In a significant market development, the iShares Expanded Tech-Software Sector ETF (IGV) achieved a new all-time high on Tuesday, marking a crucial rebound for the technology sector and offering a potential glimpse into the broader market’s future performance. This surge is particularly noteworthy given the recent market volatility and the tech sector’s previous struggles. The breakout suggests a potential shift in market sentiment and could signal considerable strength for the final months of the year, a period historically known for positive returns. This unprecedented advance for IGV raises questions about the future of tech stocks and its implications for the overall market trajectory.
Key Takeaways: IGV’s Breakout and Its Implications
- IGV’s all-time high breaks a 3-year downtrend signaling potential sustained growth in the tech sector.
- Technical analysis shows a double breakout, bolstering the bullish signal and suggesting further upside potential.
- The move contrasts with the quicker recovery of other tech ETFs like XLK, highlighting IGV’s unique position and signaling its resilience.
- Positive RSI indicates strong momentum, confirming the upswing and suggesting continued healthy technical shape.
- Earnings season presents the next significant test for IGV’s continued upward trajectory.
IGV’s Triumphant Return: A Three-Year Journey
The iShares Expanded Tech-Software Sector ETF (IGV) hitting a new all-time high is a momentous event, considering its recent history. Before Tuesday, IGV’s last all-time high was reached back in November 2021, at an intraday high of $89.76. Since then, the ETF experienced a significant 47% downturn, reaching its low in November 2022. This contrasts sharply with the SPDR Technology ETF (XLK), which hit its own all-time high much earlier in July 2023. While both ETFs have seen impressive growth since their 2022 lows—IGV is up 97%, and XLK up 103%—IGV’s journey to a new high has been considerably longer and more arduous.
Comparing IGV and XLK Performance
The differing recovery paths of IGV and XLK are revealing. From their respective all-time highs in early-mid 2023, XLK has seen a significant increase of 37%. In comparison, IGV’s growth has been more modest at just 4% since July 2023. This difference emphasizes the distinct nature of these two prominent tech ETFs and suggests potential market sector dynamics at play. While both have experienced impressive overall growth since the 2022 lows, the contrasting trends from their recent highs highlight the unique market dynamics affecting each.
Technical Analysis: Double Breakout and Bullish Signals
The significance of IGV’s new high extends beyond simply breaking previous resistance levels. Technical analysts point to a double breakout as a key driver of this bullish surge. Firstly, IGV broke out of a 10-month bullish pattern, suggesting sustained upward momentum. The measured move following this breakout points to an upside target near $102. Furthermore, IGV’s chart also shows a breakout from a three-year bullish cup and handle pattern. The price action throughout 2024 effectively formed the “handle” portion of this significant formation. Historical data suggests that similar pattern breakouts in the past have resulted in immediate and prolonged upward price movements. The current pattern’s scale is significantly larger than any preceding ones, further enhancing the bullish signal.
RSI Momentum Indicator
Strengthening the bullish case is IGV’s 14-week Relative Strength Index (RSI). The RSI has continuously oscillated between overbought territory (70 and above) and the midpoint (near 50). This consistent oscillation demonstrates strong momentum supporting the upward trend and mirrors a similar pattern observed between 2020 and 2021. As long as this RSI pattern persists, IGV is expected to maintain its healthy technical shape. A deviation from this pattern, however, could signal a potential shift in momentum, similar to what occurred in late 2021.
Implications for the Broader Market
IGV’s performance holds significant implications for the broader market. The technology sector’s recovery is crucial for the overall market’s health, as it represents a substantial part of major indices such as the S&P 500. The tech sector’s struggles in early August and early September significantly impacted the S&P 500’s performance. Therefore, IGV’s resurgence suggests a potential positive shift in investor sentiment towards technology and a possible rebound for the broader market. Historically, the final two months of the year have shown strong performance. This makes IGV’s momentum that much more critical for exploiting this historically favourable period.
Looking Ahead: The Earnings Season Test
The next crucial factor to watch will be how IGV performs during the upcoming earnings season. Maintaining the breakout through this period will serve as a significant confirmation of the bullish trend. Success will continue to validate the positive momentum reflected in the technical analysis. The strength of earnings reports from companies within the IGV portfolio will directly impact the ETF’s future trajectory and will provide more insight into its sustained upward movement.
Disclaimer
The information provided in this article is for informational purposes only and should not be considered financial, investment, tax, or legal advice. It’s crucial to consult with your financial advisor before making any investment decisions. All opinions expressed are solely those of the author (Frank Cappelleri) and do not reflect the opinions of CNBC or any affiliated entities. Past performance is not
