The Communication Select Select SPDR Fund (XLC) has a 9% weight within the S&P 500. This is smaller than the growth sector’s counterparts (XLK technology (30%) and Xly’s consumer discretion (10%). However, XLC’s future path is extremely important for the general market outlook. XLC is heavily driven by three major growth stocks: Meta (Meta), Netflix (NFLX) and Alphabet (Googl). It combines 36% of the ETF. NFLX (profiled here on 4/10) has been outperforming for several months, and has been blown up to a new all-time high after reporting revenues for 4/17. GOOGL has traded higher on Friday so far, but it’s significantly below its own high. Meta releases quarterly figures for 4/30 on the following Wednesday. And while it’s out of the April low, it has many grounds to make up for it. Both GOOGL and Meta are below their respective 200-day averages. When all of that applies, XLC finds a smack dub in the middle of the main battlefield. The ETF is hovering near the imminent breakout from a potential three-week cup-and-handle pattern. It’s constructive, but the formation has been shaped just under the bearish head and shoulder pattern that broke down below the bottom earlier this month. ETF is also fighting the 200-day moving average, consistent with a 50% retracement of the overall February-April decline (not shown). From an indicator perspective, that 14-day RSI has returned to the midpoint of 50. This is the level that momentum will ultimately need to overcome in order for it to return to a truly positive. Simply put, there’s a lot to ride on how XLC solves this zone. And it’s not alone – the S&P 500, NASDAQ-100, and many other major indices and ETFs are in a similar setup after returning from the market-wide waterfall reduction in February-April. Zooming out, XLC has been making the same Covid since 2019, and how closely the XLCETF is lined up on the S&P 500. I was running hard on the Lows, but it came to the top a few months before the S&P 500 did in 2021. Until just a few months ago. Recently, both the XLC and S&P 500 were on top this February at the same time, and in recent weeks they have gone on a similar path and tried to rebound. One thing is that the very consistent upward trend that took place for over two years from October 2022 to February 2025 is no longer effective in XLC and SPX. When XLC’s upward slop trading channel broke at the end of 2021, the market decline in 2022 was wider. To avoid similar results this time, XLC should do a better job of building on the bullish pattern of budding this time, as mentioned above. If possible, it suggests that its biggest component is working well, as it did during the previous two years ago advance. And given how influential these companies are in the broader market, their potential strength (or weakness) has a meaningful impact on the S&P 500. —Founded by Frank Capeleri: https://cappthesis.comUncertain market? Earn Edge with CNBC Pro Live, the first exclusive event on the historic New York Stock Exchange. Access to expert insights is paramount in today’s dynamic financial situation. As a CNBC Pro subscriber, we recommend attending the first exclusive and in-person CNBC Pro live event held at the iconic NYSE on Thursday, June 12th. You will also get the opportunity to network with CNBC experts, talent and other pro subscribers during exciting cocktail hours on the legendary trading floor. Tickets are limited! Disclosure: (No) All opinions expressed by CNBC Pro contributors are opinions only and do not reflect the opinions of CNBC, NBC Universal, parent company or affiliates and may have been previously distributed on television, radio, the Internet, or other media. The above content is subject to our terms and conditions and privacy policy. This content is for informational purposes only and is not aware of any financial, investment, tax, legal advice or recommendations for purchasing security or other financial assets. Content is inherently general and does not reflect the unique personal circumstances of the individual. The above content may not be suitable for your particular situation. You should strongly consider seeking advice from your own financial or investment advisor before making any financial decisions. For the full disclaimer, click here.
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