Technology Stocks Recover
The market meandered higher again yesterday. Technology bounced back nicely, which was great to see because, despite monster gains in the market last week, the Nasdaq posted a loss. And it was one of the few sectors to lose ground too.
But yesterday technology stocks roared higher and the Nasdaq moved up 2.4% to finish at the highs. Apple (Nasdaq: AAPL), which represents 15% of the index, was up 3.3% and pushed the Nasdaq to new rally highs. And our two tech stocks, STAAR (Nasdaq: STAA) and Atmel (Nasdaq: ATML) did fantastic too.
The banks continued to do very well again. The financial index was up 2.2% and the big banks like Bank of America (NYSE: BAC) and JPMorgan (NYSE: JPM) were up over 4%. The other indices were all higher yesterday too, but only by 1%. And volume was low again.
The lack of high volume days really bothers me about this rally. But everything else looks great: small caps are leaders, technology is not a laggard, banks are not laggards and the dollar has declined. In fact, if this rally wasn't predicated on bailout hope, I would be a maniacal bullish buyer.
Instead we're stuck playing the waiting game. The time to go long was weeks ago. And we did - nine times as a matter of fact. But I don't believe now is an opportune time to chase long positions.
I also don't believe we should go aggressively short. But there is far more room to the downside than the upside at this point. The only problem with being bearish here is that you're fighting a bullish trend. And as I outlined earlier, it's a mighty bullish trend. When you fight the trend, more often than not you lose money.
The smoke should clear tomorrow. And we will certainly know more details about the bailout too. Additionally, investor focus should turn back to earnings and economic results to a greater degree. Tomorrow durable goods are announced before the opening bell. And on Thursday U.S. GDP for the third quarter is released. Both of those economic announcements could have a big impact on how much longer this bullish rally will last.
