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Steady gains, but not euphoric

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The more widely watched major market averages are off their best levels of the session, but still showing good gains as the second half of the session is at hand.

Breadth is decidedly positive on the NASDAQ Composite (COMPX) 1,925 +2.34% with 18 issues advancing for every 10 declining. Most actively traded on the NASDAQ are Sun Microsystems (SUNW) $10.16 +15%, Intel (INTC) $33.80 +2.4%, Cisco Systems (CSCO) $17.80 +4.7%, WorldCom (WCOM) $8.90 +5.95% and Oracle (ORCL) $14.37 +2.6%.

NYSE breadth is also bullish, but to a lesser extent with 16 stocks trading higher for every 14 trading lower. Most active include K Mart (KM) $1.32 +6.45%, EMC Corp. (EMC) $11.29 +2.45%, Calpine (CPN) $12.79 +5.9% and Lucent (LU) $6.35 +0.79%.

Shares of Sun Microsystems (NASDAQ:SUNW) are trading higher after the company filed a lawsuit against Microsoft (MSFT) for more than $1 billion, alleging that the Windows XP operating system was made incompatible with Sun's Java programming language.

Sun Microsystems (SUNW) - Daily Chart

Once a high flyer, competitive pressures on the hardware and software fronts took their toll on shares of Sun Microsystems (SUNW). Aggressive bottom feeders may be speculating on the stocks recovery and that today's law suit may have some type of positive outcome. I don't think SUNW really want $1 billion dollars, what they want is some type of opening up of the Microsoft XP operating system that will help build demand for the Sun Java programming language. The hopes that were perhaps pinned the on the recent Justice Department settlement with Microsoft (MSFT) left Sun's Java programming language on "slow perk."

NASDAQ Composite Chart - Weekly Interval

The above is a weekly chart of the NASDAQ Composite that gives us a bigger picture of what is taking place. Today's break back above the 200-day MA is bullish and sets the stage for a rally to 1,973 and potentially 2,143.

In recent commentary, I like shares of Applied Materials (NASDAQ:AMAT) as a "semiconductor" stock that might be a leader in recovering NASDAQ scenario. Segments of the semiconductor industry have been showing improvement in recent months and the supply/demand chart of AMAT was looking longer-term bullish. Shares of AMAT are trading strong today at $53.68 after a recent pullback to bullish support trend at $45, then again on the spread-triple-top at $49. Those not willing to chase the stock are looking for a pullback near $50 for a new entry point. The current vertical count for AMAT remains bullish at $61.

Jeff Bailey
Senior Market Technician
Option Investor

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