Investing.com -- The sharp sell-off in technology shares on Monday triggered a number of concerns among investors and analysts, including those over a potential change in market leadership.
According to financial services firm BTIG, Monday marked the worst day for the momentum long factor since the coronavirus pandemic. But despite this downturn, the broader market displayed positive breadth.
“While it's still probably premature to call the end to tech leadership for this cycle, yesterday's declines did do significant damage to tech's relative trend which was already moderating,” said Jonathan Krinsky, Managing Director and Chief Market Technician at BTIG.
Semiconductor stocks, in particular, reached a new one-year relative low, drawing attention as a subgroup within the technology sector for potential further declines or a stabilization in the near future.
According to Krinsky, this downturn in tech stocks, which hold a substantial weight in the S&P 500 index, could lead to continued pressure on the sector. The strategist expects a possible retest of the 200-day moving average (DMA) later in the current quarter.
While the S&P 500 index has remained relatively flat over the past five days, eight out of eleven sectors have shown gains. Notably, the healthcare sector has emerged as the best performer year-to-date, with an increase of over 7%, after years of lagging behind.
“We think that should be an upside focus,” Krinsky said.
Alongside shifts within the US market, European markets have also shown signs of strength. A breakout from a base last week has led to continued gains on Tuesday and Wednesday.
This positive movement is observed across multiple European countries, with relative strength versus the S&P 500 potentially seeing a turnaround after prolonged downtrends.