Field note
Name the benchmark before you praise leadership
Relative strength only answers the question you ask. If the comparator is vague, leadership is theatre.
In every Relative Strength Intensive we meet at least one participant who can list “strong” names without saying strong against what. Absolute price rise feels like leadership. It is not.
Three fair comparators
For Australian equity work we usually test three bases before trusting a rank:
- A broad index that matches the investable universe
- A sector or industry proxy that shares drivers
- A defensive alternative (cash rate proxy or bond proxy) when the question is risk appetite, not peer victory
If a name leads only one of these, the story is incomplete. If it leads none, the colour on the absolute chart is decoration.
A classroom habit
Write the benchmark on the margin of the chart before you draw the ratio. The physical act slows the leap from “up” to “leader.” It also makes later notes comparable week to week.
When peers disagree with the index
Sometimes a stock leads its sector basket while lagging the ASX 200. That is not a contradiction; it is two questions. Relative strength comparison answers both — separately — if you keep the labels honest.
Bring that honesty into your next ranking sheet. If you want structured practice, the morning ranking clinic is built around exactly this discipline.