Filed under: Google (GOOG), Apple Inc (AAPL), Indices, Market matters, Technical Analysis, S and P 500

In recent weeks, the Nasdaq-100 Index (NDX) has lost considerable ground on an absolute basis and relative to the S&P 500 index.

Interestingly, if you graph the relationship between the large cap, technology-heavy bellwether and the broad market index going back to 2002, the pattern of recent months looks vaguely familiar.

In fact, it seems to be a mirror image of the false breakdown that occurred in the summer of 2006. After that particular “head fake,” the ratio staged a major upside reversal, and technology shares outpaced the S&P 500 index by a wide margin over the course of the following 12 months.

With that in mind, could we now be looking at an equally dramatic reversal of fortunes for technology shares in the period ahead?

Amid evidence that many investors are quickly souring on long-time sector leaders such as Apple Inc (NASDAQ: AAPL) and Google Inc (NASDAQ: GOOG) and that cutbacks in spending at financial services firms and a weaker U.S. economy are weighing on the bottom lines of many firms in the industry, that seems quite likely.

Under the circumstances, investors may want to pare back exposure to technology shares — the sooner, the better.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

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