Relative Strength Analysis
figure 24.23 RS Charts Indicating Market Regime Change.
Source: StockCharts.comfigure 24.24 RS Charts Indicating Overextension in Gold.
Source: StockCharts.compoint of reference. We observe the synchronicity that exists between all global
markets. Unlike performance charts, RS charts can only track two markets at any
one time.
Figure 24.23 shows how Brent Crude Oil left the average 1:1 correspondence
with Light Crude Oil and outperformed Light Crude oil as the RS line rises from
early 2011. Notice the RS line being contained within a horizontal range between
2009 to 2011.
Figure 24.24 shows the RS line of the Gold/TED Spread ratio testing the up-
per extreme level. Notice that the RS line tested the upper extreme level very ac-
curately before Gold started to underperform the TED spread.
Figure 24.25 shows the RS line of Silver against the TED Spread testing the
upper extreme level. Notice that the RS line exceeded the upper extreme level very
decisively before Silver started to underperform.