The major averages and several commodities fell as the US dollar rallied on Tuesday. Volume totals were reported lighter than average and mixed, yet near the prior session totals on the NYSE and on the Nasdaq exchange.  Decliners trumped advancers by about a 3-to-1 ratio on the NYSE and on the Nasdaq exchange. There were only 4 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, one more than the 3 issues that appeared on the prior session.

Investors sold stocks and commodities and moved to the greenback as concern spread that second quarter earnings will not be strong enough to justify the robust rally (nearly +50% rally in the Nasdaq Composite) seen in the major averages since their March lows. Losses led the Nasdaq Composite Index to its lowest close since May 1st.  Many investors feel that stocks have moved up too quickly from their March lows, and that the recession has not fully ended. The second quarter earnings season will officially begin after Alcoa (AA +1.62%), the first Dow component, announces its second quarter results.

The current rally which began on the March 12, 2009 follow through day (FTD) has stalled since the middle of June as the major averages have paused to consolidate their recent gains. The benchmark S&P 500 index slid -6% since June 12, 2009 and is currently fighting to maintain an 18-week rally. The S&P 500's current P/E ratio is 14.2 times over the past 12 months earnings, which is higher than what has been seen in prior bear markets. Further, it should be noted that the Dow Jones Industrial Average, technically, sliced below the neckline of its recent head-and-shoulders pattern. This pattern is bearish in nature, despite the fact that volume was lighter than average as the Dow sold off. This brings to mind something which has occasionally been heard around the office: "When in doubt, let time work it out."

Leading stocks continue to be the bane for this current rally. Remember that every new sustained bull market began with a healthy new batch of high-ranked leadership - stocks triggering technical buy signals as they break out of sound bases. So far, the primary problem for the major averages has been a dearth of high-ranked stocks that performed well since early March. The vast majority of high-ranked stocks (mainly Chinese tech stocks) that broke out of a sound bases have failed or gone sideways at best in recent weeks. This is not the healthy action seen in prior bull markets. This suggests that patience is paramount as this market spends more time consolidating and stabilizing after last year's violent collapse.

PICTURED: The Dow Jones Industrial Average sliced below the "neckline" of its head-and-shoulders topping pattern.

The Integrated Oil ($XOI -2.02%) and Oil Services ($OSX -3.14%) indexes sank as the energy group continued to see prices contract on Tuesday, and the tech sector faced widespread pressure as the Networking ($NWX -3.06%), Semiconductor ($SOX -2.89%), Internet ($IIX -2.78%), and Biotechnoogy ($BTK -2.01%) indexes each lost more than -2% on the session. The Retail Index ($RLX -2.10%) and financial shares also had a great deal of negative influence on the major averages as the Broker/Dealer Index ($XBD -3.75%) outpaced the Bank Index ($BKX -0.74%) to the downside.  The Gold & Silver Index ($XAU -0.53%) ended with a small loss, but it has been noted recently as no great "safe haven" area for investors looking to find any areas which might perform inversely to the equities markets should they spiral downward.

PICTURED: The Healthcare ($HMO +3.41%) group was a standout gainer on a mostly negative session.  Government entitlement programs are encountering financial challenges in how to maintain healthcare services for a huge wave of aging baby boomers, and while there are certain favorable industry demographics, the prospect of price and wage controls contributes to the rather foggy outlook for many healthcare firms.  Tuesday's gains came amid reports from sources such as briefing.com which said that some hospitals have agreed to contribute funds toward covering the uninsured in the future. The agreement was said to remove an "element of uncertainty from the sector" amid ongoing government efforts to "reform" healthcare.

Neutral Tandem Inc (TNDM -$0.60 or -2.11% to $27.86) quietly consolidated to a close today just under its 50-day moving average (DMA) line again.  Its recent rebound ran out of steam short of its prior chart highs.  Technical sell signals and heavy distribution completely negated its latest breakout above the pivot point of $29.85 based upon the stock's May 1st high, and it is slumping back into its prior base and below that important short-term average once again.  TNDM traded up as much as +72.42% since first featured at $18.89 in the 3/02/09 Mid-Day BreakOuts Report (read here).

Its choppy consolidation over the past 5-weeks since it reached an all-time high of $32.57 still offers no ideal entry point within the investment system's guidelines.  This high-ranked leader should remain on an active watch list until a sound new base has formed. Meanwhile, a multi-month upward trendline identifies the next important support level to watch.

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.