Relative Strength Spread

May 11, 2010

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 5/10/2010:

After a steep decline during the second quarter of 2009, the relative strength spread has been flat for the majority of the last year. The historical tendency has been for relative strength to do especially well as bull markets move past the initial move off the bear market lows. I suspect that this could be transitioning into an increasingly favorable environment for relative strength investing.

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Posted by Andy Hyer

Five Myths Worth Busting

May 11, 2010

Carmen Reinhart, who co-wrote This Time is Different with Ken Rogoff, had an editorial in the Washington Post yesterday. Her five myths dealt with things that people think are not possible, but based on extensive historical precedent, most definitely are possible. The Rogoff and Reinhart book points out that we think of this financial crisis as unusual, but lots of them have occurred in the past. We need only to look to history to see what is possible. Highly recommended reading.

How do you protect your portfolio from such events? While there are no guarantees, having maximum flexibility to adapt to the conditions might make things much easier.

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Posted by Mike Moody