1 Momentum Signal Suggests the Software Apocalypse Is Over. Don’t Rush to Buy Just Yet.

1 Momentum Signal Suggests the Software Apocalypse Is Over. Don’t Rush to Buy Just Yet.

Rob Isbitts

Sun, September 6, 2026 at 5:30 PM GMT+3 4 min read

The iShares Expanded Tech-Software Sector ETF (IGV) recently triggered a rare technical "Thrust" signal following a dramatic 24.5% rally over a five-week span.

According to historical data highlighted by research firm All Star Charts, this specific momentum signal, which is defined by an extraordinary five-week rate of change, has appeared only three other times in the ETF's history: 2002, 2009, and 2020.

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My take on this is that software is not thought the same as it used to be. Artificial intelligence was not threatening to make software businesses extinct. This time it's different.

So are the major players in the software ETF. Many of the stocks have crashed in price, and it's a very different list of companies than those present in IGV 10-20 years ago.

Below, here are the stocks that are down 30% over the past 52 weeks. That's about one-fifth of all holdings. And with few exceptions, the best performers have been the smallest in the IGV portfolio.

There's also the matter of valuation. Apart from the types of names we saw in those previous eras where the thrust signal worked well – Microsoft (MSFT), Oracle (ORCL), Adobe (ADBE) – there are a lot of nosebleed multiples below. As well as some companies that have no price/earnings ratios, since they have no earnings.

All things considered, IGV at 35x trailing earnings portfolio-wide strikes me as at best a trade. Not an investment. Not at this stage of the battle versus AI.

The daily chart below reflects that. It is a nice bounce. But I'm skeptical here. The problem with a nice move like IGV has had, from around $75 to $110 in just five months, is that it simply served as a recovery. This ETF has been in a trading range, albeit a large one, for at least two years.

In contrast to past periods, IGV's 2026 rebound follows a modest tech sector pullback, not a total market "clearing" event as in 2008. And with interest rates remaining elevated, enterprise IT budgets facing scrutiny, and traditional per-seat software as a service models grappling with AI disruption, this is not a similar portion of the software cycle we are talking about here.

Think of it this way: "buy the dip" has been a rallying cry for a long time. But "dip" is not 30% in a few months, and "buy" is not typically accompanied by the expectation that such a plunge will be recovered so quickly. This is life in the software stocks' fast lane. And I think that makes it less credible, when it comes to signals from the past.

To complete that thought, let's pull back the IGV chart to the start of 2020, when I think the modern investing era began.

I've labeled that last chart above in purple, to show you how a full-turn move from peak to trough to regaining the peak took about two years (labeled "1"). Now, look to the right. In the same amount of time, the same type of cycle for IGV's price occurred three different times.

Furthermore, they were practically in succession, without much of a breather. That's not a cycle, that's a chaotic market, picking on one industry just a bit more than the rest.

But it is happening in many other corners of the equity world too. That leads me to conclude that this is more likely the beginning of the end, not the start of something new.

Rob Isbitts is a semi-retired CIO, former fiduciary investment advisor, and Barchart columnist. Check out his other work at ETFYourself.com (featuring the Fresh Charts weekly trading post), and ROAR.PiTrade.com, helping investors to better-manage their own portfolios.

On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com