The major averages ended mixed as the dollar rallied after the latest round of disappointing earnings and economic data was released. Volume was lighter than the prior session on the NYSE and Nasdaq exchange which signaled large institutions were not aggressively selling stocks. Decliners led advancers by nearly a 3-to-2 ratio on the NYSE and on the Nasdaq exchange. There were 10 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 17 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.

The latest round of earnings from several high profile companies disappointed investors as many companies cut their 2011 and 2012 estimates. Pfizer Inc. (PFE -2.31%) gapped down and closed just below its 50 day moving average line after reporting a +34% increase in sales compared to the same quarter in the prior year but earnings slid -25%. Earnings continue to be reported in droves as over half of the companies in the S&P 500 have released their Q4 results. Barring some unforeseen event, earnings rose over +70% last quarter which will snap a record nine-quarter earnings slump for S&P 500 companies.  So far, nearly +80% of companies that have released their Q4 results topped estimates. However, the fact that stocks are down since earnings season began suggests investors are not happy with the results.

On the economic front, the Institute for Supply Management (ISM) said its non manufacturing index (a.k.a service-index) rose to 50.5, which signaled growth but trailed estimates. Readings above 50 suggest growth while reading below 50 indicate contraction. Even though the number topped 50, it trailed estimates which led many to question the health of this recovery. 

PICTURED: The Nasdaq Composite Index posted a 3rd consecutive gain. A substantial gain of +1.8% or more with higher volume than the prior session would mark a "follow-through-day" and confirm the new rally, giving investors a green light for new buying efforts under the guidelines of the investment system. Meanwhile, the rally effort fails if Monday's low of 2,152.25 is undercut.

Charts courtesy www.stockcharts.com

PICTURED: The Biotechnology Index ($BTK -0.41%) is perched near its recovery highs and trading above its 50-day moving average (DMA) line.

Baidu.com, Inc. (BIDU +$23.60 or +5.54% to $449.78) rose to its 3rd highest close ever today as a considerable gain backed by nearly 2 times average volume lifted it further above its 50-day moving average (DMA) line. Its slump below that important short-term average had raised concerns since getting extended from more than +5% above its pivot point from the latest "double bottom" base pattern. It had triggered a technical buy signal and was featured in yellow on 1/13/10 as it cleared the 12/29/09 high mentioned in the prior evening's note (view all notes).

Gaps often indicate substantial institutional activity.  Today's considerable gap up and close near the session high was a sign of great institutional accumulation. However, this company's chart is loaded with numerous gaps in in either direction in recent months.

The company is due to report earnings after the close on February 9th. It has a stellar sales and earnings history that satisfies the C & A criteria.  It is reassuring that the number of top-rated funds owning BIDU's shares rose from 103 in Dec '08 to 193 in Dec '09, solid evidence its shares were being accumulated by the institutional (I criteria) crowd. 

Always follow all key criteria of the investment system to stack the odds of success in your favor. In a bullish market environment, many ideal buy candidates come along.  Right now, disciplined investors are waiting for a new confirmed rally before initiating any new buying efforts.  Meanwhile, the M criteria presents a problem, since 3 out of 4 stocks typically follow the direction of the major averages. 

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.