The technology sector and related ETFs have been hit by Hewlett Packard (HPQ), Dell (DELL), and Apple (AAPL), as the “bubble” starts to cool.
The technology sector has been red hot in recent months, with major ETFs up more than 5% since the beginning of February. Apple has been the big news maker, as it broke $500/share for the first time and has been up more than 10% in the last three weeks.
Hewlett Packard dropped 1.4% yesterday, as the company reported a steep drop in earnings that widely missed estimates, while Dell Computer tumbled 5.8% due to slow sales and declining profits. Apple also declined 0.35% yesterday, as it consolidated above $500/share and remained in vastly overbought territory, amid rumors that it is going to pay a dividend. Apple’s shareholders’ meeting today sees the prospect of a dividend announcement by CEO Tim Cook.
Major Technology ETFs:
Sector SPDR Trust SBI Interest (XLK): -0.35%
PowerShares QQQ Trust (QQQ): -0.46%
Vanguard Information Technology ETF (VGT): -0.54%
iShares Dow Jones U.S. Technology Sector Index Fund (IYW): -0.49%
The technology sector and technology ETFs remain vastly overbought and overextended on a technical basis with PowerShares QQQ Trust sporting an RSI reading of 69.87, just touching the “red zone” of 70, and with the ETF price some 12% above its 200-day moving average. However, the technology ETFs remain on point and figure “buy” signals and well above their 50- and 200-day moving averages, so we have a situation where markets are consolidating after a most impressive bull run.
Bottom line: The technology sector and technology ETFs are due for a pullback that could be as much as 10% as all major indexes are in severely overbought territory and stretched very tightly.
Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.
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