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Tech Sector Holds Key to Market Bounce


Faltering of star performers will be true test of market's mettle.

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community.

In my interactions with people over the years, I've realized that everyone has a "key" -- something(s) that makes them feel alive, some passion that drives them. It's of course very personal.

Some are moved by the desire for fame, others wealth. Some people are enamored by sports, while for others, the passion is food. Still others find that reading can do what nothing else can do for them. This "key" can change over time as life progresses and new things are experienced. And the presence (or absence) of the "key" is what keeps them going with renewed vigor, lest they feel restless in life.

Well, markets are like people in that regard, in that the "key" to the latest market bounce, as we've often discussed on the Buzz, (Please see Of Chips and Dips, June 22) (Gods of the Dow, July 2) (Market Thoughts, July 7) has been the Techs and Semis.

Check out relative performance of XLK vs the SPY.

Click here to enlarge

Click here to enlarge

While Materials, Metals, Financials, and Energy have been enthusiastic participants, they haven't screamed to new highs with the S&P 500. The star has been Technology, along with some confirmation from Consumer Discretionary Stocks and Health Care.

Yesterday, the market shook off QLogic Corp (QLGC) and SanDisk Corp's (SNDK) poor performance. But after close yesterday, star performers Amazon (AMZN) and Microsoft (MSFT) disappointed.

Apple (AAPL) might be saturated by recent gains (Keep an Eye on Apple, July 22); Research in Motion (RIMM) hasn't been able to get its act together; Amazon disappointed; and it seems the market wanted something more stellar from Google (GOOG). Now that these 4 Horsemen seem tired, who's going to pull the chariot? Could it provide the catalyst we were discussing yesterday?

As I shared on June 18, "It helps to think of stocks as 'soldiers' in ancient war -- they fall first before the fate of a war is decided." If these 4 falter, the true test of the market's mettle will be here.
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No positions in stocks mentioned.

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