Tech stocks are crushing the market this year, but there are signs the sector's out-performance may be coming to an end, according to financial newsletter The Bear Traps Report.
The Nasdaq 100 index is up 15 percent year-to-date through Monday versus the S&P 500's 8.5 percent return.
Larry McDonald, the author of the report, pointed to an important sign: the difference in the volatility measures for the Nasdaq 100 and the S&P 500 has hit its widest level in over a decade. The two measures are due to revert back to more normal levels, the strategist said in a note to clients.
The CBOE Volatility Index, or VIX, is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices, according to the CBOE. While the CBOE Nasdaq 100 Volatility index, or VXN, does the same for the Nasdaq 100 index.
"You have to go back to 2004 to find this large a volatility premium" between the Nasdaq 100 VXN over the S&P 500 VIX, McDonald wrote in the Bear Traps Report. The "volatility premium is spectacular."