Tuesday, 30 April 2013

Is Tech Back?

One of the stories of the last 4+ month rally in the S&P is actually how poorly Tech has been.  YTD, the SPDR Tech ETF XLK has only gained 6.7% vs the S&P at 12.1%.

For a sector that typically outperforms during market rallies, this was very unusual.  In the last week however, something seemed to have changed in the market.

In the last 2 weeks since the minor bottom, the SPY has jumped 3.5% or so.

Tech however has jumped 5.5% in that same time frame.  Now you may say that isn't much, and its true, while large, its not a huge difference in absolute terms.  However, for a sector that has been underperforming for almost half a year now, its notable that something may have changed.  Is the market sectors finally starting to rotate out of the defensives and non-cyclicals that's been powering this rally?

Looking at the Health Care sector, one of the big drives of the S&P in the last 4+ months, you notice that in the last 2 wks, it has leveled off.  So the recent S&P jump is now starting to be driven by a different sector.  This is a somewhat healthy observation as it means there is other market leadership and the breadth of advances is improving.

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