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Tech Sector Struggles -- And Not Just Because of Apple


Other tech giants well off highs in the past year include IBM, Microsoft, AT&T, Verizon, Intel, and Amazon.

Large-cap tech continues to be a major laggard in this year's rally. It's particularly surprising since even the defensive sectors of consumer staples and health care are trading near all-time highs. The market's rally has been all-encompassing, except for large-cap tech.

The three-year chart of Technology SPDR ETF (NYSEARCA:XLK) actually shows a developing head-and-shoulders pattern, which is certainly rare in the current market environment where most stocks are trading above prior highs. The three-year chart with the head in red, shoulders in green:

Three-year daily chart of XLK, Courtesy of Bloomberg
Click to enlarge

A good portion of the weakness has of course been Apple (NASDAQ:AAPL), but tech weakness is not exclusive to the hardware giant. Other tech giants well off highs in the past year include IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), AT&T (NYSE:T), Verizon (NYSE:VZ), Intel (NASDAQ:INTC), and Amazon (NASDAQ:AMZN). Cisco (NASDAQ:CSCO) has approached a new high, but is pulling off a bit after earnings, and Qualcomm (NASDAQ:QCOM) hasn't been able to sustain its earnings strength. Google (NASDAQ:GOOG) and Oracle (NASDAQ:ORCL) are the two exceptions, both at or near five-year highs.

So it's not just AAPL. More likely in my view is that this weakness is due to the simple nature of investor rotation, as tech's strength leading the bull market led to a lot of tech overweights in the market in 2012. That is being corrected for now. But it's also a lingering, long-term sign that this current rally has not been a tide strong enough to lift all boats.

This item by Enis Taner was originally published on

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