Chip stocks need to stabilize to stave off troubling tech weakness: BTIG's Krinsky
Tech was leading the way lower for stocks Wednesday. BTIG Chief Market Technician Jonathan Krinsky noted that while tech remains at the top of the year-to-date leaderboard for the S&P 500’s 11 sectors, up 36.1%, it’s near the bottom over the last month (down 1.1%) and three months (up 3.3%).
“It has clearly lost momentum and relative strength in both cap-weighted and equally-weighted terms,” Krinsky wrote. Semiconductors remain the weakest link, he said. Rotation into software stocks has softened the blow, but that has left the industry-tracking SPDR S&P Software & Services ETF the most extended it’s been above its 200-day moving average in the last decade, other than during the postpandemic rally.
While the relative improvement is a welcome development, “we would await a pullback before adding exposure” to software, he said. And that means bulls “really need to see semis stabilize here to prevent a bigger breakdown into 2025,” Krinsky wrote.