NASDAQ TESTS EARLY MARCH LOW - RUSSELL 2000 RECOVERS AFTER SUPPORT BREAK - QUALCOM GAPS HIGHER- APPLE SHOWS RELATIVE STRENGTH - ORACLE CAUGHT IN MOVING AVERAGE SANDWICH - ENERGY ETF'S SURGE ON GOOD VOLUME -- SCHLUMBER FORMS P&F TRIPLE TOP

TESTING THE EARLY MARCH LOWS... Today's Market Message was written by Arthur Hill. John Murphy will be back tomorrow. - Editor

The major indices moved lower in early trading, but recovered in the afternoon and closed strong. Tuesday's decline marked a test of the early March lows and the major indices are showing some resilience with today's strong recovery. The Russell 2000 and Nasdaq led the market higher and I will focus on these two charts first.

The Nasdaq broke support at 2400 and this level turned into resistance (yellow band). The index rallied back to this resistance level last week and fell sharply on Tuesday. Despite this sharp fall, the Nasdaq firmed on Wednesday and refused to fall further. The recovery on good volume is impressive, but a little follow through is required before getting too excited. The first resistance hurdle is based on last week's high and a break above this level on good volume would warrant attention.

Chart 1

The Russell 2000 held up the best over the last few weeks and twice recovered after breaking support at 770. This support level stems from the late November and early January lows. The index broke support in early March, but immediately recovered and this looks like a bear trap. There was another break below 770 on Tuesday and the index once again recovered immediately. The bulls are not going to give up easily. Two failed support breaks are impressive, but a little follow through is required before getting too excited and I would like to see a break above 790.

Chart 2

A FEW BIG TECHS SHOWING RELATIVE STRENGTH... Even though the major indices tested their March lows today, I was able to find a few big tech stocks that held above their early March lows and show relative strength the last two weeks. QualCom (QCOM), Oracle (ORCL) and Apple (AAPL) are all trading well above their early March lows and all three were up over 1% today. Stocks that hold up well during bad times are likely to lead during good times.

QualCom (QCOM) is the clear leader as the stock surged over the last two days with above average volume. This is the second big surge on big volume in the last two months. The stock broke its 50-day and 200-day moving averages in February, held both in early March and gapped higher the last two days. The 50-day moving average crossed above the 200-day for a golden cross and Qualcom is actually looking good.

Chart 3

Apple Inc (AAPL) was not immune to the late February market plunge, but the stock recovered almost all of its losses and held strong over the last two weeks. In fact, AAPL did not even come close to its prior lows this week and is on the verge of breaking above its February high. Not many stocks can make this claim and Apple stands out for its relative strength.

Chart 4

Oracle (ORCL) has been trending lower since late November, but the stock firmed over the last 4-5 weeks and the moving averages are converging. You could even say that this stock is caught in a moving average sandwich. The falling 50-day marks resistance and the rising 200-day marks support. The stock is caugh in between and something has to give pretty soon here. Look for a break above the late February high for an upside breakout and a move below and puts the bull back in Oracle.

Chart 5

ENERGY STOCKS ALSO HOLDING UP... The Energy SPDR (XLE) and Oil Service HOLDRS (OIH) are also holding above their early March lows and showing relative strength over the last two weeks. These two ETFs were up over 1% today with above average volume and I am keeping my eye on the energy complex.

The Energy SPDR (XLE) bar chart is a bit of a mess over the last few weeks so I decided to use a percentage P&F chart with trendlines. The P&F chart filters out some of the noise and provides a clear bullish or bearish indication. Even though the last move formed a column of three red O's, XLE is holding the blue trendline and has yet to break down. There are two lows at 55.25 and a move below 54.7 would forge a triple bottom support break. This would be P&F bearish. As long as support holds, look for a move above 58.65 to affirm the uptrend and start the bulls moving again.

Chart 6

Turning to the P&F chart for the Oil Service HOLDRS (OIH), the break above the red trendline and the rising blue trendline give this ETF a bullish bias. The ETF has been range bound since early February and a break from this range will provide the next P&F signal. A move above 142.18 would break the last two highs (X columns) and forge a triple top breakout. A move below 131.1 would break the last two lows (O columns) and forge a triple bottom break down.

Chart 7

SCHLUMBERGER CHALLENGES RESISTANCE... On the P&F chart, Schlumberger (SLB) is knocking up against resistance and formed a triple top over the last few weeks. Another X would forge a triple top breakout and this would be P&F bullish. As the chart stands right now, the last signal was a triple bottom break down and the red "3" marks this signal. Despite the long column of X's that followed, this bearish signal has yet to be reversed and it would take a triple top breakout to do the trick.

Chart 8