A measure of whether an asset is trending upward relative to its own past price — independent of how it compares to other assets — used as a regime filter in momentum strategies.
“The market is your partner, not your opponent. When it trends, trend with it. When it chops, step aside. Knowing whether the broad market's own momentum is positive or negative is the first decision — everything else follows from that. — William O'Neil”
— William O'Neil
Deeper Explanation
Relative strength (RS) compares an asset's return to peers or a benchmark: is this stock outperforming other stocks? Absolute momentum (also called time-series momentum) asks a different question: is this asset trending upward against its own historical price? The standard implementation compares the current price to the price 12 months ago — positive absolute momentum if higher, negative if lower. Gary Antonacci's research demonstrated that combining absolute and relative momentum produces superior risk-adjusted returns compared to either alone: buy only high relative-strength assets when their absolute momentum is also positive, and move to cash (or a defensive asset like bonds or gold) when absolute momentum turns negative. The critical practical insight is that absolute momentum functions as a regime filter. Even the highest-ranked stock on relative strength should not be held if its own 12-month price trend is negative — that signals a market environment where all momentum positions are likely to struggle. Absolute momentum moving averages (the 50-day and 200-day of the Nifty 500 itself) serve the same function at the market level: they tell the momentum investor whether the broad tape is trending or breaking down.
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