RS, or Relative Strength, is a comparitive indicator that scores how well a stock or sector is performing compared to the overall market.  It scores a security from 1 to 100, the higher the score, then the stronger it is performing compared to the rest of the market.

This is important to realize when facing a market that is in a severe form of fear or doubt about the future.  The volatility that is currently underway in the market is a direct reflection of the type of fear and anxiety that is being played out by nervous investor.  The debt crisis in Greece has already spread to some of the other countries on the continent and their is a palpable fear that its contagion will not be contained.

Behind the scenes, Europeans are staring down the edge of a precipice where they do not know how far down it goes concerning the debt contagion.  Worse, the U.S., once the bastion of economic strength, is now 94% of GDP and domestic worries over rising unemployment, lack of economic growth, and rising entitlements are leaving investors wondering whether the U.S. is deserving of its once favored status as the "best deal around" when investing capital.

The point is, stocks can get real cheap, real fast in the face of all this uncertainty which is good news.  The bad news is that stocks can always get "cheaper" by falling in price in the face of all this uncertainty.  Now, there are ways to pick better investments if things go bad in today's environment (which I'll get into at another time) but, if you want to give yourself a real edge, then buy strength.

This brings me back to RS and the search for strength.  Look for sectors that have the highest RS in the market during a downturn, chunck down your focus by zeroing in on the stocks that have the highest RS as well.  Make a list of these high RS stocks from the highest RS score to the lowest RS score.

This is your hit list that you will select from when things turn back around because they have proven themselves by being able to weather downturns and maintain high performance.

This process can be repeated when looking for investments abroad including ETF's which open a whole universe of possibilities for a smart trader.