Relative strength (RS) relationships are a core component of how we judge markets. Charting RS values on point and figure charts to garner information about leadership has been a primary focus of ours for years and will continue to be so. However, relative strength has much larger scope than just point and figure charting, and with that in mind, we’ve recently added the capability to chart RS relationships on a line chart along with the ability to put over some indicators, like moving averages. As an example, the chart below shows the RS value between SPY and RSP (cap-weight S&P 500 vs equal-weight S&P 500) as well as its 400-day moving average. If the RS value is above its 400-day moving average, then SPY is in the lead. If the RS value is below its 400-day moving average, then RSP is in the lead. A 400-day moving average is roughly two years of trading data, so this is still focused on long-term trends. Any period can be used when adding a moving average to a line or RS line chart, but for today we’ll focus on a long-term view.

Running a simple switching strategy based on whether the SPY/RSP relative strength calculation is above or below its 400-day moving average. For this strategy, we put in a 14-day rule which limits switching to only those instances when a moving average cross lasted for at least 14 calendar days. This drastically reduced unnecessary changes, although there were still a handful of short-lived trades. Despite a few head fakes and unsuccessful trades, the switching strategy outperformed buying and holding either SPY or RSP by a large margin. One noticeable point from the switching strategy is that none of the “unsuccessful” trades underperformed by more than 4%. If the strategy was “wrong” then it corrected the mistake before much damage was done. On the other hand, the successful trades had much greater outperformance than the unsuccessful trades had underperformance. This gets back to a core tenant of momentum or relative strength investing, cutting the losers short and holding onto the winners if they continue to lead.

Lots of recent research has detailed some emerging relative weakness stemming from the precious metals space. While positive action on 3/25 driven largely by a possible near-term ceasefire in the Middle East sent global markets higher for the day, there is no question from looking at individual precious metal technical pictures that the space is struggling. To add to that picture today, we will highlight a recent RS change between copper & gold. Before going further, its worth mentioning that the overall technical picture for copper representative CPER is still quite weak. In fact, the fund most recently completed a bearish catapult on its default chart, moving back into a negative trend in the process.  Now earning a meager 2.54 fund score as of 3/25, the path of least resistance for copper-at least on an absolute basis- is lower.

Zooming out for a moment, we can remind ourselves of the definition of “positive relative strength.” Of course, everyone is familiar with buying an asset going up more than its respective benchmark, that’s the “easy” definition. Conversely, buying an asset that goes down less than its benchmark would also be considered positive relative strength. Positive relative strength can be analyzed over different timeframes/sensitivities, an important detail to keep in mind when trying to figure out which asset is gaining/losing strength.

We will start with a 3.25% PnF chart between CPER & GLD. Gold’s recent weakness allowed copper to reverse back higher into X’s on this chart, symbolizing near-term relative strength for the more industrial-based metal… although gold has maintained its share of long-term strength since mid-2024. It’s worth noting that, historically speaking, we have seen gold mainly take over during periods of economic contraction (note dotcom bubble and GFC) while copper has led during times of general expansion. Now- its safe to say that more recent trends haven’t followed suit as precious metals have stormed forwards over the last few years alongside other risk on assets, but the longer-term picture remains intact. Those following an RS Switching strategy (owning whichever asset in on an RS buy signal) have outperformed a simple buy and hold strategy of either asset on their own.

Converting this relationship into a line chart for the physical commodities (compared to ETF representatives) over time, we can see that story play out through a different view. Using data spanning back to 1993, the copper/gold ratio (price of copper/price of gold) has been on a steep decline since the most recent bull market began in late 2022/2023. Zooming out even further, the ratio is near all-time lows- signaling leadership from gold as you would expect…. Particularly over the last few years. As trend followers, we would ultimately expect this continue going forward, at least until we are convinced otherwise.

Finally, we will wrap up our piece with a reminder that performance (and subsequent leadership) is all relative. Remember, there will always be an identified leader between two stocks, even if both of them are names that are weakening (i.e., gold & copper have both weakened, but gold still looks “better”). To combat this, we can utilize the matrix methodology to run a larger batch of RS tests for a wider universe. To demonstrate this, we threw GLD & CPER into a matrix with broad S&P 500 representative SPXEWI. In this case, SPXEWI lands at the top of the heap, re-establishing itself against GLD with recent action. We could run a similar test adding in different representatives from different broad asset classes (take international or fixed income names, for instance) to gradually build out a wide matrix based ranking system. This is similar to the overall DALI rankings, and can be used to help guide your hand when it comes to broader asset allocation. As always, set alerts on key relationships to be notified of any changes as they occur.

Each week the analysts at NDW review and comment on all major asset classes in the global markets. Shown below is the summary or snapshot of the primary technical indicators we follow for multiple areas. Should there be changes mid-week we will certainly bring these to your attention via the report.

Remember, these are technical comments only. Just as you must be aware of fundamental data for the stocks we recommend based on technical criteria in the report, so too must you be aware of important data regarding delivery, market moving government releases, and other factors that may influence commodity pricing. We try to limit our technical comments to the most actively traded contracts in advance of delivery, but some contracts trade actively right up to delivery while others taper off well in advance. Be sure you check your dates before trading these contracts. For questions regarding this section or additional coverage of commodities email james.west@nasdaq.com.

Data represented in the table below is through 3/24/2026:

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