The Technology sector has narrowed its recent performance gap relative to the S&P 500. Over the last year, the Technology Select Sector SPDR (ARCA:XLK) has under-performed the S&P 500 SPDR (ARCA:SPY), but the shortened trading week of November 25 changed that. With strong performance toward the end of the week, the Technology sector is slightly outperforming the S&P 500 for the last month. This will be a sector to keep an eye on this week to see if there is follow-through buying. The Consumer Discretionary sector also continues to be strong,and had the best performance next to Technology last week. The strength in consumer discretionary stocks shows investors still believe in this rally and aren't playing defensive. This along with the technical evidence indicates the uptrend remains strong. Here's the outlook for these sectors, along with stocks to watch in each for the week of December 2.

Technology Select Sector SPDR moved up more than 1.5% last week, breaking above a small consolidation. This is bullish signal, and the first Fibonacci Extension target close by at $35 to $35.15. A pause or small pullback is quite likely in this region. The expectation is that the buying will persist though, pushing the price into the next target region between $36 and $36.15. With a weekly average range of $0.68 the first target could easily be hit this week, but it could take several weeks before the next target is reached assuming support levels aren't breached. $34.40 to $34.25 should now act support on pullbacks. It will take a move below $33.50 to call the uptrend into question.

Hewlett-Packard (NYSE:HPQ) jumped more than 9% on November 27 (after earnings on November 26), bringing the computer maker very close to its 52-week high at $27.78. The region around this high is likely a strong resistance area, as it sent the stock significantly lower after being tested in August. If the price drops back below $26.75, resistance has held--at least for the short-term--and the price could continue to decline toward $25.50. If that support levels holds, another run at the high is probable. Whether on this attempt, or another attempt down the road,  if the price can close above $27.78 it is a bullish signal, setting up a shorter-term target at $28.70 and slightly longer-term target at $31.15. A drop below $24.75 is bearish, indicating the strong resistance level as held, and the price will likely retreat below $22.

Consumer Discretionary Select Sector SPDR (ARCA:XLY) managed to climb just over 1% last week, bringing it very close to the $66 target provided on November 18. A pause or pullback is probable around the $66 region; the next target is $68.25. It could take a few weeks to a few months to hit the target, based on whether the price continues higher overall from here, or if the price starts breaching support levels. Minor support is near $64.50 and more important support at $63.50. A drop below $63.50 indicates a test of $61.50 to $61-- the lower trendline of a price channel.

Amazon (Nasdaq:AMZN) moved strongly to the upside last week, closing in on the psychologically important $400 mark. At current levels short-term traders will receive the most benefit from the volatility. Longer-term traders and investors will want to wait for a pullback. The November 29 high at $394.10 is right at a Fibonacci Extension target, so a pause or pullback is highly likely. Given the strong current movement though, if the price keeps pushing the next target is $408. A drop below $386 indicates at least a short-term pullback. $370 is the closest region likely to provide support. A drop below $360 indicates a longer-term pullback, which may provide longer-term buying opportunities near $330 to $320 if that trendline holds.

The Bottom Line

There is no technical evidence yet of a reversal, although there are always warnings signs and the possibility of a pullback; stop loss orders are encouraged. While there is potential upside in these securities, waiting for a pullback and buying near support regions that hold provide for trades with better reward-to-risk ratios. The uptrend remains in tact for the broad market, so buying relatively strong stocks and sectors remains the most high probability strategy in this environment.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.