Technology Select Sector SPDR (XLK) VS SPDR S&P 500 (SPY) Ratio

• Posted by DynamicHedge
• on June 11th, 2011

People have been chattering on about how we’re in a new tech bubble.  I don’t know, and I don’t really care.  You could argue that we’ve been in a tech bubble for the last 250 years.  Tech is certainly uptrending relative to broad market performance —  and we have a large, statistically significant pullback in the midst of a larger uptrend.  Time to pay attention.

 

Right now we are sitting at the bottom of a well defined range.  This chart is telling you that large cap tech is “cheap” relative to the broad market based on the last year of data.  Couple that with a big pullback in the market and you may have a decent entry point.

If we pull back and take a look at the last several years you can see that we are in the upper end of a larger macro uptrend.

$XLK is not made up of the latest and greatest social IPOs.  It’s a selection of large cap tech such as: $AAPL, $IBM, $T, $MSFT, $ORCL, $GOOG, $VZ, $INTC, $QCOM.

Since the beginning of the year I’ve been sticking with notion that large-cap value should come back in favor in a big way.  This is a great way to play that thesis, especially if you are not the ADD type watching every tick of this roller coaster market.

Large cap tech may become my new obsession — once I’ve  finished flogging the gold miners to death.

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