MTA webcast series summary: Linda Raschke - Relative Strength Strategies

This presentation was on November 10, 2011 on "Traditional and Unique ways to use Relative Strength"

Hit me up if you would like the slides that accompany it or have any questions
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Presenter's Bio: Linda Bradford Raschke is President of LBRGroup, Inc., a CTA, and president of LBR Asset Management, a CPO. She began her professional trading career in 1981 as a market maker in equity options. LBRGroup has been a registered CTA since 1992. Ms. Raschke was recognized in Jack Schwager's critically acclaimed book, The New Market Wizards, and is known for her own top selling book, Street Smarts - High Probability Short-Term Trading Strategies. She has been featured in dozens of financial publications, radio and financial television programs, has served on the Board of Directors for the Market Technician's Association and was President of the American Association of Professional Technical Analysts. Ms. Raschke has presented her research and lectured on trading for the Managed Futures Association, American Association of Professional Technical Analysists, Bloomberg, Market Technician's Association, International Federation of Technical Analysis, Canadian Society of Technical Analysts, TAG, Omega World, International Online Trading Expo, AIQ, Futures Conference, and has lectured in over 16 different countries for Dow Jones.

Relative Strength Summary Suggested Rules:
-For investors look at 6 & 12 month look back periods; 4 weeks is the worst period (least return)
-Be careful as using it increases Beta on both sides (gains and losses)
-Works best in up-trending markets with good volume
-Works in stocks, sectors, and commodities
-Be extra careful using after an extended trend as rotation will often take place at peaks and troughs
-Doesn't work in downtrends (longs are already loaded up...liquidation can be quick)
-Can use on short term trades using first 30 minute strength
-Very good strategy with relative performance models that follow benchmarks and /or are constrained by investment options.
-Needs constant updating depending on time frame

Slide 8- Dax made a lower high in late Aug and thus showed relative weakness, which set up a good trade into the Sept lows. Nasdaq showed strength by not making lower low early Oct like other indices. Rallied strongest into October as well.

Slide 10- 3M vs Intel early Oct lows...INTC didn't make new lows and was a lot stronger during the rally...AMZN similar...both made higher lows vs. lower low of 3M

Slide 11 (my 2 cemts)- Coke vs. Pepsi...great tool for sector/industry analysts...she used 180ma just for structure (could be your pay period or performance period? or any MA you wanted)...swap out s&p with your benchmark. Potential to look at st.dev of ratio around 180 day to help know when to scale back and manage money? Divergences may be good signals too.

Slide 17: answer=Amazon. The tough think is you had to pay up for AMZN since it gapped and took out near term highs...but the thrust helps you make that decision.

Slide 19: Walmart was not overbought just b/c it went over 75 on RSI...Alcoa would have killed you, but Walmart stayed up.

Slide 22: Volume by 30 minutes (vertical) by day (horizontal)

Slide 23&24: 7am time period on futures pretty good at showing trend of day; is it holding or failing or oscillating?

Slide 29: Franc long out-performing well before it went parabolic...relative strength helped show it; Home Run trade!

Q&A:
-Even though correlations are at all time highs, RS still works...all things can go up, but some still outperform
- Gary Anderson's done a lot of work on Relative Strength (google him)
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