ETFs Achieve Notable Winning Streak

The Technology Select Sector SPDR ETF (XLK) has experienced a notable rise, achieving 12 consecutive gains as of December 9th. This streak is now the second-longest in its history since 1999, trailing only behind the 13-day streak recorded in February 2017. While I’ve noticed that the sample size is relatively small, it’s still interesting to look back at past trends.

In 2017, shortly after a rally that began in November, XLK sustained its gain for about two months before experiencing a pullback. It’s worth remembering that this was a robust time, with the upward trend continuing well into early 2018. Reflecting on 2017 might feel a bit familiar, as we often compare current market behavior to that period. It’s important to note that while this winning streak seems close to ending, it doesn’t necessarily indicate a halt in the long-term upward trend. How the market reacts following this streak will be crucial, and recent months have shown that pullbacks have drawn significant interest.

Regarding XLK’s recent performance, its 12-day rally, while impressive, isn’t entirely unprecedented. An 8% increase over just a couple of weeks is solid, yet, when looking back to mid-2021, there have been stronger returns. So, while this streak might stand out in some contexts, it doesn’t exactly scream “historic” in the broader landscape.

Another noteworthy point is that the recent tech rally hasn’t just been fueled by massive growth stocks. Since the rally started on November 21st, XLK has risen about 8.8%, but its peers have outperformed it. The Equal Weight Tech ETF (RSPT) surged by 11.6%, and the Small Cap Tech ETF (PSCT) increased by over 15%. This breadth in performance across different market segments adds a solid foundation to the ongoing bull market.

Looking to the past, it’s essential to keep in mind the challenges faced earlier this year when XLK fell about 30% from its highs before making a strong recovery. This reminds me of the cascade during COVID-19, where a similar 34% drop occurred. In both scenarios, XLK rebounded sharply, gaining nearly 80% from its recent lows to its highs. If we consider 2020, the ETF rallied approximately 90% from its lows in March to late August before entering a corrective phase. After a more recent 12% decline, the current winning streak, while promising, suggests that the recovery path will likely not be straightforward.

In the coming months, perhaps drawing from the patterns of 2020, could position the market for another significant upward movement as we approach 2026.