Relative strength analysis pits one asset against the other (in this case one ETF vs. the S&P 500) to determine which one is the better performer.  Many classical technical devices can be used in the same manner as they are used on price charts.

These studies are also invaluable in portfolio analysis as they can guide you to where money should be over or under allocated.

With that said, there are two key takeaways from this report:  the first is that despite bounces in relative strength in the international/emerging market ETFs highlighted the dominant trend favors the S&P 500 as evident by the technical breakouts; the second is that within the S&P 500, it appears that PowerShares QQQ Trust ETF (QQQ) has become a leadership sector.

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PowerShares QQQ (QQQ): A positive outside month in April 2013 was followed by a key relative strength breakout.  The rally began to pick up speed in May 2013 as QQQ surpassed its September 2012 high and set into motion the resumption of the 2009 uptrend.  This now opens the door for a move closer to 80-82 or the top of the 2009 uptrend channel and the 61.8% Fibonacci retracement of the 2000-2002 decline.  On the other hand the 12% April-May 2013 rally resulted in an overbought condition and the 5/24/13 negative outside week suggests a consolidation first.

iShares MSCI EAFE ETF (EFA): EFA has fallen below the April 2013 breakout, relative to the S&P 500.  This is what is classified as a false breakout and they can be taken advantage as well.  As anticipated this has since led to the resumption of its underperformance cycle.  From an absolute perspective the 5/22/13 negative outside day, the 5/23/13 downside gap, the5/24/13 negative outside week, and a potential bearish flag formation are pointing towards lower prices.  The top of the gap (62.70) will now act initial resistance.