Brian.oco 0 Posting Whiz

Looking for a “relief rally”? That’s what Wall Street calls a temporary lull in selling that could lead to a more sustainable uptick in broad-based stock prices.

Usually, it’s one industry that feeds the bounce-back and Kevin DePew, an analyst and editor at, which tracks the stock market, says that technology is that industry right now. As a result, several indicators that he uses are back to levels last seen before the market's mid-March bounce.

In an interview on TechTalk today, Depew pointed to the Bullish Percent Indicator and High-Low Index produced by Investors Intelligence as proof of a tech-drive rally. He says those indicators measure the level of buying - or more recently - selling interest in stocks, as well as the ratio of stocks at new 52-week highs vs. new lows.

DePew points out that, as of Monday, the S&P 500 Bullish Percent Indicator was just 26.5%, indicating a very low level of buying interest - as reflected by recent market action. Similarly, just 11.5% of NYSE stocks were at new 52-week highs, he tells TechTalk.

Those are the ingredients that should lead to a "classic technical rally," says Depew, adding any near-term rally is likely to be led by "staple" (vs. consumer-related) tech stocks such as diagnostics firm PerkinElmer and LCD maker Corning.

“There are several indicators that tech stocks should rise soon,” he said. “Very simply, the number of stocks participating on the downside and the upside in the market are changing, especially on the sell side. One thing we watch is that those new lows are getting to the point where we were in mid-March where the most recent rally kicked off. That tells us that we should see a bounced in the next few days.”

DePew thinks that the sellers have run out of steam. “There is more money going to buying stocks – all the people who wanted to sell stocks may have sold out already. That should fuel a rally and encourage buyers to get back in. It’s a classic technical rally – sellers wash out and buyers climb back in.”

That’s not to say we’re out of the woods yet. “This is a short-term trading rally – don’t get too excited,” he advises. “Financial stocks are really hurting and that could pull tech stocks back just a bit. Also, financials are having their bear market now, but tech stocks had their bear market in 2000 – so technology stocks are much healthier than financial stocks right now”

So, who does DePew like? “I like tech companies that are stable, less consumer discretionary . . . companies that make hand held devices and components are a good bet. Take a firm like Corning, which makes LCD screens. They’re doing well with lots of orders coming in. I see stocks like that as good long term plays.”