Thursday, January 7, 2010

The Technology Sector is Overbought

There appears to be pretty substantial resistance right above current levels given the NDX is the only major index that is at the top of the LEH Waterfall decline; no other major sector is close to capturing all the post-LEH losses. The fundamental story in technology is better than any other sector and this sector is likely to generate the most significant earnings beats during Q4 earnings season. But, I expect to see the technology sector lag through the earnings season and take a pause given the overhead resistance at 1900-1920. Typically, financial stocks see a strong "sell the news" reaction on postive earnings and technology usually has momentum. I think that relationship could reverse in the upcoming quarter. I like PSQ long (NDX Short ETF) and trading banks with a long bias.

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