SAN FRANCISCO -- There was further escalation of violence in the Middle East overnight, but the other issues nagging at the market

yesterday --


( ENE) and Argentina -- got a reprieve today. (Reprieve being the operative word.)

Enron rose 115% to 86 cents after securing $1.5 billion in new financing from

J.P. Morgan Chase

(JPM) - Get Report



(C) - Get Report

. In Argentina, a restriction on withdrawals appears to have stemmed a run on the nation's banks.

Combined with some cautiously

optimistic comments from


(CSCO) - Get Report

, which rose 3.3%, it was enough to push major averages solidly higher today. The

Dow Jones Industrial Average


S&P 500

each gained 1.3%, and the

Nasdaq Composite

climbed 3.3% to its highest close since August.

In addition to Cisco, the Comp was buoyed by chip-equipment stocks, which got a boost from UBS Warburg's call that orders were bottoming. Among the names inspired by the call were industry giant

Applied Materials

(AMAT) - Get Report

, which rose 7.8%, and smaller players such as

Electro Scientific Industries

(ESIO) - Get Report

, which soared 23.7%. The Philadelphia Stock Exchange Semiconductor index rose 6.5%.

The market's sideways movement prior to today did not dissuade those who believe the upward trend will continue, faith that was rewarded today.

"The market's consolidation has been shallow -- more shallow than most participants have been looking for," said Scott Bleier, chief strategist at Prime Charter, which was recently acquired by Fahnestock. "There continues to be significant money 'under' the market looking for an entry point, especially in big-cap tech."

Bleier conceded long-term technical indicators "are most definitely overbought" and that today's action moved near-term indicators into overbought territory again. But "overbought markets rise the most and the quickest," he argued, noting the market's recent sideways action coincided with "healthy" market breadth.

Arnhold & S. Bleichroeder's John Roque contended otherwise in his

latest filing on

, but the market agreed with Bleier today. Advancing stocks bested declining issues by better than 2 to 1 in

Big Board

trading, while new 52-week highs bested new lows 100 to 33. In Nasdaq trading, advancers led 22 to 13, while new 52-week highs bested new lows 102 to 49.

Moving the Averages, Reprise

Bleier further noted the major stock proxies are "hovering around major moving averages and major psychological resistance," predicting the indices will break through those levels, then pull back to test them.

Classic technical analysis suggests if the averages pass that test and can build a base of support, they will move solidly higher thereafter. Bleier didn't venture a forecast on whether that will transpire, but I'm grateful he mentioned the issue of moving averages, because I believe the topic, after briefly subsiding, is going to re-emerge as a key focus for many investors.

After today's close of 1963.10, the Nasdaq Composite is above its 200-day moving average of 1949. It was the first time the Comp broke its 200-day moving average in 15 months. Similar levels for the Dow and S&P are at 10,145 and 1177, respectively, not as close as the Comp, but within striking distance.

The question remains, however, just how important crossing the 200-day moving average is, especially because the averages remain in a down-sloping pattern for the three major proxies.

The fact that major averages are "snuggling up to" levels from which they broke down in late August-early September "is probably more indicative of real battle going on," than the issue of the moving averages, said John Bollinger, founder of in Manhattan Beach, Calif.

But moving averages are "actually quite significant, primarily because people are focusing on

them," Bollinger said. "If we can get above those

moving averages, investors are going to have their confidence reinforced

and I don't think investors care if

the averages are sloping up or down."

Bollinger suggested the focus on the moving averages can become self-fulfilling but cautioned investors from overestimating the power of such data points. "They are benchmarks

of rather than causes" of market action, he said.

If an index fails to move above its moving average, or does so only marginally and then retreats, "then you have confirmation of a negative trend and you take some profits and make defensive moves," the veteran technician explained. Conversely, if an index consolidates just below its moving average, then pops through it and holds on a retest, "then you know you've seen a shift in trend and change in dynamics from where selling was the primary mission to where buying is the primary mission."

Bollinger expects a "surge of volatility" in the Nasdaq and suggested its recent consolidation pattern could be a harbinger of a "pop to the upside," as today's session confirmed. However, "if we fail and roll over, we're more likely see a real tussle between the tax sellers and bargain hunters" for the remainder of December, he cautioned.

Additionally, the technician observed that the Dow and S&P have "much less constructive charts" than the Comp, which brought us to one of Bollinger's long-standing observations: that for all the focus by many investors and the press on the big-cap averages and names, he still believes small- and mid-cap stocks are the best place to be invested.

Heading into today, the S&P 600 Small-Cap index was already trading above its 200-day moving average of 215.36 and closed up 2.4% at 221.22. Meanwhile, the S&P 400 Mid-Cap index eclipsed its 200-day moving average of 487.48, rising 1.9% to 490.44.

"It's not that large-cap isn't the place to be, it's that overall, I think small- and mid-cap are going to do better in the longer haul," he said. So much damage was done in large-cap tech stocks that what's going on is "more snapback vs. real recovery," he suggested.

As for specifics, Bollinger is long

Advanced Micro Devices

(AMD) - Get Report

and is eyeing for possible purchase the "great patterns" in

Vulcan Materials

(VMC) - Get Report


Skechers USA

(SKX) - Get Report


Smith International

( SII).

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.