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Dorsey Wright Money Management
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The Dorsey Wright Money Management team is composed of Michael Moody, Harold Parker, John Lewis, Andy Hyer, and JP Lee. Mr. Moody and Mr. Parker, Senior Portfolio Managers, joined Dorsey Wright Money Management in 1994. John Lewis, Portfolio Manager, joined the team in 2002. Andy Hyer, Marketing... More
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Systematic Relative Strength Investing
  • Relative Strength Diffusion Index 2 comments
    Apr 14, 2010 11:19 AM
    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 4/13/10.

    The 10-day moving average of this indicator is 96% and the one-day reading is 97%.  This oscillator has shown the tendency to remain overbought for extended periods of time, while oversold measures tend to be much more abrupt.
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    Is it better to look at high rs stocks trading above 50 dma rather than just all of them...or do they both generally say the same thing? for example, about 91% of stocks in the sp500 are currently trading above their 50dma, not too different from what you have showing on your chart
    14 Apr 2010, 12:32 PM Reply Like
  •  
    If you look at the chart, you can see that during some periods of time, less than 20% of the HighRS universe is trading above its 50-day MA.

    These periods of HighRS under-performance are periodic and should be expected. No strategy is going to be able to outperform all the time (if HighRS always outperformed, the chart would be a horizontal line at the top of chart).

    As far as trying to time when you should be invested in HighRS based on a moving average indicator, please read this post:

    systematicrelativestre.../

    Come to our blog for more detailed posts. Thanks for reading!
    16 Apr 2010, 03:39 PM Reply Like
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