SOFTWARE GROUP SHOWING TECH LEADERSHIP -- MSFT, CA, ORACLE, AND ADOBE ARE LEADERS
SOFTWARE HOLDERS SHOW TECH LEADERSHIP... I've written several times about some new signs of market leadership coming from the technology sector. I've mentioned Internet stocks as an example of a group that is trying to lead the Nasdaq market higher. Software stocks qualify as another technology leader. Charts 1 and 2 plot the AMEX Software Holders which are today's top performing sector Exchange Traded Fund. Chart 1 shows the SWH bouncing off its 200-day moving average which is a sign of strength. Notice also the big green volume bars over the last month. The ETF is attracting heavier volume on up days and lighter volume (red bars) on down days. That's another bullish sign. Notice also the jump in its relative strength line (green arrow) versus the Nasdaq since early September. That's another sign of Nasdaq and market leadership.
Chart 1
Chart 2
SOFTWARE HOLDER BREAKS DOWN TRENDLINE... Chart 2 gives a yearlong look at the Software ETF and also paints an encouraging picture. The Software Holders have broken their 2004 down trendline. That upturn is also seen in the SWH/Nasdaq ratio line which has also broken its 2004 resistance line. The Nasdaq has been outperforming the NYSE market since the summer. Software stocks are leading the Nasdaq market. The top holding in the ETF is Microsoft (22%). I recently showed MSFT hitting a new two-month high to turn its short-term higher (Chart 3). It's continuing to act as a software leader. But there are others.
Chart 3
COMPUTER ASSOCIATES HOLDS 200-DAY ILNE ... The second biggest SWH holding is Computer Associates (13%). And the stock is also showing good chart action. Its daily chart shows CA finding support around its 200-day moving average. Notice the heavy volume bar on its first penetration of the 200-day line during September. CA is traded on the big board and has been doing better than the S&P 500 since early September (see arrow). That makes it another software leader.
Chart 4
ORACLE IS ANOTHER ... Oracle is the third biggest ETF holding (8%) and is also acting quite well. Its daily chart shows it also finding support at its 200-day moving average after climbing over its earlier in the month. Notice the jump in the ORCL/Nasdaq ratio since early September. That's leadership. Chart 8 gives a yearlong view of Oracle. It shows the software leader trading at the highest level since April. Its Oracle/Nasdaq ratio line has broken its 2004 down trendline. Very impressive.
Chart 5
Chart 6
ADOBE HITS 52-WEEK HIGH ... Adobe is the fourth biggest holding in the Software ETF (7%) and certainly qualifies as a leader. Its daily chart shows the stock hitting a new 52-week high today. Its relative strength line (versus the Nasdaq) is also at a new high for the year. The monthly bars in Chart 8 put Adobe in better perspective. It shows the stock trading at the highest level in nearly four years (see horizontal percentage retracement lines). The stock has regained 50% of its 2000-2002 bear trend. A 62% retracement would bring it up to the 60 level. Its relative strength line is already at a new high versus the Nasdaq Composite Index.
Chart 7
Chart 8
NASDAQ 100 SHOWING LEADERSHIP... Chart 1 and 2 show the Software Holders outperforming the Nasdaq market. The Nasdaq in turn is doing better than the blue chips. Our last chart plots the Nasdaq 100 Shares (QQQ) which includes three of the stocks shown above. The QQQ is trying to trying to climb back over its 200-day average. The QQQ/SPY ratio shows the Nasdaq 100 doing better than the S&P 500 SPDRS since August (see arrow). That suggests that the technology sector is starting to show new market leadership. The software group is showing market leadership within the Nasdaq. One way to participate is to buy one of the software stocks shown above. Or buy the ETF and you can own the entire group.
Chart 9
