Technology will lead us higher

• Posted by Greg Harmon
• on December 9th, 2015

I tossed up this scan last night and it showed something startling. The scan looks for stocks with large valuations that have good technicals, momentum and fuel from short interest in a proprietary combination. Last night it showed 16 stocks, and 11 of them were int he technology sector. Technology stocks have had a very prominent place in the scan over the last 3 weeks but never this type of sweeping dominance.

Looking broadly at the sector, the Technology Select Sector SPDR ETF, $XLK, shows a good technical set up beyond those 11 names. The chart below gives 4 pieces of information to watch. First is the Deep Crab harmonic pattern. What is important there is that it has not finished playing out yet, with a Potential Reversal Zone (PRZ) above at 49.47.

The second is the Golden Cross, where the 50 day SMA crosses up through the 200 day SMA. This is a bullish signal and it occurred right around Thanksgiving. Third is the price action itself, making a series of higher lows against resistance at 44.60. Finally the momentum indicators are in bullish ranges with the RSI running sideways and the MACD a turn higher away from being the possible catalyst to renewing the move higher.

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