The major averages ended higher after a healthy Treasury auction and news that the government allowed several banks to repay TARP funds. Advancers led decliners by approximately a 3-to-2 ratio on the NYSE and on the Nasdaq exchange. Volume was reported higher than the prior session on the Nasdaq exchange, which indicated that large institutional investors were buying stocks, however there was a slightly lower volume total reported for the NYSE. There were 11 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 8 issues that appeared on the prior session.  The greater expansion recently occurring in the new highs list has offered encouraging news for growth oriented investors.

Stocks ended higher after the government released a list of banks that are allowed to repay funds borrowed via the Troubled Asset Relief Program (TARP). Treasury Secretary Timothy Geithner released a statement that said "These repayments are an encouraging sign of financial repair." He also acknowledged that "we still have work to do.” Tuesday's decision to allow some of the banks to repay TARP funds was largely due to the recent bounce in equity markets along with the banks' ability to raise funds by selling additional shares. The latest data shows that US banks have raised more than $100 billion since the government "stress test" results were announced.

The major averages caught a bid after the Treasury's successful auction of short term notes today. It is encouraging to see the major averages to continue bouncing following the worst annual decline since the Great Depression. So far, the government has pledged $12.8 trillion to end the first global recession since World War II. Currently, the benchmark S&P 500 Index has a price/earnings (P/E) ratio at about 14.8, which is not "low" on a longer-term historical basis. The average P/E ratio for the past decade has been 19.9. During prior bear market lows, the P/E for the S&P 500 Index hovered near 10 or in the low teens.

PICTURED: The S&P 500 Index is building a base-on-base type pattern.

The tech sector and the energy group helped boost the major averages on Tuesday, meanwhile lackluster action in most other areas and weakness in the Healthcare ($HMO -1.65%) group offset some of the gains.  The Oil Services ($OSX +2.18%) and Integrated Oil ($XOI +0.83%) indexes rose.  The Bank Index ($BKX +0.45%) and Broker/Dealer Index ($XBD -0.17%) posted mixed results and were little changed on the session, and the Gold & Silver Index ($XAU +0.03%) was virtually unchanged.  Positive action from the Retail Index ($RLX +0.82%) and tech shares also helped the major averages. The Biotechnology ($BTK +1.16%), Internet ($IIX +1.34%), and Networking ($NWX +1.92%) indexes each posted better than +1% gains.

Charts courtesy www.stockcharts.com 
 

PICTURED 2: The Semiconductor Index ($SOX +4.45%) gapped up while numerous chip stocks posted solid gains, helping the tech-heavy Nasdaq Composite Index outpace its peers.  Marvell Technology Group Ltd. (MRVL +14.54%) was a standout gainer among the index's components after increasing the size of its previously announced first-quarter net loss to reflect a $72 million settlement of a shareholder lawsuit.  This is yet another of several recent examples where stocks have been able to shrug of negative news headlines and rally.  This kind of action suggests that after the latest Bear Market most of the "bad news" is already factored into current market prices.  Stocks' ability to rally in the face of bad news is a characteristic typical of a healthier bullish market (the M criteria) environment.

NVE Corp (NVEC +$2.22 or +5.20% to $44.88) has encountered no distributional pressure in recent weeks while gains on near average volume have boosted it to new 52-week highs.  It is extended from a sound base now, making it a riskier choice for followers of the investment system. Usually a sound base needs to be formed over a period of at least 5-weeks minimum. Advanced chart patterns can occasionally offer valid entry points in a shorter span, but these brief consolidations must occur in a very tight trading range.  During its most recent consolidation, NVEC dipped almost -18% from its $42.99 high.  Thus, it would not be considered a "three weeks tight" type of pattern.

After any stock is bought, the system's sell rules kick in if it falls more than 7-8%, prompting investors to limit losses before they might become more devastating. This strict discipline may be especially important because of the very small supply of shares outstanding in this specific company.  A small supply of shares is generally considered a good sign with respect to the S criteria, yet could contribute to great volatility in the event of institutional accumulation or distribution. NVEC has traded up as much as +33.85% since it was first featured in yellow at $33.85 in the Friday, March 13, 2009 Mid-Day Breakouts Report (read here).

Its 50-day moving average line is an important support level to watch now.  Earnings per share rose +38% in the period ended March 31, 2009 versus the year ago quarter, yet sales were up just +14% and, as previously noted, the company's sales revenues thus far have been rather minuscule.  At less than $7 million per quarter in each of the past 8 quarters, sales have growing at a mostly lackluster pace percentage-wise. Companies reporting more substantial sales revenues generally make more reliable buy candidates, while companies with little "meat on the bone" can be particularly vulnerable to bad stumbles, fundamentally and technically.  Nonetheless, this high-ranked Electronics - Components leader has a good quarterly and annual earnings growth history (C & A criteria), and recent quarters showed sales revenues accelerating. No resistance remains due to overhead supply.

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.