Relative Strength Update

My goal is to focus investment capital in the areas that are working best. Sometimes working best means losing the least, so from early 2008 until recently, I have been enamored with Cash and Short Term US Treasuries.

Now I believe that we are replaying the 2002-2003 bottoming process (no surprise, since the same guys who caused the Clinton Bubble and the Bush Bubble are still in charge and setting in motion the Obama Bubble). So I am looking closely at what is leading, because new leaders tend to lead for the entire course of the next Bull Market.

Trends of outperformance and underperformance tend to run in five to seven year cycles. Large and Growth led from 1994 – 2000, Small and Value led from 2000 – 2006 and now Growth and Large appear to be setting up to lead again.

Large and Small are in lockstep, but this is where Large Bottomed Last Time


Growth is leading Value


Domestic is marginally beating International, but may be putting in a big Double Bottom

You can see the Percentage Returns of the different asset classes. Which one would you rather have owned?

Large Cap (Red) vs Small Cap (Blue)


Growth (Red) vs Value (Blue)


Domestic (Red) vs International (Blue)


These charts show you not only the importance of knowing what to buy, but they show you that you need to know what to sell – and when to do it! That is why I spend so many hours each week looking at the charts. I am already considering what the next Top will look like…