NETWORKING ISHARES TESTS IMPORTANT SUPPORT ZONE -- QUALCOMM CONSOLIDATES ABOVE BREAKOUT ZONE -- F5 NETWORKS TESTS SUPPORT AS CISCO HITS KEY RETRACEMENT -- DRILLING DOWN WITH THE SECTOR SUMMARY -- ASSET MANAGERS INDEX CONFIRMS BULLISH PATTERN

NETWORKING ISHARES TESTS IMPORTANT SUPPORT ZONE... Link for today's video. The technical outlook for IGN is deteriorating and this could have ramifications for the technology sector and Nasdaq. With a sharp decline the last five days, the Networking iShares (IGN) is testing an important trend line and support zone. Chart 1 shows IGN breaking its February high with a move above 31 in August. Things were looking up at this stage, but the ETF started underperforming in October because it failed to exceed the mid September high. IGN is currently testing support in the 29.5-30 area and a break would reverse the six month uptrend. The indicator window confirms relative weakness as the SCTR broke below 40 for the first time since May. Also note that the price relative (IGN:SPY ratio) recorded a 52-week low. See our ChartSchool article for more on the SCTR.

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Chart 1

QUALCOMM CONSOLIDATES ABOVE BREAKOUT ZONE... A sector, index or ETF is a reflection of its components because the whole is only as good as the sum of the parts. Many times, the top five to ten stocks account for the lion's share of the gains or losses. Of the top five components in IGN, only Motorola Solutions (MSI) and QualComm (QCOM) can be classified in uptrends. Chart 2 shows MSI breaking out with a surge in September, consolidating in October and breaking pennant resistance last week. The price relative bottomed in late July and moved higher the last three months. Broken resistance in the 61 area marks first support. The October lows mark key support in the 59 area.

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Chart 2

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Chart 3

Chart 3 shows QualComm breaking out in August and surging to 70 in early September. The stock has since consolidated with a triangle of sorts the last seven weeks. A move above 69.2 would break triangle resistance and argue for higher prices. The indicator window, however, shows QCOM underperforming the S&P 500 since early September as the price relative trends lower the last two months. A break above the red trend line is needed to revive relative performance.

F5 NETWORKS TESTS SUPPORT AS CISCO HITS KEY RETRACEMENT ... Cisco (CSCO) is one of the main reasons the Networking iShares is underperforming the broader market. Chart 4 shows this networking titan gapping down in August and working its way lower the last few months. The trend is clearly down and CSCO shows relative weakness, which is a double negative. The only potential positive here is that Cisco is near the 62% retracement and a falling wedge is taking shape. Also notice that broken resistance and the prior gap zone are in play. At this point, chartists need a bullish catalyst before calling a bottom. Wedge resistance is set at 23.5 and a break here is needed to reverse the downtrend.

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Chart 4

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Chart 5

Chart 5 shows F5 Networks (FFIV) breaking triangle support with a sharp decline below 85. Note that Juniper Networks (JNPR) also broke down last week. FFIV still has support in the 82.5-85 area and the stock managed to firm on Monday. Support stems from broken resistance and the late August low. A little firmness after a sharp decline is not enough to negate the triangle break though. I would like to see a surge back above 87. The indicator window shows the price relative breaking its August-September lows as FFIV underperforms in October.

DRILLING DOWN WITH THE SECTOR SUMMARY... The DJ US Asset Managers Index ($DJUSAG) and the DJ US Investment Services Index ($DJUSSB) broke out to new highs this month and show upside leadership within the finance sector. This is positive for the stock market because these two groups represent the investment industry. Before getting into the details, let's review how chartists can use the Sector Summary to drill down into sectors and industry groups. There are nine sectors and each sector consists of several industry groups. Chart 6 shows the Sector Summary and sector performance over the past month. The Finance SPDR (XLF) is not one of the top performing sectors, but it is up over 3.5% the past month and performing well.

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Chart 6

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Chart 7

Chartists can click on the sector names to see industry group performance over the same timeframe. Chart 7 shows the 21 industry groups associated with the finance sector. These are sorted by the percentage change for one month. Four of the five top performers come from the REIT category. Asset managers are in third place and investment services are in ninth place. Chartists can click on any of these names to see the stocks within the industry group. Chartists can also click on the icons to the left of the name (not shown here) to create a chart. You can learn more in our Sector Summary video.

ASSET MANAGERS INDEX CONFIRMS BULLISH PATTERN... Chart 8 shows $DJUSAG with a classic ascending triangle pattern. These are bullish continuation patterns that signal a continuation of the bigger uptrend when confirmed. Notice how the index hit resistance at 157.5 and formed higher lows on the pullbacks. The higher lows indicate that buying pressure is coming in at higher price levels. The subsequent break above resistance signals the triumph of demand over supply. Broken resistance turns first support in the 155-157.5 area. Key support is set in the 145-147 area. The indicator window shows relative strength improving as the price relative broke above its September high. Chart 9 shows the $DJUSSB breaking to new highs with a move above 645 this month.

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Chart 8

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Chart 9

JANUS CHALLENGES RESISTANCE AS FEDERATED BREAKS CHANNEL... Looking through the charts, I spotted interesting developments in Janus Capital (JNS) and Federated Investors (FII). Chart 10 shows Janus with a full quote window at the top. Chartist can access the full quote by checking the "full quote" box under Chart Attributes. In addition to detailed price data, this window shows the sector, industry group, SCTR value and PE. On the price chart, Janus formed higher lows in September and surged to resistance in October. The indicator window shows the StockCharts Technical Rank (SCTR) moving above 50 for the first time since February. This means Janus is now in the top half of the S&P MidCap 400 Index. In other words, it is outperforming 56% of the components in the index.

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Chart 10

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Chart 11

Chart 11 shows Federated Investors breaking resistance in May, correcting into October and breaking channel resistance with a surge the last two weeks. The breakout signals a continuation of the bigger uptrend and the July highs mark the next target. The indicator window shows the SCTR turning up and exceeding 70. Note that FII is also part of the S&P MidCap 400 Index.