I am here adding a bit more on to yesterday's post re: the relative strength line for
MSCI's $CYC index. I view the relative strength line as a decent indicator of the
market's expectation for economic momentum potential. I think it ranks somewhere
between a leading and a coincident indicator since it keys off not just pricing power
for cyclicals (leading) but full profit potential (coincident) as well. The RS line
is not used by economists as a formal economic or profits indicator, but it does
reflect the opinion of the market's players. Since the "smart money" by definition
moves into and out of stock sectors first, it is wise to watch for changes of trend in
the RS line of all stock sectors and industry groups and to also ask yourself whether
investors know something you do not. $CYC RS index chart.
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