Materials Stocks Are the Market’s Quiet Outperformers as Tech Fatigue Spreads

While everyone was busy rubbernecking the latest tech wreck, a different part of the market has quietly started to stir. Materials stocks, long the wallflowers of the post-pandemic bull run, are suddenly getting a second look from traders who’ve had their fill of AI hype and SaaS drama. The most oversold names in the sector are flashing on screens as potential value plays, and for the first time in years, the phrase 'materials momentum' isn’t just a punchline at the back of the trading floor.

The numbers tell the story. According to Benzinga, several materials stocks are now among the most oversold in the market, presenting what the publication calls 'an opportunity to buy into undervalued companies.' While the S&P 500 (^SPX) flatlined at $6,819.49 and tech proxies like XLK sat motionless at $135.6, the materials sector has quietly begun to attract capital. The Invesco S&P 500 Equal Weight ETF (RSP) is seeing inflows as investors rotate out of growth and into value, a theme echoed in Seeking Alpha’s coverage of the 'Great Substitution.'

This is not your father’s rotation. The AI narrative is still dominant, but the cracks are showing. Katie Stockton, founder of Fairlead Strategies, told Seeking Alpha that the charts are signaling a 'bifurcation' in market leadership, with software and data services stocks facing heightened risk. Meanwhile, the Bank of America 'bull and bear' indicator just hit a two-decade high, a classic sign of a market top according to strategist Michael Hartnett. When Main Street and Wall Street start to diverge, it’s usually time to look for assets that have been left for dead.

Materials fit the bill. The sector has lagged in the AI-fueled rally, but the fundamentals are improving. Commodity prices, as tracked by DBC, have stabilized at $23.76, and the threat of a global recession has receded for now. The result is a market where value is suddenly back in vogue. Materials stocks, with their battered valuations and improving cash flows, are being re-rated by investors who are tired of chasing the next tech moonshot.

The technical setup is compelling. Many of the most oversold materials names are trading at multi-year support levels, with RSI readings in the low 30s and attractive risk-reward profiles. The sector’s correlation with commodities is also working in its favor, if inflation expectations tick up, materials stocks stand to benefit. Conversely, if the market rolls over, these names are less likely to be the epicenter of the next drawdown.

What’s the catch? For one, the rotation into materials is still in its early stages. The sector is under-owned, and liquidity is thin compared to the mega-cap tech names. There’s also the risk that the rally fizzles if the macro backdrop deteriorates. But for now, the path of least resistance appears to be higher, especially for traders willing to look beyond the headlines.

Strykr Watch

The Strykr Watch to watch are straightforward. For DBC, $23.76 is the line in the sand, hold above this, and the commodity complex remains constructive. For the S&P 500, $6,800 is psychological support, but the real action is in the sector ETFs and single-name materials stocks. Look for breakouts above recent resistance levels in names flagged as oversold by Benzinga. The RSI picture is improving, and momentum indicators are starting to turn. If the sector can attract even a fraction of the capital currently parked in tech, the upside could be meaningful.

The risks are not trivial. If the economic data out of China or Australia (see the upcoming PMI and GDP prints) disappoint, the materials rally could stall. There’s also the possibility that the rotation is a head fake, driven by short covering rather than genuine investor conviction. Finally, if the broader market enters a correction, materials stocks will not be immune, even if they outperform on a relative basis.

On the opportunity side, the setup is attractive for nimble traders. Look for entries on pullbacks to support, with stops just below recent lows. The risk-reward favors long positions in oversold names, especially if the sector can build on its recent momentum. For those with a macro bent, a paired trade, long materials, short tech, could capture the rotation theme while hedging against market risk. Keep an eye on ETF flows and sector breadth for confirmation.

Strykr Take

The tech trade isn’t dead, but it’s tired. Materials stocks, ignored for years, are finally getting their moment in the sun. This isn’t a call for a new supercycle, but the risk-reward has shifted. For traders willing to step off the AI bandwagon, the materials sector offers a rare combination of value, momentum, and macro tailwinds. Don’t sleep on the rotation, sometimes the quiet trades are the ones that pay.

Date Published: 2026-02-06 14:00 UTC