Value Stocks Stage a Comeback as Tech Fatigue Sets In: Bargain Hunters Eye the Next Rotation

If you blinked, you missed it: the era of tech invincibility has finally hit a wall. For years, traders have been conditioned to buy every dip in Big Tech, riding the AI hype cycle and algorithmic momentum like it was a law of nature. But after the worst single-day shellacking for market winners in six years, the mood has shifted from FOMO to something closer to existential dread. The numbers are stark. According to MarketWatch, high-beta momentum names, think the usual suspects in the Nasdaq, just suffered a rout that even Goldman Sachs flagged as "unusual." The air is thick with talk of regime change. Bill Nygren, value-stock whisperer, is suddenly back in vogue, touting bargain-priced names that have spent the last few years gathering dust in the ETF corner. Meanwhile, the Challenger report shows layoffs in January hit their highest level since 2009, up 118% year-on-year. If you’re looking for a canary in the coal mine, that’s a whole flock.

The facts are hard to ignore. XLK, the tech sector ETF, is frozen at $138.09, flat, but only after a bruising selloff that left software and data services stocks gasping for air. Reuters reports that the market is stabilizing, but the undertone is one of nervous exhaustion. The AI disruption narrative, once a source of endless optimism, has turned into a source of existential risk. Muddy Waters’ Carson Block is circling, waiting for the right moment to pounce on overextended AI darlings. Even the cheerleaders at Benzinga are pitching "oversold" tech stocks as rescue plays, a sure sign that the easy money has left the building.

Step back and the macro backdrop looks just as fraught. The Federal Reserve is in transition, with Kevin Warsh potentially rewriting the rules of the game. Treasury Secretary Scott Bessent is busy sparring with lawmakers, and the Challenger layoffs data is a cold splash of reality for anyone still clinging to the soft-landing narrative. The Great Rotation, long prophesied and often ridiculed, may finally be underway. Seeking Alpha’s bullish take on cyclical value sectors, industrials, energy, housing, transportation, suddenly doesn’t seem so contrarian.

Let’s talk context. The last time layoffs spiked this hard was during the financial crisis. Yet, unlike 2009, the market isn’t pricing in a full-blown recession, at least not yet. Instead, we’re seeing a slow bleed from the top: high-flying tech names unwinding, while unloved value stocks quietly catch a bid. The dispersion between growth and value is at its widest in a decade, and the correlation between tech and the broader market is breaking down. This isn’t just a sector rotation, it’s a sentiment regime shift. The algos, once slavishly devoted to momentum, are now sniffing out mean reversion trades. The result? A market that feels both exhausted and restless, primed for volatility.

The real story here is the return of price discovery. For years, the market has been a one-way bet on tech, with fundamentals playing second fiddle to narrative. Now, with AI hype colliding with economic reality, traders are being forced to reassess. The layoffs data is a wake-up call: if the engine of job creation is stalling, the case for endless tech outperformance gets a lot shakier. Meanwhile, value stocks, those perennial underachievers, are finally getting their moment in the sun. It’s not sexy, but it’s real. And in a market starved for genuine bargains, that’s enough to get the smart money moving.

The narrative is shifting, but the technicals are still catching up. XLK is stuck at $138.09, with no clear direction. The lack of movement masks a deeper churn beneath the surface: volumes are elevated, but conviction is low. The RSI is hovering near oversold territory, but there’s no sign of a decisive reversal. Support sits at $135, with resistance at $142. If XLK breaks below $135, the next stop is $130, a level that would mark a full retracement of the post-AI rally. On the value side, the rotation is gathering steam. Industrials and energy ETFs are seeing inflows for the first time in months, and the spread between growth and value is narrowing. The Strykr Score for volatility is ticking higher, reflecting a market that’s on edge but not yet in panic mode.

Strykr Watch

Keep your eyes on XLK at $135 support and $142 resistance. A break below $135 opens the door to $130, while a move above $142 could trigger a short-covering rally. On the value side, watch for continued inflows into industrials and energy ETFs. The RSI for XLK is flirting with oversold, but don’t mistake that for a buy signal, momentum is still negative, and the macro backdrop is deteriorating. The Strykr Pulse sits at 58/100, reflecting a market that’s cautious but not outright bearish. Volatility is elevated, with the Strykr Score at 67/100. Threat Level is a solid 3/5, enough to keep you on your toes, but not enough to justify panic selling.

The risks are clear. If the Fed surprises with a hawkish pivot, all bets are off. A break below XLK $135 would invalidate the mean reversion thesis and open the door to a deeper correction. Layoffs could accelerate, dragging sentiment lower and triggering forced selling in leveraged strategies. On the value side, a resurgence in tech could stall the rotation and leave latecomers holding the bag. The biggest risk, though, is complacency. If traders assume the worst is over, they’re setting themselves up for disappointment.

But there are opportunities, too. Long XLK on a dip to $135 with a tight stop at $132 offers a compelling risk-reward. On the value side, look for industrials and energy ETFs with improving relative strength. Mean reversion trades are back in play, but timing is everything. If XLK breaks above $142, a short-covering rally could push it to $148 in short order. For the patient, this is a market that rewards discipline and punishes FOMO.

Strykr Take

This isn’t the end of tech, but it is the end of easy money. The Great Rotation is real, and the market is finally rediscovering the virtues of price discovery. Stay nimble, respect the technicals, and don’t get caught chasing yesterday’s winners. For the first time in years, value is more than just a punchline.

datePublished: 2026-02-05 13:00 UTC