Chips Buck the Trend

This was evident Monday when SanDisk (SNDK) jumped 4% on news of price increases in flash memory. But don't expect semis to rally to the same degree as the basic materials, energy and industrials, Roque says, noting those other sectors "don't have that same overcapacity overhang and have a longer-lived cycle."

If tech's advance is coming at the expense of another sector, it's most likely financials, the technician says, noting the latter's market-cap weighting within the S&P has gone down six months in a row from 22.3% in December to 20.9% in June. That may seem like a small drop, but it's an "amber-flashing light, which continues to say underweight financials or look for shorts if you're more aggressive," he says.

Financials including Lehman Brothers (LEH) and Bear Stearns (BSC) were notably weak again Tuesday amid speculation Standard & Poor's is going to downgrade $12 billion of subprime mortgage debt.

On a separate but related issue, despite ongoing strength in mega-caps like Exxon Mobil (XOM), the bulk of energy stocks have failed to keep up with the rally in the underlying commodities, Helene Meisler observes in TheStreet.com's Top Stocks newsletter.

As we head into the thick of second-quarter earnings season, it's worth noting the technology sector is expected to post year-over-year earnings growth of 9% vs. just 2% for energy, according to Thomson Financial. Nevertheless, energy stocks remain beloved and widely owned while skepticism for the tech sector is high, as indicated by the record level of short interest on Nasdaq stocks.

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