Tech’s Value Mirage: Why the Great Rotation Isn’t Saving Materials or Software Bulls

The market’s latest magic trick is making value stocks look attractive just as growth implodes, but don’t be fooled. The so-called “great rotation” is less a tidal wave and more a mirage shimmering on the horizon, especially if you’re holding materials or software names. With XLK frozen at $135.6 and the materials sector’s supposed “rocket fuel” failing to ignite, traders are left wondering if the only thing rotating is the narrative.

Let’s get to the meat. The XLK ETF, which tracks the U.S. tech sector, is dead flat at $135.6. Meanwhile, the news cycle is a whipsaw of contradictions: Seeking Alpha warns that AI-driven disruption is accelerating a rotation from growth to value, with software and data services facing “heightened risk.” At the same time, Benzinga touts materials stocks as the next big thing, while MarketWatch’s Michael Hartnett says the Bank of America ‘bull and bear’ indicator is screaming “peak.”

If you’re looking for price action, you’re in the wrong market. Both tech and materials are in a holding pattern, with the only thing moving being the consensus view. The MoneyShow’s “SaaS-Pocalypse Now” chart shows software stocks getting hammered YTD, but the sector’s ETF is motionless. It’s as if the market has collectively decided to take a breath, waiting for the next macro shoe to drop.

The context is crucial. For years, tech was the only game in town. Now, with AI’s hangover and passive flows shifting, the market is searching for new leadership. The problem is, value isn’t delivering. Materials stocks are being hyped as “oversold” and “undervalued,” but the tape doesn’t lie. The underlying commodities are asleep, and the sector’s ETFs are stuck in neutral. The rotation from growth to value is more theory than practice, at least for now.

Cross-asset correlations are breaking down. In the past, a rally in materials meant commodities were on the move. Now, with DBC and XLK both flat, the old playbooks are useless. Macro data is the only thing that matters, and traders are stuck in a waiting game. China’s upcoming PMI and Australia’s GDP print are the next big catalysts, but until then, the market is content to drift.

The analysis is simple: the market is in transition, but the new regime hasn’t arrived. AI-driven disruption has upended the old order, but the beneficiaries are unclear. Software stocks are being dumped, but value isn’t picking up the slack. The result is a market that’s neither bullish nor bearish, just confused.

Strykr Watch

Technically, XLK is a monument to indecision. The ETF is parked at $135.6, with no conviction on either side. The 50-day and 200-day moving averages are flatlining, and RSI is stuck at 48. There’s no momentum, no trend, just a market waiting for direction.

Key levels to watch: $137.50 is the nearest resistance, with $134.20 as support. A break above resistance could spark a short-covering rally, but don’t expect it to last. On the downside, a move below support would likely trigger algorithmic selling, but the lack of volume suggests any move will be short-lived.

The Strykr Score is a tepid 42/100, reflecting the market’s lack of conviction. Volatility is low, with the Strykr Volatility Rating at 22/100. This is a market for range traders, not trend followers.

The risks are obvious. If China’s PMI disappoints or Australia’s GDP comes in weak, the rotation narrative could collapse. A hawkish Fed or a spike in real yields would hit both growth and value, leaving traders with nowhere to hide. The market’s complacency is the biggest risk of all.

Opportunities are scarce, but not nonexistent. Range traders can fade XLK at the edges, selling resistance and buying support. For the brave, a breakout trade above $137.50 or below $134.20 offers asymmetric risk-reward. Just don’t expect the move to happen on your timetable.

Strykr Take

The great rotation is a myth, at least for now. The market is stuck in limbo, with neither growth nor value able to take the lead. XLK and materials are telling you the same thing: wait for the macro data, keep your trades tight, and don’t chase the narrative. When the catalyst comes, the move will be violent. Until then, survive and advance.