"When you have a conviction, you will get beat up by the market!" Frankly, this is the best advice I have ever gotten during all these trading years. I covered my shorts last Friday and actually bought some technology stocks (RIMM, AAPL, GOOG, to name a few) because I was surprised by the resilience in these technology shares. While the broad market was down, the Nasdaq finished the trading day in the green, and it was one of the few days in which technology stocks outperformed the overall market in recent months. In addition, treasuries retreated from recent highs as yields on 10-year notes increased to 2.6120%. I believe these two divergences are a good indicator of where the market is headed for the next couple weeks due to the following reasons. First, technology stocks have underperformed the market and have been the laggards throughout this correction, so any strength in the sector should be bullish for the market. Second, panic seems to have subsided somewhat given the positive reaction in the bond market last Friday. Third, the S&P quickly tested the 1065 level and found strong support there, suggesting to me that we might be headed for the top of the trading range again (first stop at ~1100, then perhaps ~1130).
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