Stocks tanked around the world, led by Asia, after disconcerting economic data from the Far East suggested the economic recovery may be in jeopardy. The volume total reported on the NYSE was higher and lower on the Nasdaq exchange which marked a distribution day for NYSE indexes and avoided one for the Nasdaq. Decliners trumped advancers by more than a 8-to-1 ratio on the NYSE and by more than a 4-to-1 ratio on the Nasdaq exchange. There were only 2 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 than the 6 issues that appeared on the prior session, and one of the lowest readings since this 24-week rally was confirmed with the March 12, 2009 follow-through day. New 52-week highs still outnumbered 52-week lows on the NYSE, but trailed on the Nasdaq exchange.

Overnight, markets plunged around the world after Japan said that its gross domestic product (GDP) expanded at an annual rate of +3.7% for the second quarter. This was lower than the Street's median estimate for a +3.9% increase. Elsewhere, China's stock market plunged nearly -6% after the country said that foreign direct investment (FDI) was lower than expected. FDI is an important measure of global investors' appetite for risk and plays a major role in developing nation's economies. The fact that FDI decreased in China, one of the strongest developing economies in the world, reflects poorly for global investors' appetite for risk.

The selling spilled over to the rest of the world as investors across the globe dumped stocks and commodities and moved into so-called "safer" assets such as the US Dollar and bonds. It is important to note that the entire 24-week rally was predicated on the notion that the economic recovery would be powerful. However, much of that recovery was due to strong participation from the US government. Therefore, when the Fed said last week that it was going to slow down its participation in the market, that took much of the wind out of the bull's collective sails. That coupled with the fact that for the first time in weeks leading stocks are getting in trouble paints a negative picture for the health of this aging rally. 

Up until this point, leading stocks have been acting well. However, late last week, then again today, one by one many leaders triggered technical sell signals. It should come as no surprise that leadership continues to be our primary concern which is something that we have repeated endlessly since the current rally began in mid-March. Over the past five and half months, once in a while a leader would get pounded, but new leaders would quickly show up. The fact that a handful of high-ranked leaders got smacked suggests that the current market rally is under pressure and could be in severe jeopardy. Furthermore, the fact that most of the "leading stocks" are from China is not a particularly healthy sign for growth in the "New America" . When your stocks get in trouble (hopefully you own leading stocks during any market rally) one would be wise to listen to what the price/volume action is telling you about each issue on a case-by-case basis and move to cash and wait for the correction to run its course.

PICTURED: The S&P 500 Index gapped down and fell on higher volume than the prior session, a sign of distribution, and closed below near-term support (black line above) as it closed near the session low.

Charts courtesy www.stockcharts.com

PICTURED: The Healthcare Index ($HMO +2.39%) was a standout gainer on Monday's otherwise negative session.  Dwindling prospects for a government-run health insurance plan lifted the shares of managed care companies and relieved investors who fear the companies could not compete with such a plan.

AsiaInfo Holdings, Inc. (ASIA -$1.03 or to $15.95) gapped down today for a loss on below average volume. Since the stock slumped below its 50-day moving average (DMA) line in early August it was hit with a distribution day on 8/11/09 as it suffered a considerable decline on high volume.  Now it is consolidating near its prior chart lows and its 200 DMA line which may act as support. However, based on its weak action and its Relative Strength rank has slumped to 68, well below the usual minimum 80+ guideline for buyable candidates. Technically, it would have to rally above its 50 DMA and rally above recent chart highs in the $20 area for its outlook to improve.  ASIA was recently featured in the August 2009 CANSLIM.net News (read here). Based on its inability to make progress above its pivot point since, disciplined investors avoided taking action that would have exposed them to any losses. Disciplined entries and exits are critical to investors' success with the investment system.

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.