Linda Raschke commenting on the current adjustment in the technology sector

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.

Source: DecisionPoint

Charts: DecisionPoint

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