TECHNOLOGY SPDR TRIES TO BOUNCE AT KEY CHART SUPPORT -- BIG TECH STOCKS TESTING 200-DAY LINES ARE CISCO, GOOGLE, AND MICROSOFT -- FACEBOOK HITS NEW HIGH, WHILE APPLE TESTS CRITICAL CHART SUPPORT
TECHNOLOGY SPDR BOUNCES OFF 200-DAY LINE ... The technology sector has been one of the market's weakest sectors over the last month. That, however, may be changing for the better. The daily bars in Chart 1 show the Technology Sector SPDR (XLK) bouncing off of its 200-day moving average and chart support at its early February intra-day peak (41.37). [The XLK also retraced 50% of its February/April advance which usually provokes some buying]. In addition, its 14-day RSI line (top of chart) is bouncing from oversold territory near 30. Daily MACD lines (below chart) may be about to turn positive. New buying in the technology sector would be a positive sign for the market.
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Chart 1
BIG TECHS STOCKS TESTING 200-DAY LINES... A number of the biggest stocks in the XLK are testing important support levels of their own. Chart 2 shows Microsoft (MSFT) bouncing off its 200-day line. Chart 3 shows Alphabet (GOOGL) doing the same. So is Cisco Systems (CSCO) in Chart 4. The ability of those three to stay above that major support line will help determine how far the technology sector will bounce. Chart 5 shows Facebook (FB) hitting a new record, which makes it a technology leader. Apple has been the biggest drag on the XLK.
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Chart 2
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Chart 3
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Chart 4
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Chart 5
APPLE TESTS CRITICAL CHART SUPPORT... Apple is the biggest holding in the Technology SPDR (12%), and exerts a big influence on the direction of the technology sector. And it hasn't been helping. Chart 6 shows Apple (AAPL) sitting right on potential chart support along its first quarter lows and the intra-day low formed last August. The stock remains well below its moving average lines and a price gap formed during April. The only positive on the chart is the fact that its 14-day RSI line (top of chart) is in oversold territory below 30. Its daily MACD lines (below chart) are still negative, but are starting to improve. Any bounce in Apple would help boost the technology sector. At the very least, the stock needs to find support around current levels to prevent a breakdown.
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Chart 6
RETAILERS PLUNGE ... Chart 7 shows the S&P Retail SPDR (XRT) falling nearly 4% to the lowest level since February. It's also trading below its moving average lines. The XRT/SPX ratio (top of chart) has fallen to the lowest level in more than a year. The cancelled merger between Office Depot and Staples sent both stocks 39% and 17% lower. Big losses in retailers like Macy's ( -12%), Michael Kors (-11%), and Nordstrom (-6%) are helping make the Consumer Discretionary SPDR (XLY) the day's biggest loser (as is a 4% drop in Walt Disney). Chart 8 shows the XLY losing ground, but still above its 50-day average. The economically-sensitive XLY has been one of the market's best performers since February. That may be about to take a turn for the worse.
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Chart 7
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Chart 8
AMAZON REACHES A NEW HIGH... Interestingly, the biggest stock in the XRT and XLY is also its strongest. Chart 9 shows Amazon.com (AMZN) trading above its December high to a new record. That's not a coincidence. The fact that AMZN is doing so well while traditional retailers aren't is probably indicative of changing buying habits by consumers. Most would probably rather shop on their computer than having to drive to a mall. If that's the case, the breakdown in traditional retailers may have less to do with whether or not consumers are buying, but rather how they're buying.
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Chart 9
POWER SHARES QQQ TESTING MOVING AVERAGE RESISTANCE... The Dow and S&P 500 are giving back part of yesterday's gains. Both stock indexes, however, remain above their 50- and 200-day moving averages. Chart 10, however, shows the Power Shares Nasdaq 100 (QQQ) still trading below its moving average lines. The QQQ/SPX ratio (top of chart) shows how much the QQQ has lagged behind this year. That's mainly due to weakness in biotech and technology stocks. It's difficult to imagine a strong market move from here without more help from the QQQ. Until it's able to clear both moving average lines, the bounce in the other market indexes will remain in doubt.
