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Dorsey Wright Money Management on Relative Strength Diffusion Index If you look at the chart, you can see that duri...
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High RS Diffusion Index
The chart below measures the percentage of high relative strength stocks that are trading above their 50-day moving average (universe of mid and large cap stocks.) As of 5/22/12.
(click to enlarge)
The 10-day moving average of this indicator is 35% and the one-day reading is 30%. This indicator reached a recent low of 15% on 5/18/12. Dips in this indicator have often provided good opportunities to add to relative strength strategies.
Relative Strength Spread
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 5/21/2012:
(click to enlarge)
Even during the correction of the past couple of weeks, the RS Spread has continued to rise-a potentially good sign for RS going forward.
Weekly RS Recap
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 (5/14/12 - 5/18/12) is as follows:
The worst performance for the week actually came from the bottom quartile of the ranks (laggards).