When the biggest sector in the S&P500 representing 25% of the entire index makes an all-time daily, weekly and monthly closing high, it’s probably worth paying attention. I also hear the lazy people talk about how Technology is being led by just a few names. This is simply not true as the Technology Equal-weight index is also breaking out to new highs. We’re seeing a broad based rally in Tech, and it’s not something new.
I’ve been pounding the table on Technology because it’s been outperforming on an absolute basis, but also on a relative basis. Tech is not just going up, it’s beating all the other sectors. Here is the Equally-weighted Tech Index Fund $RYT breaking out of a 4-month base to new all-time highs. New highs are a characteristic of uptrends, not downtrends:
This is not a rally being led by fewer and fewer names. This is a rally where participation is expanding, not contracting like the bears would like you to believe. I’m really not sure what some people are looking at. Tech stocks are going up, not down. Look at the weekly closing chart of the $XLK that I keep pointing to. I’m not sure about you, but I see a breakout above the March 2000 highs, a successful retest and now the beginning of a new leg higher that can take Technology up another 40%:
The risk has been very well-defined. The trade has been very simply to be long Technology if $XLK is above 64, which were those former March 2000 highs. We’ve not only held that, but we’re now making higher highs to further confirm the direction of trend. This trade is still in place and I think there is plenty of upside left:
From a shorter-term, tactical perspective, I think a long in $XLK if we’re above 70 makes sense. Below that and things get messy.
Here is a list of stocks with the most attractive risk vs reward opportunities right now: