The major averages rallied for a third consecutive day, helped by a big rally in China and news that American International Group Inc. (AIG +21.25%) said it plans to repay the government. The indices ended with modest gains while volume was reported slightly higher on both exchanges, but volume continues to be below average which is not a good sign of institutional sponsorship. Advancers led decliners by over a 2-to-1 ratio on the NYSE and by nearly a 2-to-1 ratio on the Nasdaq exchange. 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, up from the 6 issues that appeared on the prior session. New 52-week highs outnumbered new 52-week lows on both exchanges.

Overnight, shares in China rallied +5% after briefly touching bear market territory on Wednesday- marked by a decline of -20% from a prior high. This helped shares around the world rally, since most of the recent sell-off stemmed from China. AIG surged +22% for the top gain in the Standard & Poor’s 500 Index after Chief Executive Officer Robert Benmosche said the company plans to repay the government bailout and do something for its shareholders. Benmosche, the company's new CEO, said in an interview in Croatia that "at the end of the day, we believe we will be able to pay back the government and we hope we will be able to do something for our shareholders as well." Last year, AIG agreed to exchange nearly +80% of its equity for a $60 billion credit line, an investment of as much as $70 billion and $52.5 billion to buy mortgage-linked assets owned or backed by the insurer. This was one of the largest bailouts in history. If the company can repay the government it is a net positive, so the news boosted optimism that the brunt of the financial crisis is now behind us- which bodes well for other financial firms

Elsewhere, Treasury Secretary Timothy Geithner said he thinks the US economic recovery is still in the nascent stages as evidenced by the recent onslaught of stronger-than-expected earnings and economic data. Geithner said, "We have a long way to go, but we are starting to see signs of stability, and these signs mark the first steps to recovery." On the economic front, US leading economic indicators rose last month for a fourth straight month. The Conference Board’s gauge rose +0.6% for the longest consecutive series of increases since 2004. Another report showed that manufacturing in the Philadelphia region unexpectedly expanded this month which was the first increase in almost a year. The economic and manufacturing data added to recent flurry of evidence that the recession may be ending.

PICTURED: The S&P 500 Index continues to advance on below average volume as it approaches its recent chart resistance level (prior highs at 1,018).

The financial group helped underpin the major averages' gains on Thursday as the Broker/Dealer Index ($XBD +1.94%) and Bank Index ($BKX +2.87%) were on the rise.  Tech sector indices ended unanimously higher as the Internet Index ($IIX +1.74%), Networking Index ($NWX +1.98%), Semiconductor Index ($SOX +1.02%), and Biotechnology Index ($BTK +1.42%) advanced.    Generally defensive areas also posed gains as the Healthcare Index ($HMO +1.51%), Gold & Silver Index ($XAU +0.94%), Integrated Oil Index ($XOI +0.95%), and Oil Services Index ($OSX +1.46%) climbed.  The Retail Index ($RLX +0.41%) rounded out the widely positive session with a modest gain.

Charts courtesy www.stockcharts.com

PICTURED: The Broker/Dealer Index ($XBD +1.94%) is consolidating above prior chart highs.

Universal Travel Group (UTA +$0.64 or +5.06% to $12.70) has posted gains on light volume after recently encountering heavy distributional pressure, pulling back near prior chart highs and its 50-day moving average line. The Chinese provider of airline tickets and travel related services erased all of its gains since it gapped up on 7/28/09 when rising from a choppy 6-week base. Strong action had prompted it to be featured in yellow at $12.87 in the 7/28/09 CANSLIM.net Mid-Day Breakouts report (read here), and it subsequently traded as much as +33.64% higher.  Its considerable gain above its pivot point came with very heavy volume nearly 6 times its average daily trading total. Heavy volume, well above the minimum +50% above average volume guideline, has accompanied many of the market's biggest historic winners.

The investment system has a rule that says whenever a stock rises +20% or more in 2-3 weeks or less from when it was bought, that stock should be held for at least 8 weeks and be given a chance to produce bigger gains.  The rule was created because the market's most explosive winners often got off to a strong start. However, the stock's bad breakdown and deteriorating market environment (the M criteria) argue strongly against giving it the benefit of any doubt.  For now it is making a stand at an important level, but keep in mind that there is a lot of risk after its many-fold run from its March lows.  The fact that it is trading more than +100% above its 200-day moving average line gives investors another reason to be especially disciplined about making proper entries and exits.  Always limit losses if any stock falls more than -7% from your buy point.

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.