The major averages experienced another see-saw session after the latest round of economic data was released and the Federal Reserve decided to keep rates near historic lows. Volume picked up in the final hour and was reported higher on the Nasdaq exchange while NYSE volume was reported near but just under the prior session total. Advancers led decliners by an 8-to-7 ratio on the NYSE, but decliners outnumbered advancers by a 3-to-2 ratio on the Nasdaq exchange. There were 16 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 10 issue that appeared on the prior session. In terms of new leadership, the recent action has yielded very little, however new 52-week highs are still outnumbering new 52-week lows on the NYSE and Nasdaq exchange.

At 8:30AM ET, ADP released its monthly employment report which is used as a good proxy for how the jobs market fared each month and closely mirrors the Labor Department's official nonfarm payrolls report released on the first Friday of each month. ADP said US employers slashed -203,000 jobs in October, which was lower than the Street's estimate of a -227,000 decline. They also upwardly revised September's reading to a decline of -254,000. The stronger than expected report led many to believe that Friday's official report will err on the side of fewer, rather than more, job cuts. Then, at 10:00AM ET, the ISM released its service sector index which at 50.6 signaled growth and was in line with the Street's average forecast. Readings above 50 signal growth and readings below 50 signal contraction.

A few hours later, at 2:15PM ET, the Federal Reserve surprised no one when they decided to keep rates steady near historic lows as the economy continues to "recover." In their after meeting commentary the Fed signaled that the economy continues to "pick up" and that the housing market continues to improve which is a key ingredient to a sustained recovery. The Fed warned that rising unemployment and hard-to-get-credit for many people and companies could curb the rebound in the near future. Bloomberg.com reported that the "Fed has now entered into a new phase -- managing the recovery rather than fighting the worst recession and financial crisis to hit the country since the Great Depression." Last week, the government reported that the economy grew last quarter, which was the first sign of growth in more than a year!  Unemployment remains a primary concern as it hovers near a 26-year high of +9.8% and will probably tick higher to +9.9% when the government releases October's official results on Friday.

Wednesday marked Day 3 of the current rally attempt which opens the window for a new follow-through day (FTD) to occur. We have received a lot of questions about what exactly is needed in order for a new FTD to occur. Going forward, as long as Monday's (Day 1) lows are not taken out then this rally-attempt remains intact and a proper FTD could emerge. A FTD occurs anytime after Day 3 of a new rally attempt and requires that at least one of the major averages advances by at least +1.7% on higher volume than the prior session. Preferably, one would like to see a concurrent new batch of high-ranked leadership trigger fresh technical buy signals on or shortly after a new FTD. Assuming these criteria are met, then a new rally is confirmed which means that 3 out of 4 stocks will probably rally higher.

PICTURED: The NYSE Composite Index may be forming a bearish head-and-shoulders topping pattern.  Losses undercutting the neckline could send a more worrisome message as to the market's deteriorating health, prompting investors into a more defensive posture.

Charts courtesy www.stockcharts.com

PICTURED 1: The Healthcare Index ($HMO +4.65%) was a standout gainer as it posted a large gain and rallied back above its 50-day moving average (DMA) line.

Charts courtesy www.stockcharts.com

PICTURED 2: The Retail Index ($RLX -0.40%) has been making a stand at its 50 DMA line again.  It held up at that important short-term average in early October.

Pegasystems Inc  (PEGA -$0.87 or -3.14% to $27.75) suffered a loss today with almost 6 times average volume after opening the session with a steep decline following its results for the period ended Sept 30, 2009, yet it rebounded considerably from its early lows after briefly undercutting its June-July highs. It flashed worrisome technical sell signals last week while violating its 50-day moving average (DMA) line and sinking below an upward trendline connecting its July-October lows. Since its 10/23/09 appearance in this FSU section under the headline "Quiet Consolidation Near Important Support Level" its subsequent losses on above average volume have been noted as signs of distribution. Prior resistance in the $27 area is an important chart support level for it to find prompt support. Additional damaging losses would hurt its outlook.  It would need to rally back above its 50 DMA for its outlook to improve.

This high-ranked Computer Software - Financial firm attracted an increasing number of institutional investors, as the number of top-rated funds owning its shares rose from 43 in Sep '08 to 80 in Jun '09, which is a solid reassurance concerning the investment system's I criteria. PEGA has shown good sales revenues increases and its earnings increases were well above the +25% guideline in the 4 last quarterly comparisons versus the year ago period. The previously noted downturn in annual earnings (the A criteria) from 2003 to 2006 has been followed by a solid turn around and big earnings increases in '07 and '08, and Street expectations for '09 are calling for well above +25% growth.

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.