The major averages ended the last day of the second quarter lower as consumer confidence unexpectedly fell and home delinquencies more than doubled. Volume totals were reported higher on the NYSE and very near the prior session total on the Nasdaq exchange. Decliners led advancers by nearly a 7-to-5 ratio on the NYSE and by a 5-to-4 ratio on the Nasdaq exchange. There were only 7 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 17 issues that appeared on the prior session.  There had been a welcome improvement in recent days, yet an even greater expansion in the new highs list in the weeks ahead would offer more encouraging news for growth oriented investors.

The major averages ended lower on the last trading day for the month and quarter. The major averages have enjoyed strong gains during the second quarter after a flurry of economic data came in stronger than expected. On March 12, 2009, the same day Bernard Madoff pleaded guilty to the largest ponzi scheme in the history of the world, each of the market averages produced a sound follow-through day which confirmed the current rally which began in early March. Over the 17 weeks that have followed, the major averages tacked on sizeable gains before encountering multi-year resistance.

On Tuesday economic news was mixed as the Conference Board released its consumer sentiment index. The index slid to 49.3 which was six points below the Street's forecast. The decline in consumer sentiment was largely due to the ongoing recession and a recent jump in energy prices.  Elsewhere, the government released data which showed prime mortgages defaults (60 days or more past due) rose +2.9% through March 31 from +1.1% at the same time last year. 

Since early March, the small cap Russell 2000 Index has emerged as the standout winner, surging a whopping +56%! The tech-heavy Nasdaq Composite Index is a close second, after vaulting +49%. Meanwhile, the S&P 500 Index raced +44% higher and the Dow Jones Industrial Average rose +37%. It is important to note that the vast majority of stocks that helped the major averages rally were beaten down, low-ranked stocks bouncing from egregiously oversold levels. Stocks such as Citigroup (C -1.66%) which bounced from $0.97 to just under $5.00, or Bank of America (BAC +0.08%) which rose from $2.53 to $15.07 a share, helped send the major averages soaring -not fresh leadership! There have been a few high-ranked stocks that triggered technical buy signals over the past 17 weeks, and the vast majority of them have technically failed or they were tremendously volatile and difficult for disciplined investors to effectively trade for profits (e.g. NFLX and TNDM). That said, until the major averages trade above their long multi-year downward trendlines, the market's sideways to lower action may likely continue. Until then, patience is king.

PICTURED: The monthly chart of the Dow Jones Industrial Average shows the prior 3 major market cycles. The bear market from 2000-2002 lasted 31 months, and the current bear market just finished its 20th month. We should also note that the current bear market has demonstrated the most severe (% decline) since WWII -damage that may require a longer time to fully "repair."  The major averages are currently trading below multi-year downward trendlines which identify levels that have emerged as formidable technical resistance. Until the bulls manage to lift each of the major averages above their multi-year downward trendlines, the longer-term outlook remains rather bearish.

Charts courtesy www.stockcharts.com

PICTURED: The Biotechnology Index ($BTK -0.63%) edged lower, yet its 50-day moving average (DMA) line has converged and crossed above its 200 DMA, which could bode well for biotech issues in the near term.

Netease.com Inc (NTES -$0.78 or -2.17% to $35.18) is consolidating above its 50-day moving average (DMA) line and an upward trendline connecting its chart lows in recent months.  Those are important support levels to watch just above its most recent pivot point - which it rose above with its 5/28/09 gap up and considerable gain with +79% above average volume, confirming a technical buy signal from a second-stage base. This a high-ranked leader may need to spend more time consolidating before a sound new base might form and offer another ideal entry point. Meanwhile, subsequent violations of support might prompt investors with a profitable interest in NTES to lock in their profits.  Deterioration back into its prior base would obviously raise concerns and trigger technical sell signals. 

Indications of institutional buying demand have been noted after earnings news on 5/20/09 caused a "shakeout" that tested support near its 50 DMA line -and it found prompt support near that short-term average. The number of top-rated funds owning an interest in its shares increased from 18 in June '08 to 67 in March '09, which is very reassuring news in respect to the I criteria. In its last appearance in this Featured Stock Update section on June 19th an annotated graph helped investors identify support under the headline "Prior Highs and 50 DMA Line Are Important Support To Watch" (read here).  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).

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.