Chart of the Day - Tech Breakouts

• The Industrials sector has already hit a fresh 52-week high recently, with the S&P 500 and the Tech sector not far behind from doing the same.
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• It has been nearly six months since Tech closed at a 52-week high, which is a historically extended streak.
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• Historically, the Tech sector hitting a 52-week high after extended periods of not doing so has been followed by consistently, but weaker-than-average returns.

The S&P 500 is currently 1.61% away from moving back to its February 19th closing high, and as we wait for that to happen, looking under the hood on a sector level shows there are finally new highs to speak of. That includes the Industrials sector, which hit a new high within the past week, and Utilities, which did so in late May. As for other sectors, a handful would still need to manage rallies of at least 10% before the same could be said for them. Meanwhile, the likes of Consumer Staples, Communication Services, and Financials are only within a few percentage points.  Behind Industrials, the next closest sector to hitting a 52-week high is also the one that carries the largest weight in the S&P 500: Technology. Interestingly, as the sector is within 1.5% of its 52-week high, it is notable in that we are closing in on the six-month mark since that prior peak. As shown in the second chart below, Tech's last 52-week high on 12/26/24, was a couple of months ahead of the broader market.

Zeroing in on Tech, it has been 114 trading days since the sector last closed at a 52-week high. As shown in the chart below, there have been plenty of times in which the sector has gone as long as a year without making a 52-week high, but still, the current streak without doing so is one of the longest streaks on record. The last time Tech traded without hitting a 52-week high for at least 100 trading days was around the times of the 2022 bear market. In the past decade, the only other occurrence was in 2019. Since 1990, there have been a total of 16 instances of Tech going for at least 100 consecutive trading days without setting fresh 52-week highs. Most of those also coincided with historically large drawdowns for the sector.

Although the sector hasn't yet made a new high, current levels mean that one is within reach.  To get an idea of how returns may look after that happens, in the table below, we show the performance for the Tech sector after those past streaks of 100 or more days ended when Tech finally closes at a 52-week high.

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Again, even though the current streak is technically not yet over, it is shaping up to be a remarkably quick recovery to new highs.  For these past streaks, 2019 holds the record as the 52-week high occurred just 72 trading days from the date of that period's 52-week low. During that run from the 52-week low to the 52-week high, the sector rallied 32.3%. Fast forward to today, it's only been 45 days since the low, or about a month and a half less than that 2019 period, and Tech is up a slightly larger 34.8%!

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When the S&P 500 Tech sector reclaims a 52-week high after at least 100 trading days, forward returns tend to be positive — but are typically below long-term averages.

Median 1-year return: +14.98%
Positive 1-year outcomes: 81% of the time
Median 6-month return: +8.49%
‍Median 3-month return: +4.48%

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Bottom line: While forward returns are usually positive, the magnitude tends to be lower than average. Investors should expect moderate gains with relatively high consistency, but not explosive upside.

Peeling back a layer, we would note that for individual Tech stocks, we are starting to see an uptick in 52-week highs.  The Tech sector saw 8.7% of its components hit 52-week highs last Friday and this Monday, which is the highest share since February 19.  That would suggest we are starting to see Tech stocks on an individual basis beginning to break out to the upside, and the charts would back that up. Using our Chart Scanner to go through the sector's stocks shows a number experiencing or on the verge of breakouts in various forms. Such a move has been observed from Crowdstrike (CRWD) or IBM (IBM), which are at 52-week highs while others aren't quite at a 52-week high yet like Cisco (CSCO). KLA Tencor (KLAC) is another example, having moved above resistance with the next point to watch being the past year's high, whereas names like F5 Networks (FFIV) and VeriSign (VRSN) have been in solid uptrends toward fresh highs. Finally, others have much longer roads to join those at 52-week highs, but breakouts are being seen in other forms. For example, Lam Research (LRCX) and Microchip (MCHP) appear to have broken out of sideways ranges or longer-term downtrends, and Qualcomm (QCOM) and Tyler Tech (TYL) are attempting to break above resistance at 200-DMAs.

Bottom Line Takeaway: Tech is on the verge of breaking out, and history suggests that once it does, forward returns tend to be positive. While the broader S&P 500 nears its prior high, leadership is quietly shifting beneath the surface — with Industrials already at new highs and Technology just 1.5% away. We’re seeing individual breakouts across a growing number of Tech names, and the sector’s rapid recovery from recent lows mirrors past periods that preceded strong multi-month rallies.