If Something Seems Unsustainable…

We’ve seen some historic market events in the past few weeks.  We’ve written about the rare precedent of three straight weeks of 3% gains in major indices – and possibly on our way to a fourth – and yesterday we touched upon the remarkable run in the Philadelphia Semiconductor Index (SOX).  That run continues for a 17^th straight session today, thanks to extraordinarily well-received earnings from Texas Instruments (TXN). 

A nearly 20% jump in a major technology stock is nothing to sneeze at.  TXN not only met the necessary condition for a post-earnings rally with an EPS beat, but also the sufficient condition of higher guidance.  It blew away its consensus EPS estimate – $1.68 in Q1 vs. $1.36 exp – and more importantly, significantly raised guidance for the current quarter to $1.77 to $2.05, well above the prior consensus of $1.57.  Those are indeed solid reasons for a significant rally, even for a stock that set a new all-time high just before reporting its results. 

TXN, 14-Years, Weekly Candles

Source: Interactive Brokers

TXN credited heavy demand from data centers as a key reason for their success.  While there are justifiable concerns about whether the immense amounts of money being raised and spent by AI hyperscalers might prove to be a drag on their current and future profitability and cash flows, the recipients of that spending are clearly doing just fine, at least at present.  While much of the early focus was on cutting edge AI chips, like those produced by Nvidia (NVDA), investors have come around to the need for analog chips, like those produced by TXN, and memory chips, like those produced by Sandisk (SNDK), to power data centers. 

Nonetheless, it still seems crazy to think that a winning streak of 16, possibly 17, straight days for any financial product, let alone a major industry sub-index, can be sustained.  It has to end at some point, no?   I can find no other examples of a streak this long for SOX for at least 30 years.  I found 9-day streaks in September 2025 and August 1994, and an 8-day streak in October-November 2021.  Interestingly, the longest I could find during the internet bubble was merely 5 days, which occurred four times: March and November 1998, June-July 1999, and August 2000.  Notably, the biggest gain among the prior streaks was in August 2000, which occurred as the internet bubble was popping.  It gained 17.8% during those five days, which shows once again that bear market rallies are short, sharp, and ferocious.

Meanwhile, since the start of the current 17-day streak on March 31^st through noon today, SOX had gained 42%!  I’m having trouble coming up with an appropriate adjective to describe it.  The current, nearly vertical rise has taken the index about 250% higher in just a year, though with a substantial piece coming this month alone.  Note that the rally did not begin from an especially big decline – the sector had barely fallen during March, never even remotely testing bear market levels.

SOX 1-Year, Daily Candles

Source: Interactive Brokers

Can this continue?  I would have given this a big “no” based on the precedents laid out above.  It certainly looks like a potential blowoff.  But if key components of SOX can continue to deliver positive surprises in the manner that TXN just did, it becomes much more difficult to bet against it.  A big risk now is that expectations become too lofty for companies to exceed.  Let’s see if others like TXN can leap over even very high expectational hurdles.

For a reminder of what can happen, though in a very extreme and peculiar set of circumstances, let’s take a quick look at a 1-month chart of Avis Budget Group (CAR).  I’ll let others explain the mechanics behind this extraordinary short squeeze and its subsequent implosion, but I couldn’t resist sharing this chart.  That move really was unsustainable…

CAR, 1-Month, 15-Minute Candles

Source: Interactive Brokers