Social media stocks have been taking it on the chin this week: Facebook – down, LinkedIn – down, Twitter – down.
The Global X Social Media Index ETF (SOCL) reflects this sad performance.
The Social Media ETF chart shows SOCL slicing below it’s 200 and 20-day SMA and the green support line.
Perhaps more importantly, Tuesday’s decline came on almost 5x average trading volume.
With a 20% rally from May to July, social media has been a leading S&P 500 sub-sector.
What does this social media sell off mean for the S&P 500 (^GSPC)?
The chart below plots SOCL against the S&P 500 and highlights periods of SOCL weakness.
A 28% March/April SOCL drop didn’t affect the S&P 500, in fact the S&P recorded modest gains.
A leading sector losing steam is not the best scenario, but recent history shows that SOCL weakness in itself doesn’t have to take down the S&P 500 (SPY).
There are other factors that may take down the S&P and market in general, but we don't even have to worry about those, as long as the S&P stays above a very specific support level. More details here:
Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.
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