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Saturday, March 13, 2010

Technology Sector Review


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This is a  review of the daily charts of the technology sector. Previously this week, 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, but trading sideways, and a long-term bull market.

This technology reviw will include ETFs XLK and SMH plus the popular stocks AAPL and GOOG.  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 and various forecasts show a solid demand in 2010 for software and hardward. 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



Noteworthy Closing Prices
Current 22.75
2010 High 23.27 (1-4-10)
YE 12-31-09 22.93
10 Month EMA 20.99

Overview XLK is up +3.22% for the week, up +4.89% for the month, down -0.78% for the year, and up +72.09% since the March 9, 2009 market bottom.  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. This ETF also includes the S&P telecommunications sector, which is merged into this technology sector.  See the XLK Technology portfolio holdings here. All the individual stocks reviewed below are in XLK.  The 50 day average volume is approximately 12.5+ million shares; so this is a very liquid ETF.

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 2010 pullback created price damage that continues to be repaired through sustained higher prices.

Resistance and Support The current closing price, the middle yellow horizontal line, is in the sideways channel trading of January 2010, which is recent resistance. Above this resistance are the 2010 highs, represented by the highest yellow horizontal line.

Moving Averages The 25d sma ceased descending on February 26 and is now ascending, a postive sign. The 50d sma continues to gradually descend while 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 and the 50d sma on March 4, which are bullish signals.

Uptrend Line The yellow uptrend line, a rate of price ascent, 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 this trendline, this rates of price ascent, will determine whether a bull market signal is generated sooner.

Downtrend Line The yellow downtrend line, a rate of price descent, is from the October 31, 2007 all-time closing high of 28.40 down through the January 4, 2010 closing high of 23.27, the peak YTD closing high so far.  XLK is just below this trendline.

Relative Strength Index (RSI)
RSI 25 day = 80.00, very overbought
RSI 10 day = 95.69, extremely overbought.
A pullback and/or consolidation is probably imminent, before a further surge upwards.

MACD (12,26,9) The MACD is bullish and has been since March 4.

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 signal, the lowest yellow horizontal line, at the current close, the middle yellow horizontal line. The highest yellow horizontal line is the 1-4-10 closing high YTD.

Conclusion The XLK has now had a decent rally off the low of February 4.  However, the current price is still below the 12-31-09 YE close and January 4, 2010 YTD closing high.  The RSI 10 day and 25 day are signalling overbought conditions, so a pullback and/or consolidation appears imminent.  I believe XLK will ultimately break through upside to new 2010 highs, just not sure how long this will take.  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. The intermediate-term trend is still bearish. The long-term trend remains bullish.


SMH: Semiconductors ETF



Noteworthy Closing Prices
Current 27.01
2010 High 28.52 (1-8-10)
YE 12-31-09 27.92
10 Month EMA 25.24


Overview SMH is up +1.05% for the week, up +2.39% for the month, down -3.26% for the year, and up +69.77% since the March 9, 2009 market bottom. 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.

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 2010 pullback created price damage that continues to be repaired through sustained higher prices.

Resistance and Support The current closing price, the middle yellow horizontal line, is below the December 2009 highs and in the sideways trading range of December 2009.  This is recent resistance. Above this resistance is yet more resistance and ultimately the 28.00+ price area, the 2010 highs,  the highest yellow horizontal line.

Moving Averages The 25d sma bottomed on February 26 and began ascending, a very bullish signal. The 50d sma is slightly descending. The 100d and 200d sma's are ascending. The 25d sma broke down through the 50d and 100d sma's, but regained the 100d sma on March 11, a bullish sign. SMH has struggled with the 100d sma and has been above now for only 5 days. SMH regained the 50d sma on March 5 and has stayed above.

Uptrend Line The yellow uptrend line, a rate of price ascent, 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.

Downtrend Line The yellow downtrend line, a rate of price descent, is from the July 19, 2007 high of 40.42 down through the January 8, 2010 high of 28.52, the peak YTD closing high so far.  SMH has not reached this trend line.  I chose the SMH highs in 2007 to more closely match the all-time market record highs that occurred later in 2007.

Relative Strength Index (RSI)
RSI 25 day = 69.65, overbought
RSI 10 day = 62.86, reasonable.
Recent sideways trading is providing consolidation.  A small pullback and/or continued consolidation may occur before a surge upwards.

MACD (12,26,9) The MACD is bullish and has been since February 24.

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 signal, the lowest yellow horizontal line, at the current close, the middle yellow horizontal line. The highest yellow horizontal line is the 1-8-10 closing high YTD.

Conclusion The SMH has now had a decent rally off the lows of February 4.  However, the current price is still below the December 2009 closing highs, 12-31-09 YE close, and the January 2010 closing highs.  There remains substantial recent resistance above. The RSI 10 day and 25 day are not signalling overbought conditions, so a significant pullback does not appear imminent.  Additional sideways, consolidation trading may occur, however.  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.  The intermediate-term trend is still bearish. The long-term trend remains bullish.


Apple



Noteworthy Closing Prices
Current 226.60
2010 High 226.60 (3-12-10)
YE 12-31-09 210.73
10 Month EMA 188.62

Overview AAPL is up +3.49% for the week, up +10.74% for the month, up +7.53% for the year, and up +172.65% since the March 9, 2009 market bottom.  Wow! AAPL has been setting all-time highs recently, generated by the iPad hype. An intermediate-term buy/long/bull signal was generated on Friday, March 12.  Previously, an intermediate-term buy/long/bull signal occurred iin 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.  Now yet another bull signal has occurred.

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, generated a buy/long/bull signal on Friday, March 12, 2009.  Therefore, AAPL is now in an intermediate-term bull market.  That is, the 25d sma is higher than the 50d sma.

Resistance and Support The current closing price, the highest yellow horizontal line is above all resistance because AAPL is at an all-time high.  There is no resistance whatsoever above, just free air! :)  The middle yellow horizontal line, the previous 2010 closing high on January 19, is critical recent support as is a brief consolidation on March 5 and 8.

Moving Averages The 25d sma bottomed on February 26, began ascending, and now has regained both the 100d and 50d sma's.. The 25d, 50d, 100d, and 200d sma's are ascending. Overall, the bullish signals are encouraging.

Uptrend Line The uptrend line in yellow, a rate of price ascent, 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 price strength.

Downtrend Line There is no downtrend line, a rate of price descent, because AAPL is at an all-time high.

Relative Strength Index (RSI)
RSI 25 day = 82.54, very overbought
RSI 10 day = 99.37, extremely overbought.
AAPL has had a big bull run that won't last forever and is way overbought. Expect a pullback and/or consolidation soon, before another surge upwards in 2010.

MACD (12,26,9) The MACD is bullish and has been since March 1.

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 signal, the lowest yellow horizontal line, at the current close, the highest yellow horizontal line. The middle yellow horizontal line, the previous 2010 closing high on January 19.

Conclusion AAPL has rallied Big Time above the February 4 closing low, which has been lowest closing during the 2010 pullback. The current price is at an all-time high.  The RSI 25 day and 10 day indicate AAPL is way overbought.  Expect a pullback and/or consolidation soon, before another surge upwards in 2010.  I would think the shorts, the bears, will jump on AAPL at some point due to the inevitability of a pullback.  The intermediate-term trend became bullish on Friday, March 12.  The long-term trend remains bullish.


Google



Noteworthy Closing Prices
Current 579.54
2010 High 626.75 (1-4-10)
YE 12-31-09 619.98
10 Month EMA 522.24

Overview GOOG is up +2.72% for the week, up +10.01% for the month, down -6.52% for the year, and up +99.23% since the March 9, 2009 market bottom.  Googzilla is looking a little more bullish lately. An intermediate-term buy/long signal was generated on April 13, 2009 and the Bull Run was on - until a sell/short signal on February 1, 2010, which is still in effect.

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 since February 1 for GOOG. That is, the 25d sma is less than the 50d sma. 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 remains below the January 4, 2010 closing high, the highest yellow horizontal line and the 12-31-09 YE close. The current close, the middle yellow horizontal line, is just above the November 2009 highs, which is now recent support. GOOG is at the late November 2009 and mid January 2010 sideways trading ranges, which is recent resistance.  Overcoming this resistance is the next obstacle for GOOG.  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 now regained the 25d, 50d, and 100d sma's, which is encouraging.

Uptrend Line The uptrend line in yellow, a rate of price ascent, 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 regained this uptrend line on March 1 and has stayed above. Whether GOOG can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.

Downtrend Line The yellow downtrend line, a rate of price descent, is from appoximately the November 6, 2007 all-time closing high of 741.79 down through the January 4, 2010 high of 626.75, the peak YTD closing high so far. GOOG has not reached this trend line.

Relative Strength Index (RSI)
RSI 25 day = 72.28, overbought
RSI 10 day = 91.22, extremely overbought.
GOOG has had a good bull run that won't last forever and is overbought. Expect a some pullback and/or consolidation soon, before another surge upwards in 2010.

MACD (12,26,9) The MACD is bullish and has been since March 9.

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 signal, the lowest yellow horizontal line, at the current close, the middle yellow horizontal line. The highest yellow horizontal line, is the 2010 closing high to date on January 4.

Conclusion GOOG has rallied from the lows of February 25. However, the current price is still below the December 2009 closing highs, 12-31-09 YE close, and the January 2010 YTD closing highs. There remains substantial recent resistance above. The RSI 10 day and 25 day are signalling overbought conditions, so a pullback may occur. Additional sideways, consolidation trading appears likely, however. 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. The intermediate-term trend remains bearish. The long-term trend remains bullish.


Summary


I am long-term bullish on all 4 stocks reviewed above: XLK, SMH, AAPL, GOOG.  We are long AAPL. Based on the indicators above, AAPL is in an intermediate-term bull market and XLK, SMH, and GOOG remain in intermediate-term bear markets.  All 4 stocks are in a 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.

Other technology stocks and ETFs I have reviewed or hope to review soon are the major stocks CSCO, HPQ, IBM, INTC, MSFT, ORCL plus CRM, VMW, CY, and hybrid IMAX plus the IYW and other related ETFs.


Twitter



I microblog on Twitter:

@MatrixMarkets
Related to this blog, plus additional news about S&P 500, US Dollar, some Technology, and any trades we make.

@OspreyFlyer
Technology stocks and news


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