BIOTECHS AND TECHS GIVE NASDAQ NEW SIGNS OF UPSIDE LEADERSHIP -- INTEL LEADS CHIP BOUNCE -- SOX BOUNCES OFF 200-DAY AVERAGE -- NETWORKERS HIT NEW HIGHS -- INTERNET AND SOFTWARE GROUPS MAY BE NEXT

NASDAQ LEADS MARKET HIGHER... Two good things happened today regarding the Nasdaq market. One is that it gained over a percentage point and bounced sharply off its 50-day moving average as shown in Chart 1. [The Nasdaq 100 did even better]. That kept the Nasdaq uptrend intact. The second good thing is seen in the rising Nasdaq/S&P 500 ratio (green line). The ratio line peaked in late November and has been dropping since then. That loss of Nasdaq leadership contributed to some stalling in the overall market's advance. The ratio has jumped sharply this week, however, and suggests that the Nasdaq is starting to exert new upside leadership. That's a good sign for the market. Two of the top five percentage gainers in the Nasdaq 100 were biotechs -- Amgen and Genzyme. [See today's earlier message on the upturn in biotechs]. The top percentage gainer was Research in Motion.

Chart 1

RESEARCH IN MOTION BOUNCES OFF 50-DAY LINE ... The daily chart of RIMM looks very similar to the Nasdaq chart itself. Chart 2 shows the stock bouncing off its 50-day average and climbing more than 7% on rising volume. That's a good sign for it and the Nasdaq market. Intel provided some leadership as well. Chart 3 shows the semiconductor bellwether climbing back over its 50-day line on rising volume. That gave a big boost to the semiconductor group as well.

Chart 2

Chart 3

SEMICONDUCTORS BOUNCE OFF 200-DAY LINE ... I recently showed the Semiconductor (SOX) Index testing its 200-day moving average. That's usually a very important test for any stock or market group. After today's 2% rally, it looks like the SOX has survived that test (Chart 4). Chart 5 shows the Semiconductor Holders (SMH) doing the same. Both also closed back over their 50-day lines. Volume also picked up. Semiconductors have been the weakest part of the technology sector over the last year. It's a good sign for the Nasdaq when its weakest group survives an important test of support. Networkers and the Internet groups also had a strong day.

Chart 4

Chart 5

NETWORKERS RESUME UPTREND -- THE INTERNET IS NEXT ... Three other key technology groups had strong days today. Chart 6 shows the Internet Index (IIX) testing its recent high after bouncing impressively off its 50-day moving average. An upside breakout appears imminent. The Networking Index (NWX) has already resumed its uptrend as shown in Chart 7. Software Holders (SMH) rose on strong volume today and are challenging their recent highs. All of these charts bode well for the Nasdaq market which appears ready to resume its uptrend.

Chart 6

Chart 7

Chart 8