The major averages closed mixed after spending most of the session in the red as investors digested the latest round of mixed economic data. Volume, an important indicator of institutional sponsorship, was reported higher than Monday's totals which indicated large institutions were not aggressively dumping stocks. Advancers led decliners by a 3-to-2 ratio on the NYSE, but decliners narrowly led advancers by a 5-to-4 ratio on the Nasdaq exchange. There were 58 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, slightly lower than the total of 63 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 remained in the single digits.

There were two important economic data points that were released today: factory orders and pending home sales. First, the good news, the Commerce Department said that factory orders in November rose +1.1% which more than doubled the Street's estimate for a +0.4% increase. The stronger than expected report reiterated healthy manufacturing data released on Monday from both the US and China. The report showed that demand for steel, computers, and chemicals all remained strong which bodes well for the ongoing economic recovery.

Elsewhere, the National Association of Realtors said pending home sales plunged -16% in November, which was the lowest reading since June and fell short of the Street's lowest estimate. Pending home sales are defined as the number of buyers who agreed to purchase previously occupied homes. A pending sale is one in which a contract was signed, but not closed. It is important to note that the index is used as a leading indicator of existing home sales, not new home sales. The mixed economic data made it difficult for investors to ascertain the health of the economy. That said, many are still waiting for the month of December's official jobs report which is slated to be released before Friday's opening bell.

Market Action- Price & Volume Remains Healthy
Stocks remain strong as they managed to brush off the negative housing data and close near their intra-day highs on Tuesday. The current rally is in the middle of its 44th week (since the March 2009 lows) and on virtually all accounts looks strong. In addition, most bull markets historically lasted for approximately 36 months, so the fact that we are beginning our 10th month suggests we have more room to go. The Dow Jones Industrial Average, small cap Russell 2000 Index, S&P 500 Index and Nasdaq Composite and NYSE Composite indices are all trading near their respective 2009 highs which also bodes well for this rally. Leadership is beginning to expand which is a welcomed sign, and ideally it will continue to expand over the next few weeks as the major averages continue advancing.

PICTURED: The Nasdaq Composite Index closed higher with a gain on above average volume on Tuesday.

Charts courtesy www.stockcharts.com

PICTURED: The Bank Index ($BKX +2.24%) has started the new year with 2 consecutive gains which helped it rally above its 50-day moving average (DMA) line for the first time since October.  Not long ago, this index was nearly threatening to undercut prior chart lows in the $41 area, weakness which might have been a more ominous sign. Weakness in the financial indexes in the latter months of 2009 had raised concerns that the broader market was also due to spend time consolidating. This near-term strength is a very welcome improvement this week that certainly has helped the overall market outlook. The financial group is a reliable leading indicator. Longtime readers of this commentary know that the financial group topped first in 2007 and then led the way down.  Financial shares also helped lead the recovery from the March 2009 lows. 

Longtop Financl Tech Ads (LFT -$0.79 or -1.98% to $39.10) suffered a loss on higher volume today after gapping down, but it ended near its session high.  Its prior gain with above average volume for a new all-time high had helped it get extended after recently rising from a choppy 14-week base. It is trading more than +5% above its pivot point and above its "max buy" price, so disciplined investors would avoid chasing it. Its Up/Down Volume Ratio of 2.3 is an unbiased sign of recent accumulation taking place.  Recent highs and its 50-day moving average line are now coinciding in the $33 area and defining an important support level to watch.

A proposed offering of additional shares on 11/16/09 seems well received by the market. Its fundamentals remain strong.  The number of top-rated funds owning an interest in its shares rose from 20 funds in Dec '08 to 55 funds in Sept '09, which is reassuring concerning the I criteria.  It has reported strong annual and quarterly earnings increases (good concerning the C & A criteria) backed by strong sales revenues increases. Return on Equity of +20% is above the +17% guideline. Upward progress can often be hindered by additional share offerings for the near-term, yet institutional investors typically increase their interest through the process.   LFT was first featured at $22.19 on Thursday, April 02, 2009 in the CANSLIM.net Mid Day Breakouts Report (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.