The major averages negatively reversed (opened higher and closed lower) after the bears showed up and sent stocks tumbling in the afternoon. Volume was heavier than the prior session on the NYSE and on the Nasdaq exchange, which marked another distribution day for the popular averages. Decliners trumped advancers by about a 2-to-1 ratio on the NYSE and by over a 2-to-1 ratio on the Nasdaq exchange. There were 38 high-ranked companies from the CANSLIM.net Leaders List, making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, one lower than the 39 issues that appeared on the prior session. New 52-week highs substantially outnumbered new 52-week lows on both major exchanges.

The major averages turned lower in the final hour of trading after analyst Dick Bove downgraded Wells Fargo & Co. (WFC -5.12%). Stocks spent the majority of the session trading in positive territory after Morgan Stanley (MS +4.80%) and Yahoo Inc. (YHOO +2.85%) topped analysts estimates. Wells Fargo, the largest US home lender this year, negatively reversed after Bove of Rochdale Securities cut the shares to “sell” and said earnings were boosted by mortgage-servicing fees rather than improving business trends.

Timothy Geithner the current US Treasury Secretary said the bank capital-purchase program in last year's $700 billion bailout will be allowed to expire later this year because parts of the economy and the markets are stabilizing. Geithner told Reuters that “We are now at the point where we can begin to wind down the programs that really defined TARP in its initial stages,” referring to the Troubled Asset Relief Program. Elsewhere, the Federal Reserve released its Beige Book which surveyed its 12 districts. The report showed that the 12 regions believe that many sectors of the economy have stabilized or are modestly improving. The report also showed that all regions showed a waning real estate market. 

The Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 indexes all suffered an "outside reversal" day which means today's range eclipsed yesterday's range. Chart readers view outside reversal days as very significant since historically they have often marked a meaningful change in trend. The fact that all of the major averages traded to fresh 2009 highs before turning lower on heavier volume than the prior session suggests a near term pullback may be in the cards. That said, adjust your stops and trade accordingly. The first level of support for the benchmark S&P 500 is 1,080, then its 8-month upward trendline and 50-day moving average (DMA) line. Barring some unforeseen event, this rally will remain intact until the 50 DMA line is breached. If the S&P 500 closes below 1,080 then this rally will be viewed by us as "under pressure."

PICTURED: The S&P 500 Index suffered a distribution day and negatively reversed after hitting a fresh 2009 high.

Charts courtesy www.stockcharts.com

PICTURED: The Bank Index ($BKX -2.39%) violated its 50-day moving average (DMA) line with Wednesday's loss marking its 5th straight decline. Longtime CANSLIM.net members know the importance the financial group has as a leading indicator for the broader market. Note that in both September and October it failed to make any further upward progress after spiking to new 2009 highs, meanwhile it has established recent chart lows in the $43 area as the next important support level. Deterioration under those lows would raise concerns that the broader market rally is beginning to falter.

ArcSight, Inc. (ARST +$0.07 or +0.28% to $24.85) has stubbornly held its ground near all-time highs since last week's gains on above average volume. It is now too extended from its prior base to be buyable under the guidelines of the investment system. It has encountered very little distributional pressure since its 9/04/09 breakout, and yet it offered disciplined investors opportunities to accumulate shares without chasing it more than 5% above its pivot point.  It had done so when its positive reversal prompted its last appearance in this FSU section on 10/02/09 under the headline "Positive Reversal After Intra-Day Pullback Under Max Buy Level." Its 10/02/09 low ($21.52) closely coincides now with its 50-day moving average (DMA) line, making that a very important technical support level to watch on pullbacks.

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.