The major averages overcame early losses to end with small gains on Tuesday while volume totals on the NYSE and Nasdaq exchange were reported slightly up from the prior session totals. Advancing issues led decliners on the NYSE by about a 3-to-2 ratio, but by a narrower 5-to-4 ratio on the Nasdaq exchange. There were 38 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, down from the 42 issues that appeared on the prior session. On both exchanges new 52-week highs still significantly outnumbered 52-week lows, and new lows were in the single digits again.  The market's more favorable conditions of late (concerning the M criteria) are detailed more extensively in the new August 2009 issue of our monthly newsletter, CANSLIM.net News (read here)..

The session began in negative territory after reports that June personal income fell a larger-than-expected -1.3% and June spending made a generally in-line -0.4% increase.  A better-than-expected monthly increase of +3.6% for June pending home sales provided some encouraging news.  Late afternoon buying helped stocks make a strong finish.

Caterpillar Inc. (CAT +6.14%) plowed higher, leading the Dow's gainers. General Electric Co. (GE +0.73%) posted a small gain, and investors hardly noticed as the world’s biggest maker of locomotives and medical imaging equipment agreed to pay $50 million to settle U.S. regulatory claims it manipulated earnings to meet analysts’ estimates.

The US dollar traded near the weakest level against the euro this year.  A private report report from ADP Employer Services is due at 8:15AM ET which economists expect will show U.S. companies eliminated fewer jobs in July, reaffirming that the end of the recession may be near. Many pundits are calling for a pullback after the market's latest sprint higher. The action in the major averages has been marked by positive breadth which still suggests that buyers remain in control. 

Group action was mixed on Tuesday, with modest losses for the Retail Index ($RLX -0.86%), Healthcare Index ($HMO -0.49%), and energy-related Oil Services ($OSX -1.65%) and Integrated Oil ($XOI -0.28%) indexes.  Meanwhile, standout gainer were the Bank Index ($BKX +2.65%) and Biotechnology Index ($BTK +2.29%), followed by the Networking Index ($NWX +0.84%).  There was little change for the other regularly followed indices in this Industry Group Watch section, with a tiny loss for the Internet Index ($IIX -0.09%) and minimal gains for the Broker/Dealer Index ($XBD +0.05%), Semiconductor Index ($SOX +0.07%), and Gold & Silver Index ($XAU +0.13%).

Charts courtesy www.stockcharts.com

PICTURED: The Networking Index ($NWX +0.84%) is near its 2009 highs, up +85.83% from its March low.

HMS Holdings Corp (HMSY -$0.97 or -2.49% to $38.00) suffered another loss today with above average volume, closing back under its 50-day moving average (DMA) line, raising more concerns. Its 7/31/09 gap down and 50 DMA violation following its latest quarterly financial report which showed sales and earnings increases near the investment system's minimum guidelines, decelerating sequentially. This high-ranked Commercial Services - Healthcare firm's prior highs in the $38 area are an important support level. Deterioration into its prior base, or a violation of its 50 DMA line, would raise more serious concerns and trigger additional technical sell signals. It has shown healthy action since a gap up gain on 6/16/09 with heavy volume triggered a technical buy signal. The heavy volume and gap up provided a nice reassurance of institutional (the I criteria) buying demand.

A downturn in 2006 earnings is a fundamental flaw in HMS Holdings Corp's annual earnings history that raises some concerns with respect to the A criteria of the investment system.  Investors' odds are usually better with a company that has a steady 3-5 year earnings growth history.  That shortcoming could give investors one extra reason to be very careful about limiting losses.

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.