The major averages ended lower on Wednesday after a weak regional economic report, but the month and quarter still ended on a strong note.  Volume was higher than the prior session which marked another distribution day for the NYSE indexes, but the loss was too small to be considered distribution day for the Nasdaq Composite Index. Decliners led advancers by about a 3-to-2 ratio on the NYSE and on the Nasdaq exchange. There were 21 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 from the 23 issues that appeared on the prior session. New 52-week highs still outnumbered new 52-week lows on both exchanges.

The Chicago Purchasing Managers Index was below estimates which sent the Dow Jones Industrial Average down over 100 points before a late-day rally helped send the blue chip index and all others back to closes in the upper half of their intra-day ranges. Since March, the major averages have rallied smartly, even in the face of negative economic data, which is an encouraging sign. The Chicago PMI slid to 46.1 in September rather than rising to the 52 that economists expected. The index fell below the boom/bust line of 50. It is considered a precursor to the National Institute for Supply Management Index to be released on Thursday. The market also had some positive economic news, the Commerce Department revised its reading for the second-quarter gross domestic product. The government said GDP, the broadest measure of the economy, fell to a pace of just +0.7% in the spring. The new reading was better than the annualized -1.1% decline that economists were expecting.

For the quarter the Dow Jones Industrial Average rose +14.3%, which was its largest quarterly gain since the +17.1% surge in the fourth quarter of 1998, during the dot-com bubble. The benchmark Standard & Poor's 500 Index surged +15.0% for the quarter.  The Dow has rallied in 6 out of the past 7 months which is a very strong sign. Even stronger is the fact that the S&P 500 and Nasdaq Composite indices have both ended higher every month since March - posting gains in 7 consecutive months). Looking forward, as long as the market continues advancing this rally remains intact and investors should stand ready to buy ideal looking breakouts.  If the distributional action we have seen this week continues, however, it will be noted in ongoing commentaries as a warning for investors to be more proactive in locking in profits and reducing their market exposure. 

PICTURED: The tech-heavy Nasdaq Composite Index is strong.  It surged +19.6% in the third quarter!  Its last streak of 7 straight monthly gains was in 2003, which marked the beginning of a multi-year Bull Market.

Charts courtesy www.stockcharts.com

PICTURED: The Healthcare Index ($HMO -1.81%) in recent weeks has slumped under its upward trendline and its 50 DMA line.  The weaker action does not bode well for healthcare stocks in the near term.

NVE Corp (NVEC -$0.28 or -0.52% to $53.16) is a high-ranked leader in the Electronics - Components/Connectors group.  It ended with a small loss today on lighter volume, slumping further below its 50-day moving average (DMA) line which has now acted as a resistance level. Despite some encouraging signs of support arriving near its upward trendline and above prior chart lows in the $49 area, after recent distributional pressure it needs more time to form a new sound base. Meanwhile, further deterioration would trigger additional worrisome sell signals.  It was noted when closes under its 50 DMA line for the first time since March raised concerns and triggered a technical sell signal. Its Accumulation/Distribution rank is down to a D now, having fallen from a B on 9/16/09 when it last appeared in this section under the headline, "Negative Reversal, Yet Still Above Max Buy Level." That negative reversal was followed by the gap down loss on heavy volume that negated its latest breakout.  This makes a good example for study of how negative reversals can signal a change in trend. 

Keep in mind its small supply (the S criteria) of only 4.68 million shares outstanding which can contribute to greater than usual volatility. Be mindful of its still rather minuscule sales revenues. These concerns heighten the need for great discipline in trading (buying AND selling).  NVEC was first featured in yellow at $33.85 in the Friday, March 13, 2009 Mid-Day Breakouts Report (read here). This high-ranked Electronics - Components industry group leader has a good quarterly and annual earnings growth history (C & A criteria) and even showed acceleration in the latest report for the quarter ended June 30, 2009. In that period sales revenues were up +41% and earnings were up +53%, even bigger percentage increases than prior solid (+25% or better) earnings comparisons.  That is what we call earnings growth acceleration, and it is a very encouraging characteristic commonly seen in the market's biggest winners.

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.