Health care, biotech and drug ETFs rallied Monday on news that French drugmaker Sanofi-Aventis SNY is buying household and personal
care products maker Chattem CHTT for about $1.9 billion. Chattem stock skyrocketed 33% to 93.14. The market may have also cheered
a move by the Senate to clear a major hurdle in a health care reform bill Monday by making the first of three procedural votes.

Power Shares Dynamic Pharmaceuticals PJP jumped 2.6% to a 52-week high of 18.58 in strong trade. PJP has returned 15% year to
date vs. 23% for the S&P500. IShares Dow Jones U.S. Healthcare Providers Index IHF gapped up 2.3% to 49.33 in heavy trade. It’s returned 38%
year to date. Its rank highest among health ETFs. Aetna AET, the biggest mover in the 47-stock ETF, surged 4.7% to 34.04 in robust volume. It’s extended 13%. The top holding in IHF, United-Health UNH makes up 11% of the fund. Standard & Poor’s upgraded United-Health to a buy rating Thursday and raised its target price. Deutsche Bank, on the other hand, issued a hold rating on the stock on Wednesday, after the House passed a bill that would extend a health care subsidy to lower insurance premiums forsome unemployed workers.

Cobra Helps Hospitals. The measure would lengthen the period inwhich the government subsidizes 65% of the continuing Cobra health care coverage for the unemployed from nine to 15 months. Cobra, or the Consolidated Omnibus Budget Reconciliation Act, gives the unemployed the right to keep using their employer’s health plan but pay for it themselves. Extending Cobra is “fundamentally negative” for managed-care providers
because they “typically lose money on their Cobra enrollees,” wrote Deutsche Bank analysts Darren Lehrich and Scott Fidel in a client note. But extending the Cobra subsidy should be positive for hospitals and “serve as an important ‘bridge’ for the hospitals until a real jobs recovery will drive more employer-sponsored insurance coverage,” they wrote.

United Health shares broke out of from Dec. 10. It’s 8% extended from a 29.84 buy point. It faces overhead resistance at 33.49. Deutsche Bank on Thursday issued a buy rating on another stock in IHF, Medco Health Solutions MHS, a pharmacy benefit management firm. Deutsche analysts wrote in a client note that health care reform plans under debate in Washington “should be a net positive for the PBM industry due to increased coverage
leading to more script volume.”

Medco’s stock is trading between a 66.10 buy point and support at the 10-week average after rebounding
from a light-volume pullback to the 10-week line. SPDR S&P Biotech XBI gapped up 2% to 52.42 after clearing prior resistance at 52.43 intraday. This follows a high-volume gain of 1.62% Friday. TheETF broke above the neckline of an inverted head-and-shoulders pattern with the potential of rising 10% or more, according to Chuck Dukas, a technical analyst and founder of TREND advisor.com, a stock advisory firm. XBI has shed
2% year to date. One of XBI’s top-10 names, Human Genome Sciences HGSI, led Monday’s advance. It climbed 5% in above-normal trade to clear a 29.39 buy point in a three-weeks tight pattern. Morgan Stanley initiated coverage of the drug maker with an overweight rating.

Nasdaq 100’s Annual Revamp The Nasdaq 100 index underwent its annual make over on Monday. The index, which tracks the largest
non financial domestic and international stocks listed on the exchange ranked by market capitalization, saw seven stocks leave: Akamai
Technologies AKAM, Hansen Natural HANS, IAC/InterActive IACI, Liberty Global LBTYA,Pharmaceutical Product Development PPDI, Ryanair RYAAY
and Steel Dynamics STLD. They were replaced by BMC Software BMC, Vodafone VOD, Mattel MAT, Mylan MYL, SanDisk SNDK, Qiagen NV QGEN and Virgin Media VMED.

Power Shares QQQ Trust QQQQ, which tracks the Nasdaq 100, outperformed the major indexes this year with a 51% return. It eclipsed the S&P 500 by 28 percentage points and the Dow by a whopping 32 percentage points. Seagate STX led the portfolio with a 299% gain, followed by Liberty Media LINTA, up 236% and Baidu BIDU 212%. Genzyme GENZ, Pharmaceutical Product Development PPDI and Apollo Group APOL lagged the group
with losses of 21% to 28%.

Call buying picked up in MGM Mirage as traders bet the casino company may have put in a bottom, said optionMonster analyst David Russell in comments on the Web site. For disclosure, Russell is long the calls. OptionMonster's tracking programs detected bullish trading patterns in the heavily shorted leisure stock, he said. Call volume earlier was almost four times the average level amid heavy buying, while three times more puts were sold than purchased. In one notable trade, an investor snapped up about 20,000 January 2011 $20 calls against open interest of 1,739 contracts. Most of the
trades were priced for 70 cents. MGM shares rose 5.15 percent to $9.60 in

afternoon trading. "The stock also has the potential to get squeezed higher because short interest represented a hefty 43 percent of the float on Nov. 30," he said. Other players bought the January $10 calls in size for 29 cents to 37 cents, although volume was below open interest. OptionMonster programs also detected new money flowing into the January $11 calls.

Indexes Add To Recent Gains As Volume Dwindles

Stocks shrugged off disappointing economic data Wednesday as they trotted mostly higher.

The Nasdaq rose 0.8%, the NYSE composite 0.5%, and the S&P 500 0.2%. The Dow was flat. Volume was down on both major exchanges for a third day in a row.

Yet the session proved productive in a technical sense. The Nasdaq's distribution day count fell to three. The Nov. 18 distribution day became too dated. Also, the Nasdaq has climbed more than 5% from its Nov. 19 distribution day

The tally of higher-volume declines remained unchanged for the other major indexes.

Before the open, the market had to digest some data on personal income and spending. Both figures came in lower than expected, but the income jump was the best in six months. The market apparently decided that was good enough. The indexes opened higher.

The market tumbled at 10 a.m. EST, when new-home sales for November missed forecasts badly. The indexes, though, soon began chugging higher.

Among sector groups, gold-mining, steel and Internet did well. Most sector groups rose, in fact.

The dollar weakened, which helped boost oil and gold-mining stocks. Throughout 2009, stock indexes generally have strengthened as the dollar crumbled, but that relationship hasn't been so strong recently.

Action was quiet among top-rated stocks Wednesday, though a few showed vigor.

China Automotive Systems (CAAS) bounced off its 10-week moving average in strong volume. It gained 13% in fast trade, closing near session highs.

On Wednesday, China's central bank said the country's recovery is still weak. This eased fears that a tightening was ahead. Beijing recently had hinted at moves to cool real estate speculation, which sent the Shanghai composite down 8% in six sessions.

The Shanghai composite rose 0.8% Wednesday. Chinese stocks that trade on U.S. exchanges also appeared to benefit.

The Shanghai has beaten the U.S. indexes this year, up 69% vs. 44% for the Nasdaq.

Many of the Chinese stocks that rose Wednesday, however, are thinly traded. Others notched nice gains in sluggish volume.

One other area showing strength is small caps. The S&P 600 jumped 1.2% Wednesday and is up 9% this month — best among the indexes. In 2009, whenever the market did well, small caps led. They lagged when the market stalled beginning in October.

A couple of breakouts Wednesday raised question marks.

American Greetings (AM) cleared a 10-week base after reporting earnings. But the stock gave up all gains and closed slightly lower.

Expedia (EXPE) rose past a 26.80 buy point but volume was well below average.