What a Week: Role Reversal

"Tech makes a seasonal peak between the 15th and the end of January, after Intel reports its news," says Jeffrey DeGraaf, chief technical analyst at Lehman Brothers. But DeGraaf believes these stocks are still good long-term investments, and adds that better entry points might come later in the first quarter. His research shows that most investors are still underweight technology, and that the seasonal weakness will lead to a more deeply oversold situation.

DeGraaf says stocks like Cisco, IBM Microsoft(MSFT Quote), Oracle(ORCL Quote) and Novellus(NVL Quote) show "great long term charts"; in other words, they are trading in a range that provides a solid base for future returns. "These bases are very symptomatic of what happens after a bubble," he says. "There is a five- to eight-year window where stocks go dormant and start to revive in the seventh year."

The earnings agita will pass, says James Paulsen, chief investment strategist at Wells Capital Management. "Tech companies have been doing this for the entire decade," says Paulsen. "They report earnings numbers that are pretty good, but give cautionary comments. Then the next quarter turns out to be pretty good anyway." It's the flip side of what the tech CEOs were doing in 1999, says Paulsen, "when they'd say 'earnings are a bit light, but the future looks fantastic.'"

Indeed, the future for tech may be better than the guidance suggests. The technology sector is expected to provide the strongest earnings growth of 2007, says John Butters, an analyst at Thomson First Call.