Relative Looks

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Volume 19 – Relative Looks

This volume compares various pairs of series by dividing one by the other. For example, the Russell 2000 / Russell 1000 ratio divides the Russell 2000 index by the Russell 1000 index. When the numerator (Russell 2000 in this example) is outperforming the denominator (Russell 1000 in this example), the line is rising. Conversely, when the line is falling, the Russell 1000 is outperforming the Russell 2000. Note that outperforming can mean either falling less quickly or rising faster.

Dow Jones Industrials / Gold Price Ratio, weekly, 1885
Dow Jones Industrials / Moody's Aaa Bond Price Ratio, weekly, 1885
Gold Price / Moody's Aaa Bond Price Ratio, weekly, 1875
Nikkei 225 (in US$) / Dow Jones Industrials Ratio, daily, 1965
NASDAQ Composite / S&P 500 Ratio, daily, 1963
Russell 2000 / Russell 1000 Ratio, daily, 1980
S&P 400 MidCap / S&P 500 Ratio, daily, 1981
NYSE Financials / NYSE Composite Ratio, daily, 1965
DJ Energy Sector / DJ Industrial Sector Ratio, daily, 6/30/82
DJ Technology Sector / DJ Basic Materials Sector Ratio, daily, 6/30/82
DJ Basic Materials Sector / DJ Industrial Sector Ratio, daily, 6/30/82
DJ Consumer Cyclical Sector / DJ Consumer Non-Cyclical Sector Ratio, daily, 6/30/82
The Moody's Aaa Bond Price is the price (not total return) implied from the yield by assuming an 8% coupon and a constant 20 year maturity. These are all one panel charts drawn on
logarithmic price scales.

 

Chart V19h, NYSE Financials/NYSE Composite Ratio, March 1997 (3kb)

The line is the ratio of the NYSE Financials to the NYSE Composite Average. When the line is rising, the Financials are outperforming the Composite. When it is falling, the Financials are underperforming.

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Note: This study (dividing one series by another) is called Relative Strength. It is not Welles Wilder’s Relative Strength Index, a popular momentum based oscillator.

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Last modified: April 06, 2005