There are 255 stocks in the S&P 500 that trade on market relative strength (RS) buy signals, but not all of them are created equal. For the uninitiated, a stock being on a market RS buy signal is generally a desirable trait, signaling sustained outperformance versus our benchmark (SPXEWI) and continued technical favor. Of the various technical indicators we follow, RS signals remain one of the most closely watched by many Dorsey Wright analysts because they often identify leadership trends that can persist for years—or even decades.

In previous versions of this report, we highlighted Danaher (DHR), which maintained a market RS buy signal from June 1993 until early 2023—a nearly 30-year streak. While no current stock is approaching that milestone, several names continue to exhibit impressive durability. W.R. Berkley (WRB) remains the current leader, having held a market RS buy signal since July 31, 2000, now at a quarter century years of uninterrupted leadership.

The table below highlights today’s “RS Aristocrats,” defined here as stocks that have remained on market RS buy signals for 12 years or longer. The results have been impressive. Since their respective signal dates, the 22 stocks have produced an average annualized return of 20.0%, versus roughly 8% for the market benchmark. On a cumulative basis, the average stock in the group has outperformed the market by more than 5,200%. Several names stand out for exceptional long-term performance. Apple (AAPL) has gained nearly 58,700% since moving to a market RS buy signal in 2004, while Amphenol (APH), Cadence Design Systems (CDNS), and Broadcom (AVGO) have each delivered more than 6,000% cumulative returns.

Importantly, an RS buy signal is just one component of our technical process. Some companies on the list currently carry more modest overall technical scores despite their long-term RS leadership. Honeywell (HON), for example, has maintained an RS buy signal since 2007 but modestly underperformed the benchmark over that span, and is currently a weak 2 for 5’er.

Ultimately, these “RS Aristocrats” represent a small group of stocks that have demonstrated remarkable consistency across multiple market cycles. History suggests that this type of sustained relative strength is rarely accidental, making these longer-term leaders worth continued attention from a technical perspective.

Among the aristocrats, Linde Plc (LIN) appears to be one of the most attractive current options. The 4 for 5’er trades on two consecutive buy signals and is close to breaking a triple top at $528. The stock moved to a positive trend in February and has pushed higher since then. The stock market has been on a RS buy signal since 2001, outperforming the market by almost 1,500% over that span. LIN trades in actionable territory near the middle of its ten-week trading band. Support lies nearby at $496, $472, and $448, with the bullish support line at $440.

The NDW research platform has two main tools for identifying areas of strength and weakness in the market – the Dynamic Asset Level Investing (DALI) tool and the Asset Class Group Scores (ACGS). DALI is perhaps the more approachable of the two tools – it provides a top-to-bottom relative strength ranking of every asset class in a single, easy-to-digest layout. The ACGS system, while more visually complex, offers more granularity and more ways to slice the universe of investable assets. Another key difference between the two systems is the speed with which they change. Generally, changes in the market landscape start to show up in the ACGS earlier than they do in DALI. This is not to say that one system is inherently better than the other – the higher sensitivity of the ACGS means it may identify emerging trends earlier, but the tradeoff is that it is more likely to get “head faked.” The difference in sensitivity also means that, at times, the two systems may not be in total agreement with one another. Today we wanted to highlight two relatively recent relative strength developments – one where the ACGS and DALI agree and one where they diverge.

One way to look for changing relative strength on the ACGS page is select the “All Groups” view and then sort the groups by score direction. Score direction measures how much a groups score has changed from a recent peak or trough and sorting by score direction can tell us which groups have strengthened or weakened the most over the short-term. Currently, the Inverse-Fixed Income group has the highest score direction, 1.90, of all 134 groups on the ACGS page, which is unsurprising given the rise in interest rates over the last couple of months. The group with the second highest score direction is the US Small Cap Value group, which may unanticipated as large cap growth has been such a dominant force over the last few years. Not only does small cap growth now have the second highest score direction in the ACGS system, but on average score (the default metric for the ACGS rankings) the group ranks 10th and the other three US small groups – All US Small Cap, US Small Cap Growth, and US Small Cap Blend – all rank in the top 15. This stands in stark contrast to the DALI size & style rankings where small cap growth and small cap value rank sit in the two bottom positions.

This is one instance where the ACGS may be identifying a trend – strength in small caps – earlier than DALI. If you’re interested in adding exposure to small caps, there are several viable options. With a near-perfect 5.85 fund score, the Invesco S&P Smallcap 600 Pure Value ETF (RZV) is the highest-scoring of all broad small cap funds. RZV has given two consecutive buy signals, most recently breaking a triple top late last month. The fund is verging on heavily overbought territory with a weekly overbought/oversold (OBOS) reading of 67% but remains just within actionable territory. Year-to-date (through 6/10), RZV has 19.34% on a price return basis. The Invesco S&P Smallcap 600 Pure Growth ETF (RZG) has an almost-as-impressive 5.64 fund score and is less extended than its value counterpart with a weekly OBOS reading 42%; RZG is also up more than 19% year-to-date. Those looking for style-agnostic small cap exposure may wish to consider the iShares Russell 2000 ETF (IWM), which currently has a favorable 4.58 fund score and is up just over 14.5% year-to-date.

On the other end of the score direction spectrum, at -3.20, precious metals now have the lowest score direction of all 134 groups in the ACGS system, suggesting rapid deterioration; the group also ranks 112th based on average score. In this case, DALI and the ACGS agree as precious metals has fallen to the bottom of the DALI commodities rankings. Individual ETFs have also shown significant signs of weakness – the iShares MSCI Global Silver Miners ETF (SLVP) fell to a market RS sell signal last week and its fund score has fallen roughly a point and a half since the beginning of June and now sits at an unfavorable 2.56; similar deterioration has been seen in the VanEck Gold Miners ETF (GDX). The precious metals group is now heavily oversold with a weekly OBOS reading of -90%, so it is possible we could see a mean-reversion bounce in the near-term. If you’ve been holding on to exposure to precious metals or miners, such a bounce would be a convenient exit opportunity as DALI, the ACGS, and the charts/fund scores for GDX and SLVP all reflect a major decline in strength.

While there are similarities between DALI and the ACGS – both rely on relative strength to identify areas of strength and weakness in the market, there are some important differences between the two tools. As discussed, the ACGS tends to be faster-moving and therefore may be better at identifying emerging trends, but also potentially more susceptible to “head fakes.” The difference in sensitivity between DALI and the ACGS means that they may not always be in unison. But, when both tools are pointing the same way – as in the case of precious metals – we would be wise to take heed.

The option suggestions featured here are pulled from the NDW Options Ideas tool. These are just a sample of the ideas that can be found there. The Options Idea tool contains numerous additional income and speculative plays. It also offers relative strength-based screens targeting the highest (and lowest) relative strength stocks and ETFs that have recently moved counter to their longer-term trend. To access or subscribe to the Options Ideas tool click here.

Call

Philip Morris International (PM) September 18 $175 Call

Put

Coinbase Global Inc (COIN) September 18 $160 Put

Income (Short Put)

Dell Technologies Inc (DELL) $340 Put