When this Special Report Series began March 23, 2008 with Part 1 (read here), the Dow Jones Industrial Average had scored a follow-through day (on 3/20/08) which confirmed the market's latest rally attempt.  The blue chip index was the first and only one of the major averages to have risen above its 50-day moving average (DMA) line. Since that time, the major averages have each made additional progress above their respective 50-day moving average (DMA) lines, but collectively, the Dow Jones Industrial Average, Nasdaq Composite Index, and S&P 500 Index remain trading under their longer-term 200 DMA lines as listed in the following table:

Nasdaq Composite: 50 DMA 2,300 (+4.4%) 200 DMA 2,536 (-5.3%)

S&P 500 Index: 50 DMA 1,340 (+3.7%) 200 DMA 1,439 (-3.4%)

Dow Jones Industrial Avg: 50 DMA 12,365 (+4.7%)  200 DMA 13,093 (-1.1%)

The case for a new Bull Market has become stronger.  However, one fact remains a concern today which was noted in past reports published during the 2000-2003 Bear Market period.  A market is not considered to be in "healthy" shape when all three of the major averages are trading below their longer-term 200 DMA lines.  Right now the Dow is only about -1% from reaching that important threshold. If it leads the way, perhaps we will see the other major averages follow it above their 200 DMA line. Such a technical improvement in the days ahead would be a very reassuring sign for investors, perhaps justifying more aggressive buying in equities. When you look to buy stocks, remember that margin use is actually considered appropriate for growth investors. In the Certification program, the experts recommended full margin use during bull market periods, provided that sound buy and sell rules are always followed. Discipline is obviously required to avoid reckless entries and also limit losses.  Many investors think of margin use as aggressive, saying "It is too risky", however the response from the learned professionals is that, "It is only risky if you don't follow the rules."

Financial Stocks Show Encouraging Improvement
When we revisit the ETF that tracks the financial sector, there has been a clear rise above its downward trendline since Part 2 (read here) of this Special Report Series was published on April 3, 2008. The technical improvement of its chart was further emphasized by a gap up on Friday, April 18, 2008 that helped it end the week above its 50-day moving average (DMA) line. However, the chart included below still shows a clear pattern of lower highs followed by lower lows.  Note that volume behind the past week's gains was unimpressive, which seems to reveal a lack of heavy institutional buying demand.  Gains above the most recent highs ($27.37 and $27.91) could help to clinch an "upturn" in the group, especially so if volume expands behind the move.  As previously suggested, there is a reasonable likelihood that additional gains in the financial sector can help the broader market build more upward momentum.  Any failure to new lows would likely coincide with a broader market capitulation that would prompt investors to reduce exposure by selling stocks and raising cash.

Technical Improvement in Nasdaq's Advance/Decline Line
We are finally seeing signs of improvement in the Nasdaq's Advance/Decline line.  Some new members may have missed prior references to the Advance/Decline line in the "Investing the the New Millennium" articles in CANSLIM.net News issues (December 2007, February 2008), but what is most important to notice is the change that is finally taking place now.  There was a clear period where, for many months, more stocks have been declining than advancing, giving investors rather poor odds.  This is one place where the latest evidence suggests that the tide may indeed be turning in a meaningful way.  Bull Market periods of the past, believe it or not, actually included times when, month after month, more stocks were advancing rather than declining.  This is something to keep in mind because it helps explain the tough patch investors have suffered through.  This is not a prediction we will begin seeing a dramatically favorable slant either, but we will be watching closely.

Hopefully you have done a good job of preserving capital during the weak early 2008 market period. If not, you may lack the confidence to do some more aggressive buying in equities right at one of the most important times - when odds of your success are more favorable. The early part (first 13-weeks) of a new confirmed rally has historically been loaded with new leaders that often go on to produce great gains, so those who pay close attention to the M criteria are now engaging in new buying efforts.  When you look to buy stocks, remember that margin use is actually considered appropriate for growth investors. In the Certification program, the experts recommended full margin use during bull market periods, provided that sound buy and sell rules are always followed. Discipline is obviously required to avoid reckless entries and also limit losses.  Many investors think of margin use as aggressive, saying "It is too risky", however the response from the learned professionals is that, "It is only risky if you don't follow the rules."

More Leadership, More New Highs
In Part 2 of this Special Report Series a sample screen using the CANSLIM.net Leaders List Screening Tool found 101 stocks on the CANSLIM.net Leaders List that were trading at or within 5% of new 52-week highs.  While this report won't include another long table of results (you can conduct you own custom queries any time with the screener), the same screen parameters yielded 161 stocks today.  This offers us another sign of expanding leadership and strength among the high-ranked stocks which are closely being followed each day.  High-ranked leaders meeting each day's mid-day screen results for the CANSLIM.net Mid-Day BreakOuts Report are carefully studied and noted accordingly, and in the past week CANSLIM.net's regular readers noticed a wave of new stocks highlighted in yellow in the reports and added to the Featured Stocks list. 

High-Ranked Leaders That Should Be On Your Watch List