The XLK vs. FDN Convergence is Underway
In the 6/21/24 TPA-RRG report, TPA highlighted the strange divergent performance of XLK (TECH) and FDN (Internet) stocks. The screenshot below from the report shows that, on 6/21 the 6-month performance of XLK and FDN was off by 11.98%. TPA pointed out that this is a strangely large gap for 2 ETFs, which normally track each other very closely.
That has narrowed in just the past four days. The 1-year and 6-month charts below highlight the decline in the ratio XLK/FDN, which has declined measurably in the past four days.
Chart 3 below shows that the 6-month performance difference between XLK and FDN has now shrunk from 11.98% to 8.23% in just 4 days. We would expect more convergence to occur.
Jeff Marcus founded Turning Point Analytics (TPA) in 2009 after 25 years on trading desks and 13 years as a head trader to provide strategic and technical research to institutional clients. Turning Point Analytics (TPA) provides a unique strategy that works as an overlay to clients’ good fundamental analysis. After 10 years of serving only large institutions, TPA now offers its research services to mid and small managers, RIA’s, and wealthy sophisticated individuals looking for a way to increase their returns and outperform their peers.
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