In the past five days we have seen some relative underperformance in Technology stocks versus the broad market, at least when comparing XLK (SPDR Technology Select, Expense Ratio 0.18%) versus SPY (SPDR S&P 500, Expense Ratio 0.09%).
Year to date, Tech is still outpacing the broad market U.S. equity index the S&P 500, but only marginally, and everyone should be familiar with the outsized out-performance that Technology stocks have delivered in both the trailing one year, and more-so in the trailing five year periods.
There appears to be some light profit taking in the Tech heavy QQQ (PowerShares QQQ Trust, Expense Ratio 0.20%) which has seen about $500 million flow out of the fund lately (which is moderate at best compared to actual net flow levels we typically see on a weekly basis for the fund) where top components are AAPL (11.38%), GOOG (8.09%), and MSFT (7.69%).
XLK being technology specific is obviously more concentrated these aforementioned names, with weightings that look like the following: AAPL (13.26%), GOOG (9.55%), and MSFT (8.15%). One potential catalyst that some may be sleeping on as the market flirts with new highs is the upcoming earnings season where these benchmark names are expected to report quarterly results (GOOG 4/17, MSFT 4/24, AAPL 4/28).
It makes a ton of sense for us to watch the individually listed options in these individual equity names closely, as well as options and fund flow activity in XLK, QQQ, and related ETFs with Tech heavy or Tech specific exposure. There has clearly been some trimming of positions in XLK as well, for year to date the fund has lost about $1.1 billion into strength in the sector.