Software/Semi Rally Would Be Powerful Punch:
We often like to put up ratio charts to compare sectors, indexes, or individual names. They are often a good way to see how to overweight one instrument against another. Below is the ratio chart of the IGV compared to semiconductors, perhaps the two most important sub-groups within technology, or the market for that matter. It shows that the SMH acting much better, and the ETF is higher by 10% YTD, while the IGV (software) is lower by 3%. Now the IGV chart sports a bullish falling wedge pattern, on the bottom of the PRICE chart below, but it is still in a downtrend. Again I am not a big proponent of mean reversion, as I believe PRICE is accurate, and stocks are strong for a reason and vice versa, for weakness. Could software be ready to start showing strength that semis have been? That would be a serious 1-2 blow for the bears. I hear incessant talk about how we need a flush before tech bottoms. And it may be true, but the market likes to confound the most, and perhaps the whoosh lower may not be in the cards, and those positioned that way would have to unwind their bearish bets.