Technology Sector Review

*****

I'm going to review a few daily charts to review the technology sector.  In my previous post, I reviewed the S&P 500 and US Dollar to see what was going on overall with respect to USA equities and currency.  In that review, I concluded the S&P 500 is in an intermediate-term bear market, with encouraging bullish signals, and in a long-term bull market.  I also concluded the US Dollar was in an intermediate-term bull market and long-term bull market.

There are many more technology ETFs and stocks, of course, than I will review here.  Long-term I am bullish personally on technology and 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

Overview 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 approximately 12.5+ million shares; so this is a very liquid ETF.  XLK is still down 3.88% in 2010 YTD but up 66.72% from the March 2009 bottom.

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 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 March 1, which is a bullish sign. The 2010 pullback created price damage that continues to be repaired through sustained higher prices.

Resistance and Support The current closing price of 22.04, the middle yellow horizontal line, is in the sideways channel trading in Novermber and December 2009, which is recent resistance. The resistance from the October 2009 highs has been overcome but the resistance of the November 2009 highs has yet to be tested in this current pullback. XLK regaining the 23.00+ price area after the three down days of January 20, 21, and 22, 2010 would be next, after overcoming the sideways channel trading of December 2009.  The 2010 highs are represented by the highest yellow horizontal line.

Moving Averages The 25d sma ceased descending on February 26 and has leveled off, which is a postive sign.  The 50d sma continues to gradually descend. The 100d and 200d sma's continue to ascend.  Most bothersome is the 25d sma breaking down through the 50d and 100d sma's. XLK did regain the 100d sma on March 1, as noted. However, the 50d sma has not been regained and held, a bearish sign.  Overall, some strong indications of price weakness persist, and a price breakout above the 50d sma is necessary for an encouraging bullish signal. XLK has not been above the 50d sma since January 21.

Trend Lines I have included two yellow uptrend lines.  The higher uptrend line, a faster rate of price ascent, is from the March 9, 2009 market closing low of 13.22 up through the January 29, 2010 closing low of 20.96. XLK had broken down through this trendline but regained the trendline and has held it since February 26.  The second, lower yellow uptrend line, a slightly slower rate of price ascent, is a more traditional trendline. This trendline 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 has been the bottom for this 2010 pullback to date. The XLK has remained above this trendline since bouncing up above on February 5. Whether the XLK can continue above these trendlines, these rates of price ascent, will determine whether a bull market signal is generated sooner.

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 above this 20.86 signal, the lowest yellow horizontal line, with a current close 22.04, which is the middle yellow horizontal line.  The highest yellow horizontal line is the 12-31-09 close of 22.93.

Conclusion The XLK has now had a decent rally off the low of February 4 and is now back to the January 22 price area. However, the current price is still below the 12-31-09 close and there is recent resistance above.  In addition, the XLK has not regained and held the 50d sma, another bearish sign.  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

Overview 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, and AMAT, which comprise approximately 55% of the total portfolio. The 50 day average volume is 16+ million shares; so this is a very liquid ETF.  SMH is still down 4.26% in 2010 YTD but up 68.01% from the March 2009 bottom.

Intermediate-Term Trend 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 February 26, but has not been able to regain and hold 50d sma after two attempts. The 2010 pullback created price damage that continues to be repaired through sustained higher prices.

Resistance and Support The current closing price of 26.73, the middle yellow horizontal line, is below the October 2009 high, in the lower area of the December 2009 sideways trading range, and in the middle of the February 2010 sideways trading range.  This is a lot of recent resistance. SMH regaining the 28.00+ price area, the 2010 highs that is ultimately the highest yellow horizontal line, would be next, but all of this recent resistance must be overcome first.

Moving Averages The 25d sma bottomed on February 26 and began ascending, a very bullish signal. The 50d sma leveled off but is slightly descending. The 100d and 200d sma's are ascending. Most bothersome has been the 25d sma breaking down through the 50d and 100d sma's. SMH has struggled with the 100d sma and has been above now for only 5 days. SMH has also struggled with the 50d sma and now has closed below. Overall, some strong indications of price weakness persist, and a price breakout above the 50d sma is necessary for an encouraging bullish signal.

Trend Lines I have included two yellow uptrend lines. The higher uptrend line, a faster rate of price ascent, is from the February 23, 2009 closing low of 15.66 up through the January 22, 2010 closing low of 25.67. SMH has now broken down through this trend line this week, for the second time during this current pullback.  The lower uptrend line, a slower rate of price ascent, is a more traditional trend line.  This uptrend line is from the February 23,  2009 closing low of 15.66 up through the February 4, 2010 closing low of 24.51. The February 4 closing low has been the bottom for this 2010 pullback to date.  The SMH has remained above this trendline since bouncing up above on February 5. Whether the SMH can continue above these trendlines, these rates of price ascent, will determine whether a bull market signal is generated sooner.

Long-Term Trend 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 25.18 signal, the lowest yellow horizontal line, with a current close of 26.84, which is the middle yellow horizontal line.  The highest yellow horizontal line is the 12-31-09 close of 27.92.

Conclusion The SMH has now had a decent rally off the lows of February 4 and is now back to the January 22 price area. However, the current price is still below the 12-31-09 close and there is substantial recent resistance above. In addition, the SMH has not regained and held the 50d sma, another bearish sign. 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.

Apple

Overview 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 February 17. AAPL at the current closing price of 210.71, the middle yellow horizontal line, is now at the 12-31-09 closing price of 210.73, but still below the January 19, 2010 closing high of 215.04, the highest yellow horizontal line.

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, still indicates a bear market since Feburary 17.  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 for the second time on February 24, which was a bullish sign.  AAPL regained the 50d sma for the second time on February 26. The 2010 pullback created price damage that continues to be repaired through sustained higher prices.

Resistance and Support The current closing price of 210.71, the middle yellow horizontal line, is in the middle area of the late December 2009 through late January 2010 sideways trading range.  This is recent resistance. This resistance is the next obstacle for AAPL before the 215.00+ highs of 2010 can be attained.

Moving Averages The 25d sma bottomed on February 26 and began ascending, a very bullish signal. The 50d, 100d, and 200d sma's are ascending. Most bothersome has been the 25d sma breaking down through the 50d and 100d sma's. However, if the current price can be maintained, the 25d could cross above the 100d sma soon.  AAPL is above the 50d sma, another bullish indicator.  Overall, the bullish signals are encouraging.

Trend Line The uptrend line in yellow is from the January 20, 2009 closing low of 78.20 up through the February 4, 2010 closing low of 192.05. The February 4 closing low has been the bottom for this 2010 pullback to date. AAPL battled this trendline for days before breaking out above February 25. Whether AAPL can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.

Long-Term Trend 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 above this 185.73 signal, the lowest yellow horizontal line, with a current close of 210.71, which is the middle yellow horizontal line. The highest yellow horizontal line is the 12-31-09 close of 215.04.

Conclusion AAPL has now significantly rallied off the February 4 low.  The current price is now back in the upper 2010 sideways trading range.  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 bullish signals, including staying above the 50d sma. The intermediate-term trend is still bearish, but there have been encouraging bullish signals. The long-term trend is still bullish.

Google

Overview Googzilla, the leading edge technology giant that is 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.

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day & 50 day simple moving averages, still indicates an ongoing bear market since February 1 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 2010 pullback. This pullback created price damage that has not been repaired through sustained higher prices.

Resistance and Support GOOG is well below the January 4, 2010 high of $626.75, the highest yellow horizontal line. The current close of 554.59, the middle yellow horizontal line, is right at the October 2009 closing highs, which is recent resistance. Overcoming this resistance is the next obstacle for GOOG and would be an upside breakout.  There is additional resistance above before there can be any thought of regaining the 600.00+ price area and 2010 highs.

Moving Averages The 25d sma bottomed on March 1 and began ascending, a very bullish signal. The 50d, continues descending.  The 100d and 200d sma's are ascending. Most bothersome has been the 25d sma breaking down through the 50d and 100d sma's plus the 50d sma breaking down through the 100d sma on March 4.. GOOG has regained the 25d sma but has yet to regain the 50d and 100d sma's.  Even with 5 consecutive days of gains, there are significant bearish signals to overcome through sustained higher prices.

Trend Line The uptrend line in yellow is from the November 24, 2008 closing low of 257.44 up through the February 25, 2010 closing low of 526.43. The February 25 closing low has been the bottom for this 2010 pullback to date. GOOG has managed to stay right on or above this trendline for 5 days now.  Whether GOOG can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.

Long-Term Trend 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 517.71 signal, the lowest yellow horizontal line, with a current close of 554.59, the middle yellow horizontal line.  The highest yellow horizontal line is the January 4, 2010 YTD high of 626.75.

Conclusion GOOG is rallying off the 2010 low of 5 days ago.  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. GOOG has a long way to go to restore prices before the 2010 pullback.  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 regain the descending 50d sma. SMH, the semiconductors ETF, has regained the 100d sma and is now struggling with 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 is above all the reviewed moving averages: 25d, 50d, 100d, and 200d sma's and has encouraging bullish signals.  GOOG has regained the 25d sma, but is below the 50d and 100d sma's. AAPL and GOOG are bellweather technolosdgy stocks, whose price performance has been 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 have reviewed or 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.

*****