Technology has been a leader of the 3.5 year bull market. The Nasdaq made a new high before the SPX on each subsequent breakout over the past 3.5 years. Until the September breakout. Here is a chart of the SPX / NDX index ratio over the past 3 years:
As you can see, the NDX has consistently outperformed the SPX index for most of the past 3 years. I’ve circled in red all of the local highs in the SPX index in the past 3 years. Each new local high in the SPX index corresponded to an even higher relative level in the NDX index. So the leaders (tech) of the bull market gained even more strength on each up move.
The new local high in SPX in September (above the April high) was the first time we’ve seen a major local high in SPX over the past 3 years without a relative strength high in the NDX. More concerning, the recent collapse in the NDX vs. the SPX (last 2 weeks) has taken the relative level of the NDX vs. the SPX to 8 month lows (when the SPX was trading around 1300).
More than any other chart, I think this loss of tech leadership should concern both short and long-term bulls. It’s also why I think the market top for this bull market is IN.