TECHS AND SMALL-CAPS LEAD MARKET (AAPL, QCOM) - HEALTHCARE SPDR SURGES TO NEW HIGH (AMGN, LLY) - IGN EXCEEDS 2009 HIGHS (CIEN, CSCO) - DOLLAR ETF BOUNCES OFF KEY RETRACEMENT - EURO BREAKS FLAG SUPPORT

TECHS AND SMALL-CAPS LEAD MARKET HIGHER... Link for todays video.After a broad-based decline on Friday, buyers returned and pushed stocks higher on Tuesday. All of the major indices were up strong with large-cap techs and small-caps leading the way higher. Chart 1 shows the Nasdaq 100 ETF (QQQQ) in a clear uptrend over the last few months. Price action moves from the lower left to the upper right of the chart. Since the December surge, QQQQ moved into a consolidation over the last few weeks as the ETF traded on either side of 46. Last weeks lows mark consolidation support at 45.5. A break below this level would argue for a pullback, but this would not be enough to reverse the overall uptrend. The September trendline and late November lows mark a support zone around 43-43.5. It would take a break below this level to call for a re-evaluation of the bigger uptrend. Chart 2 shows the Russell 2000 ETF (IWM)** closing at its highest closing level of 2010.

Chart 1

Chart 2

Within the Nasdaq 100 and QQQQ, Chart 3 shows Apple (AAPL) surging over 4% today. The stock broke triangle resistance in late December and this broken resistance area turned into support. Chart 4 shows QualCom (QCOM) moving sharply higher over the last few weeks. The stock recorded a new 52-week high in early January.

Chart 3

Chart 4

HEALTHCARE SPDR SURGES TO NEW HIGH... Chart 5 shows the Healthcare SPDR (XLV) continuing its run with a 2.42% surge on Tuesday. XLV took off in early November, edged higher throughout December and surged again in January. The ETF is up over 17% since early November and up almost 5% this year. There is no doubt that the trend is up, but the advance is certainly getting overextended without a correction since late October. This advance also appears to be getting frothy because todays advance was the biggest since June. An acceleration after an extended advance can sometimes foreshadow a pullback or consolidation. Think of it as a buying climax, which is the opposite of a selling climax or capitulation. The trend remains up, and strong, so it is too early to use the Fibonacci Retracements Tool to estimate support for a correction or pullback.

Chart 5

Chart 6 shows Amgen (AMGN) surging over 2% with pretty good volume. Actually, Amgen has been lagging some of the other big healthcare names because it remains below its Sep-Oct highs. The stock bounced in November, consolidated in December-January and bounced off support today. Chart 7 shows Eli Lilly (LLY) surging over 4%. LLY broke resistance around 35 and broken resistance turned into support. Also note that todays surge occurred on big volume.

Chart 6

Chart 7

IGN EXCEEDS 2009 HIGHS... Chart 8 shows the Networking iShares (IGN) edging above its September highs over the last few days. This September high also happens to be the 2009 high, which means the ETF forged a new 52-week high over the last few days. IGN broke triangle resistance at the end of December and continued strong into January. Notice that broken resistance around 27 turned into support. With the surge over the last four days, this networking ETF is showing relative strength in 2010.

Chart 8

Chart 9 shows Ciena (CIEN) breaking wedge resistance with a gap and high volume surge today. Chart 10 shows Cisco (CSCO) breaking triangle resistance in early January and holding that breakout the last two weeks.

Chart 9

Chart 10

DOLLAR ETF BOUNCES OFF KEY RETRACEMENT... The DB Dollar Bullish ETF (UUP) advanced for the second day running as concerns over the Euro dominated trading. First, investor confidence in Germany fell more than expected to dampen the prospect of recovery. Second, concerns over Greek debt continue to weigh on the Euro. Chart 11 shows the DB Dollar Bullish ETF (UUP) bouncing off the 50-62% retracement zone over the last two days. I showed this chart last week as the ETF hit the retracement zone. Technically, the short-term trend is still down as the ETF remains below the trendline extending down from the late December high. Look for follow through above 23 for a breakout. RSI was in its support zone (40-50) last week. With the two-day bounce, RSI moved back above 50 and momentum is improving. Just as the 50-60 zone acted as resistance in the downtrend, the 40-50 zone should act as support in an uptrend.

Chart 11

EURO BREAKS FLAG SUPPORT... The Euro carries the biggest weighting in the US Dollar Index ($USD) and the DB Dollar Bullish ETF (UUP). The Euro accounts for 57.6% of the DB Dollar Bullish ETF (UUP). The Japanese Yen is next with around 13.6%, followed by the British Pound at 11.9 and the Canadian Dollar at 9.1%. While these other currencies certainly affect the DB Dollar Bullish ETF and the US Dollar Index, the Euro is by far the big driving force. Chart 12 shows the Euro ETF (FXE) meeting resistance just below broken support and breaking flag support with a sharp decline the last two days. The next support zone resides around 138. In the indicator window, RSI met resistance in the 50-60 zone, which now marks downtrend resistance for this momentum indicator.

Chart 12