After outperforming the Nasdaq-100 index for about a year, the S&P 500 index has recently started to lag behind, especially since July. What started out as just a potential relative pullback is now shaping up to be a trend reversal. The chart shows a smoothed relative strength between the E-mini S&P 500 Continuous Contract (@ES) and the E-mini Nasdaq-100 Continuous Contract in subgraph 2 with Bollinger Bands. The relative strength line shows a trend reversal since last summer from an uptrend that started back in October 2012.
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Written by Frederic Palmliden, CMT, Senior Quantitative Analyst, TradeStation.