Yesterday, stocks started weak, but by late morning, the financial sector caught fire among investors looking for the best stock picks and pulled the market along to another gain. The winning streak is now five straight days up for the Dow Jones Industrial Average, a perfect start for the new year.

The ADP employment change reading showed that almost 300,000 private payrolls were added in December, which was almost three times higher than expectations. It was also the biggest monthly increase in the history of the index. There was speculation that since the increase is so high, there would also be a big increase in the non-farm payrolls report on Friday. There is little doubt that this report contributed greatly to the stock market’s gain.

In corporate news, Qualcomm (NASDAQ: QCOM) rose 2.1% following an agreement to buy Atheros Communications (NASDAQ: ATHR) for $45 per share. Walt Disney (NYSE: DIS) gained 2.5% after Goldman Sachs Group (NYSE (NYSE: GS) added it to their “conviction buy list.” AIG (NYSE: AIG) jumped 7.34% after news that a $3 billion bid had been made for its Taiwan unit.

Family Dollar Stores (NYSE: FDO) fell 8.8% after cutting its earnings outlook for Q1. And BJ’s Wholesale Club (NYSE: BJ) lost 2.2% after announcing the close of five stores and December same-store sales failed to meet expectations.

Treasurys fell yesterday following the strong ADP numbers taking the 10-year note to a yield of 3.461%. The U.S. dollar was much higher on the strong jobs numbers, taking the euro down to $1.3155 versus $1.3297 on Tuesday.

At the close, the Dow gained 32 points to 11,723, the S&P 500 rose 6 points to 1,277, and the Nasdaq gained 21 points at 2,702. The NYSE traded over 1 billion shares with advancers ahead of decliners by 1.4-to-1. The Nasdaq crossed 509 million shares with advancers ahead by 2.4-to-1.

What the Markets Are Saying

Yesterday’s new high closes for all of the major indices, except the NYSE Composite, has confirmed the bull’s short-, intermediate- and long-term trends. And the resumption of the financial group’s lead following a day of profit-taking is also encouraging because it verifies that the healthy group rotation mentioned on Monday is alive and well.

Congratulations to those who bought and held Tuesday’s Trade of the Day, the Direxion Daily Financial Bull 3X Shares (NYSE: FAS), which gained 96 cents yesterday and is well on its way to our target of $32, closing yesterday at $30.12.

Our minimum near-term target of 11,785 for the Dow is now very close, just 63 points away, while the S&P 500’s is just over 1 point from 1,278. The Nasdaq has achieved its goal of 2,700 to 2,710 by closing yesterday at 2,702. These targets match the mid-August 2008 resistance highs for the Dow and S&P 500. The Nasdaq high matches the double-tops of July and December 2007.

The significance of achieving these numbers? The real battle has just begun and we have had an impressive beginning to the new year. But 2010 started the same way until selling erupted in mid-January, which cut the rally short. It wasn’t until mid-March that a renewed thrust drove stocks forward again.

Will the same pattern evolve? Probably not. But as we move higher, the public will resume their bullish stance and our internal indicators will again hit new high ground as resistance stiffens.

Yes, the market “climbs a wall of worry,” and our strategy is to be long stocks. But consolidations do occur, so here are the near-term support numbers for each index:

• Dow 11,550
• S&P 500 1,245 (December breakout)
• Nasdaq 2,670 (December breakout)

On Jan. 14, 2010, and several times before, I estimated a year-end 2010 target of S&P 1,245, saying, “a [Standard & Poor’s] target [for] the S&P 500 is at between 1,215 and 1,250 by year-end, which puts my estimate of 1,245, based on technical analysis, nicely within that range.”

The close on Dec. 31 was 1,257.64. Let’s hope that the targets for this year are exceeded by an equal amount.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.