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 9/21/2010:
It has been well documented that the most difficult environments for relative strength strategies are those where there are dramatic changes in leadership-where the laggards become the leaders. We experienced that from mid-2008 to mid-2009 and it was reflected in a sharply declining relative strength spread during that time. We have been in a transition phase for over a year now where the relative strength leaders and the relative strength laggards are duking it out and neither one has distinguished itself from the other in terms of performance. Stay tuned for developments, but I suspect that we could well see a steadily rising trend in the coming years as relative strength leaders reassert themselves.
[...] of several return factors that has a long-term record of solid performance. If you look at the RS spread chart that we post weekly on this blog, you can see that RS leadership has endured a drawdown and that leaders and laggard [...]