we do that, I’ll read our disclaimer. All opinions expressed in this video are for general informational purposes only and should not be viewed as investment advice. Momentum Wealth does not provide tax or legal advice, and nothing contained in these materials should be taken as such. To determine which investments or planning strategies may be appropriate for you, consult your financial advisor or other industry professionals prior to investing or implementing a planning strategy. As always, please remember that investing involves risk and potential for loss. Past performance does not guarantee future results. Please seek advice from a licensed professional.
Okay — 2023. We all remember this: the recession that never came. Every day we were inundated by headlines. CNBC told you why we are going into a recession. Barron’s said economists predict a whopper of a recession — not just a recession, a whopper. The Economist said a global recession is inevitable. Money magazine: CEOs think there’s going to be a recession. Politico: a recession is inevitable. Bloomberg: a recession is 100%. That’s a pretty high percent. The Wall Street Journal said there’s going to be a recession. Fortune: “Dr. Doom” says the recession’s going to be long and ugly. And the World Bank warned of a global recession in Forbes.
So now let’s see what actually happened, Blake.
Blake: That’s what actually happened. All year long we were getting bombarded with virtual guarantees of an inevitable recession, yet there were only two points in the year where we really wanted to look at hedging. The rest of the time we were very clearly in a nice uptrend — and the S&P 500 in 2023 was up 26% and closed at its highs. So the trend cut out all that noise and just helped us relax and go with the trend.
Now we have the current Above the Red Line. We have a long-term trend that we define as the 200-day moving average. You’re going to get this every month. We show you this and ask: is the trend favorable, or is the trend negative? If the trend is favorable, it’ll help you cut out all that headline noise. The S&P 500 is clearly favorable. We had a little tricky spot last year in April, and we’ve trended favorably since.
The Nasdaq 100 — the leading tech stocks — same thing. Above the red line, trend looks very favorable.
We also follow something called the momentum trend. It’s a multifactor approach, and the momentum trend is a bit more of a shorter-term indicator. We follow this very closely. The momentum trend is simply two shorter-term moving averages: a 21-day and a 50-day. The momentum trend is positive when the 21-day is above the 50-day and the price is above both. As you can see, we are there — a very clearly favorable short-term trend, and the way it looks, there’s no reason to believe that changes anytime soon.
I do want to bring your attention back to March. Notice how the momentum trend went negative before the real carnage took place. That’s why we follow trend — we can see momentum start to fade before the big price drops come into play. In those scenarios you’re going to see us get negative. And if the trends remain favorable, that’s going to help us cut out the noise. Presently, our momentum trend looks very good and very favorable.
We also have a publication we send out called M5 — our top stocks from a momentum basis. We’re combining these two reports for you, and we’re adding the momentum charts to the M5 review as well, which we thought you’d really like.
Walking through the current names: a couple of long-running technology leaders are starting to flip negative on momentum, so those go on a short leash. Others continue to show a consistent pattern of higher highs and higher lows, with the blue line above the red line and price above both — can’t ask for much more than that. What stands out is the rotation: some of that technology money is moving into healthcare and financials, and our momentum process picks up on those major rotations in the market.
David: One thing I did want to mention is that Blake is now an official CFP. So we have a certified financial planner in our presence. Congratulations, Blake, for passing all those requirements.
Blake: Thank you.
David: Blake is going to be heading up our financial planning team. He’ll be overseeing our partnership at Foundation Planning as well, and our relationship with Trust & Will. Trust & Will provide wills for about $200; you could create a living trust for about $500; and you can get 12 months of legal advice for about $300. So all in, you can get a will, a living trust, and legal advice for a year for about a grand, which is incredible.
Blake: All of our clients get 10% off every plan.
David: And in fair disclosure, we make no money from this. This is a total value-add. We just thought it was a great idea and an excellent value. Because of all of our planning and what Blake’s doing on the CFP front, this is all value-added service. Anybody we’re managing money for — Blake can help you with the planning, and he can help you get established with Trust & Will if you choose to use them. We can also have conference calls with your attorney and do a lot of legwork in that process as well. Blake’s going to send out a financial planning checklist, so feel free to take us up on any of this.
One other interesting statistic: only about 6% of certified financial planners are under the age of 30 — and you’re one of them. Congratulations.
All right, everyone. Thank you very much. We appreciate every one of you, and I hope this was a quick and easy rundown through the charts. We will see you next month.
The Red Line shows what the market is doing. Our strategy page shows what we do about it.
General disclosures. This video and the accompanying commentary are provided by Momentum Wealth Planning, LLC (“Momentum”) for educational and informational purposes only and do not constitute investment, legal, or tax advice, nor an offer or solicitation to buy or sell any security. Views expressed reflect the opinions of the speakers as of the date recorded, are subject to change without notice, and may differ from views expressed elsewhere by Momentum. Nothing presented should be relied upon as a prediction or guarantee of future market behavior. Information and market data referenced have been obtained from sources believed to be reliable, but Momentum does not guarantee their accuracy, completeness, or timeliness, and such information is subject to change without notice.
Any indices or market data referenced are shown for illustrative purposes. Index returns reflect the price performance of unmanaged indices, do not reflect the deduction of advisory fees, trading costs, or other expenses, and cannot be invested in directly. Technical indicators such as moving averages and momentum measures are analytical tools; they are not predictive, they generate false signals, and they will at times cause a strategy to reduce exposure before a market advance or maintain exposure into a decline.
Investing involves risk, including the possible loss of principal. There is no assurance that any strategy, allocation, or risk-management technique will achieve its objectives, limit losses, or prove profitable. A risk-managed portfolio may underperform broad market indices, particularly during strong rising markets. Diversification does not ensure a profit or protect against loss. Past performance does not guarantee future results.
Momentum does not provide legal or tax advice; consult a qualified attorney or tax professional regarding your particular situation. Any third-party products, services, or pricing referenced are provided by unaffiliated firms, are subject to change without notice, and are described for convenience only — their inclusion is not an endorsement or recommendation. To determine which investments or planning strategies may be appropriate for you, consult your financial advisor or another qualified professional before investing or implementing a plan.
Momentum Wealth Planning, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission, located in Estero, Florida. SEC registration does not constitute an endorsement by the SEC, nor does it indicate that Momentum has attained a particular level of skill or ability. Advisory services are offered only to clients or prospective clients where Momentum and its representatives are properly licensed or exempt from licensure, and no advice may be rendered unless a client service agreement is in place. Additional information is available in our Form CRS, Form ADV Part 2A, and Additional Important Disclosures.
Regarding M5 and individual securities. M5 is an internal, rules-based momentum ranking produced by Momentum for informational purposes. Any securities identified in this episode are discussed solely to illustrate our analytical process and prevailing market trends. They are not recommendations to buy, sell, or hold any security, and they should not be assumed to be suitable or profitable for any investor. The securities discussed do not represent all of the securities purchased, sold, or recommended by Momentum, and the reader should not assume that an investment in any security identified was or will be profitable. Rankings are point-in-time, change frequently, and holdings may be added or removed without notice or further commentary. Momentum, its principals, and its clients may hold, purchase, or sell positions in securities mentioned. Client allocations vary based on individual objectives, risk tolerance, and account constraints, and no client should assume their portfolio holds any security discussed.