The Apple-driven sell off in the Tech sector appears to be nearing capitulation levels. Chart below is of XLK / SPX. The sharp drop appears consistent with historical episodes of capitulation, and is now not far from long term support. Technical oscillators also reflect that the ratio is at the most oversold levels since March 2011.
There has been a lot of chatter from technical analysis types who are saying that Apple’s chart looks like a blowoff top. (Apple is 20% of the Tech index) However, on a fundamental basis, this view is unlikely. Apple continues to have a very large moat around its business, and is trading at just 12x trailing PE – less than the market multiple – after adjusting for its cash hoard.
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