A recent uptick for a broad-based tech ETF could signal that the market is ready for a rally in software stocks, regardless of size, according to Oppenheimer. Technical analyst Ari Wald highlighted the SPDR S & P Software & Services (XSW) in a Nov. 25 note to clients, saying that the fund looks poised to potentially breakout of a multi-year slump. “We’re also bullish on Technology across industries, software and semiconductors most notably. Given Oppenheimer’s coverage in the former, we think it’s important to flag that the equal-weighted S & P Software & Services SPDR (XSW) reclaimed its Q2 breakout above its year-long bottoming pattern. On a relative basis, the ETF’s small-cap exposure provides attractive rotation potential as well, in our view,” the note said. The fund has a total return of more than 23% year to date, but is still down more than 5% from its highs for the year in July and even further from its highs in late 2021. XSW 5Y mountain The XSW ETF is trading below its July highs. A big rally for the XSW would be a change of pace from the strength of the so-called “Magnificent Seven” tech stocks that have dominated the market in 2023. The Invesco QQQ Trust (QQQ) , which has large exposure to all of those stocks, is up more than 40% for the year. The XSW gives investors a less concentrated group of holdings. The fund follows a “modified” equal weight strategy, according to State Street, with no stock accounting for more than 1% of the fund as of Nov. 27. And the fund’s holdings mean that investors won’t be adding even more exposure to all of the Magnificent Seven. Though the fund is broad, it does not include all categories of what many investors consider to be tech stocks. For example, none of Apple , Nvidia and Meta Platforms are holdings in the XSW. The fund has an expense ratio of 0.35%, and more than $370 million in assets. — CNBC’s Michael Bloom contributed reporting.
