Large cap technology shares could be at risk in the near term

Posted Oct 9th 2007 4:20PM by Michael Panzner
Filed under: Earnings Reports, Google (GOOG), Apple Inc (AAPL), Amazon.com (AMZN), Indices, Market Matters, Money and Finance Today, Research in Motion (RIMM), Technical Analysis, Tech for the Rest of Us, Technology

Since the market's sell-off in March, large cap stocks have outperformed their small-company peers by a hefty margin.

Among other reasons, investors have favored the shares of companies they deemed less vulnerable to the spreading credit crisis, as well as those that might benefit from strong growth in overseas markets should the U.S. economy falter.

Within the universe of larger companies, one group, in particular, has done noticeably better than others. Large cap technology shares, which includes the likes of Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN), Google Inc. (NASDAQ: GOOG), and Research in Motion Ltd. (NASDAQ: RIMM), have had a stellar run, both in absolute terms and relative to other shares.

Since the year began, for example, the Nasdaq 100 index has gained more than 23%, and it has beaten the blue chip-rich S&P 100 index by 13 percentage points.

Recently, however, the ratio of the latter to the former index has approached levels last seen in January 2006. At that time, technology stocks staged a dramatic about-face, losing ground in comparison to other, less volatile shares.

With earnings season approaching and at least some evidence that operating results and the outlook going forward, especially in some consumer-related sectors, may not live up to high expectations, the market-leading technology bellwethers could be poised for at least a short-term relative pullback.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

Tags: aapl, amzn, goog, rimm