The yellow histogram on this chart compares the 21-day return of NDX against the S&P 500 . (It uses our Smart Relative Strength custom script.) Notice how Monday’s reading was the highest since August 27. That was immediately before the euphoric Labor Day pop when Apple and Tesla split their shares.
Even though NDX has managed to hit new highs since then, it’s mostly lagged the S&P 500 . See this second percent-change comparison between NDX and SPX since the beginning of September:
However things could be changing – as the in our main study suggests.
This year’s price action also shows a cup-and-handle continuation pattern. The March low was the cup and the May low was the handle. Prices quickly snapped back from the lows both times, showing that buyers lurked not far below the surface.
Another interesting event happened yesterday: NDX hit a new all-time high for the first time in six weeks. Meanwhile, the Dow Jones Industrial Averages has gone almost five weeks without a new high. That suggests the shorter-term momentum is with the NDX.
The change in sentiment may not be a huge surprise when you consider the macro environment, with job growth still lagging and the Fed remaining dovish. That’s dragged on interest rates and made high-multiple growth stocks more palatable.
Additionally, many of NDX’s big members have gone nowhere for months and digested 2020’s big gains. For example: AAPL , Microsoft , Amazon.com, Tesla and PayPal. That leaves them much less stretched now than “value” sectors like financials and industrials . That could also make big investors more comfortable returning to the big growth names.
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