Don't Ignore This Chart!

Technology SPDR: Lagging for 3 Weeks and Leading for 3 Years


Despite relative weakness the last few weeks, XLK remains in a clear uptrend and shows no signs of weakness on the price chart. First, note that XLK recorded 52-week highs throughout 2016 and is currently less than 2% from a new high. Second, XLK held the September low when the market swooned and SPY broke its September low. Third, XLK is showing signs of life with a surge off the support zone at 46. 

The lower window shows the price relative, which is the XLK:SPY ratio. Overall, XLK outperformed SPY for over three years because this ratio rose. The blue rectangle shows a long period of flat relative performance because the ratio moved sideways. The red areas show short and sharp pullbacks in April 2016 and October 2016. I would not read to much into the most recent pullback because the overall trend is clear up and this is the dominant force at work. 
Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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