Stock Market Trends: Models Suggest Bull is Catching Its Breath


Has the bull run died or is it just taking a rest? Now that May has passed, perma-bears have moved from “Sell in May and Go away” to a “June Swoon.”

ETF Stocks has reason to believe that recent weakness could be more of a “buy the dip” sort of correction than the beginning of something uglier. All of our market models continue to pour out “buy signals” while stocks trend lower in the short run. It has been our experience that it is a opportune time to buy when our measuring sticks and the short-term trend don’t line up.

We will add this caveat, our minds could change if the indexes close below Friday May 31, 2013’s final prices before rolling on to new highs. ETF Stocks sees the two levels as support and resistance. Whichever gives first should dictate the near-term direction of the market. Fortunately, stocks shouldn't fall too far if bears win the technical analysis tug-of-war. The respective 50-day moving averages should act as a backstop for the NASDAQ, Dow, and S&P.

Another reason we feel that the current uncertainty probably won’t end badly is because tech stocks look stronger than most. During our weekly sector review, Technology showed signs of outperformance relative to the benchmark indexes for the days/weeks ahead. Tech hardware and Computer hardware have the most robust characteristics, in our view.

Typically, when technology stocks do well, the overall market does well.

Investors might consider Technology Select Sector SPDR (XLK) as a way to participate in tech stocks if ETF stocks made the correct call. However, if the overall market falls, we’d expect to XLK to struggle, too, but the exchange-traded-fund should hold up better than others.

Some of the biggest names in the hardware industry include: Apple Inc. (AAPL), EMC Corporation (EMC), Hewlett-Packard Company (HPQ), Seagate Technology Public Limited Company (STX), VeriFone Systems, Inc. (PAY), and Diebold, Incorporated (DBD) to name just a few.

Overall, if the indexes continue to show weakness in the short-term, ETF Stocks would expect Wall Street to bounce back rather quickly, according to the current readings of our models. If  our outlook changes, we’ll certainly let you know if future articles. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , ETFs , Stocks , Technology

Referenced Stocks: XLK

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