The major averages rallied on the first trading day of 2010 as the US dollar fell and healthy economic data was released from the US and China. As expected, volume, an important indicator of institutional sponsorship, was reported higher than Thursday's pre-holiday totals which indicated large institutions were more aggressively buying stocks. Advancers trumped decliners by a 4-to-1 ratio on the NYSE and by over a 3-to-1 ratio on the Nasdaq exchange. There were 63 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, higher than the total of 24 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange, while new lows were back in the single digits on each exchange.

Overnight, stronger than expected manufacturing data was released from China which sparked a broad based rally in overseas markets. Manufacturing in China grew by the strongest level since April 2004 and helped allay concerns that the global economic recovery was waning. It is important to note that China was one of the first countries to recover from the first global recession since World War II. The buying continued in the US when the Institute for Supply Management’s (ISM) factory gauge rose to 55.9. The report topped estimates and was the highest level in more than three years, which suggests the US manufacturing sector is definitely in recovery mode.

Charts courtesy www.stockcharts.com

PICTURED: The Broker/Dealer Index ($XBD +2.96%) posted a solid gain, rallying up from its 50-day moving average (DMA) line.

ArcSight, Inc. (ARST +$3.15 or +12.31% to $28.73) gapped up today and triggered a technical buy signal as it blasted above its latest pivot point. It quickly rallied on above its "max buy" level to new all-time highs with volume on the session more than 3 times average behind its considerable gain. Its color code was changed to green as it soon got extended from its latest 8 week base. Its recent rebound above its 50-day moving average (DMA) line was noted as it helped its outlook improve. Patience had allowed for it to form a sufficient new bullish base pattern, however the consolidation on the right side did not constitute a proper downward sloping "handle" for an ideal cup-with-handle pattern. Normally stocks are expected to correct by about -10-15% as the handle forms. Its powerful breakout on volume was an undeniable sign of institutional buying demand, nonetheless, even without a more recent shakeout.  Prior chart highs in the $27 area are now an important support level, while any technical deterioration back into its latest base would raise concerns.

While ARST was considered a "late-stage" breakout possibility when first featured, it continued putting up solid sales revenues and earnings results since first featured in yellow at $19.91 in the 9/01/09 mid-day report with an annotated daily graph (read here).

Color Codes Explained :
Y - Better candidates highlighted by our staff of experts.
G - Previously featured in past reports as yellow but may no longer be buyable under the guidelines.