Systematic Relative Strength

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return. Those at the top of the ranks are those stocks which have the best intermediate-term relative strength. Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (1/4/10 – 1/8/10) is as follows:

The best performance last week came from those stocks with the weakest relative strength, many of which were Energy names. It seems that the leaders and laggards have taken turns having the better performance in recent weeks. This has caused the relative strength spread to flatten out, after declining strongly during the laggard rally off of the March lows.