KLA-TENCOR LEADS STRONG SEMICONDUCTORS -- GENENTECH JOINS BIOTECH RALLY -- NVIDIA AND GOOGLE HELP BOOST NASDAQ --- NASDAQ 100 STILL SHOWING UPSIDE LEADERSHIP

GENENTECH TURNS UP... Last week I showed upside breakouts in the biotech group. I focused on Amgen which is the bellwether of the group and one of its biggest stocks. Here's another big one. Chart 1 shows Genetech (DNA) moving up to challenge its July high. The green volume bars over the last week show new buying power. Recent buying patterns on the big board and the Nasdaq show investor preference for larger stocks. Amgen (not shown here) and DNA are two of the largest in a reviving biotech group. Last week I also showed the Biotech Holders (BBH) moving well above their 200-day average. Today, a second biotech ETF has accomplished that bullish task. Chart 2 shows Biotech iShares (IBB) trading over their 200-day line.

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SEMICONDUCTOR HOLDERS NEAR 200-DAY LINE ... A lot of Nasdaq buying today is coming from semiconductors. Buying of chips may be coming at a very opportune time. Chart 3 shows the Semiconductor Holders (SMH) consolidating just below their 200-day moving average. The "pennant-shaped" pattern over the last two weeks has a bullish look to it. [Pennants are small triangles which trade between two converging trendlines and are usually continuation patterns]. Several large chip stocks are already trading over their 200-day lines including Applied Materials and Intel. Today's top performer, however, is KLA-Tencor which is breaking through its 200-day line on strong volume (Chart 4). The KLA/SMH relative strength ratio is breaking out as well which makes KLAC a chip leader.

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NVDIA AND GOOGLE LEAD NASDAQ HIGHER... Today's top percentage gainer in the Nasdaq 100 is Nvidia. Chart 5 shows the stock breaking through its early May peak to reach the highest level in nearly five years. The NVDA/QQQQ ratio is also breaking out which confirms its leadership role in the Nasdaq market. The next upside target for Nvidia is its January 2002 all-time high at 36.33. Nvidia isn't one of the Nasdaq biggest stocks. Google is. And it's turning into a Nasdaq leader once again. "Chart 6 shows Google rising above its 2006 resistance line in a bullish looking triangle". That should give a boost to the Internet group which has been another Nasdaq leader of late and the Nasdaq market as well.

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'THE QQQQS ARE STILL CLIMBING. ... Although Chart 7 shows the Nasdaq 100 Shares trading below their spring high, they've actually been doing better than the broader market since early August. That can be seen by the rising QQQQ/SPX ratio line which bottomed during August and reached a new three-month high today. Although it may be somewhat over-extended on a short-term basis, the QQQQ appears capable of reaching its April high at 43. An upside breakout by the semiconductor group would certainly help move the Nasdaq market toward its 2006 high. A rising Nasdaq is also supportive to the rest of the market.

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