Conclusion, Investment Implications, Strategy

The SPDR NYSE Technology ETF (XNTK) made a major breakout higher yesterday, above formidable overhead resistance at 119.40 to 120.90, amid expanding asset flows and relative outperformance versus the benchmark S&P 500 (SPY).  These three factors indicate ideal conditions for XNTK’s recent strength to continue in the weeks and potentially months ahead.

Current Sector & Industry Group Ideas

Table 1 below is also accessible via the Sector & Industry Group Ideas rectangle at the top of the Research Center.

Table 1

Click the table to  make it larger

This table also regularly appears in our weekly Keys To This Week: Sector & Industry Groups report published on Monday mornings.

Analysis and Rationale

The SPDR NYSE Technology ETF (XNTK) generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index. It may invest in equity securities that are not included in the index, cash and cash equivalents or money market instruments, such as repurchase agreements and money market funds. The index is composed of 35 leading U.S.-listed technology-related companies.

Chart 1 below plots XNTK daily since January 2022 with its 200-day moving average, a widely-watched major trend proxy.  The colored highlights show that XNTK rose significantly above formidable overhead resistance at 119.40 to 120.90 yesterday, which represents its May 2022 benchmark low and August 2022 benchmark high, to indicate a major bullish breakout.  Note that XNTK failed at previous tests of this resistance on Feb 2nd and Mar 31st, indicating the market “sees” it and recognizes its importance.

Chart 1

The 120.90 to 119.40 area now becomes important underlying support that should contain price on the downside if this new breakout is to remain valid.

The upper panel of Chart 2 below also plots XNTK daily since February with its 200-day MA, this time with a corresponding chart of the daily total net assets invested in XNTK and their 21-day moving average in the lower panel.  We use the 21-day MA to identify the monthly (our Tactical time period) trend of expansion or contraction.  

Chart 2

The lower panel shows that these assets are currently in a May 5th trend of monthly expansion and that XNTK has risen by 4% since then.  Expanding asset flows fuel a positive price trend.  Not shown is that XNTK has outperformed the S&P 500 (SPY) by 8% since Apr 25th.

The current combination of a positive trend, relative outperformance, and expanding assets establishes favorable conditions for the current rise in XNTK to continue.