The leadership chain (SOX>NDX>SPX) is holding up this week on the daily charts.
SOX/NDX has done the first thing needed to go bullish again and that is to authoritatively take out the moving averages. The second – and lagging – thing is to turn those averages up. So far, so good. It’s a bullish indicator.
NDX/SPX is still questionable. But it’s important to note that legal issues facing the Tech behemoths like Apple and Google are weighing here. The ratio is intact to its uptrend and thus, still bullish.
SOX/SPX is ticking new highs and this is a positive and bullish cyclical indicator.
Now let’s get a look at these ratios on a weekly chart. As we have noted recently, SOX/NDX was weak but still trending up from 2016. The recent positive move certainly helps fortify that uptrend.
There is a lot of hype out there about value stocks (don’t get me wrong, I am interested in positioning where I find interesting opportunities) but the weekly chart paints the recent cooling off in Tech vs. broad SPX as a cool down from an excessive situation. The larger trend is up, big time.
And look at the Semis go vs. the broad market. It’s an overbought indicator (much like it was going into Q4 2017) but it’s bullish until it isn’t.