The Technology Select Sector SPDR (NYSEArca: XLK) is up 7.1% year-to-date, good for one of the better performances among the nine sector SPDR exchange traded funds and encouraging enough for some market observers to see more upside ahead for technology stocks.
However, the tech sector could be turning around. As a growth-centric sector, the area typically leads during a market rally. Consequently, in the fourth quarter, technology stocks may see a boost as money managers shift money to winning stocks and away underperformers before the year-end.
XLK, the largest tech sector ETF “is comprised of 76 holdings from across the technology sector each with a weighted average market capitalization of $270 billion. The fund is extremely popular with investors given its liquidity and low gross expense ratio of 0.14%. Taking a look at the chart, you can see that see that the price recently broke above a key level of resistance shown by the dotted trendline. This bullish gap higher is a clear signal that the trend is in favor of the bulls and at this point any would expect the upward momentum to continue,” according to Investopedia.
Companies may scramble to spend their cash hoards before the year-end, or engage in so-called budget flush. If companies have not used money on new technologies yet, they are likely to spend near the end of the year.
Additionally, all the latest consumer technologies are put in the limelight during the holiday season.
“Years of interest rates near zero and emerging markets leading the way in terms of economic growth look set to be upended as the Federal Reserve inches towards its first rate hike in almost a decade. The Goldman team, led by chief U.S. equity strategist David Kostin, suggest investors look at information technology and financials as we enter a new leg in global markets,” reports Bloomberg.
Last month, investors piled into tech ETFs after approaching the funds in tepid fashion through much of the year. Now, XLK’s 2015 inflows appear robust when measured against other sector ETFs.
Technology Select Sector SPDR
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.