Apr 23, 2019
Backtest | Ratio
An uptrend is a series of higher highs and higher lows. Using a ratio between 2 securities shows which is relatively stronger. A Relative Strength analysis can quantify which security within a list of MORE THAN 2 securities is strongest.
So let's look at one current situation. Emerging markets have shown good relative strength on shorter-term basis. If this continues then a higher low and higher highs situation could develop (vs SP 500). That said, SPY has continued to be strong -- both Emerging markets AND US Stocks have been strong this year. It actually hasn't mattered which you've owned --- so even if you were wrong on thinking a ratio would go up/down, you still made good money either way. This won't always be the case though.
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