Stocks rallied on Monday continuing the recent string of a strong starts to the week before the bears show up and send stocks lower by Friday. Volume was lighter than the prior session on the Nasdaq exchange and on the NYSE which signaled large institutions were not aggressively buying stocks. Advancers led decliners by over a 3-to-1 ratio on the NYSE and by nearly a 2-to-1 ratio on the Nasdaq exchange. There were 7 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 9 issues that appeared on the prior session. New 52-week highs still outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange. 

Stocks rebounded from a three-month low and marked Day 1 of a new rally attempt after a series of stronger than expected economic data points were released. Manufacturing reports in the US, Europe and China all showed that the global economic recovery is accelerating which helped allay concerns that the recovery was running out of steam. The US dollar fell which helped a slew of dollar denominated assets (mainly commodities, and also stocks) rally. The Institute for Supply Management said that US manufacturing enjoyed its largest gain since August 2004 which was a welcomed sign.

Exxon Mobil Corp (XOM +2.72%) gapped higher after the oil giant said earnings fell less than expected because of higher oil prices and output. So far, nearly 80% of the companies that have reported earnings have topped estimates in the fourth quarter which, barring some unforeseen event, will snap a record nine-quarter earnings slump for the S&P 500. Analysts believe that earnings grew +76% in the last three months of 2009 as the global economy continues to rebound from its worst recession since WWII!

Looking at the market, Monday marked Day 1 of a new rally attempt which means that as long as Monday's lows are not breached, the earliest a possible follow-through day could emerge will be this Thursday. However, if Monday's lows are taken out, then the day count will be reset and the chances for a steeper correction increase markedly. It is also important to see how the major averages react to their respective 50-day moving average (DMA) lines. Until they all close above that important level the technical damage remaining on the charts is a concern. So far, the market's reaction has been tepid at best to the latest round of economic and earnings data. Remember that the recent series of distribution days coupled with the deleterious action in the major averages suggests large institutions are aggressively selling stocks.  Disciplined investors will now wait for a new follow-through day to be produced before resuming any buying efforts. Until then, patience is key.

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PICTURED: The S&P 500 Index posted a gain on lighter volume, showing that a lack of buying demand coming from the institutional crowd persists.

Charts courtesy www.stockcharts.com

PICTURED: The Gold & Silver Index ($XAU +5.54%) ended an 8 session losing streak with a considerable gain today, rallying up toward its 200-day moving average (DMA) line.  It that long-term average acts as resistance it generally would not bode well for stocks in the group of precious metal mining firms.

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.