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TECH VS. BANKS: A TALE OF TWO TRENDLINES

There's a long-standing Wall Street saying: "Banks are never an investment, always a trade."

A look at the ratio between the S&P 500 Technology Sector Index .SPLRCT and the S&P 500 Banks Index .SPXBK helps explain why. Over the long run, technology stocks have clearly been the stronger performers.

That trend has remained intact this year. The tech sector is up more than 15% in 2025, compared with a 6.7% gain for the banks index. For context, the broader S&P 500 .SPX has advanced 8.7%, while the S&P 500 Financials Sector .SPSY has added just 2.3%.

More recently, though, the relationship has started to shift.

The Tech/Banks ratio peaked at 12.41 on June 1, right as it tested a long-term resistance line that stretches back to the dot-com era. That failed breakout warned that technology's long-running leadership could be vulnerable if the ratio reversed lower.

That's exactly what has happened so far. Since the June 1 close, technology stocks have fallen just over 9%, while the banks index has surged more than 13%.

As a result, the Tech/Banks ratio has pulled back sharply and spent the past several weeks hovering around its 200-day moving average. The ratio closed Monday at 9.97, just above the 200-DMA at 9.93.

The key question now is whether tech’s recent relative weakness versus banks has largely run its course. The long-term moving average could provide a foundation for a rebound.

If the ratio continues to weaken, the next major support level sits near a long-term trend line drawn from the 2006 low, now just below 9.00. That line has consistently contained tech’s relative weakness against banks for roughly eight years.

Looking further ahead, a more significant technical development is taking shape. The long-term resistance line from the 2000 peak and the support line from the 2006 low are gradually converging and are on track to intersect around 2029.

By then, the Tech/Banks ratio could be approaching a major inflection point. A sustained move above resistance would signal renewed long-term leadership from technology, while a break below support would suggest banks are gaining the upper hand. Either way, the contracting range points to the potential for a much larger trend to emerge.

(Terence Gabriel)

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