By the first week of the semester the stock market closes with a bang with the leading U.S. indices reaching new All Time Highs (‘ATH’).
The broad S&P 500 (SPX) Index based on the market capitalizations of 500 large US companies makes a robust close above any previous highs burning rubber when the 2019 second half lights have turned green.
S&P 500 Monthly Price Chart, June 6th 2019
The Dow Jones Industrials Average (DJIA) also made a new ATH high during the week but failed very nearly below the October 2018 market top.
Dow Jones Industrials Monthly Price Chart, June 6th 2019
The Nasdaq 100 (NDX) technology index behaved similarly to the DJIA by marking a new ATH during the week but closed within a hair of the April/May double top.
Nasdaq 100 Monthly Price Chart, June 6th 2019
This market price action with a clear apparent advantage of the SP500 should entice to open long positions withing the broader US market but taking a look at the price ratio of the indices a different scenario is emerging.
The S&P 500 indeed appears stronger than the Dow Jones Industrial index with an emerging bearish technical signal opposite to the bullish set-up highlighted here above on on the individual indices. It therefore appears no so favorable to select industrial companies for investment purposes.
DJIA/SPX Monthly Price Ratio, June 6th 2019
The surprise arises when comparing the S&P 500 with the Nasdaq 100 technology index. The technology sector demonstrates a superior relative strength to the broader index as emphasized by the ratio trending lower and an overall bearish technical orientation that should rather entice investment into technology companies.
SPX/NDX Monthly Price Ratio, June 6th 2019
Investors with a long view of the markets should therefore give a preference to the technology sector ETFs. On our side we will continue searching for attractive stock picking positions with a focus on technology companies, also reminding our readers that we have a longer term bullish view of the US markets with a scenario for the Nasdaq 100 index to reach above $9,000 in 2019-2020: