The major averages closed mixed and without any great changes after central banks, flush with record reserves, announced that they are moving away from the US dollar and into the euro and the yen. Volume was reported lighter, revealing no great buying conviction, or any further distribution from the institutional crowd. Advancers narrowly led decliners on the NYSE and while decliners slightly outnumbered advancers on the Nasdaq exchange. There were 71 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, sharply higher from the 46 issues that appeared on the prior session. New 52-week highs were in the triple digits, substantially outnumbering new 52-week lows, the later of which were in the single digits on both major exchanges.  The recent expansion in the new highs list is another encouraging sign of healthier market action, as any sustainable market rally requires a healthy crop of strong leaders.

The major averages opened higher after policy makers across the globe announced record reserves during the third quarter. Bloomberg.com reported that foreign currency holdings grew by $413 billion last quarter, which is the highest reading since 2003, to $7.3 trillion. Central banks which reported currency breakdowns put +63% of the new cash into euros and yen in the third quarter according to Barclays Capital. That is the highest percentage in any quarter, with more than an $80 billion increase. The US currency has lost -10.3% on a trade-weighted basis over the past six months, which is the largest decline since 1991. The report showed the US dollar’s 37% share of new reserves fell from about a +63% average since 1999. The US dollar has steadily fallen over the past few years which has led many to question the official position of the US government vis-a-vis the greenback. The dollar continues to fall as the Treasury sells a record amount of debt to finance a budget deficit that totaled $1.4 trillion in fiscal 2009 ended Sept. 30. Many critics say that the US government is debasing its currency to help stimulate economic growth and that, in the long term, is a failed policy. Remember that a weaker currency boosts exports which helps economic growth but also hurts the nation’s creditors (mainly Asian countries). The US dollar index fell to 75.77 last week which is the lowest level since August 2008 and down from the high this year of 89.624 on March 4. The index, traded above 76.10 on Monday, which is within six points of its record low reached in March 2008.

The current rally remains intact as it currently enters its 32nd week from the March 12, 2009 follow-through day. That said, the market deserves the bullish benefit of the doubt until support is breached. So far, the Federal Reserve has helped the rally as they have kept rates near historic lows. The latest survey from Bloomberg (of 54 economists) shows that they believe the Fed will lift its overnight lending rate to 1.25% by the end of 2010. A separate poll shows that the European Central Bank (ECB) will increase its benchmark rate by half a percentage point to 1.5%. Economists believe that America’s economy will grow +2.4% in 2010, compared with +0.95% in the euro-zone, and +1% in Japan, median predictions show. 

PICTURED: The S&P 500 Index rallied to a new 2009 high close, posting a 6th consecutive gain on light or average volume since finding support at its 50-day moving average line.

Financial shares showed mixed action as the Bank Index ($BKX +0.97%) rose and the Broker/Dealer Index ($XBD -0.44%) fell modestly, meanwhile the Retail Index ($RLX -0.00%) was unchanged.  The Healthcare Index ($HMO +1.06%) posted a gain, and energy-related shares' gains lifted the Integrated Oil Index ($XOI +0.99%) and Oil Services Index ($OSX +1.22%), however the Gold & Silver Index ($XAU -0.18%) failed to keep pace with other defensive groups. The Semiconductor Index ($SOX +1.40%) rallied higher, but that not enough to lift the tech-heavy Nasdaq Composite Index.  Meanwhile, the Biotechnology Index ($BTK +0.16%) and Networking Index ($NWX +0.07%) only managed minor gains, and the Internet Index ($IIX -0.40%) edged lower.

Charts courtesy www.stockcharts.com

PICTURED: The Semiconductor Index ($SOX +1.40%) rallied toward recent highs after finding prompt support near its 50-day moving average (DMA) line.

Green Mountain Coffee Roasters (GMCR -$1.40 or -1.94% to $72.03) has been quietly consolidating on the right side of a cup-with-high-handle pattern. It completed an additional share offering on 8/07/09, then slumped under its 50-day moving average (DMA) line and nearly tested support at prior chart lows before rallying back.  Its big gain for a new 52-week high on 9/28/09 came with high volume, but while it cleared all chart resistance, it had not completed a sufficient length base or a proper handle for a cup-with-handle pattern.  It negatively reversed on the next session after reaching the $75.89 high, which is the basis for the pivot point of its "high handle" being cited in notes since 10/05/09.  Any deterioration under recent chart lows would raise concerns, and subsequent losses under its 50 DMA line would be even more worrisome signs of waekness.

A fresh breakout to new highs with a gain on heavy volume would trigger a valid technical buy signal, meanwhile it should remain on investors' watch lists. Disciplined investors will watch for volume-driven gains to trigger a new technical buy signal before making any initial buys or add-on purchases.  Do not be confused by the 3-for-2 split that occurred in the interim, as GMCR has traded up as much as +191% since appearing with an annotated graph under the headline "It May Soon Be Time To Go Green" when featured in the January 2009 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.