METV - Tech Relative Strength Still Negative

Summary

• Outside of a brief period last summer, the Technology sector has seen its relative strength line sit in negative territory for nearly the whole of the past year.
• While Tech’s relative strength is not as weak as it once was and is closing in on the first positive readings since the mid-summer, today marks the 131st trading day of consecutive negative readings.
• That is handily the longest streak in nearly a decade and one of only six other times a streak has eclipsed 100 trading days.

Each day in our Sector Snapshot, we provide updated charts of the relative strength lines of each sector versus the S&P 500. Outside of a brief period last summer, Technology, the largest sector in terms of market cap, has seen its relative strength line sit in negative territory for nearly the whole of the past year. In other words, the broader market has outperformed the Tech sector almost every day for a year straight. In the chart below, we show the one-year relative strength line of Tech versus the S&P going back to 1991. After some of the most dramatic underperformance of the past couple of decades, Tech rebounded, and the sector has now only underperformed the broader market by a little less than 3% in the past year. While Tech’s relative strength is not as weak as it once was and is closing in on the first positive readings since the mid-summer, today marks the 131st trading day of consecutive negative readings. That is handily the longest streak in nearly a decade and one of only six other times a streak has eclipsed 100 trading days.

The current streak has yet to come to a close, but in the chart below, we show the performance of Tech and the S&P 500 following the conclusion of each of those prior streaks of 100 or more days. Overall, performance does hold a positive bias with positive returns a vast majority of the time. That being said, the average size of those gains is not exactly impressive. In the case of Tech, the average and median gains are smaller than the norm across these time periods. One year out is the starkest difference, with an average gain of less than 5% compared to what has typically been a gain that sits in the mid-teens. Likewise, the S&P 500 tends to underperform the norm one year later, but short- to medium-term performance is stronger than the norm. Six-month returns, in particular, have been impressive, with a move higher every time and an average gain that is more than double that of the typical six-month performance since 1991.

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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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