Stocks and commodities rallied on Tuesday as the dollar fell for a second consecutive day after healthy news from the ailing housing front was released and the Australian central bank unexpectedly left interest rates steady. Volume was heavier than the prior session on the NYSE and Nasdaq exchange which signaled large institutions were buying stocks with better conviction. Advancers led decliners by over a 3-to-1 ratio on the NYSE and by a 5-to-4 ratio on the Nasdaq exchange. There were 17 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, higher than the 7 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. 

Overnight, the Reserve Bank of Australia left rates steady at +3.75% which surprised a slew of economists and analysts across the globe. Nearly everyone believed that Australia would raise rates to combat inflation. This allayed pressure on other central bankers to start raising rates as we make our way out of the worst global recession since WWII. The Street believes that the European Central Bank (ECB) and the Bank of England (BOE) will keep borrowing costs unchanged when they meet later this week. The dollar fell for a second straight day which sent a host of dollar denominated assets higher on Tuesday. 

Stocks caught a bid after the National Association of Realtors said pending home sales rose +1% in December to 96.6. The pending home index was developed as a leading indicator of housing activity for existing homes, not new homes. Furthermore, a pending sale is booked when a contract is signed, but not yet closed. Normally, it takes anywhere from four to six weeks to close a contracted sale. Housing stocks also rallied after D.R. Horton (DHI +10.92%), one of the country's largest homebuilders, reported its first quarterly profit in several years.  

It was a busy day on Capital Hill as both Paul Volcker, head of the U.S. Economic Recovery Advisory Board, and Treasury Secretary, Timothy Geithner testified before Congress. Volcker repeated his view that the government should prohibit commercial banks from owning hedge funds and limit their ability to trade for their own accounts to help mitigate risk at these financial powerhouses. Geithner said that the US must lower its deficit as the economy recovers.

Looking at the market, Tuesday marked Day 2 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. 

The Biotechnology Index ($BTK +2.63%) led the tech sector while the Networking Index ($NWX +1.33%), Semiconductor Index ($SOX +0.91%), and Internet Index ($IIX +0.58%) followed along with smaller gains.  The Retail Index ($RLX +1.35%) posted a gain, and the Bank Index ($BKX +0.23%) and Broker/Dealer Index ($XBD +0.62%) helped add a slightly positive influence on the major averages.  Defensive groups also posted gains, led by the Healthcare Index ($HMO +1.55%), while the Integrated Oil Index ($XOI +1.07%), Oil Services Index ($OSX +0.86%), and the Gold & Silver Index ($XAU +0.27%) also edged higher.

Charts courtesy www.stockcharts.com

PICTURED: The Networking Index ($NWX +1.33%) is still trading under its 50-day moving average (DMA) line, yet it is now consolidating within -6% of its highs.

Green Mountain Coffee Roasters (GMCR +$1.67 or +1.98% to $86.08) is perched near all-time highs above its "max buy" level. Its small gain today on light volume led to its second best close ever. Recent chart lows in the $78 area are an important support level to watch now.  It is clear of resistance due to overhead supply, a factor making it more likely to sprint higher, unhindered.  Disciplined investors would avoid chasing it more than +5% above its latest pivot point.  Meanwhile, losses should always be kept small by strictly selling any time any stock falls more than -7% from your buy price. 

GMCR has stayed well above prior chart highs while recently consolidating, and it has shown healthy action since its last appearance in this Featured Stock Update (FSU) section on January 13, 2010 under the headline "Gains Leave Winner Extended From Latest Base. GMCR had made a new appearance on 12/28/09 in yellow in the mid-day report (read here), returning the previously featured favorite to the Featured Stocks page at CANSLIM.net. Weak action had led it to be dropped from the Featured Stocks list on 12/01/09, but the repair of its prior 50-day moving average (DMA) line violation had improve its outlook. Do not be confused by the 3-for-2 split that occurred in the interim, as GMCR has traded up as much as +240% since appearing with an annotated graph under the headline "It May Soon Be Time To Go Green" when featured in the January 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.