Last week we saw huge trading volume in a technology exchange traded fund, XLK (Technology Select Sector SPDR), before the ETF lost some luster to finish the week from a performance standpoint. Approximately 60 million shares traded in XLK last Monday, versus average daily trading volume of approximately 10 million shares, and we witnessed about $800 million enter the fund via creation activity last week.
As equities weakened to finish the week, XLK fell, and subsequently closed below both its 200 and 50 day moving averages on Friday. [ETF Weekly Recap]
XLK, like QQQ (PowerShares Nasdaq 100), is very dependent on AAPL, as it has a 13.81% weighting in fund. Other top components are IBM (8.75%), MSFT (7.43%), T (6.69%), and GOOG (5.88%).
Techs have outperformed the broad market year to date, as XLK has lost 0.95% versus the S&P 500 down 3.31%. With tax loss harvesting taking place going into the final weeks of 2011 and institutional holders likely optimizing portfolios by selling one ETF and potentially purchasing another in “tax swaps”, we expect to continue to see heightened activity in other U.S. technology sector specific ETFs.
Other products that may be in the spotlight in the near term include VGT (Vanguard Information Technology), IYW (iShares DJ U.S. Technology Sector), FXL (First Trust Technology AlphaDEX), QTEC (First Trust Nasdaq 100 Technology Sector), RYT (Rydex S&P Equal Weight Technology) and PTF (PowerShares Dynamic Technology Sector).
Technology Select Sector SPDR
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