Aug 20, 2010

Another choppy day on moderate volume

Short-term: 1 green, 2 yellow, 1 red – tending yellow
Intermediate-term: 2 yellow, 2 red – tending red
Stock targets: 60% swimming, 22% neutral, 18% sinking

The short-term green is a signal of slight divergence – not a potential oversold bounce for the whole market. Technology shares may be better than much of the market going forward. Makes sense. If there is a potential credit crunch, tech companies are the least vulnerable since they generate free cash and have no debt. They are the sector that is most accustomed to product price deflation. A few different product cycles are aligned well which should protect them a bit in a slowdown and provide solid growth in a recovery. And after 10 years of going nowhere, there is some value in the sector.

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