The major averages ended mixed but virtually flat on Friday, yet higher for the week.  Decliners narrowly led decliners on the NYSE and on the Nasdaq exchange while the volume totals were reported lighter than the prior session on both major exchanges. Ideally, one would like to see volume expand when the market rallies and contract when it pulls back. This is exactly what we have seen this week, which is encouraging action. There were 17 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 11 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. Additionally, the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq Composite are now collectively trading above their respective 200-day moving average (DMA) lines.  The major indices' progress above their 200 DMA lines, and the expansion in the new highs list, were the two very important improvements which Ken Gruneisen mentioned investors should be watching for in the June 2009 issue of CANSLIM.net News under the headline "Leadership Expansion Needed To Fuel A Healthy Summer Rally" (published last weekend -read here).

On Monday, General Motors (GM delisted) filed for Chapter 11 bankruptcy protection. The market opened higher, rallying in the face of the largest bankruptcy ever, sending the major averages above their respective near-term resistance levels as volume expanded. The market's ability to shrug off the bad news and roar higher set the stage for a very healthy weekly advance. Aftering enjoying very healthy gains from the March 2009 lows, the market had spent the latter half of May consolidating. Now, the market vaulted above resistance near the major averages' respective 200 day moving average (DMA) lines. The prior resistance now serves as a very important support level to watch. In the weeks and months ahead, the bulls remain in control as long as support (formerly resistance) is not breached. In other news, shares of GM and Citigroup (C -3.08%) were removed from the Dow Jones Industrial Average, and Cisco Systems Inc (CSCO +1.02%) and Travelers Cos Inc (TRV +0.30%) replaced the two icons.

The news on the economic front was positive, personal spending for April declined -0.1%, which topped the average forecast and was an improvement from March. Meanwhile, personal income for April showed a surprise +0.5% in the face of higher unemployment. Construction spending for April was also stronger than expected and rose by +0.8% month-over-month. The ISM Manufacturing Index for May was +42.8, which largely matched expectations however it was stronger than the prior month's reading. The reading indicated that manufacturing activity continues to contract but the rate of contraction is falling. 

On Tuesday, the major averages edged higher for the fourth straight day on signs of improvement in the housing market. Home resales rose at the fastest pace in seven years, which was the latest in a series of stronger-than-expected data concerning the housing market. The rally helped the S&P 500 Index 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.

On Wednesday, the major averages snapped a four day winning streak, impacted by sour economic news and a stronger US dollar. The country's largest private employer services firm ADP said employers slashed -532,000 jobs in May. Later in the day, the Institute for Supply Management’s (ISM) index of service industries was 44 which missed the Street's forecast. The latest studies show that the service industry presently makes up over +80% of the economy. Federal Reserve Chairman Ben S. Bernanke testified in Washington today and told lawmakers that large US budget deficits threaten financial stability. The big news on Wednesday was the US Dollar and its relationship to both equities and commodities. A slew of commodities got smacked on Wednesday as the US dollar advanced. It is important to remember that the US dollar and commodities are inversely related, meaning commodity prices fall when the dollar rallies. The inverse is also true, such that commodity prices rise when the dollar falls. This relationship is important because the US dollar rallied smartly during the latter half of 2008 while commodities plunged. Meanwhile, the greenback has spent the past few months in a virtual free fall which has helped lift a slew of commodities. Interestingly, the inverse relationship between the dollar and stocks also exists. The major averages have surged since the March near term low while the dollar has virtually imploded. This is an important relationship that will likely continue to dominate global capital markets as investors scan the globe for outsized returns.

On Thursday, the major averages shrugged off negative retail sales data and ended higher as commodity prices rebounded sharply from Wednesday's sharp sell off and the dollar fell. The Labor Department said initial jobless claims slid by 4,000 to 621,000 in the week ended May 30. This was in line with forecasts from a revised 625,000 the prior week. The report also showed that the total number of people collecting unemployment insurance fell for the first time in nearly five months which broke the streak of 17 consecutive records.

Before Friday's opening bell, the Labor Department released May's job's report. The government said that US employers cut a lower-than-expected -345,000 jobs last month which was the smallest reading in eight months. Meanwhile, the unemployment rate jumped to +9.4% which was the highest level since 1983.

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PICTURED: The benchmark S&P 500 Index has paused near prior chart highs after rallying above its 200-day moving average line. Leadership expanded nicely this week which bodes well for this current rally. Remember to always keep your losses small and never fight the tape!

Charts courtesy www.stockcharts.com 
 

PICTURED: The Internet Index ($IIX +0.32%) posted a modest gain, which made it a standout on Friday. Its 50-day moving average (DMA) line recently crossed above its 200 DMA line, which is a bullish indication that usually bodes well. This week it charged to new 2009 highs, and it is one of the leading gainers for the year thus far!

Netease.com Inc (NTES +$0.62 or +1.66% to $37.94) hit another new all-time high today while extending its winning streak to 7 sessions. Disciplined investors avoid chasing stocks that get more than +5% above their pivot point, and it is extended from a sound base now -so it is outside of the investment system's guidelines for any new buying efforts to be justified!  In fact, investors with a profitable interest in NTES to protect would be wise to watch closely for future sell signals which could prompt them to lock in profits.  Technically, its prior chart highs are now a critical support level to watch, and any subsequent deterioration back into its prior base would obviously raise concerns and trigger technical sell signals.

A considerable gain with above average volume on 5/21/09 was noted as an indication of prompt institutional (the I criteria) support, and its color code was then changed to yellow with a new pivot point of $32.75 based upon its 5/07/09 high plus .10.  This followed its first test of support at its 50-day moving average (DMA) line on 5/20/09 after consolidating in a tight range for several weeks following a previous steady advance into new all-time high territory.  NTES was first featured at $26.75 in the 3/31/09 CANSLIM.net Mid-Day Breakouts Report (read here). This high-ranked Chinese Internet - Content firm was also summarized in greater detail including an annotated graph in the April 2009 issue of CANSLIM.net News (read here). The number of top-rated funds owning an interest in its shares increased from 18 in June '08 to 66 in March '09, which is very reassuring news in that department. 

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.