Author: The Coe Report
Model: Market Timing Technicals
Disclosure: None
Technology has shown underperformance for several weeks and that is becoming a concern as it is now threatening the long-term bullish case.
The ratio of the NASDAQ 100 (NDX) versus the S&P 500 (SPX) has pulled back to the 200-day exponential moving average and with today’s tech weakness it is giving way. Prior to today, the ratio had traded above this average since the fall of 2008, when global markets were in the final throws of their bear markets.
Technology, like the emerging markets (which are also underperforming), led equity markets out of the bear market lows. Leaders to the upside also lead to the downside.
Should technology continue to underperform, pushing this ratio firmly beneath the critical 200-day average, then it would be a strike against the case for the bull market. In the very least it would imply we were entering a prolonged consolidation phase. Either way technology is currently a sell.
