“So the last shall be first, and the first shall be last.”
Although Jesus probably wasn’t talking about the tendency for the most beaten down stocks in a bear market to become the best performing stocks coming off the bottom, this scripture in Matthew is certainly an accurate description of what has taken place in the stock market over the past two months.
The S&P 500 declined 57% from its peak on October 10, 2007 to its low on March 9, 2009. Over the last two months, the S&P 500 has rallied over 35%. However, the returns of individual stocks has been highly discriminate since the low. To highlight the discrepancy of individual stock returns, consider the table below:
|
Signal |
Column |
Avg Return Since 3/9/09 |
|
Buy |
X |
28.12% |
|
Buy |
O |
45.72% |
|
Sell |
X |
52.85% |
|
Sell |
O |
102.24% |
The table above categorizes all of the mid and large cap stocks in the S&P 900 by their Point & Figure relative strength rank on March 9, 2009 and shows each group’s performance since that time. For those who may be unfamiliar with Point & Figure Charting, the following explanation may be helpful:
|
Combination |
Description |
|
Buy Signal / Column of Xs |
Strong LT RS / Strong ST RS |
|
Buy Signal / Column of Os |
Strong LT RS / Weak ST RS |
|
Sell Signal / Column of Xs |
Weak LT RS / Strong ST RS |
|
Sell Signal / Column of Os |
Weak LT RS / Weak ST RS |
Although extremely unpleasant for High RS strategies right now, one of the virtues of RS is its ability to adapt to new leadership over time!
