The major averages rallied for the fourth straight day on signs that the ailing housing market continues to improve. Advancers led decliners by a 3-to-2 ratio on the NYSE and by a 5-to-4 ratio on the Nasdaq exchange. Volume was reported lower than the prior session on both major exchanges. There were 26 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 28 issues that appeared on the prior session.  The greater expansion recently occurring in the new highs list has offered encouraging news for growth oriented investors.  

The latest data from the ailing housing market helped send stocks higher on Tuesday. Home resales, rose at the fastest pace in seven years which was the latest in a series of stronger-than-expected data from the housing market. Medical stocks rallied after President Barack Obama urged Congress to pass his health-care reform program. The plan is still a work in progress but will be a combination of a private/public funds. The thesis is that the net result for medical companies will be more revenue which should translate into higher profits.

News spread that Ford (F +4.57%) and General Motors (delisted) auto sales were stronger than expected last month. GM also announced that it found a buyer for its Hummer brand. At first the company tried to keep the deal a secret, but around mid-day the NY Times reported that a Chinese company was the buyer, which presents the scenario that the US military will be making future purchases from China to satisfy the need for more Hummer brand vehicles.  This is a historic time for the balance of power between the US and China. Both countries rely heavily on each other for continued growth and prosperity. The Chinese sell their low-priced goods to the US and then buy the US' debt. This dynamic has worked for decades, but many are speculating that it will not continue. We find this notion hard to believe because of basic dollars and cents. Would you snub your largest customer? No. Then why would they? As the world appears to be recovering from the economic slump, it is becoming very clear that China will be a leader on the way out. This is best evidenced by the flurry of Chinese stocks that have emerged as leaders in recent weeks.

Financial stocks ended mixed to mostly lower after several high profile financial companies issued more shares in their rush to repay borrowed TARP funds. Morgan Stanley (MS +0.67%), JPMorgan (JPM -4.46%), and American Express (AXP -4.92%) raised capital by selling more shares. The concern is that, by issuing more stock, the banks will dilute their existing shares. While these financial firms are focused on feathering their own nests and digging themselves out of some deep holes, another unfortunate consequence is the lack of funding flowing toward innovative new companies with a desire to bring forth new products and services that might enhance the quality of life of all.

Turning our attention back to the market, the S&P 500 Index added slightly to Monday's gain that had helped it close above its 200-day moving average (DMA) line for the first time since December 2007. According to Bloomberg, this was its longest streak below its 200 DMA line since the 1930's. Looking forward, as long as the benchmark index continues trading above the 930 level (formerly resistance, now support) then the bulls remain in control. The Dow Jones Industrial Average also traded above its 200 DMA line intra-day for the first time since May 2008, but the blue chip index ended off its high and about 11 points below the mark. It is also encouraging to see a few high-ranked leaders manage to recently break out of sound bases, which offers investors a chance to capitalize on the current rally.

PICTURED: The Nadaq Composite Index has been strong.  On Tuesday, it rallied further above its 200-day moving average line and above prior chart highs.

Charts courtesy www.stockcharts.com 
 

PICTURED: The Retail Index's ($RLX +1.53%) 3rd consecutive gain, helped it to a new 2009 high close. The 50-day moving average (DMA) line's recent bullish 200 DMA line crossover generally bodes well for the RLX.

Neutral Tandem Inc (TNDM +$0.66 or +2.13% to $31.62) gapped up again today for a gain on lighter volume to another new all-time high.  Its color code has been changed to green after its close above its "max buy" level. It recently found prompt support near its 50-day moving average (DMA) line, and its impressive "positive reversal" on 5/14/09 was noted as a sign of institutional support. It gapped up on 4/30/09 for a new all-time high after reporting solid quarterly sales and earnings increases. It has traded up as much as +72.42% since first featured at $18.89 with a $21.08 pivot point in the 3/02/09 Mid-Day BreakOuts Report (read here).

TNDM's latest pivot point of $29.85 was based upon the stock's May 1st high.  For investors who miss a proper buy point whenever any high-ranked stock breaks out from a first stage base, the stock's first pullback to the its 50 DMA line (or its 10-week average when viewing a weekly chart) may offer a them an ideal secondary buy point. Odds of success taper off upon each subsequent test of support at that important short-term average line.  The discipline of the investment system that applies still requires for investors to avoid "chasing" and buying any stock more than +5% above its prior chart high or pivot point.  As always, investors should sell to limit losses if ever any stock falls more than -7% from their buy price.

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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.