Exchange traded funds (ETFs) in the technology sector are showing strength, but is it driven from true demand or is it simply from a bargain hunting spree by savvy investors?

The semiconductor space of the tech sector surprised observers for the month of May. SPDR S&P Semiconductors (XSD) was up 2.1% for the month and PowerShares Dynamic Semiconductors (PSI) was up 1.8%. Over the last 12-week period, XSD rose 26.3% and PSI gained 19.4%, reports Gary Gordon on ETF Expert.

So is there a way to discern if this was bargain buying or chip demand? It could be a combination of both, as shipments were up 25% for the month, but sales were a mere 1.3%.  Historically, when semis are doing good, the economy usually follows. It’s important to take into consideration the fact that the recent run up is due to bargain hunting.  So keep an eye on the trends.

Tags: Sector ETFs, Technology