The past week, the bears have had a few productive days giving concern to the bulls. Today was another one of them. The trend for a while was a strong gap-up on the first day of the month, which we saw today, but within minutes it quickly reversed and the bears took control the rest of the day. Is this time to panic or are we still safe?
Fortunately, we are still within the trading range by the skin of our teeth in the S&P 500 (SPX). The uptrend is still intact and this is either a great chance to buy or this is the start of the end for the September 2010 rally.
The 50 day SMA is the key support level that needs to hold if the trading range is broken as it would keep the uptrend intact. I suspect this rally will continue and bounce off support levels since we still have plenty more QE to help us out, but I won’t argue with the market if we start to break support levels.
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With the iPad release tomorrow, I would hope it can help boost technology stocks leading the way for a market bounce, but we’ll see. I’ve added more exposure to the technology sector in anticipation of this with one of my newer positions being Lattice Semiconductor Corp (LSCC). The original idea was to reduce some exposure to energy and wait for a pullback while Wednesday’s iPad release gave life to the technology sector, which would be helpful to LSCC, among others. After today’s action, we can no longer count on tomorrow being bullish, but I won’t exit until key support starts to break. Keep a close eye on your positions in case this blip on the radar turns into something more painful.
As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna was Long LSCC but positions may change at any time.
