Log on to finance.yahoo.com to find the monthly dividend-adjusted closing prices for the most recent 4 years for Abercrombie & Fitch (ANF). Also collect the closing level of the S&P 500 Index over the same period.

a. Calculate the 4-month moving average of both the stock and the S&P 500 over time. For each series, use Excel to plot the moving average against the actual level of the stock price or index. Examine the instances where the moving average and price series cross.

Is the stock more or less likely to increase when the price crosses through the moving average? Does it matter whether the price crosses the moving average from above or below? How reliable would an investment rule based on moving averages be? Perform your analysis for both the stock price and the S&P 500.

b. Calculate and plot the relative strength of the stock compared to the S&P 500 over the sample period. Find all instances in which relative strength of the stock increases by more than 10 percentage points (e.g., an increase in the relative strength index from .93 to 1.03)

and all those instances in which relative strength of the stock decreases by more than 10 percentage points. Is the stock more or less likely to outperform (underperform) the S&P 500 in the following two months when relative strength has increased (decreased)?

In other words, does relative strength continue? How reliable would an investment rule based on relative strength be?