Appendix
The rise and fall of the relative strength spread (RSS) measures traders’ day-to-day confidence in the immediate direction of price. Traders’ confidence crested in early 2000 as the S&P 500 reached a bull market high (Figure A.1).
FIGURE A.1 S&P 500
Since then, traders’ confidence has slowly eroded, however, evidenced by the irregular decline of the RSS (Figure A.2). A comparison of momentum during the two major rallies since 2000 is instructive. The rally from the 2003 low was attended by positive feedback and a rising RSS, but during a second advance from the 2009 low, confidence, as measured by the RSS, failed to match that of the ...
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