The Communication Services Select SPDR Fund (XLC) has a 9% weighting within the S & P 500, which is smaller than its growth sector counterparts: XLK Technology (30%) and XLY Consumer Discretionary (10%). But XLC's future path is extremely important for the general market's prospects. XLC is heavily driven by three major growth stocks: Meta (META) , Netflix (NFLX) and Alphabet (GOOGL) make up a combined 36% of the ETF. NFLX (which we profiled here on 4/10) has been outperforming for months and just blasted to new all-time highs after reporting earnings on 4/17. GOOGL is trading higher so far Friday after its earnings report, but it remains noticeably below its own highs. META releases its quarterly numbers next Wednesday, 4/30. And while it's off its April lows, it, too, has a lot of ground to make up. Both GOOGL and META remain below their respective 200-daymoving averages. All of that being the case, XLC finds itself smack-dab in the middle of a major battleground. The ETF is hovering near an impending breakout from a potential three-week cup-and-handle pattern. That's constructive, but the formation has taken shape right BENEATH the bearish head-and-shoulders pattern that it broke below earlier this month. The ETF also is battling its 200-day moving average, which aligns with the 50% retracement of the entire February–April decline (not shown). From an indicator perspective, its 14-day RSI has popped back to the 50-midpoint, a level that it would need to eventually overcome for momentum to truly flip back to positive. Simply stated, A LOT is riding on how XLC resolves this zone. And it's not alone — the S & P 500, the Nasdaq-100 and many other key indices and ETFs are in similar setups after snapping back from the February-April market-wide waterfall decline. Zooming out, we can see how closely aligned the XLC ETF has been with the S & P 500 since 2019. XLC had a strong run off the COVID lows but topped out a few months before the S & P 500 did in 2021. Eventually, the S & P followed suit, with both the index and ETF declining through most of 2022. After the late-2022 low, XLC and the SPX followed a similar trajectory on the way up through just a few months ago. Most recently, both XLC and the S & P 500 topped around the same time this past February and have taken similar paths in recent weeks, attempting to rebound. One thing is clear: the very consistent uptrend that had been in place for over two years — from October 2022 through February 2025 — is no longer valid for XLC and the SPX. When XLC's upward-sloping trading channel was broken at the end of 2021, it led to the broader 2022 market decline. To avoid a similar outcome this time, XLC needs to do a better job of building on budding bullish patterns - like the one we just reviewed above. If it can, that would suggest that its largest components are performing well and leading — just as they did during the previous, two-year advance. And given how influential these companies are to the broader market, their potential strength (or weakness) will have a meaningful impact on the S & P 500. — Frank Cappelleri Founder: https://cappthesis.com Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today's dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You'll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited! DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
