XLC Communications Services ETF Weekly Chart; Overbot; Negative Divergence; Upper Band Violation; Price Extended; AI Orgy Petering Out

Most sectors have already come off their tops but not XLC. Communication Services are off to the races for the last couple years riding the AI orgy to glory. Well, all good things come to an end. The neggie d (red lines) says XLC is about to have a Led Zeppelin Communication Breakdown.

XLC holds META, GOOGL, GOOG, NFLX, T, TMUS, TTWO, DIS, VZ, CHTR, etc...., it is an artificial intelligence parade. The happy AI group march forward for 2 years with people clapping and applauding, throwing money at them, but now the parade route is about to change. XLC and its merry holdings will now march through the seedy part of town, past the drug addicts, and behind the horses and elephants that are making brown deposits on the asphalt every few feet.

There are nothing but negatives on that chart. Price makes the higher high but the red lines highlight the negative divergence across all indicators; she should stall, run out of gas, and begin collapsing at any time on the weekly basis. The RSI and stochastics are overbot agreeable to a pullback. Let us be generous and call it a rising wedge pattern, that is bearish, although there should be more price touches to the trend lines to make the wedge more legit.

Price has violated the upper standard deviation band so a trip to the middle band at 96 and rising, and the lower band at 88 and rising, are on the table. Price is extended above the moving average ribbon (price above the 20 above the 50 above the 100 above the 200) so a mean reversion lower is needed.

The Aroon green and red lines show that both XLC bulls and bears believe that price will go up forever. Of course, it will not. The Aroon signals the uber bullishness and rampant complacency. Joe Sixpack is taking an entire paycheck and buying NVDA because the guy on television said to buy it and forget about it. Comically, his buddy, Timmy Trader, told him to be diversified and invest one-half in NVDA and the other half in PLTR.

The blue circle shows a big buying volume week 2 weeks ago but it ws not as robust as the buying volumes last year. If XLC wanted to rock 'n roll higher all night long, the volume should be higher. As the analysts pimp the AI story on television and the internet, they are selling their shares to Edna Bagholder and Carmelita Sucka. The chart forecasts bad things ahead on the weekly basis; a multi-week pullback is set to begin. Do not rule out a move to 104-105 to satisfy the top band but she should peak-out in the days ahead and begin a selloff.

Let us see, taking a look at the daily chart to see where the top may be at, wow, that is in neggie d as well. The Thursday trading session is underway and XLC is at 102.36 perhaps already receiving the neggie d spankdown on the daily and weekly bases. She should be cooked here and interestingly, the upper shadows for the last two price candlesticks are a Tweezer Top, if they hold. They should have longer shadows but that is close enough for government work.

Keystone is not holding XLC long or short right now but obviously short is the play going forward. That means many, or most, maybe all, of the tickers that XLC holds, will head south as well. A crowd favorite. Headin' down south, to the land of the pine,....  This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Friday Evening, 2/7/25, at 6:12 PM EST: XLC finishes the week at 102.74 with universal neggie d on daily and weekly charts. Obviously, XLC is a ticker you do not want to be long. Next week will likely be the start of the multi-week communication Breakdown.

Note Added Friday Morning, 2/14/25, Valentine's Day, at 6:18 AM EST: XLC receives a pop higher to 104.67 after King Donnie does not deliver the tariff punch he promised. The weekly chart will likely take a couple extra weeks to top out due to the extra hype. Simply make sure the neggie d remains in place and you will know the top is in.

Note Added Tuesday Evening, 2/18/25: XLC is at 104.82 to begin the holiday-shortened week a matching high and the weekly chart shows neggie d across all all indicators. She's cooked on the weekly basis. XLC should drop for a few weeks from here. Commentator Josh Brown on CNBC is bullish on XLC but he must be looking at the wrong charts.