In the June 14 "Bear Market Strategies" report, Hanson writes about comparative relative strength relationships. I do this frequently as well, but take note that Comparative Relative Strength is different to the Relative Strength Index (RSI) technical indicator.

Hanson writes:

"Exhibit 20 shows the monthly performance of the Dow Industrials versus the S&P over the past decade. The point here is that major relative strength shifts appear to form around the peaks and troughs of the four-year cycles. The downturn into the 2000-2002 bear market is clearly defined, as is the upturn into the current cycle in the fourth quarter of 2002 - the first quarter of 2003. Recent action has broken a two-year downtrend in the relationship, and may be signaling the start of a new cyclical bear market. At the very least, it would be fair to say that in recent years Dow underperformance has been a sign of market optimism, and Dow out-performance has been a sign of market defensiveness."

Comparing the Dow 30 to the S&P 500, Hanson produces the graphic in his Exhibit 20, which illustrates his "flight to quality ahead of bear cycles" case. You can do the same by using the Comparative charting feature (i.e., the "Overlay") at ADVFN.com.

Here for instance is the Dow 30 (in black) versus the Russell 2000 small cap index ETF (IWM) (in blue). The Russell small caps carry more risk than the S&P 500, so the "capital flight" situation ought to be (and is) more apparent.

At cycle bottoms this concept works in reverse.

Amazing how the May 10 FOMC decision was the turning point that ushered in the Bear, which I immediately called.

Wall Street does have a lot of good analysts who understand these concepts. They have been through bull and bear cycles many times before, and they know what to look for.

In time so will you because that's why I'm here.