Log in to Connect and link to the material for Chapter 9, where you will find five years of weekly returns for the S&P 500 and Fidelity's Select Banking Fund (ticker FSRBX).
a. Set up a spreadsheet to calculate the relative strength of the banking sector compared to the broad market.
b. Identify every instance in which the relative strength ratio increases by at least 5% from its value five weeks earlier. In how many of the weeks immediately following a substantial increase in relative strength does the banking sector outperform the S&P 500? In how many of those weeks does the banking sector underperform the S&P 500?
c. Identify every instance in which the relative strength ratio decreases by at least 5% from its value five weeks earlier. In how many of the weeks immediately following a substantial decrease in relative strength does the banking sector underperform the S&P 500? In how many of those weeks does the banking sector outperform the S&P 500?
d. How well does the relative strength rule perform in identifying buy or sell opportunities?