In recent weeks, investor enthusiasm has been drifting lower, suggesting a lack of catalysts compelling investors to buy or sell with conviction. This waning enthusiasm is seen in the declining cumulative momentum scores within each group of benchmark ETFs, the number of benchmark ETFs with momentum scores greater than 20, and the sum of the top three benchmark ETF momentum scores in each group. This lack of investor enthusiasm is also evident in the absence of large ranking changes within the benchmark ETF groups. ETF relative strength suggests investors are waiting for a reason to take action.

Sectors: The leading Sector Benchmark ETFs had a general reduction of momentum, as exhibited by the decline in the number of benchmark ETFs with momentum scores greater than 20 and the sum of all Sector Benchmark ETF momentum scores. The sector ranking made some interesting moves last week: Technology dropped from first to fifth as its momentum score declined from 23 to 18. Health Care and Utilities remained at the top with increases in their respective momentum scores. Discretionary and Consumer Staples were both near the bottom, which is odd since Discretionary is typically near the bottom when investors seek safe havens such as Consumer Staples, which would typically move that sector up in the ranks. Discretionary may be near the bottom because of the shakeup in the brick-and-mortar retail industry more than investors’ negative view of retail in general. Real Estate moved up two spots, possibly because the Fed’s increase in interest rates is behind us—for now. Telecom and Energy are still at the bottom of the list. These sector positions are likely based on special situations affecting each industry and not on a negative investor view of the economy. Overall, sector relative strength suggests investors are not changing their bullish bias—they’re just less committed to it.

Factors: Momentum, Growth, and Low Volatility are the top factors among our Factor Benchmark ETFs. This is a bullish alignment of factor rankings, as evidenced by the three factors at the bottom of the list, which are classic laggards when investors are bullish: Value, Fundamental, and High Beta. While the factor rankings reflect investors’ optimistic view, they do exhibit a decline in momentum as a group and at the top and bottom of the ranks. Note that there are only two factors with momentum scores greater than 20, which is down from three the previous week and five the week before that. Also note that there are no factors with negative factor scores, which suggests capital is continuing to flow into equities as an asset class.

Global: Among the Global Benchmark ETFs little changed in the ranking, but there was a decline in cumulative momentum. The top-ranked regions continue to include China, Eurozone, and EAFE. This ranking suggests that investors now view these regions as economically and politically stable and growing. A declining U.S. dollar has also motivated investors to seek non-U.S. equity holdings. The laggards include Latin America, Canada, and UK. The positions of Latin America and UK are likely due to investor uncertainty about their political futures and the potential negative impact that may have on their economies. Canada and USA may be near the bottom of the ranking, not because investors view those markets negatively, but because capital is seeking non-North America equity holdings. From a global perspective, investors remain moderately bullish on equities.

Two Week Edge Chart 06/21/17

Disclosure: Author has no positions in any of the securities mentioned and no positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.