Monday, April 19, 2010

S&P Technology Sector: XLK Update

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XLK Overview
XLK is up +0.21% for the week, up +2.63% for the month, up +3.71% for the year, and up +79.88% since the March 9, 2009 market bottom. XLK has been lagging other sectors and the major indexes this year. The XLK is a general technology ETF designed to represent the technology sector of the S&P 500, which is approximately 22% of the S&P 500. This ETF also includes the S&P telecommunications sector, which is merged into this technology sector. See the XLK Technology portfolio holdings here. The top 11 holdings currently are: Microsoft, Apple, IBM, AT&T, Cisco, Google, Intel, Hewlett-Packard, Oracle, Verizon, and Qualcomm for a total of 65.71% of the portfolio. This is a very liquid ETF.

IYW Technology ETF
IYW is up +0.05% for the week, up +3.78% for the month, up +5.32% for the year, and up +96.43% since the March 9, 2009 market bottom. Overall, IYW has outperformed XLK. The iShares Dow Jones Technology Index ETF portfolion holding are here. I like this ETF, but the 50 day average daily volume is about 335,000 shares, compared to XLK of 9 million shares. The top 9 holdings are Microsoft, Apple, IBM, Cisco, Google, Intel, Hewlett-Packard, Oracle, and Qualcomm for a total of 62.38% of the portfolio. IYW trades similar to XLK and is just below its YTD high, which occurred on April 15 as it did for XLK.

XLK Daily Chart
Below is the XLK daily chart for 2010.

Noteworthy Closing Prices on Daily Chart below:
2010 YTD 4-15-10 High 24.05 (Highest yellow horizontal line)
Current Close 23.78 (Second highest yellow line)
YE 12-31-09 22.93 (Third highest yellow horizontal line)
10 Month EMA 21.55 (Lowest yellow horizontal line)

XLK: Ready To Pop For A New 2010 YTD High?

Intermediate-Term Trend
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, signalled a bull market for the XLK on Thursday, March 18. That is, the 25d sma is greater than the 50d sma. A bear market signal had been in effect since February 5, 2010.

The current closing price, the second highest yellow horizontal line, is just below the 2010 YTD high of 24.05 set on 4-15-10, which is recent resistance. Earlier, longer term resistance is from Janaury and February 2007 at the 24.00 area.  There is a lot of price interaction in the 24.00 area at this point, which is short term and long term resistance.

There are multiple levels of support below, which I believe is sufficient and I do not foresee any significant pullback . Significant support is the previous 2010 YTD 1-4-10 high of 23.27 below current price. There is also long-term support from August, 2008 in the current price area, including the peak of 23.73 on 8-15-08.

Moving Averages
The 25d sma stopped descending on February 26 and is ascending. The 50d sma is ascending and crossed above the 100d sma on April 14.  The 100d and 200d sma's continue to ascend. The 25d sma has regained the 50d and 100d sma's. XLK is well above all the sma's monitored and the sma's are beginning to spread out in a bullish fan.

Uptrend Line
The uptrend line, a rate of price ascent, is from the March 9. 2009 closing low of 13.22 up through the February 4, 2010 closing low of 20.86. The February 4 closing low was the bottom of the 2010 pullback. The XLK has remained above this trendline since bouncing up above on February 5.

Downtrend Line
The downtrend line, a rate of price descent, is from the October 31, 2007 all-time closing high of 28.40 down through the April 15, 2010 closing high of 24.05, the peak YTD closing high so far. XLK is just below this downtrend line.

Relative Strength Index (RSI)
RSI 14 day = 70.29 is at the overbought line, but reasonable
RSI 28 day = 69.35 is at the overbought line, but reasonable
The RSIs indicate another YTD high is possible before any consolidation and/or pullback.

MACD (12,26,9)
The MACD is bullish since April 13, but has been hovering around the bull/bear 0.00 line since March 29.

Long-Term Trend
The lowest yellow horizontal line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. The XLK is well above this signal at the current close, the second highest yellow horizontal line.

XLK set a 2010 YTD high on Thursday, April 15 and then pulled back on Friday, April 16 along with the entire market on the Goldman Sachs fraud charges news.  A lot of the tech earnings were priced in advance of this current earnings season and expectations are high.  So even if there is a small pullback and perhaps consolidation, I am strongly bullish on XLK in 2010 and predict there will be many more 2010 YTD highs.  The RSI 14d & 28d are both at approximately 70 which is marginally overbought, but reasonable. The MACD is slightly bullish.  The intermediate-term trend is bullish. The long-term trend remains bullish.

We are long AAPL and CRM which are in the XLK portfolio, but do not have any long or short position in XLK stock.

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