Most Improved by Relative Strength
Interesting development; For the past couple of weeks this excel file has been empty and no one has said anything. To me this means this part of the site is not being used. I’ve been considering changing this anyway. This 1 month rate of change of a 6 month relative strength when spread over so many issues is difficult at best to use. After vacation I will replace this report with a ranking report for Sectors and Industry Groups. It appears that the ranking works better and is easier to use. ETFs and Indexes are only redundant so they will not appear.
It might look something like this: Rankings Opinions welcomed
The Microsoft Excel version is 2007 – If you are having a problem due to a previous version or due to the lack of XML conversion – check out a Trading Notes on Microsoft Excel the Free downloads available from Microsoft should do the trick. If not please send an email and we’ll solve the problem for you 
About Most Improved
Each week appears a report entitled: Largest Changes in Raw Numbers (21 Days).[Top 10 used to appear in Newsletter] – Last week in the discussion of relative strength I explained that in the Ranking Reports we use a rate-of-change component of six and twelve months. In other words, in terms of relative strength which groups, ETF’s, indices, and stocks have performed the best over the last six months and twelve months respectively. Often, but certainly not always, once something reaches the top of the rankings a good portion of the move is behind us. Most of you, I am quite sure would like to catch moves in their early stages, rather than chase them later. Enter the Largest Changes Report.
The Prudent Trader Largest Changes Report measures the largest changes over the previous 21 trading days (approximately one month) by relative strength rate-of-change. For this weeks newsletter we will concentrate solely on the relative strength aspect of this report and utilize two examples: first on the positive side UTH (Holdrs Utility ETF); and secondly on the negative side MTK (streetTracks Morgan Stanley Technology ETF). This is not a comment on where these ETF’s may be going in the future, it is a comment on what you could have noticed, and taken advantage of, in hindsight, by spending a few moments reviewing this report each week.
Way back in the May 20 newsletter UTH first appeared on the most improved list in spot number 4. Likewise the Industry Groups Gas Utilities and Diversified Utilities also appeared as well as the Dow Jones Utility Average, the Philadelphia Exchange’s Utility Index (UTY), and the Dow Jones U.S. Utilities Index (DJUSUT). Utilities are acting well relative to the overall market at least over the last month.
With the apparent confirmation from utility industry groups and utilities indices is this ETF worth a further look? At the time (data is no longer available but if memory serves me) UTH ranked about 80th of 188 ETF’s we currently follow in terms of relative strength over the previous six months. UTH as well as utility industry groups and utility indices continued to appear on this report every week until July 8 when they finally disappeared from these listings.
There are a few things to notice on the above chart of UTH. First, even though the relative strength rate-of-changes were below zero, i.e. underperforming the market, they were improving very nicely; secondly, the daily calculation also improving and making a higher high prior to the first breakout above the May high; and finally the PT-Accumulation algorithm (available in the technical indicator tables, ETF) showing UTH under accumulation (since the end of 2005). Take a moment and pull up a chart of UTH, applying your favorite indicators, and take note of how they looked back in May. Would you be interested?
MTK initially showed weakness back in December of 2005 appearing as the fifth worst showing over the previous twenty one days in the December 10 Newsletter, and remaining in the largest declines for three more weeks. Then it appeared again the same week as UTH above and again the following week.
Notice that after the initial showing of weakness MTK declined slightly but then proceeded to rally to new highs. Of particular interest on this chart (in 20/20 hindsight of course) is how even with the rally MTK was losing relative strength, i.e. it was advancing but not at the pace of the overall market. Fast forward to the first quarter of 2006 when MTK seemingly broke up from a short sideways consolidation but relative strength went nowhere. It was performing with the market, nothing more, nothing less. Fast forward once again to the May 20 report when MTK again appeared on the most declined and notice all the technology component company it had. Now as before pull up a chart of MTK and scroll back to last December and last May, apply your favorite indicators, would you have acted then or shortly thereafter?
If these situations were of interest you could always visit www.AMEX.com and pull up the component stocks of the ETF of interest, or you could search on site through the industry group or index component stocks. There may have indeed been an even better and more appropriate situation for you, in the underlying component stocks. In either case your attention has been properly directed.
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