1/ 3-Month Relative Highs
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3-Month Relative Highs
For the week ending Friday March 14th the S&P500 index closed down 2% for its fourth negative week in a row. However, this relative strength scan shows 10 stocks making new relative 3 month highs versus the index on Friday, with the highest relative close for $GE in 1,842 days (since November 2017).
You will see that 3 of the stocks ($PSX, $AIZ, and $CINF) have a ‘True’ label in the Breakout column. This means that this is their first new 3 month relative high in 3 months, signaling a potential run of outperformance.
Using our Signal Tester we can test how the breakout signal has performed historically. Using the historical S&P500 members over the last 5 years we see that there were over 5,800 breakout signals. The chart below shows the average performance 21 days after each signal (the green line) plotted against the average return for the index (yellow), with the relative performance in red.
You can see the red line dips slightly after the first day after each signal (profit taking?) before reaching its maximum outperformance after about 8 trading days. The rally then starts to lose steam, as the red line descends. At the end of the 21 day period the average gain versus the index were almost identical in a strong market (+1.5%), but the initial breakout provided a short term buying opportunity.
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Originally posted 17th March 2025
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