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Will Tech Stocks Underperform In 2022? Watch This Ratio

Published 01/05/2022, 04:11 PM
Updated 07/09/2023, 06:31 AM

Tech stocks began underperforming the broader market several months ago when the NASDAQ Composite to S&P 500 Index ratio peaked out at 2000 high.

This is worth noting because this tech ratio has been in a rising up-trend for the past two decades, highlighted by each (1) on today’s “monthly” chart.

NASDAQ/S&P 500 Ratio Monthly Chart.

While this suggests long-term strength, it doesn’t mean that strong pockets of under-performance (corrections) cannot emerge. This is exactly what we saw over the past year or so.

That said, tech stocks perked up into year-end, with the ratio kissing the underside of potential resistance to close out December at (2).

If the ratio turns lower at (2), it suggests that tech stock may underperform for several more months. 

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