On Thursday the major averages overcame early weakness and ended the session slightly higher while trading continued in an unusually tight range.  Decliners trailed advancers narrowly on the NYSE, yet advancers outnumbered decliners slightly on the Nasdaq exchange. Volume totals were reported slightly higher on the NYSE and on the Nasdaq exchange versus the prior session while both totals remained at below average levels typical of the "summer doldrums" when many fund managers are still vacationing.  There were 13 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the 23 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on both exchanges while new lows were in the single digits again.

In addition to seeing a contraction in the number of high-ranked stocks hitting new 52-week highs, there are other signs that new leadership is thinning of late.  Take note that on Thursday the Mid-Day report's screen parameter was lowered to include stocks within 10% of their 52-week highs, instead of the usual mid-day screen showing stocks within 5% of 52 week highs.  Even after that adjustment, only 10 stocks were listed and noted, whereas on the prior session's screen showing stocks within 5% of their 52 week highs 16 stocks showed up.

Investors did not flinch at the news that the FDIC's Problem List of banks has expanded to a 15-year high and that noncurrent loans and leases increased for a 13th consecutive quarter.  A big spike up in AIG (AIG +26.93%) shares was attributed to a short squeeze.

The preliminary second quarter GDP report's headline number showed a better-than-expected 1.0% annualized decline, unchanged from the advance reading. Consumer spending during Q2 also topped expectations by contracting 1.0%, an improvement from the previous 1.2% decline.  Meanwhile, initial jobless claims were reported in-line with expectations at 570,000, down 10,000 from the previous week.  Continuing claims at 6.13 million were below expectations and down more than 100,000 from the previous week as more unemployed workers lost their jobless benefits.

Remember there is no reason to force a trade. Instead remain patient and wait for an expansion in leadership before accumulating any new positions or adding to current winners.

PICTURED: The S&P 500 Index blasted to a new high on 8/21/09 with heavier volume due to options expirations (always on the 3rd Friday of the month).  Since then totals have been at or below average while consolidating in a tight range above prior highs.

Financial shares held up well in the face of the FDIC-related news headlines (mentioned above) as the Broker/Dealer Index ($XBD +0.48%) and Bank Index ($BKX +1.33%) were among the session's best gainers. It is an encouraging sign of a healthier market environment whenever stocks are resilient and can rally in the face of negative news.  It was a mostly quiet session otherwise on Thursday, with small gains for the Retail Index ($RLX +0.17%), Internet Index ($IIX +0.11%), Semiconductor Index ($SOX +0.25%), and Integrated Oil Index ($XOI +0.23%) and virtually no change for the Oil Services Index ($OSX -0.03%) and Networking Index ($NWX -0.03%).  For the session, the Biotechnology Index ($BTK -2.21%) was a relative laggard as it sank more than -2%.

Charts courtesy www.stockcharts.com

PICTURED: The Gold & Silver Index ($XAU +1.88%) has a well established upward trend in recent months.  At the same time, one can connect at least 3 clear prior chart highs to identify its longer-term downward trendline. A subsequent break above or below either trendline would provide an important hint for investors about where the XAU is ultimately headed.

Netease.com Inc (NTES -$0.37 or -0.87% to $42.45) has seen volume totals drying up while recently consolidating in a tight range above support at its 50-day moving average (DMA) line. Gains have lacked volume since it encountered that heavy dose of distributional pressure and it was last shown in this section on 8/13/09 under the headline "Gap Down Loss on Heavy Volume Triggers Sell Signal" (read here).  The market's negative reaction was due to the fact that sales revenues for the quarter ended June 30, 2009 were reported at -1% versus the year ago period, which was a continuation of its steady sequential deceleration in sales revenues increases from +79%, +59%, +42% in the Jun, Sep, Dec '08 comparisons and +24% in Mar '09.

Gaps are often a dead giveaway that large institutional investors (the I criteria) are rushing in one direction. In this case, the weak technical action was considered an early sell signal.  Any subsequent losses below its 50 DMA line or prior chart highs in the $38 area would raise more serious concerns and trigger additional sell signals. It was also noted before as "an especially ominous sign, after a considerable run up, when a stock experiences its biggest point loss on the highest volume ever."  There is not a number by its 8/13/09 volume spike, but that day's considerable loss came as 8.7 million shares traded!  NTES traded up as much as +74.8% following its appearance in the April 2009 issue of the monthly newsletter, CANSLIM.net News (read here).

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.