XLI Industrial ETF: A Closer Look

The XLI Industrial ETF has seen a rise of about 18% this year, which is impressive, but it hasn’t really grabbed headlines. Interestingly, it’s outperformed the S&P 500, which is up 17%. So, why isn’t it more talked about? Well, there are a couple of key reasons. First, it trails behind the XLK Technology ETF, which has surged 31% this year. Second, XLI hasn’t made much headway recently; it’s just barely above what it was back in July 2025, gaining less than 1% since then.

Today, let’s dive deeper into XLI and consider how it might be on the verge of a breakout, which could boost its relative strength soon. The initial chart shows a consolidation range, illustrated as a trading box. These boxes indicate sideways price movements, and in a long-term uptrend, they often signal a bullish continuation. We saw something similar from mid-May to late June, although it was brief. After a strong breakout in early May, the ETF experienced another rally until late July.

Some traders might see the absence of new highs as a worrying sign, especially while other sectors continue to rise. However, momentum suggests a different narrative. The 14-day RSI has cooled off from its earlier highs, but it’s simply indicating a phase of healthy consolidation, rather than a downturn. There’s also no significant negative momentum divergence, reinforcing the idea that we’re just in a temporary lull, not a trend reversal.

If we take a broader look at the monthly chart, going back to 2011, we can see this trading range highlighted in yellow in the top right. It might be setting up for what could be a significant multi-year base breakout. Historically, XLI has experienced four major breakouts to new all-time highs, each resulting in substantial upward movements that lasted for months or even years. This aligns with the bullish outlook for XLI, suggesting that the current upswing could be the initial phase of a new trend.

So, should investors consider shifting into XLI now that it has lagged behind technology? While the difference in performance is evident, it’s actually a relatively recent trend. For several months, XLI and XLK were performing quite similarly year-to-date. It’s only recently that technology has begun to outpace XLI significantly.

With many big tech companies revealing their earnings soon, there’s a chance that current momentum in that sector might start to fade. If so, we might see more money flowing back into sectors like XLI, which seem poised for growth.

The final point worth mentioning is the relative performance ratio of XLI to XLK. This ratio has been on a steady decline for the past five years, showing that technology has consistently outperformed industrials. However, there have been moments when this trend reversed in favor of industrials after significant underperformance. Notably, it’s been 28 weeks since the last peak in this ratio, which occurred in mid-April. Since then, XLI has lagged behind XLK by roughly 20%. Historically, such a pattern of underperformance has happened only a few times since 2020, and in each case, a reversal followed shortly after.

Given how deeply this performance ratio has dipped again, it might suggest we’re nearing another point where things could shift back in favor of XLI.