Most of the popular indexes suffered another negative reversal and distribution day after the US dollar finally bounced. This marks three "negative reversals" in the past four sessions which is an ominous sign and suggests that large institutions are heavily selling stocks, not buying them. Decliners trumped advancers by over a 3-to-1 ratio on the NYSE and over a 2-to-1 ratio on the Nasdaq exchange.

From our perspective, the current rally is under pressure, which bodes less favorably concerning the M criteria.  At least one encouraging sign to watch for is that the major averages continue trading above their respective 50-day moving average (DMA) lines.

Monday's volume totals were mixed, reported higher on the NYSE, yet lower on the Nasdaq exchange helping that index avoid a distribution day. There were 25 high-ranked companies from the CANSLIM.net Leaders List, making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, higher than the 23 issues that appeared on the prior session. New 52-week highs still substantially outnumbered new 52-week lows on both major exchanges.

The market opened higher but quickly turned tail after the US dollar bounced from an egregiously oversold level. Ticker symbol: UUP is a popular exchange traded fund (ETF) that tracks the greenback. Another way to "play" the dollar's decline is buy buying/selling any of the other currency related ETF's, such as the FXE (euro) or FXC (Canadian dollar). Remember that the dollar is inversely related to these currencies so when the dollar rallies the respective currencies fall and vice versa. A stronger dollar also puts pressure on dollar denominated assets such as stocks and commodities. Therefore, it should come as no surprise that the big move in the dollar Monday morning put additional pressure on equities. The current rally is 34 weeks old and has yet to pullback more than 8% since the March 12, 2009 follow-through day. That said, as long as the major averages continue trading above their respective 50 DMA lines the bulls remain in control.

PICTURED: The Dow Jones Industrial Average suffered another negative reversal and distribution day, which marks 3 out of the past 4 sessions intra-day gains were erased for losses!

Charts courtesy www.stockcharts.com

PICTURED 1: The Bank Index ($BKX -4.09%) dove toward recent chart lows with a large loss.

Charts courtesy www.stockcharts.com

PICTURED: The  Broker/Dealer Index ($XBD -1.42%) closed the session very near its 50-day moving average line.  Several sources reported an intra-day low near its August low.  If that is truly the case, its close near the upper end its trading range might be considered encouraging.   Further deterioration in financial stocks would bode well for the broader market outlook.

W N S Holdings Ltd Ads  (WNS -$1.49 or -10.52% to $14.16) has totally negated its breakout, and worse, as today's loss on above average volume led to a violation of its 50-day moving average (DMA) line and recent chart lows, triggering technical sell signals. The high-ranked Indian Commercial Services may serve as an example of why disciplined investors should limit losses if any stock falls more than 7-8% from the price paid. The deterioration back into its prior base had already raised concerns and been noted. It encountered prompt distribution pressure shortly after its 10/16/09 considerable gain on more than 2 times average volume which helped it trade and close above its pivot point, triggering a technical buy signal while clearing stubborn resistance.

Since featured at $15.28 in yellow in the 9/28/09 mid-day report (read here) it had encountered resistance in the $16 area while consolidating just above important support at its 50-day moving average (DMA) line. Quarterly earnings have been above the +25% guideline and its annual earnings history has been great, satisfying the C & A criteria. However, sales revenues growth has decelerated, raising some concerns.  Only 14.5 million shares are in the public float, which is considered a good characteristic concerning the S criteria, and could contribute to greater volatility in the event of any heavier institutional buying or selling that may come. 

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.