Relative Strength Oscillators for Comparing an Asset with a Market Index

Summary

This indicator compares an asset’s performance with a selected market index using Markos Katsanos’ relative strength measure. It takes the momentum of the logarithm of the asset-to-index ratio, smooths it, and displays the result around a zero line with a signal average. Positive and negative values distinguish relative strength from relative weakness. The period, smoothing, signal average, and comparison index can be changed.

A companion comparative relative strength calculation is also available, along with an optional rolling correlation display whose colors indicate positive or negative correlation strength. The script describes its formulas and settings but supplies no performance tests or evidence that its signals predict returns. Its readings depend on the selected index, input source, and parameter choices; the correlation display describes co-movement, not whether the asset is outperforming. Treat the plots as analytical tools rather than a tested trading system.

Key ideas

• The main oscillator measures momentum in the logarithm of an asset’s price relative to a chosen index.
• A smoothed signal line and zero-centered display help visualize changes in relative performance.
• A companion comparative relative strength calculation provides an alternative relative measure.
• An optional rolling correlation display shows the direction and degree of asset-index co-movement.
• The indicator describes calculations and visual features but provides no backtest evidence.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.