The major averages rallied on Wednesday as the US dollar continued its free fall and the Fed released its Beige Book. Volume totals compared to the prior session were reported higher on the Nasdaq and lower on the NYSE.  The S&P 500 Index and the Nasdaq Composite Index both marked fresh 2009 highs. Advancers trumped decliners by over a 2-to-1 ratio on the NYSE and the Nasdaq exchange. There were 36 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 solidly from the 22 issues that appeared on the prior session. New 52-week highs still outnumbered new 52-week lows on both exchanges while new lows were in the single digits yet again.

The US dollar slid to a fresh one-year low against six major currencies including the euro, which sent most dollar denominated assets higher. Remember that there tends to be an inverse relationship between a weak dollar and dollar denominated assets since they become more attractive to foreign investors due to favorable exchange rates. A weaker dollar played a pivotal role in the massive increase in commodity prices several years ago.

The Federal Reserve released its Beige Book business survey which is published two weeks before an official meeting and shows how businesses are performing across the country. The survey showed that 11 out of 12 regional banks reported signs of a stable or improving economy in July and August while retail sales were "flat" and labor markets remained "weak." 5 regions "mentioned signs of improvement," which helped support the notion that the economy is recovering.

The S&P 500 Index has rallied +52% from its 12-year low set in early March, and it hit another new 2009 closing high. The Nasdaq Composite Index also charged higher and hit another new 2009 closing high, illustrating that all sell-offs have been nominal and "contained." In more bullish news, famous investor Michael Price, said that today's US stock market resembles 1975-1982, when the S&P 500 doubled. Price said, “We made very good returns from ‘75 to ‘82,” and managed some of the best performing mutual funds during the 1980s and 1990s. He now runs New York-based MFP Investors LLC. Price said in an interview on Bloomberg to "Pick your spots, pick your stocks, do your work, and somebody’s going to be selling something too cheaply." However, high-ranked leadership still remains selective, which is a concern. Ideally, one would like to see a new batch of high-ranked stocks with superior fundamentals trigger fresh technical buy signals as they break out of sound bases in the days and weeks ahead.

PICTURED: The S&P 500 Index enjoyed a fresh high close for 2009!

PICTURED: The Medical - Health Maint Org group is currently ranked 137th out of 197 Industry Groups recognized by the newspaper, which indicates that many other industry groups are showing better relative strength.  The Healthcare Index ($HMO +2.02%) was among Wednesday's better gainers, but disciplined investors always focus their buying efforts on stocks residing in the top quartile of all industry groups.  Historic studies have proven that is where the odds are normally most favorable.

Pegasystems Inc  (PEGA +$0.57 or +1.86% to $31.14) has been quietly consolidating above its 50-day moving average line, with volume totals drying up since its big 8/24/09 gain. It promptly stalled after clearing its early-August highs and fell back near its short-term average again, yet it proved resilient and found great support during a brief market correction which recently led many leading stocks to break down at key chart support levels.  Now an upward trendline (not shown) connecting its July-September chart lows may be watched as an initial chart support level above additional support that might be expected at its 50 DMA line and its recent low ($26.61 on 8/18/09).  PEGA may be forming an "ascending base" pattern, so its color code is changed to yellow with new pivot point and max buy levels noted. Ascending bases are formed when an upward trending stock endures 3 pullbacks of 10-20%, each pullback followed by higher highs and higher lows.  This analysis is considering the previously cited "double bottom" as the first of three pullbacks, followed by two more recent pullbacks.  Therefore, a powerful breakout with volume conviction could trigger a fresh technical buy signal. However, this may also be considered a 4th stage base, and experienced investors know that late stage bases can be more failure prone.

PEGA first triggered a technical buy signal when rising from the "double bottom" base on the day it was featured in the 7/29/09 mid-day report (read here).  The Computer Software - Financial firm has shown solid sales revenues increases and +25% earnings increases in the 3 last quarterly comparisons versus the year ago period. The previously noted downturn in annual earnings (the A criteria) from 2003 to 2006 has been followed by a solid turn around and big earnings increases in '07 and '08, and Street expectations for '09 are calling for well above +25% growth.

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.