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The largest sector weight in the S&P 500 continues its impressive upside run both on an absolute and relative basis. Software and Hardware have rallied along with the sector, but the closely watched Semiconductor space continues to struggle. Breadth in the group experienced a rare development in the August 17th trading session and could provide the fuel needed for a continued rally.

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S&P 500 Technology

The Technology sector continues to rally above the rising 50-day moving average and the 2,500-support zone at the February and March lows of this year in a bearish to bullish reversal. Relative to the S&P 500, the group trades above long-term relative support at the highlighted zone and the ratio’s rising 50-day moving average.

The price action exhibited in Software & Services closely mirrors that of the sector, trading above the 3,100-support zone and the rising 50-day moving average. Relative to Technology, the group has rolled over to an underperformer in breaking down below the long-term highlighted zone and the ratio’s now-declining 50-day moving average.

Hardware and Equipment continued its impressive accent in this week’s trading session, well above support at the 2,900-breakout zone and the rising 50-day moving average. It would not be a surprise to see some consolidation in the space over the next several trading sessions, simply due to the sheer distance between price and its 50-day moving average. Relative to Technology, the group continues to outperform in breaking above the highlighted resistance zone and the ratio’s rising 50-day moving average.

Semiconductors and Equipment remain trapped between long-term resistance at the 2,050 zone and the flat 50-day moving average, failing to break out above the Q1 lows of this year. Relative to Technology, the group continues to falter after testing relative resistance at the downtrend line on a series of lower highs below the ratio’s declining 50-day moving average.

Breadth

The percentage of Technology components trading above their 50-day moving average received an upside boost in the August 17th trading session, printing an additional reading above the 95% level after crossing above this mark in the trading session prior. There were nine instances since 2008 where this dynamic occurred for a median gain of 6.47% with a 10.00%-win rate over the following quarter. However, these nine developments all occurred in the past three years. Investors would be prudent to receive these results with reduced enthusiasm due to the small sample size and limited history. Nevertheless, we wanted to highlight this historically rare development for the space.

This note is a preview of our Sector Deep Dive. See our thoughts and more in the full report.

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Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.