The major averages rallied for gains on the 13th day of the current rally attempt however volume, a critical gauge of institutional demand, fell compared to Tuesday's totals. Advancers led decliners by nearly a 3-to-1 ratio on the NYSE and by a 3-to-2 ratio on the Nasdaq exchange. New 52-week highs outnumbered new lows on both exchanges. There were 14 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 10 issues that appeared on the prior session. 

Federal Reserve Chairman Ben S. Bernanke spent the day testifying on Capital Hill. His comments helped send stocks higher and the dollar lower after he said the central bank will keep interest rates low to ensure the economy continues to recover. Bernanke told Congress that the Fed will eventually need to tighten monetary policy however we are still in the “nascent” stages of the economic rebound which still requires low interest rates for an extended period. This helped allay concerns that the Fed will begin raising rates more aggressively after last week's surprise discount rate hike. The Fed has left its federal funds rate, the rate banks charge each other for overnight loans, at a record low near zero for more than 14 months as the economy continues to recover. 

Elsewhere, it was disconcerting to see US home sales unexpectedly drop to a record low. The tepid reading illustrates how weak this recovery actually is. In Washington D.C., the Senate approved a $15 billion plan to give companies tax breaks for hiring people. The Senate passed the jobs bill today by 70-28. The bill will now make its way to the House where Democratic leaders must decide whether to pass it without changes or to try to merge it with a $150 billion jobs bill it approved in December.

Looking at the market, Wednesday marked Day 13 of a new rally attempt which means that as long as the February 5th lows are not breached the window remains open for a new follow-through day (FTD) to emerge. A new follow-through day will confirm the current rally attempt and will be produced when one of the major averages rallies at least +1.7% on higher volume than the prior session as a new batch of leaders break out of fresh bases. However, if the February 5, 2010 lows are breached then the day count will be reset and a steeper correction may unfold. So far, the market’s reaction has been tepid at best to the latest round of economic and earnings data which remains a concern. Remember that the market remains in a correction until a new new follow-through day emerges. Until then, patience is paramount.

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PICTURED: The Nasdaq Composite Index posted a gain to get back above its 50-day moving average (DMA) line, but it faces resistance at recent highs.

The Bank Index ($BKX +2.28%) and Retail Index ($RLX +1.96%) were among the best performing groups that had a positive influence on the major averages on Wednesday.  Tech shares also had a positive impact as the Semiconductor Index ($SOX +1.92%) led the way higher while the Biotechnology Index ($BTK +1.26%), Networking Index ($NWX +1.24%), and Internet Index ($IIX +0.90%) posted unanimous gains.  The Broker/Dealer Index ($XBD +0.58%), Healthcare Index ($HMO +0.92%), and Integrated Oil Index ($XOI +0.68%) also closed with modest gains.  Meanwhile, the Gold & Silver Index ($XAU -0.66%) and Oil Services Index ($OSX -0.28%) lagged most other areas as they ended modestly lower.   

Charts courtesy www.stockcharts.com

PICTURED: The Retail Index ($RLX +1.96%) posted a considerable gain today, rallying to a new recovery high close.

Intuitive Surgical Inc. (ISRG +$1.53 or +0.45% to $344.21) is quietly hovering near its 52-week high. The stock has barely encountered any distributional pressure, and its current Up/Down Volume Ratio of 1.5 provides an unbiased bullish statistic concerning its recent price/volume pattern.  As the weekly graph below shows, down weeks with worrisome above average volume have been very rare since early-2009!  The number of top-rated funds owning its shares has risen from 283 in Mar '09 to 320 in Dec '09, which is reassuring concerning the investment system's I criteria.  ISRG was featured again most recently in the 1/22/10 mid-day report (read here), returning after some time off the Featured Stocks list. Subsequent gains into new high territory would have more serious bullish implications.  The broader market (M criteria) outlook would be helped immensely by a powerful follow-through-day on higher volume from at least one of the major averages and better leadership to confirm a new rally of significance.  Meanwhile, odds are less favorable for investors making profits with new buys, and caution is advised.

Its annual earnings history (the A criteria) has been very impressive. Although quarterly comparisons have not shown perfectly steady increases above the +25% guideline, the latest period ended December 31, 2009 showed an impressive acceleration in sales revenues and earnings growth.  ISRG rebounded impressively from its March low ($84.86) and may be on course for its all-time high ($359 in 2007). Notes outlined technical deterioration before and when it was last dropped from the Featured Stocks list on 6/10/08. ISRG traded up more than 13-fold since first featured in yellow in CANSLIM.net reports in the summer of 2004. 

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.