NASDAQ 100 LEADS MONDAY BOUNCE -- HEWLETT PACKARD LEADS DOW BOUNCE -- ROTATION FROM BONDS TO STOCKS

QQQS CLEAR 20-DAY AVERAGE... As it did last week, the Nasdaq 100 is leading the rest of the market higher in Monday trading. Nasdaq leadership is a positive sign for the market. Chart 1 shows a number of positive short-term chart developments. The QQQs are rising over their 20-day moving average. A close above that line would be even better and would signal a likely challenge of the (blue) 50-day moving average. The 50-day line coincides roughly with a down trendline (not shown here) drawn over the January/February highs. The daily stochastic lines are rising over 50 and the MACD lines are turning positive for the first time in two months. A strong upside follow-through this week (on rising volume) could lend support to the view that the downside correction ended with last week's bounce off the 200-day moving average.

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NASDAQ LEADERS... Three of Monday's top percentage gainers in the Nasdaq 100 are shown below. ATI Technologies is climbing over its 50-day average after bouncing off its 200-day line. Check Point Software has climbed back over its 50-day line. NVIDIA is trading at a two-month high and is heading for a challenge of its January high.

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HEWLETT PACKARD LEADS DOW HIGHER... In another sign of technology leadership, Hewlett-Packard is the top percentage gainer in the Dow today. The stock rose back over its 200-day average last week, and is gapping up for for a test of its 50-day average today. The Dow leader has already broken its two-month down trendline. It still needs to clear the 50-day line, however, and initial chart resistance near 23.50. Intel is the Dow's second strongest stock.

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MARKET TURNS MORE OPTIMISTIC... A sign that the market is turning more optimistic can be seen in today's sector rotations. Leadership is coming from technology, transportation, and materials. Defensive groups like consumer staples, energy, and utilities are lagging. Small caps are doing better than large caps. Growth is doing better than value. All signs of renewed confidence. Finally, bond prices are declining as stock prices are rising. Chart 6 shows the 10-year T-note yield climbing to the highest level in three weeks. As yields rise, prices fall. That means that investors are selling bonds and buying stocks.

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CNN-FN TODAY... I'm guest hosting on CNNfn rom 3:00 to 4:00 this afternoon. I get to ask a few questions for a change. Should be fun.