The major averages collectively fell for the first time this year after a disappointing start to earnings season. Volume, an important indicator of institutional sponsorship, was reported higher than Monday's totals on the NYSE and on the Nasdaq exchange, which marked a distribution day and suggested large institutions were more aggressively selling stocks. Decliners led advancers by nearly a 3-to-1 ratio on the NYSE and Nasdaq exchange. There were only 12 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, considerably lower than the total of 55 issues that appeared on the prior session. New 52-week highs still solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange, and new 52-week lows reported were in the single digits.

Stocks slid across the globe while concern spread that the economic recovery may slow down as governments begin to withdraw their massive stimulus plans. Overnight, China raised its reserve limits for banks, a move which is designed to curb their explosive economic growth. Since the March bottom China has played a pivotal role in leading the global economy out of the worst recession since WWII. China has emerged as a strong economic engine for growth. The threat of an economic slowdown in China spooks many investors.

Over the next few weeks, earnings news will likely set the tone for the near-term action in the major averages. Analysts believe that combined profit for the average company in the benchmark S&P 500 Index surged +62% during the fourth quarter. If that occurs that will snap the longest earnings losing streak in history, and it would be the first quarterly increase in corporate earnings since 2007. Remember, that it is extremely important to digest each individual company's results, and it is equally or more important to see how each company reacts to its earnings.

On Monday, we penned, "After three strong weeks of gains, the market appears to be showing signs that a near-term pullback might be in the cards. A slew of stocks negatively reversed (opened higher and closed lower) on Monday, which suggests a change in trend may unfold." Therefore, Tuesday's pullback was somewhat expected as the major averages (and leading stocks) pause to consolidate their recent gains. Is the rally over? No, but all we have to do is be cognizant of the fact that a near-term pullback may occur and then trade accordingly. The current 45-week rally remains intact as long as the major averages continue trading above their respective 50-day moving average (DMA) lines. Until those levels are breached, the bulls deserve the benefit of the doubt.

Defensive areas took some of the hardest hits on Tuesday as the Gold & Silver Index ($XAU -3.67%), Healthcare Index ($HMO -2.71%), Oil Services Index ($OSX -2.16%), and Integrated Oil Index ($XOI -2.04%) were among the session's biggest percentage decliners.  In the technology sector, Semiconductor Index ($SOX -3.59%) suffered a considerable loss, followed by the Internet Index ($IIX -1.61%) and the Networking Index ($NWX -1.30%). Weak action in the Bank Index ($XBD -1.70%), Broker/Dealer Index ($XBD -1.25%) and the Retail Index ($RLX -1.22%) also dragged the major averages lower.

Charts courtesy www.stockcharts.com

PICTURED: The Biotechnology Index ($BTK -0.28%) held its ground above its September 2009 high close. Considering the extent of most other groups' losses, the did an admirable job of holding its ground.

AsiaInfo Holdings, Inc. (ASIA -$0.48 or -1.64% to $28.74) closed with a small loss today on light volume, quietly consolidating above its 50-day moving average (DMA) line (now $27.52) which is the next important support level to watch. A technical buy signal did not occur since an advanced "3 weeks tight" pattern was recently noted.  Time is still needed, and a subsequent breakout with heavy volume could confirm a new technical buy signal. But caution is important now, since its large loss on heavy volume on 1/05/10 was a worrisome sign of distributional pressure (previously noted). Meanwhile, its 50 DMA line and prior chart highs in the $26 area are an important support level to watch on pullbacks. An upward trendline defines another support level, but that is well below its current price or earlier support where violations might trigger technical sell signals.

ASIA was featured 10/14/09 in the mid-day report (read here) as it gapped up for a new 52-week high with 5 times average volume, triggering a technical buy signal by blasting above its pivot point. It has traded up as much as +68.13% since first featured in the August 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.