The chart below is the spread between the relative strength leaders and relative strength laggards (universe of mid and large cap stocks). When the chart is rising, relative strength leaders are performing better than relative strength laggards. Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.
(Click to Enlarge)
As you can see, the relative strength leaders have had much better performance than the relative strength laggards over time. However, the last 8 months have been brutal for most relative strength strategies. Although none of us know what will come next for relative strength strategies, let’s have a little fun and take a guess. It is important to point out that due to differences in holdings, some relative strength strategies may perform well even when the relative strength spread is declining (and the opposite is also true.)
Posted by Andy Hyer 
