Tech Stocks Question Rally’s Staying Power
It is common knowledge that technology stocks tend to provide leadership during sustainable rallies. The chart below shows the NASDAQ relative to the S&P 500 Index. When tech stocks are stronger than the market, the line on the graph rises. When tech stocks are weaker than the market, the line on the graph falls. The S&P 500 is shown at the bottom of the chart. The green vertical lines show significant and sustainable market bottoms. In every case (except now), tech stocks led the market higher. Tech stocks lagged on Thursday. Tech stocks are lagging again early in Friday’s gains.
How did tech stocks perform vs. the market off the March 2009 lows? Very well - they provided strong leadership just as you would expect during a sustainable rally. RSI (top) stayed above 50, which is bullish.
Compare the March 2009 bottom (above) to the present day rally (below). There is a clear non-conformation taking place. Unless tech stocks begin to lead, the current rally remains questionable. RSI, in contrast to 2009, has remained below 50, which is bearish.
