DELL, LAM RESEARCH, NVIDIA, AND NOVELLUS LEAD NASDAQ BREAKOUT -- SOX MAY BE ABOUT TO JOIN TECH UPTREND -- QQQQ LEADERSHIP SHOWS MONEY ROTATING TO LARGE TECH

LAM RESEARCH AND NVIDIA NEAR RECORD HIGHS ... On Friday, I listed a number of large technology stocks that were leading the Nasdaq market higher. With the Nasdaq market finally exceeding its spring highs (and leading the rest of the market higher today), I thought I'd look at some more Nasdaq leaders. Lam Research and Nvidia are two of the strongest performers in the Nasdaq 100 today. Chart 1 shows Lam Research nearing a challenge of its early 2006 peak at 53.74. Assuming it clears that hurdle, it will be in position to challenge its 2000 peak at 56.81. Nvidia has already exceeded its 2006 peak and is nearing a test of its 2002 peak at 36.33 (Chart 2). Their rising relative strength lines are measured against the Nasdaq Composite Index and show them to be leaders in that market.

Chart 1

Chart 2

DELL EXCEEDS 200-DAY LINE ... Here's another household name in the technology field that's starting to do better. The daily bars in Chart 3 show Dell trading over its 200-day line for the first time in more than a year. Its relative strength line is also showing some improvement. Dell had been underperforming the Nasdaq until mid-September. Since then, its been helping to lead the Nasdaq higher. That's the kind of technology leadership that inspires some confidence. The monthly bars in Chart 4 are also encouraging. They show the stock bouncing off major chart support along its 2001 lows near 20 (green line). The Dell/Nasdaq ratio (solid line) may also be starting to turn up near chart support after falling for the last two years. The poor performance since the start of 2005 is similar to what I've shown in other technology blue chips (like Microsoft) that are starting to come back into favor. That bodes well for the Nasdaq market.

Chart 3

Chart 4

NOVELLUS NEARS 52-WEEK HIGH -- LEADS SOX HIGHER ... Novellus is not only a Nasdaq leader, but it's a leader in the lagging semiconductor group (more on that later). It's also one of today's technology standouts. The daily bars in Chart 5 show Novellus surging to a ten month high and challenging its early 2006 peak at 30.62. In case the daily bars make the stock look "expensive" to you, take a look at the monthly bars in Chart 6. They show the stock on the verge of a new two-year high and the possible breaking of a six-year down trendline. Its relative strength line (which has fallen versus the Nasdaq since 2002), is starting to rebound. That may also bode well for the chip group which is testing overhead resistance of its own.

Chart 5

Chart 6

SOX MAY BE NEARING BULLISH BREAKOUT ... The semiconductor group has been the weakest part of the technology sector and has been a drag on the Nasdaq market. The chip group, however, may finally be starting help the Nasdaq. Chart 7 shows the Semiconductor (SOX) Index in the process of challenging its 200-day moving average (red line). A close above that resistance line would probably attract new money into the lagging group (and give a boost to the Nasdaq). Its relative strength ratio (solid blue line) is measured against the Nasdaq market and has been falling all year. The RS line has started to bounce during November which may come at a good time for chip stocks and the Nasdaq. That's because the Nasdaq Composite and the Nasdaq 100 Indexes are breaking out to a new five-year highs.

Chart 7

BIG TECH STOCKS LEAD NASDAQ BREAKOUTS ... Both Nasdaq indexes closed above their spring highs today to record the highest prices in more than five years. Chart 8 shows the bullish breakout in the Nasdaq 100 Shares (QQQQ) which comprise the largest stocks in the Nasdaq universe. One of the points I've been making lately is that the Nasdaq resurgence is being led by larger and better established technology stocks which lends more credibility to its new market leadership. Chart 8 makes the same point. The blue solid line is a ratio of the Nasdaq 100 divided by the Nasdaq Composite Index. Throughout the first half of the year, the larger stocks in the QQQQ were pulling the Nasdaq lower. Since August (when the latest rally began), the larger Nasdaq stocks have been pulling the Nasdaq higher. That may also explain why the Nasdaq market, which had been lagging behind the rest of the market all year, was the only one to hit a new 52-week high today. Money is rotating into large-cap technology stocks.

Chart 8