In recent weeks, the Nasdaq-100 Index (NDX) has lost considerable ground on an absolute basis and relative to the S&P 500 index.
Interestingly, if you graph the relationship between the large cap, technology-heavy bellwether and the broad market index going back to 2002, the pattern of recent months looks vaguely familiar.
In fact, it seems to be a mirror image of the false breakdown that occurred in the summer of 2006. After that particular "head fake," the ratio staged a major upside reversal, and technology shares outpaced the S&P 500 index by a wide margin over the course of the following 12 months.
With that in mind, could we now be looking at an equally dramatic reversal of fortunes for technology shares in the period ahead?
Amid evidence that many investors are quickly souring on long-time sector leaders such as Apple Inc (NASDAQ: AAPL) and Google Inc (NASDAQ: GOOG) and that cutbacks in spending at financial services firms and a weaker U.S. economy are weighing on the bottom lines of many firms in the industry, that seems quite likely.
Under the circumstances, investors may want to pare back exposure to technology shares -- the sooner, the better.
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.











Reader Comments (Page 1 of 1)
1-26-2008 @ 5:50PM
joelliebesfeld said...
Virtually every prospering country in the world is heavily investing in technological advancement, many of them for military and other strategic purposes. Americans appear to equate technology mostly with consumer oriented products. The U.S. does globally partcipate with much of the development of non-consumer technology. There are however problems with this. Some of the countries that have amassed huge wealth to invest in non-consumer technology are either not our friends or marginal friends, and the countries that we deal with may be "sleeping with the enemy." The U.S. must invest in its own technological advancement to keep an assured perimeter of safety and security. The U.S. must at all costs maintain its technological leadership. The tech sector should be focusing on developing home-grown engineers and scientists, preventing the theft of intellectual property, homeland security detection devices of every ilk, countermeasures to prevent abuse of the Internet and handheld computing devices, satellite technology, modernizing our military defenses at every level, the deployment of supercomputers for weather and other logistical preparation systems, etc. If the U.S. pooled its private sector and governmental resources to these applications the tech sector would not only be rejuvinated by many new emerging technologies but would reinvigorate the consumer tech sector. One example of where this happened was with the global positioning systems (GPSs). These devices were originally used for piloting and marine applications. Today they are used by numerous consumers in vehicles, by law enforcement, tracking lost animals, etc.