On his talk, Yann says “Most long-only asset managers use a fundamental approach in their process – especially in the equity world. However, that does not mean portfolio construction and market timing are not part of their plan. The way such managers use technical analysis is generally twofold: (i) upstream, to target the size of their cash pocket, leverage, or beta; and (ii) downstream, as a timing tool to enter a new position, trade around it and eventually exit.

We think a third dimension is worth emphasizing, too: sector momentum analysis based on the relative strength concept. The information such charts can bring to the portfolio manager are particularly useful if you use several methods and a multi-timeframe analysis. After showing the additional information given by relative charts, we shall compare different methods and try to determine the most relevant combination of technical indicators to carry out sector analysis. Finally, we will analyse the current shape of DJ Stoxx 600 subsectors in order to build a European equity portfolio based on a top-down approach.