Strykr Analysis
NeutralStrykr Pulse 58/100. The market is neutral, but the risk of further tech underperformance is rising. Threat Level 3/5. Breadth is improving outside tech, but headwinds remain.
The era of tech’s unchallenged dominance is looking a little less inevitable. For years, the playbook was simple: buy the dip in tech, ignore everything else, and let the algorithms do the heavy lifting. But as February limps to a close, the market is sending a different message. The technology sector’s stranglehold is loosening, and a long-overdue rotation is quietly taking shape.
Let’s get specific. The Technology Select Sector SPDR Fund (XLK) is flat at $138.39, refusing to budge even as earnings season delivers a mixed bag. Block’s headline-grabbing layoffs have stoked fresh AI anxiety, with MarketWatch reporting that fears of artificial intelligence decimating jobs and software demand are now front and center. Meanwhile, Barron’s notes that while earnings could push the broader market higher, “everything else” is working against it. The whipsaw in major indices, as Schaeffer’s Research puts it, reflects a market struggling to process increased geopolitical tensions, AI sustainability pressure, and the slow-motion collapse of the software sector.
This isn’t just noise. The narrative is shifting. ETFTrends points out that stock market returns are broadening out, with technology’s dominance finally facing real competition from other sectors. The so-called “SaaSpocalypse” is no longer just a clever headline, it’s a reality for software stocks, which have endured relentless selling as investors question whether AI is a growth driver or a margin killer. Even private equity stocks, once the darlings of the risk-on crowd, are taking it on the chin. The rotation is real, and it’s not just a blip.
Historically, tech leadership has been sticky. Every time the sector wobbled, the market found a reason to pile back in. But this time, the cracks are deeper. The combination of rising US wholesale prices (+2.9% year-on-year, per NY Post), persistent inflation, and a market that’s already priced for perfection means there’s less room for error. The last time tech lost its grip this decisively was in 2015, when value and cyclical stocks staged a comeback. The difference now is that the macro backdrop is more uncertain, the AI narrative is more fraught, and the crowding in tech is even more extreme.
Cross-asset signals back up the case for rotation. Commodities are flat (DBC at $25.04), gold is rallying on geopolitical risk, and even crypto is seeing a flight to quality within its own ecosystem. The risk-on, tech-centric playbook is being challenged from all sides. The question is whether this is the start of a genuine regime change or just another head fake.
Strykr Watch
Technically, XLK is stuck at $138.39, with support at $135 and resistance at $142. Momentum is fading, and relative strength is rolling over. Breadth is picking up outside of tech, with financials, energy, and industrials starting to show signs of life. The key level to watch is $135, if that breaks, expect a fast move to $130. On the upside, a close above $142 would force the shorts to cover, but the odds favor more chop and rotation. Volume in XLK is declining, a sign that the hot money is moving elsewhere.
The risk is that tech’s malaise spreads to the broader market. If XLK loses $135, expect a domino effect across growth stocks. The AI narrative, once a tailwind, is now a source of anxiety. Layoffs, margin compression, and regulatory scrutiny are all weighing on sentiment. The rotation into value and cyclicals could accelerate if inflation stays sticky and rates remain elevated. On the flip side, if tech can stabilize and earnings surprise to the upside, the sector could stage a short-term bounce, but the days of effortless outperformance are over.
Opportunities are emerging for stockpickers. Long value and cyclical sectors on dips, with stops just below recent lows. Short or underweight tech, especially software names with high AI exposure and stretched valuations. Consider pairs trades (long energy, short tech) to capture the rotation. For the brave, buy XLK if it holds $135 and shows signs of reversal, but keep stops tight, this is not the time to be a hero.
Strykr Take
Tech’s market dominance is being challenged, and the rotation is real. The smart money is already moving into value and cyclicals, while tech bulls are left hoping for a miracle. The playbook has changed. Adapt or get left behind.
Strykr Pulse 58/100. The market is neutral, but the risk of further tech underperformance is rising. Threat Level 3/5.
Sources (5)
Software stocks fall as Block's big job cuts stoke further AI fears
Block's layoffs exacerbated concerns that artificial-intelligence could decimate employee counts and hurt demand for software.
Earnings Could Push the Stock Market Higher. Too Bad About Everything Else.
The latest round of financial results is one bright spot that might carry stocks to new highs, despite this year's turmoil.
Wall Street Eager to Move Past Rough February Performance
It was a whipsaw week of price action for all three major indexes, as investors endured increased geopolitical tensions, AI sustainability pressure ,
Dorsey's blunt AI warning sharpens debate over jobs and profits
Jack Dorsey is not the first chief executive to say artificial intelligence will transform work. He may be among the first to act as if it already has
A Growing Danger Investors Ignore At Their Peril
Growing fears of AI disruption have been a key theme here in February, with the SaaSpocalypse hitting the software sector hard. The recent SCOTUS deci