Technology Sector Review

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I mostly follow the technology sector as that is what my interest is.  Therefore, I'm going to review a few daily charts, to see what the impact of the recent equities pullback has been.  In my previous post, I reviewed the QQQQ, the NAS 100 ETF, which is technology weighted, along with SPY, DIA, and IWM.  I concluded that QQQQ is in an intermediate-term bear market, with encouraging bullish signals, and in a long-term bull market. 

Late this week in a post, I reviewed the XLK, the S&P Technology SPDR ETF.  I will update below, but the conclusion is the same as QQQQ, an intermediate-term bear market, with encouraging bullish signals, and a long-term bull market.

There are many more technology ETFs and stocks, of course, and hopefully I can review those in an additional or supplemental post in the future, including the IYW Technology ETF.  Long-term I am bullish personally on all the ETFs and stocks listed below.  Obviously the future is technology, I do my best to keep up with all the latest news and research.  I microblog some technology information on Twitter at @OspreyFlyer.  A summary is at the end of this post.

XLK: Technology ETF

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.  See the XLK Technology portfolio holdings here.  The 50 day average volume is 12+ million; so this is a very liquid ETF.

The intermediate-term signal, the comparison of the 25 day & 50 day simple moving averages, still indicates an ongoing bear market for the XLK. That is, the 25d sma is less than the 50d sma.  This is the first such bear market signal since the March 2009 bottom, occurring on February 5.   What a bull run! This reveals the depth of the current pullback. The XLK did regain the 100d sma on Thursday, which is a bullish sign. The recent pullback created price damage that continues to be repaired through sustained higher prices.

The close on Friday of 21.82 is in the lower range of the sideways channel trading in Novermber & December 2009, which is recent resitance.  The resistance from the October 2009 highs was overcome during the week.  XLK regaining the 23.00+ price area after the three down days of January 20, 21, & 22, 2010 is next, but recent resistance must be overcome first.

The uptrend line in yellow is from the March 9, 2009 market closing low of 13.22 up through the January 29, 2010 closing low of 20.96.  The XLK had broken down through this trendline but regained the trendline and has held it for the last 6 days, a bullish price signal.  Whether the XLK can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.

The 25d and 50d sma's continue to descend.  The 100d sma has begun to ascend. The 200d sma rate of ascent is beginning to increase. Most bothersome is the 25d sma breaking down through the 100d sma. XLK did regain the 100d sma on Thursday, as noted. Overall, some strong indications of price weakness persist, and a price breakout above the 50d sma is necessary for an encouraging bullish signal.

The lowest horizontal yellow 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 above this 20.62 signal with a close on Friday of 21.82, which is the higher horizontal yellow line.

Conclusion: The XLK has now had a decent rally off the lows of earlier this month and is now back to the January 22 price area. Holding the current price levels and higher prices will eventually sustain a signal that an intermediate-term bull market has returned through ongoing price strength.  A breakout above the 50d sma would be encouraging.  The intermediate-term trend is still bearish.  The long-term trend is still bullish.

SMH: Semiconductors ETF

The SMH is a technology ETF designed to represent companies that develop, manufacture, and market integrated circuitry and other products known as semiconductors.  Of course, semiconductors are integral to the technology sector and to the global economy.  Semiconductors demand can be seen as a global economic indicator.  See the SMH Semiconductors portfolio holdings here. This ETF is heavily weighted to INTC, TXN, & AMAT, which comprise approximately 56% of the total portfolio.  The 50 day average volume is 16+ million; so this is a very liquid ETF.

The intermediate-term signal, the comparison of the 25 day & 50 day simple moving averages, still indicates an ongoing bear market for the SMH. That is, the 25d sma is less than the 50d sma. This is the second such bear market signal since the March 2009 bottom, occurring on February 5.  This reveals the depth of the current pullback. The SMH did regain the 100d sma on Tuesday and 50d sma on Friday, which are bullish signs. The recent pullback created price damage that continues to be repaired through sustained higher prices.

The close on Friday of 26.84 is in the lower range of the sideways channel trading in December 2009, which is recent resitance. The resistance from the October 2009 highs has not been overcome yet.  SMH regaining the 28.00+ price area, the 2010 highs, would be next, but recent resistance must be overcome first.

The uptrend line in yellow is from the March 9, 2009 market closing low of 15.91 up through the January 22, 2010 closing low of 25.67. The SMH had broken down through this trendline but regained the trendline and has held it for the last 4 days, a bullish price signal. Whether the SMH can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.

The 25d sma continues to descend but the 50d sma has leveled  off. The 100d sma has begun to ascend. The 200d sma rate of ascent has held steady. Most bothersome is the 25d sma breaking down through the 100d sma. SMH did regain the 100d sma on Tuesday and the 50d sma on Friday, as noted. Overall, some indications of price weakness persist, but bullish signals continue to mitigate and are encouraging.

The lowest horizontal yellow 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 SMH is above this 24.93 signal with a close on Friday of 26.84, which is the higher horizontal yellow line.

Conclusion: The SMH has now had a sustained rally off the lows of earlier this month and is now back to the January 22 price area. Holding the current price levels and higher prices will eventually sustain a signal that an intermediate-term bull market has returned through ongoing price strength.  The intermediate-term trend is still bearish, but there have been encouraging bullish signals. The long-term trend is still bullish.

Apple

The mighty Apple, technology innovator with a cult following for its products and stock.  A buy/long signal was generated in mid February 2009 and the race was on - until a sell/short signal just before Christmas 2009. It was a amazing bull run!  Another breakout, and buy/long signal, occurred a couple of weeks later, which lasted until this last Tuesday.  Disturbingly, AAPL regained, and then lost, the 50d sma this last week.

The intermediate-term signal, the comparison of the 25 day & 50 day simple moving averages, still indicates a bear market since Tuesday for the AAPL. That is, the 25d sma is less than the 50d sma.  This reveals the depth of the current pullback. AAPL did regain the 100d sma on February 11, which was a bullish sign, but is now struggling with the 50d sma, as noted.  The recent pullback created price damage that continues to be repaired through sustained higher prices.

The close on Friday of 201.67 is lower than the October and November 2009 highs, which is recent resistance.  This resistance is the next obstacle for AAPL, before there can be any thought of regaining the 210.00+ price area and 2010 highs.

The uptrend line in yellow is from the March 9, 2009 market closing low of 83.11 up through the January 29, 2010 closing low of 192.06.  AAPL battled this trendline before breaking out above on the tenth day!  The trendline has been held for 6 days, a somewhat bullish price signal even though sideways trading the last 4 days. Whether AAPL can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.

The 25d sma continues to descend but the 50d sma is now ascending. The 100d and 200d sma's continue to ascend. The 25d sma breaking down through the 50d sma is the problem. AAPL has regained the 100d sma but is struggling with the 50d sma, as noted. Overall, some indications of price weakness persist, but bullish signals continue to mitigate and are encouraging.

The lowest horizontal yellow 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. AAPL is well above this 179.65 signal with a close on Friday of 201.67, which is the higher horizontal yellow line.

Conclusion: AAPL has now had a decent rally off the lows of earlier this month and is now back to the January 22 price area. Holding the current price levels and higher prices will eventually sustain a signal that an intermediate-term bull market has returned through ongoing price strength. AAPL is generating mixed signals and struggling with t he 50d sma.  The intermediate-term trend is still bearish, but there have been encouraging bullish signals. The long-term trend is still bullish.

Google

Googzilla, the leading edge technology giant becoming involved in so many ventures, including non-technology.  A buy/long signal was generated on April 13, 2009 and a bull run was on - until a sell/short signal on February 1, 2010.

The intermediate-term signal, the comparison of the 25 day & 50 day simple moving averages, still indicates an ongoing bear market all of this month for GOOG.  That is, the 25d sma is less than the 50d sma.  GOOG has not regained the 50d and 100d sma's.  This reveals the depth of the current pullback.  The 25d sma descending through both the 50d & 100d sma's is bothersome.  The recent pullback created price damage that has not been repaired through sustained higher prices.

GOOG is well below the January 4, 2010 high of $626.75.  The close on Friday of 540.76 is lower than the October 2009 highs, which is recent resistance. This resistance is the next obstacle for GOOG, before there can be any thought of regaining the 600.00+ price area and 2010 highs.

The uptrend line in yellow is from the March 9, 2009 market closing low of 290.89 up through the February 4, 2010 closing low of 526.78. GOOG has managed to stay right on or above this trendline for 11 days now!  The trendline has been held for these 11 days, a somewhat bullish price signal even though trading sideways since January 25. Whether GOOG can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.

The 25d and 50d sma's continue to descend.  The 100d and 200d sma's continue to ascend, but the rate of ascent is decreasing. The 25d sma breaking down through the 50d and 100d sma's is the problem. GOOG has not been able to regain the 50d and 100d sma's. Overall, price weakness persists as the price is churning sideways near the bottom of this pullback.

The lowest horizontal yellow 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. GOOG is above this 512.05 signal with a close on Friday of 540.76, which is the higher horizontal yellow line.

Conclusion: GOOG has not significantly rallied off the lows of earlier this month.  Higher prices are necessary to generate a signal that an intermediate-term bull market has returned through ongoing price strength. Whether GOOG will rally and regain the 50d and 100d sma's or churn sideways and the 50d and 100d sma's come to the price, is the bothersome question.  The intermediate-term trend is still bearish.  The long-term trend is still bullish.

Summary

XLK, a general technology ETF, has barely regained the 100d sma and has yet to approach the descending 50d sma.  SMH, the semiconductors ETF, has regained the 100d sma and now just barely regained the 50d sma.  The technology sector has experienced a significant price pullback in 2010.  Both are in an intermediate-term bear market and long-term bull market, according to the signals reviewed.

AAPL has regained the 100d sma but is struggling with the 50d sma.  GOOG has yet to regain the 50d and 100d sma's.  AAPL and GOOG are bellweather technology stocks, whose price performance is bothersome and frustrating.  Both are in an intermediate-term bear market and long-term bull market, according to the signals reviewed.

Technology 4Q 2009 earnings reports have been good and the 2010 outlook and guidance is very positive.  At some point in 2010, I think the technology sector will continue the bull run that began from the March 2009 market lows and even earlier.

Other technology stocks and ETFs  I hope to review soon are the major stocks CSCO, HPQ, IBM, INTC, MSFT plus CRM, VMW, CY, and hybrid IMAX plus the IYW and other related ETFs.

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