The S&P 500 technology sector is approaching what would be its most powerful 10-week advance on record going back to 1990, but BTIG strategist Jonathan Krinsky cautions that the rally now sits in a constellation of technical extremes that have frequently preceded notable reversals.
"If the week ended right now, it would be the best 10-week gain (+44.6%) in the history of the S&P 500 Tech Sector," Krinsky wrote, drawing attention to several measures that suggest the move may be stretched.
Among the metrics he cited, the S&P 500 Information Technology index closed with a relative strength index, or RSI, of 82 and was trading 28% above its 200-day moving average. According to Krinsky's analysis, that particular combination of readings has occurred in only ten distinct periods since 1990, with the most recent such episodes in June 2024, August 2020, and late December 1999.
While a small number of those episodes delivered further gains - Krinsky pointed to May 1995 and July 1997 as examples - the larger pattern has tended toward meaningful consolidations or drawdowns over the subsequent 40 trading sessions in most cases.
Analysts and market participants have repeatedly compared the current tech advance - a cycle some date to November 2022 with the emergence of ChatGPT - to the Internet-driven run that began in December 1994 with the launch of Netscape. If that parallel is accurate and the current cycle maps onto the earlier one, Krinsky's time-series study would place the market in conditions analogous to July 1998. In his sample of overbought and extended episodes, that was the worst outcome: the S&P 500 tech sector declined by more than 20% before finding a bottom in October 1998.
Krinsky also noted a shift in market leadership. The S&P 500 tech index has advanced roughly 7% since mid-May, while the group often referred to as the Magnificent 7 has fallen 2.3% over the same span. That divergence signals a narrowing of the engines behind the broader tech advance, according to his note.
Adding to the cautious read, the Daily Sentiment Index for the VIX hit 13 - its lowest reading of the year. "The only fear left is FOMO," Krinsky wrote, underlining that investor sentiment toward volatility is unusually subdued even as technical indicators show extended conditions.
Taken together, Krinsky's assessment frames the current tech rally as historically strong but technically stretched, with precedent for significant near-term volatility and consolidation in several prior episodes that displayed similar readings.