The technology sector has been lagging the broader market all of 2022, with the Nasdaq 100 performance down -26.47% YTD and within 4.13% of crossing its respective 200-day moving average. The S&P 500 (SPY), on the other hand, has seen price being supported by seasonal buying, which could run its course after the traditional Santa Claus rally is over.
Or, a final push higher as soon as Monday or Tuesday for a wave five could pave the way for a retest of 410-412 before a move back to fill the gap near 380. While the breakout above the 200-day moving average for the S&P 500 after Powell's speech is certainly encouraging from a chartists perspective, the fact remains that the rotation into defensive sectors such as healthcare, financials, and utilities rather than the technology sector, which normally leads the market off of market bottoms.
However, the technology sector could be positioned to turn that around and be on the verge of clearing the September high, should XLK stall out below that level and head lower, it would suggest a retest of the October lows. The XLK is now +10.57% for the month while still trading below the 200-day moving average. Other major indices are still in major market down-trends, warranting a somewhat cautious market view.
However, Tech giants within the technology sector have achieved P&F breakouts. The elephant in the room this week is the S&P 500 chart as it is currently testing down-trend resistance that has been in place all year and trading above the widely followed 200-day moving average for the 2nd day in a row, encouraging buyers of the 200-day moving average.
A breakout in 2022 saw the SPY above the 200 MA a dozen times. Each breakout failed to hold, while this week's breakout above the 200 MA is rather encouraging. The 2022 breakouts above the 200 MA have a horrific track record thus far.
We've seen some pretty impressive bear market rallies this year, with three highlighted below. For the most part, the two previous rallies in March and August were just straight up, which is typical for counter-trend rallies. However, this last one, which started in November, has more of an accumulative structure.
The technology sector has been under intense pressure all year, lagging far behind the overall market. However, that could be starting to turn around. Last Wednesday's Alphabet (NASDAQ:GOOGL) P&F analysis triggered a Double Top Breakout for the first time this year with an impressive price objective of $132 with the Jan-23 calls, 100 strike OI being 35,786.
Another mega-cap stock Meta Platforms (NASDAQ:META) that triggered a new Point and Figure buy signal is META, as with Thursday's high volume push higher after Powell's speech saw another Double Top Breakout in META with a price objective of $176 with the Jan 23 calls with the 120 strike showing increasing open interest now at 38,064 as of this writing.
The recent technical developments this week will need to be monitored closely.