Recent weakness in technology is pulling down the market

The latest leg of the long-term bullish trend line started with the low of late June and the late August lows. The bullish run since this latter low has been impressive taking it above the early August high. The Thursday and Friday drop in stocks took the S&P back down to the early August high. The Dow never went as high and has dropped lower while the Nasdaq composite suffered only a very minor two-day drop. These differences are negligible when looking at the three indexes in weekly (as opposed to daily) charts. Here, all three indexes have been contained by their bullish trend channels since early October 2011. They are all near the top of their channels.

Our Relative Strength Stock Sector Table shows strength but also notable areas of weakness. First let’s look at the strength: Building was up a huge 6% in September following five straight months of losses. Transportation turned around to a big 3% gain possibly mirroring improvement in the economy. But the Technology group that had been so strong in the last two months has plunged, led by the Technology Hardware sector down a very large 6%. Only the Semiconductors and Internet sectors were up significantly out of the seven
Technology sectors.

Here’s the relative strength chart of the Building Sector:
buildingHere’s the relative strength chart of the Technology Sector:technology

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