The major averages ended mixed on Friday, but they were collectively lower for the week. This was the first weekly decline since May as investors cashed in positions before the approaching second quarter end. Volume totals were reported considerably higher on both major US exchanges due to Friday's quadruple witching options expirations. Advancers led decliners by almost a 2-to-1 ratio on the NYSE and by approximately a 3-to-2 ratio on the Nasdaq exchange. There were 12 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 8 issues that appeared on the prior session.  A further expansion in the new highs list would offer encouraging news for growth oriented investors. 

On Monday, the major averages sliced below near term support levels which was a serious warning sign for this 15-week rally. Tepid data from New York’s manufacturing sector coupled with a positive outlook from the International Monetary Fund (IMF) weighed on stocks. The Federal Reserve Bank of New York released its general economic index on Monday. The index, which measures manufacturing activity in the New York region, fell to -9.4. Readings below zero signal a contraction. In addition, the report fell short of the Street's -4.6 estimate which bodes poorly for the health of the overall economy. The US dollar rallied after the International Monetary Fund (IMF) raised its outlook for the US economy. The Russian Finance Minister Alexei Kudrin also made the case for a stronger dollar after he said the greenback is in “good shape.” Even though the news sent the US dollar higher, it adversely affected US equities and sent a slew of commodity prices lower. Over the weekend, the Group of Eight (G8) finance ministers met in Italy to discuss the global economy. The group focused on cutting soaring budget deficits and reducing bank bailouts.

On Tuesday, stocks ended lower after mixed news from the economic front was released. Housing starts in May showed surprising strength while producer prices eased. Housing starts jumped +17.2% in May which followed a -12.9% drop in April. Elsewhere, producer prices fell in May and were below expectations. The inflation component of the report (core prices) also fell. Overall producer prices eased to a +0.2% gain after rising +0.3% in April. May's reading was far short of the +0.7% increase the Street had expected. Core prices fell -0.1% in May which helped ease inflationary concerns.

On Wednesday, stocks ended mixed after FedEx (FDX -0.98%) released a disappointing earnings forecast and said the economy is "extremely difficult."  Elsewhere, the rating giant, Standard & Poor's downgraded the credit ratings of 18 banks as Congress prepared legislation to address the financial industry. Several of the country's largest banks began repaying TARP funds, yet this was a foregone conclusion and investors largely yawned at the news. In other economic news, the Labor Department released the consumer prices index (CPI) which showed that the cost of living in the US rose at a slower-than-expected pace in May. This helped allay inflation concerns and was the largest 12-month drop in prices in almost 60 years! The consumer price index rose +0.1% after no change a month earlier. From May 2008- May 2009, the consumer price index fell -1.3% which was the largest decline since 1950. Remember that prices last year were way out of whack with historical norms, so a pullback of some sort is not necessarily a bad thing. At this point, how many people do you know who are really upset at paying lower bills each month?

On Thursday, the major averages ended mixed after healthy economic data helped raise hopes the recession has bottomed. The Labor Department said continuing jobless claims slid by 148,000 to 6.69 million, which was the first decline since January. The report also showed that weekly initial claims increased 3,000 to 608,000. After the open, the Conference Board released its index of leading economic indicators which rose +1.2%. The Philly Fed Survey, a separate report, showed that manufacturing shrank at the slowest rate in nine months in the Philadelphia area. Treasury Secretary Timothy Geithner defended the administration’s plan to extend powers to the Federal Reserve.

On Friday, stocks ended mixed as a slew of options expired. Friday marked the simultaneous expiration of monthly and quarterly options, an event which is known as quadruple witching. Looking at the market, the 15-week rally remains intact, but under pressure. Leadership remains scant, which continues to be the bane for this current rally. It is of the utmost importance for a fresh batch of leadership to emerge in order for any sustained move higher. Objectively, this rally appears to be losing steam as it is aging, and investors must remain cautious and extremely selective until a fresh round of accumulation occurs. Furthermore, if the major averages continue to fall, this rally could quickly end, and raising cash would be prudent.

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PICTURED: The S&P 500 Index pulled back after encountering resistance this week.

Charts courtesy www.stockcharts.com 
 

PICTURED: The Gold & Silver Index  ($XAU +2.98%) halted its slide near its 50-day moving average line.

Netease.com Inc (NTES +$0.01 or +0.03% to $35.36) is a high-ranked leader that is consolidating and still a bit too extended from its second-stage base. Prior chart highs and its 50-day moving average (DMA) line (both near $32) are an important support level to watch on pullbacks. Subsequent violations might prompt investors with a profitable interest in NTES to lock in profits.  Deterioration back into its prior base would obviously raise concerns and trigger technical sell signals.

The number of top-rated funds owning an interest in its shares increased from 18 in June '08 to 68 in March '09, which is very reassuring news in respect to the I criteria. NTES was first featured at $26.75 in the 3/31/09 CANSLIM.net Mid-Day Breakouts Report (read here). A considerable gain with above average volume on 5/21/09 was noted as an indication of prompt institutional 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.   It found 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.  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).

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.