Technology Shows Relative Strength

Alfonso Depablos, CMT
October 9, 2023

From the Desk of Alfonso Depablos @Alfcharts

Relative strength is one of the most essential tools we employ on a daily basis. 

Analyzing relative trends allows us to determine whether an asset is outperforming a benchmark or its alternatives.

This increases our chances of success as we navigate the markets.

Even though the stock market has been trading sideways since July, the relative trends are very much in favor of technology these days.

Below is the equal-weight Technology Sector (RSPT) breaking out of a 3-year base relative to the equal-weight S&P 500 (RSP):

After a prolonged period of sideways action, the RSPT/RSP ratio is taking out its 2021 highs as it looks poised to resolve from its current range.

If this breakout is a valid one, we must anticipate further outperformance from tech and growth stocks in the coming months and quarters.

Under this scenario, we’ll be looking to put money into the best long setups in the strongest issues within the sector.

Do not underestimate relative strength. Embrace it. It keeps us on the right path. 

We hope you enjoyed this post.

As always, we love to hear from you, so shoot us a note and let us know what you think.

Alfonso

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