Top 5 Technical Developments for 2012 - Number 2 - Technology SPDR (XLK) Fails at Broken Support

The Technology SPDR (XLK) led the market in the first half of the year, but lagged the market in the second half and underperformed the S&P 500. The technology sector accounts for over 19% of the S&P 500 ETF (SPY) and is by far the biggest sector. Lack of leadership from this key sector is a concern as we head into 2013. The chart below shows XLK breaking the August 2011 trend line and this break-zone turning into resistance in the 29-29.5 area. This zone marks clear resistance because the ETF failed to hold above 29 at least five times in the last nine weeks. Note that XLK formed a bearish engulfing the first week of December and a black candlestick last week. The base case scenario is for a continuation lower with the next support zone in the 26 area. A break above 29.50 is needed to change this bearish prognosis.

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