Nasdaq To S&P 500 Index Ratio Undergoing Important Test

Tech stocks have been on shaking ground over the past several weeks / few months.

And this shows up clearly in today’s ratio chart, pitting the Nasdaq Composite versus the S&P 500 Index on a “monthly” basis.

This long-term chart really gets at the heart of the Nasdaq’s performance versus the broader market… and because it’s a “monthly” chart, it really highlights the macro trend.

As you can see, the Nasdaq’s outperformance propelled it to touch its 2000 highs before pulling back. The recent underperformance has seen the Nasdaq slide to a key trend-line support area.

Bulls want this area to hold and spur another rally attempt higher. Until broken this is a strong support level and odds favor that it will hold.

But if this price support breaks down, then look for tech stocks to underperform as the ratio heads to the lower end of its uptrend channel.

(Click on image to enlarge)

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