Sunday, April 29, 2007

XLK and Money Flows for Technology Stocks

Our last look at the Technology sector found that it held up well in the face of the late February/early March market weakness, with waning 10-day adjusted relative dollar volume flows preceding the decline. Since that time, we've had a rebound in flows (pink line) to above average levels (red line), powering the Technology ETF (XLK; blue line) to fresh bull highs.

The five highly weighted stocks within XLK that I use to compute the flows are MSFT, INTC, IBM, CSCO, and VZ. Together, these issues comprise about 40% of the index.

Of the five stocks, we see slightly negative 10-day flows (i.e., slight outflow of dollars) in CSCO. CSCO is also showing 10-day flows below its 200-day moving average. VZ is displaying positive flows, but rather well below its 200-day average. MSFT is the only stock that has shown outflows over the 200-day period, but--over the past ten sessions--has been attracting dollars. That's worth keeping an eye on.

Overall, the dollar volume flows within the Technology sector are positive, but not overly impressive. If we continue to see a tailing off of the 10-day levels, I'd expect to see some consolidation among these stocks.