ETFreplay blog | Uptrending Ratio Indicates Relative Strength ETF Backtests QUANTIFY It

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.