BIOTECHS AND CHIPS LEAD MARKET TO NEW HIGHS -- IBM IS BIGGEST DOW POINT GAINER

BIOTECHS HAVE A STRONG DAY... While all the market averages hit new highs today, leadership once again came from small caps and the Nasdaq. Biotechs were a big part of the Nasdaq's strong advance to new high ground. The Biotech Index gained 3.8% on the day. Chart 1 shows the BTK breaking through its July peak to reach the highest price since mid-June. The rising relative strength line along the bottom also shows that the biotechs are starting to exert market leadership. Millennium Pharmaceuticals has the heaviest weight in the Biotech Index (6.64%). Chart 2 shows MLNM leading the BTK higher since the start of August.

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SOX HITS NEW HIGH... The Semiconductor (SOX) Index rose 2.8% today to reach another 52-week high. Its rising relative strength line also shows strong market leadership. Chart 3 is a monthly chart of the SOX from its 2000 peak. It shows that the next resistance barrier is the peak hit during the first quarter of 2002 near 650. That chart also shows the 650 level to be a 38% retracement of the entire bear market. Two of most heavily traded chip stocks to hit 52-week highs were Advanced Micro Devices and Texas Instruments.

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IBM LEADS DOW HIGHER... A brokerage upgrade gave IBM a big boost today and helped make the stock the Dow's biggest point gainer. Chart 5 shows IBM heading up to challenge the highs hit during May near 90. Upside volume has also been impressive throughout the past week. The relative strength line (vs. the Dow) has broken its down trendline. That means that IBM may be going from a Dow laggard to a Dow leader. Chartwise, IBM still needs to clear the 90 level to achieve a bullish breakout. Its weekly chart shows that 90 has been a stubborn barrier for the past year. The odds for an upside breakout, however, look pretty good at this point.

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RFMD AND CDW LEAD NASDAQ 100... The two top percentage gainers in the Nasdaq 100 were RF Micro Devices and CDW. RFMD gapped over 10 on very heavy volume to reach a nine-month high. The chart of CDW is more impressive. Chart 8 shows CDW breaking through the high of last November on big volume to reach a new 52-week high. Chart 9 shows CDW now in position to challenge major resistance at 60. Today's heavy volume (and the pattern of rising bottoms) increases the odds for an eventual breakout through that chart barrier.

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