Technology exchange traded funds were outperforming the broader stock indexes in Tuesday’s move higher, and recent strength against the overall market may point to more gains for the sector.
Technology Select Sector SPDR (NYSEArca: XLK) rallied 1.4% in afternoon trading. The $5 billion ETF invests in the technology companies from the S&P 500.
Technology stocks could extend their rally after the ETF recently jumped to its highest ratio versus the S&P 500 in over nine years, Bloomberg reported Tuesday.
The level of Technology Select Sector SPDR divided by the SPDR S&P 500 ETF (NYSEArca: SPY) hit the highest point on Oct. 17 since January 2002, according to the article.
The technology ETF’s rise means the sector could have enough momentum to climb further, said Ari Wald, a New York-based technical strategist at Brown Brothers, in the Bloomberg story.
“We broke out to the upside recently, showing relatively strong demand,” Wald said. “That’s a pretty good sign, especially that it’s able to post relative gains during this period of market volatility.”
Technology Select Sector SPDR is up 4.2% year to date, compared with a 1.3% gain for the S&P 500, according to Morningstar.
The chart below shows the ratio of the technology ETF versus the S&P 500 fund.
Full disclosure: Tom Lydon’s clients own SPY.