The major indices ended lower as volume totals were lower than Friday's levels on the 11th day of the current rally attempt. Advancers led decliners by a small margin on the Nasdaq exchange, while there was closer to an even mix but a slightly negative bias on the NYSE. New 52-week highs outnumbered new lows on both exchanges and new lows were in the single digits on each exchange.  There were 24 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 31 issues that appeared on the prior session. 

Stocks did much of nothing on the first trading day of this week even after the latest round of M&A news was released and several high profile earnings announcement topped analyst estimates. Barring some unforeseen event, the average company in the S&P 500 is on track to snap a record nine quarter earnings slump as earnings season slows down. It is important to note that even though over +70% of S&P 500 companies have topped the Street's Q4 estimates, 2010 earnings forecasts have fallen from the beginning of the season. Analysts believe that earnings will grow by +26.3% in 2010 which is down from the +30.6% projected in early January. In addition, the S&P 500 is trading below where it closed when earnings season began in early January.

Turning to the housing front, the latest data shows that the rate of delinquencies and new foreclosures fell in the fourth quarter while a new record was set in the number of home loans which are behind on payments. The Mortgage Bankers Association said that the percentage of loans that were in foreclosure or behind at least one payment surged to +15.02% which is the highest since the MBA's records began in 1972. Many analysts believe that foreclosures will likely stay high for the rest of the year as the economy and the jobs market continue to recover from the worst recession since WWII.

Looking at the market, Monday marked Day 11 of a new rally attempt which means that as long as the February 5th lows are not breached the window remains open for a new follow-through day (FTD) to emerge. A new follow-through day will confirm the current rally attempt and will be produced when one of the major averages rallies at least +1.7% on higher volume than the prior session as a new batch of leaders break out of fresh bases. However, if the February 5, 2010 lows are breached then the day count will be reset and a steeper correction may unfold. So far, the market’s reaction has been tepid at best to the latest round of economic and earnings data which remains a concern. Remember that the market remains in a correction until a new new follow-through day emerges. Until then, patience is paramount.

Professional Money Management Services - A Winning System - Inquire today!
Our skilled team of portfolio managers knows how to follow the rules of this fact-based investment system. We do not follow opinion or the "conviction list" of some large Wall Street institution which would have us fully invested even during horrific bear markets. Instead, we remain fluid and only buy the best stocks when they are triggering proper technical buy signals. If you are not completely satisfied with the way your portfolio is being managed, Click here to get connected with one of our portfolio managers. *Accounts over $250,000 please.  ** Serious inquires only, please.

PICTURED: The Nasdaq Composite Index is consolidating above its 50-day moving average (DMA) line on light volume.

Charts courtesy www.stockcharts.com

PICTURED: The Bank Index ($BKX +1.91%) posted an encouraging gain to start the week, and recent strength in this influential financial group has helped to underpin the latest rally effort. At Monday's close the BKX was only -3.5% off its recovery high.

Aruba Networks Inc. (ARUN +$0.01 or +0.08% to $12.19) held its ground today. It gapped up 2/19/10 and was featured in the mid-day report (read here) as a considerable gain for a new 52 week high on more than 8 times average volume helped it break out from a flat base-on-base pattern above its 50-day moving average line. A gap up gain with 8 times average volume is an indication of heavy institutional (I criteria) buying demand.

Quarterly earnings increases (excluding items - click here to read about "Q2 Loss" in the Business Journal) have been strong and sales revenues in the latest quarter ended Jan 31, 2010 showed impressive acceleration. The strong technical action was an immediate response to its improving fundamentals. Its current quarterly earnings (C criteria) increases have been above the +25% minimum guideline and earnings in recent years followed prior annual losses. 

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.