Communication Issues:
We all know inside the communication services sector lies plenty of technology no matter how they try and disguise it. They reside in the “internet” subsector and there have been some names within that have been struggling mightily. More than 50% of the XLC, the top 4 holdings, emanate from the space with META GOOGL and NFLX. The top component in META makes up more than 30% of the fund and it is dealing with the very round 500 number here. The stock is coming back to retest a bull flag breakout so soon is concerning. Another top holding in NFLX completed a bearish evening star Tuesday and could be coming back to retest its flag breakout too. GOOGL has been the outlier, a laggard now 14% off most recent 52-week highs, and it could be ready to find a short-term floor, which will likely be a dead cat bounce here as it trades to its 200-day SMA registering a spinning top candle (on the MONTHLY chart one can see the reversals in January and February). The chart below of the XLC shows the combination of all these things we just discussed and it is slipping BELOW a bull flag. No need to push the envelope here on weakness. Let strength emerge before you apply a more sanguine approach.