This is an excerpt from today's DecisionPoint Alert on DecisionPoint.com:
It may only be a one-day bounce, but the questions are already appearing..."Is the correction over in Technology? Is this a BUY point?" Below I have the chart of the Nasdaq, followed by the Technology Sector SPDR (XLK). The first chart is a longer-term daily chart that shows us the strength and weakness in participation by looking at the percent of stocks with price above their 20/50/200-EMAs. We are seeing some improvement on %Stocks above their 20/50/200-EMAs. I have annotated numerous negative divergences that have occurred over time and this recent one also was prescient. I do think it is positive that price found support at the August low, but it didn't hold the 50-EMA.
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What does the Technology sector look like? Unfortunately, my thought was a bearish reverse flag the minute I opened it. However, it is holding onto its rising trend and is staying above the 50-EMA. The RSI is nearly positive and the PMO is less overbought.
Conclusion: At this point, I suspect that Technology, like the market as a whole, will see a pause or sideways consolidation. The indicators aren't negative enough to expect another big leg down, but they aren't positive enough to suggest a sustained rally ahead. I think you could get back into the technology sector or hold onto your technology sector stocks. However, there are other areas of the market that I find more interesting these days which Diamonds readers can confirm.
Happy Charting! - Erin
Technical Analysis is a windsock, not a crystal ball.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
