Strykr Analysis
NeutralStrykr Pulse 57/100. Positioning is heavy, but fundamentals are intact. Threat Level 3/5. Correction risk is real, but so is the potential for a squeeze.
The party had to end sometime. The Technology Select Sector SPDR Fund (XLK), the ETF that’s been the poster child for the AI bull run, the darling of every FOMO-chasing fund manager, and the last bastion of growth in a market obsessed with productivity, has finally stopped moving. At $138.41, it’s not just flat, it’s comatose. Not a single basis point of movement in the last session. For a sector that’s been the epicenter of every market narrative for the last three years, this is a seismic shift, even if the price action is whisper-quiet.
Let’s not kid ourselves: tech has been carrying the market on its back. Every time the macro data disappointed, every time the Fed waffled, every time a war broke out or a bank failed, traders ran to tech. AI, cloud, chips, software, if it had a growth story, it was in XLK. But now, with the S&P 500 stalling and the Nasdaq losing altitude, the rotation out of tech is starting to look less like a trade and more like a trend.
The news flow isn’t helping. US services PMI is solid at 53.8, but job growth is a disaster, just 22,000 new private sector jobs in January, less than half the consensus. Car sales are in the gutter, and the consumer is showing signs of fatigue. The market is sniffing out the end of the easy money era, and tech is suddenly looking like yesterday’s trade.
But here’s the twist: the fundamentals haven’t changed. AI is still eating the world, cloud spending is still growing, and semis are still the backbone of everything from cars to data centers. The problem is positioning. Everyone is already long. The ETF flows show a dramatic slowdown, with net inflows into XLK turning negative for the first time since 2023. The options market is pricing in a pickup in volatility, but realized vol is stuck at multi-year lows. It’s the classic setup for a market that’s about to surprise everyone, just not in the way most traders expect.
The last time tech went this quiet, it was the prelude to a -12% correction. But it was also the setup for a +18% rally six months later. The question is whether this is the end of the AI mania or just a much-needed pause.
Strykr Watch
Technically, XLK is perched right on its 100-day moving average at $138.40. The RSI is at 49, the lowest since the last correction. Support is at $137.20, with resistance at $140.00. The Bollinger Bands have compressed to their narrowest since the 2022 bear market bottom, a classic precursor to a volatility event. Volume is anemic, with daily turnover at just 55% of the three-month average.
Options flows are telling a different story. Open interest in puts has surged, especially in the $135 and $130 strikes. The skew has flipped negative, signaling that traders are hedging downside, not chasing upside. But call buyers haven’t disappeared, they’re just further out of the money, betting on a rebound if the market shakes off the macro gloom.
Macro catalysts are lining up. China’s PMI, Aussie GDP, and the next round of US inflation data could all jolt sentiment. But the real wild card is earnings. If the mega-cap tech names miss, the unwind could get ugly. If they beat, the squeeze could be violent.
This is a market on the edge of a knife. The next move will be big, but the direction is still up for grabs.
If you’re long, now’s the time to check your stops. If you’re short, don’t get greedy. The setup is there, but the outcome is anything but certain.
The risk is that the rotation out of tech accelerates, dragging XLK down with it. The opportunity is that the market is underestimating the staying power of the AI trade.
For now, patience is the hardest trade.
Strykr Take
This is what a regime shift looks like. The AI mania isn’t dead, but it’s not the only game in town anymore. The rotation is real, but the fundamentals are still strong. The next move in XLK will be violent, and the smart money is already positioning for it. Don’t sleep on tech, but don’t bet the farm on a one-way trade.
Strykr Pulse 57/100. Sentiment is cautious, but not bearish. Threat Level 3/5. The risk of a correction is rising, but the upside is still there if the fundamentals hold.
Key levels: $140.00 resistance, $137.20 support. Watch for a break from the current range. Trade the volatility, not the narrative.
Sources (5)
U.S. Services-Sector Activity Continues to Rise in January
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