MW A tech wreck has rattled markets. Why this battered S&P 500 sector could be primed for a bounce.

By Jamie Chisholm

A popular software ETF is now at extremely oversold levels, according to one measure

Shares of many tech plays have been sent to the dump.

Hard to believe, but amid the recent shellacking meted out to parts of the technology sector - on fears AI will eat software and jitters about gazillion-dollar capex pledges - the S&P 500 is only down 2.6% from its record high.

Perhaps it feels worse because the stock market dip has been accompanied by intense volatility in precious metals and a crypto collapse.

So what happens next? One development has seen the broader market underpinned by a rotation into the non-digital economy, with shares of Coca-Cola $(KO)$, for example, this week surging to a fresh peak.

Indeed, Jonathan Krinsky, technical strategist at BTIG, notes that 19% of the S&P 500 SPX hit a 52-week high midweek, the most in over a year. "Yes some were defensive (staples), but that's not an overly bearish message," he says in a bulletin published Thursday.

Still, it's doubtful the S&P 500 SPX can make much headway unless the hard-hit tech sector can find its footing once again. The fundamental concerns may linger, but where do we stand from a technical perspective?

For the S&P 500 itself, Michael Kramer at Mott Capital Management notes that the Wall Street benchmark sits around the 6,800 and "the next area of support would likely be between 6,700 and 6,720."

The good news for bulls is that the iShares Expanded Tech-Software Sector exchange traded fund IGV, down more than 13% in just the last five sessions and the flag-carrier of recent tech-doom, may be itching to bounce. Volume of shares traded averaged about 45 million over Wednesday and Thursday, a record high that suggests capitulation selling, according to Krinsky.

He adds that the IGV this week also tested the long-term uptrend from 2009 lows, as well as hitting its 200-week moving average. In addition the IGV's 14-day relative strength index, a gauge of share price momentum, finished Thursday's session at just 14.8. An RSI below 30 is deemed to signal an asset is oversold.

"We think a tactical counter-trend rally [for the IGV] should be starting soon," says Krinsky.

His assessment dovetails with that of Chris Watling, chief market strategist at Longview Economics, who says that according to his overextended indicator, "the 'software and services' industry group is at one of its most oversold levels in the past decade."

Source: Longview Economics

Watling adds that the put-to-call option ratio for the Nasdaq 100 NDX, which contains a very large tech weighting, is at low levels and close to signaling a buy for the index. Put options are usually bought when traders are pessimistic about an asset price, while call options are bought when they are optimistic. Consequently a low put/call ration suggests pessimism is carrying the day.

In addition, Watling says, the NDX is oversold on Longview's medium-term technical scoring system.

"So while this isn't a call to BUY tech or software outright (for now), it's worth watching these indicators closely given some of them are starting to generate some interesting $(BUY)$ messages. At some point the sector will experience, at the minimum, a relief rally," says Watling.

Mott Capital's Kramer remains wary, however. He notes that though the Cboe VIX index VIX, a gauge of expected S&P 500 volatility, has been rising along with VIX futures, it has yet to spike in a manner that speaks to stock market capitulation. Normally VIX futures (VXJ26) (VXK26) are more expensive than the VIX because they must reflect the increased chance of volatility occurring over a longer time frame. That rising VIX futures curve is known as contango.

At times of extreme stock market anxiety the VIX often jumps above VIX futures, pushing the VIX curve into a condition known as backwardation. That is not currently the case, says Kramer.

"At the moment, the VIX is not trading above the 3-month VIX index, meaning the market has not yet flipped into backwardation. That suggests implied volatility is rising across the curve, but we have not seen a true crescendo of fear," Kramer says.

The markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are higher as benchmark Treasury yields BX:TMUBMUSD10Y inch up. The dollar index DXY is barely changed, while oil prices (CL.1) rise and gold futures (GC00) are trading around $4,890 an ounce.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              6798.4     -2.45%  -1.78%  -0.69%  11.75% 
   Nasdaq Composite                                                     22,540.59  -4.83%  -4.00%  -3.02%  13.89% 
   10-year Treasury                                                     4.194      -4.40   1.90    2.20    -30.20 
   Gold                                                                 4886.3     -0.46%  8.14%   12.79%  69.29% 
   Oil                                                                  63.57      -3.30%  8.15%   10.73%  -10.54% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Amazon.com shares (AMZN) are down sharply after the company forecast big spending for 2026 and its profit guidance underwhelmed.

Molina Healthcare stock (MOH) is diving after the health insurer forecast a sharp drop in profit for the upcoming year.

Shares of Stellantis $(STLA)$, the carmaker whose brands include Fiat and Jeep, are plunging after taking a $26 billion charge as it scaled back its push into electric vehicles.

Companies reporting earnings on Friday include Cboe Global Markets $(CBOE)$ and Under Armour $(UAA)$.

U.S. economic data due Friday include the University of Michigan consumer sentiment survey for February, released at 10:00 a.m. Eastern

Fed officials making comments include Fed Vice Chair Philip Jefferson speaking at 12:00 p.m.

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The chart

Source: Bespoke Investment

Bitcoin's (BTCUSD) selloff has been dramatic: from $125,000 in October to brushing $60,000 late Thursday. But how does this compare with previous slides? Bespoke Investment presents the chart showing bitcoin's earlier retreats from what were then record highs. "Historically, bitcoin has only reached 52-week lows a few times over the past decade (2018 and twice in 2022), and those instances have tended to occur closer to the end of major drawdowns rather than the beginning," says Bespoke.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   AMZN    Amazon.com 
   NVDA    Nvidia 
   GME     GameStop 
   AMD     Advanced Micro Devices 
   PLTR    Palantir Technologies 
   MSFT    Microsoft 
   IREN    Iren 
   MSTR    Strategy 
   TSM     Taiwan Semiconductor Manufacturing 

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-Jamie Chisholm

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February 06, 2026 06:47 ET (11:47 GMT)

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