Relative Strength Spread

SPY vs IWM Relative Strength Spread Indicator

The SPY vs IWM Relative Strength Spread indicator measures leadership between large-cap and small-cap equities by comparing the percent performance of SPY (S&P 500) against IWM (Russell 2000) over a user-defined lookback period.

The indicator plots a zero-centered histogram in a separate pane, making relative strength shifts immediately visible.

How It Works

The indicator calculates the percent change of SPY and IWM over the same lookback window.

It then subtracts IWM’s percent change from SPY’s percent change.

The result is plotted as a histogram pinned to the 0% line.

This design removes long-term drift and ensures that:

Positive values indicate SPY is outperforming IWM

Negative values indicate IWM is outperforming SPY

How to Read the Histogram

Above Zero (Green Bars)
Large-cap stocks are leading → typically associated with risk-on stability and institutional flow into SPY-weighted names.

Below Zero (Red Bars)
Small-cap stocks are leading → often signals risk appetite expansion and speculative participation.

Crosses of the Zero Line
Mark potential leadership transitions between large caps and small caps.

Why This Indicator Is Useful

Identifies market regime shifts (risk-on vs risk-off behavior)

Confirms or filters trend strength in equities

Helps time rotations between large-cap and small-cap exposure

Works consistently across all timeframes

Because the calculation is based on percent change, the histogram remains normalized and comparable regardless of price level or timeframe.

Best Use Cases

As a market internals / breadth confirmation tool

As a bias filter for SPY, IWM, or index futures

To spot early leadership changes before price trends fully develop