Something that has been noticed over the last two weeks is the development in the technology sector chart ( XLK ). Initially, in January there was a slight correction at the technology companies, but subsequently we witnessed a very strong rally in an upward direction. However, during the rally, four of the indicators registered a decrease:
- OBV indicates that volume is falling significantly as the price hits new record highs (here the red lamp should light up – Strong!)
- Silver Cross Index registered a decrease of -22% while 20 and 50-day EMAs were bullish
- Percentage of shares over 20 and 50-day EMA with over 25%!
Let’s see the chart below:
These were concrete signs that the growth of the technology sector was fading and that a correction might be possible.
Negative differences are a strong hint that something is likely to happen, but they are not infallible. Market volume may be limited, but Large-cap stocks can still support the growing trend. Nevertheless, these differences between technology index and indicators will nail it more often than not.