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. As of 2/12/2010:
After being out of favor for the better part of a year, the stage is set for relative strength to re-emerge as a winning investment factor. None of us know how soon we’ll again see a sustained rising spread, but the historical tendency has been for periods of underperformance for relative strength factors to be followed by periods of strong outperformance.
