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NASDAQ Composite challenges August's high

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Bolstered by a favorable court ruling for Microsoft (NASDAQ:MSFT) $56.87 +7.3% the NASDAQ Composite (COMPX) 1,417 +4% now shows a third gap higher after setting a multi-year low in early October. Today's gains are being lead once again by the Fiber Optic Index (FOP.X) 45.56 +10.6%, which has surged some 98% since setting an all-time low of 22.92 on October 9th, but still down 57% since its December 31st close. As bullishness builds in the Fiber Optic Index, and the broader NASDAQ itself, bears continue to lock in gains with each move higher.

NASDAQ Composite Chart - Daily Interval

Today's break above the 1,366 level now has the upper-end of our Bollinger Band at 1,432 and upper end of retracement at 1,426 in play. On Wednesday, the FOMC is expected to make a decision on interest rates and Cisco Systems (NASDAQ:CSCO) $12.57 +8.25% reports earnings after the bell.

NASDAQ volume is heavy as we've reached the halfway point of the session, with over 1.4 billion shares already traded. Breadth is decidedly positive with advancers outnumber decliners by a 2 to 1 margin. We've noted an improvement in the 52-week highs versus 52-week lows category in recent weeks and today's action has 77 stocks achieving new 52-week highs versus just 23 stocks trading new lows.

NASDAQ volume leaders have Cisco Systems (CSCO) $12.57 +8.25% trading 65 million shares, Sun Microsystems (NASDAQ:SUNW) $3.26 -0.94% trading just over 50 million. Shares of SUNW are under selling pressure as this had perhaps been the company most outspoken against Microsoft's competitive software advantages.

The NYSE Composite (NYA.X) 488.97 +1.78% also looks set to challenge its August 22nd relative highs of 516, but would expect round-number resistance near 500. Here too, breadth is positive with advancers outnumbering decliners by a 2 to 1 margin, with 39 stocks reaching 52-week highs versus just 16 stocks trading new 52-week lows.

Volume leaders on the NYSE have telecom equipment providers Lucent (NYSE:LU) $1.21 +6.14% and Nortel (NYSE:NT) $1.38 +13% both trading just over 340 million shares.

Jeff Bailey

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