A huge tech allocation shift is underway
The Main Point: Software stocks relative to semiconductors appear to be topping at least on a short to intermediate term basis.
Some Added Color: For the better part of a year software stocks have been lauded as a safe haven where you can find high growth unaffected by global trade issues. It’s been an amazing rally.
Technically, Software is trading at new highs just exceeding the 2018 peak. Technical analysis textbooks suggest wedges provide intermediate term ceilings and floors.
That hasn’t quite been the case here, but it would be noteworthy if the March low is lost.
On the other hand, semiconductors have based for a year. After dealing with trade and growth issues across the board, they’re now starting to break trend resistance from 2018.
While we can’t predict the future, at this point the ratio turning down seems to be more of a product of semiconductors acting well versus software acting poorly. Regardless it appears the market is suggesting a preference for semi’s over software here.
Thanks for reading. Trade ‘em well!
The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
