NASDAQ HITS 52-WEEK HIGH -- NYSE COMPOSITE RECAPTURES 10K -- A 10 YEAR LOOK AT THE NASDAQ -- AIRLINES TAKE OFF -- CONTINENTAL LEADS AIRLINES HIGHER -- APPLE BREAKS TRIANGLE RESISTANCE -- THE APPLE AFFECT -- GOLD MINERS ETF BOUNCES OFF RANGE SUPPORT

STOCKS END HIGHER IN SHORT SESSION... Today's Market Message was written by Arthur Hill. - Editor

The stock exchanges closed early on Tuesday (1PM), but that did not deter the bulls and the major indices notched another gain before the 4th of July holiday. The gains across the board were small and volume was light in pre-holiday trading. The Nasdaq edged closer to 2650 and recorded a new 52-week high on Tuesday. On Chart 1, the Nasdaq formed a big bullish engulfing last week and this reinforced support at 2550. Even though follow through was not immediately after the bullish engulfing, the index managed to move higher four of the last five days and record a new high today. There is nothing bearish about this price action. Chart 2 shows monthly bars and the last 10 years for the Nasdaq. Even though the index remains well below the March 2000 high, the long-term trend is clearly up as the index holds its 40-month moving average and works its way higher.

Chart 1

Chart 2

NYSE COMPOSITE MOVES BACK ABOVE 10000... The NYSE Composite edged higher on Tuesday and this was enough to recapture the 10000 level. A nice round level like this would normally be seen as "psychologically" important, especially for the Dow. However, the NYSE Composite is a little more obscure and the 10000 level does not carry as much "psychological" importance. However, technically, there is some important resistance just above 10000. The index first moved above 10000 in early June and failed to hold above. There was another attempt to cross 10000 in mid June and the index again failed to hold this level. Tuesday's move above 10000 marks the third attempt in five weeks and there is considerable resistance just above 10000. A consolidation has formed the last six weeks and a break above the June highs is needed to reassert the uptrend. Chart 4 shows the monthly bars and the last 10 years for the NYSE Composite. Unlike its tech cousin, the NYSE Composite broke to new highs at the end of 2004 (new all time highs). The index continued higher and is on the verge of yet another new all time high in July.

Chart 3

Chart 4

AIRLINES CATCH A LIFT... Despite continued strength in oil prices, Airlines were one of the top performing industry groups on Tuesday. The Amex Airline Index ($XAL) surged over 2% and broke above its mid June high. In addition, the index broke above its 50-day moving average for the first time since February and Airlines are showing some signs of life. Chart 5 also shows RSI and a large positive divergence over the last few months. The indicator became oversold at the end of April and then formed a higher low in June. The index formed a lower low in June and the combination makes for a positive divergence. RSI confirmed this positive divergence with a surge above 50 and a move to its highest level since January.

Chart 5

AIRLINE LEADERS... The next charts show some of the leaders in the Airline group. Continental Airlines (CAL) surged over 11% with above average volume. The stock recaptured the 50-day moving average, but is likely to hit resistance soon from the 200-day moving average and the March-May consolidation. U.S. Airways (LCC) surged over 7% and ended the day near its 50-day moving average. The stock gapped up four days ago and this gap is holding. JetBlu (JBLU) broke above its May highs in mid June and has been one of the stronger airline stocks. The stock is nearing resistance around 12 from the 200-day moving average and March consolidation. A break above 12.5 would be quite bullish for JBLU.

Chart 6

Chart 7

Chart 8

APPLE BREAKS CONSOLIDATION RESISTANCE ... Apple (AAPL) has been grabbing headlines and new highs for some time and shows no sign of letting up (on either front). The stock surged over 35% from mid April to early June and then consolidated the last 4-5 weeks. A triangle formed and the stock surged above triangle resistance today. Apple fell short of a new high today, but the triangle breakout signals yet another continuation higher and the bulls are lining up behind Apple again. When you're hot, you're hot.

Chart 9

APPLE POWERS QQQQ ... Apple is the single biggest component in the Nasdaq 100 ETF (QQQQ) and the surge in Apple contributed a great deal to QQQQ's gains over the last few months. According to the PowerShares website, Apple represents 8.83% of QQQQ. The next biggest components are Microsoft (5.91%), Qualcom (5.33%) and Google (4.51%). Apple is far and away the largest component and QQQQ traders would be advised to watch Apple just as much as QQQQ. Chart 10 shows AAPL and QQQQ over the last six months and the positive correlation is clear. Both moved sharply higher from early March to early July and neither shows signs of weakness.

Chart 10

GOLD MINERS ETF BOUNCES OFF SUPPORT... With gold surging and the US Dollar Index falling over the last few days, it is a good time to check in on the Gold Miners ETF (GDX). Chart 11 shows that GDX has been locked in a trading range since November 2006. The ETF established a support zone around 36-37 and bounced off this zone four times since November 2006. GDX also established a resistance zone around 42-43 and failed in this area four times since September 2006. Taken together, GDX is locked in a trading range bound by support at 36-37 and resistance at 42-43. This means the long-term trend is flat and a range break is needed to establish a directional bias.

Chart 11

There are some pretty good swings within this range and the current swing remains down. The ETF peaked with gold in mid April and declined to new lows in late June. GDX has a series of lower lows and lower highs working since mid April. Despite a nice bounce off support the last five days, it would take a move above the mid June high to reverse this downtrend. This puts GDX in the same position at the StreetTracks Gold ETF (GLD). As noted in yesterday's market message, GLD also remains in a downtrend and has yet to break above its prior high for a trend reversal.

Chart 12