Shares of the SPDR Technology ETF (NYSE: XLK) rebounded well on Wednesday but
pulled back on Thursday, in action similar to the S & P 500 (SPX).
Chart Courtesy of StockCharts.com
On Wednesday, we noted that if the markets continued to move higher, XLK should participate. What we weren't sure of, at that time was whether the technology sector would mimmick the general tone of the market, or show some relative strength.
The answer, at least on Thursday was the latter. XLK, pretty much mirrored the market's moves, giving up its early day gains at the close. And why not? XLK is a well diversified technology portfolio of large cap stocks, the kind that mutual funds and big traders like to put their money in, especially when they're trying to latch on to a trend. It makes sense for portfolio managers to own something that can be reliable in a rising market, and predictable in a falling market.
XLK moved above its 20-day moving average on Wednesday, and stayed there at the close on Thursday. As we noted here on Wednesday, XLK, because of its similarity to the Nasdaq 100 index (NDX) is likely just one more good day or so from testing its 50-day moving average.
If the Nasdaq Composite and the Nasdaq 100 continue to rebound, we would expect this ETF to participate nicely. It also has some Dow Industrial Average components in it, which gives it extra pop potential from big cap mutual fund managers.
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