Strykr Analysis
NeutralStrykr Pulse 48/100. Tech is flatlining as liquidity dries up and traders rotate into dividend stocks. Threat Level 3/5.
If you’re waiting for tech to bail you out this month, you might want to check your liquidity assumptions at the door. The Technology Select Sector SPDR Fund (XLK) is stuck at $143.90, flatlining while the rest of the market tries to decide if February will be a rerun of January’s modest gains or the start of something nastier. The narrative that tech is a perpetual motion machine, immune to macro headwinds, is being put to the test as Treasury issuance drains liquidity and traders rotate into dividend stocks for stability. The AI trade is looking tired, and the bid for risk is getting thinner by the day.
The facts are stubborn. XLK hasn’t budged, holding at $143.90 for four straight sessions. That’s not a typo. The sector that led the market higher in 2024 and 2025 is now stuck in neutral, with breadth narrowing and momentum indicators rolling over. CNBC’s latest coverage highlights that stock futures are falling after a weekend selloff in silver and Bitcoin, raising questions about the durability of the AI trade. Meanwhile, top Wall Street analysts are pushing dividend stocks as a safe haven, according to CNBC, a clear sign that risk appetite is fading.
The macro backdrop is increasingly hostile for growth. Treasury settlements are draining $64.3 billion from the market, as Seeking Alpha reports, and the Treasury General Account is rising. That’s a double whammy for tech, which relies on abundant liquidity to justify nosebleed valuations. The Fed isn’t coming to the rescue, and inflation remains sticky. The AI trade that powered the last leg of the rally is losing steam, and the bid for risk is evaporating.
The technical setup for XLK is uninspiring. The ETF is stuck at $143.90, with resistance just above and support not far below. Momentum indicators are rolling over, and the RSI is drifting lower. Breadth is narrowing, and the sector is losing its leadership role. If XLK breaks below support, expect a swift move lower as traders rotate into defensives and dividend plays.
The risk is that the market gets caught in a feedback loop: tightening liquidity leads to lower tech valuations, which leads to more selling. If Treasury issuance continues to drain cash from the system, and if the Fed stays hawkish, XLK could be in for a rough February. The upside is limited unless we get a positive surprise on inflation or a dovish pivot from the Fed.
The opportunity is for traders who can rotate into defensives and dividend stocks. The best trades are in sectors with stable cash flows and low sensitivity to liquidity. Tech is still a trade, but not a buy-and-hold. If you’re looking to buy the dip, wait for a clear reversal signal and keep your stops tight.
Strykr Watch
The Strykr Watch to watch for XLK are $143.50 on the downside and $145.00 on the upside. A break below $143.50 would signal that the sector is losing its leadership role, while a move above $145.00 would suggest that the rally has legs. Momentum indicators are rolling over, and breadth is narrowing. Watch for a spike in volume on down days: that’s a classic warning sign.
Dividend stocks are gaining favor as traders rotate out of tech. The best trades are in sectors with stable cash flows and low sensitivity to liquidity. If XLK breaks down, expect a swift rotation into defensives and dividend plays.
The risk is that the market gets caught in a feedback loop: tightening liquidity leads to lower tech valuations, which leads to more selling. If Treasury issuance continues to drain cash from the system, and if the Fed stays hawkish, XLK could be in for a rough February. The upside is limited unless we get a positive surprise on inflation or a dovish pivot from the Fed.
The opportunity is for traders who can rotate into defensives and dividend stocks. The best trades are in sectors with stable cash flows and low sensitivity to liquidity. Tech is still a trade, but not a buy-and-hold. If you’re looking to buy the dip, wait for a clear reversal signal and keep your stops tight.
Strykr Take
Tech’s leadership is fading, and the easy money is gone. Rotate into defensives and dividend stocks, keep your stops tight, and be ready to pivot. February is shaping up to be a test of nerves for tech bulls.
Sources (5)
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