Let’s continue now with our special Alert series called, “My Top Seven ETFs for 2011.” Each week, I’ll be letting you in on the ETFs that I think are best positioned to perform well in the coming year. Part I in our series was the SPDR S&P Oil & Gas Exploration (XOP) and Part II was the Market Vectors Agribusiness ETF (MOO).

Part III in our series is the Technology Select Sector SPDR (XLK). This ETF is designed to deliver performance equal to the general performance of publicly traded equities of companies in the technology sector. That description only gives us broad strokes, so let’s dig a bit deeper.

The fund holds 85 tech stocks, and among the top holdings are stalwart tech names such as Apple Inc. (AAPL), Microsoft Corp. (MSFT), International Business Machines (IBM), AT&T Inc. (T) and Google Inc. (GOOG).

As you can see by the chart here of XLK, there’s been some serious performance in the space since late August. In fact, the fund was up more than 30% during that time. This technology ETF now trades well above both the 50-day moving average and the 200-day moving average.

Although XLK has traded substantially higher during the past five-plus months, I think the sector has more room to run in 2011. One key reason for my optimism is that after a couple of years of very low capital expenditures on technology upgrades, American companies and companies around the globe finally are starting to put money into their long-awaited upgrade cycles.

Capex spending on tech goodies such as servers, software upgrades, communications systems upgrades, etc., is going to be big in 2011. That likely will mean strong earnings for the biggest and best tech companies out there -- companies that make up XLK.