All the major averages except for the Dow Jones Industrial Average sliced and closed below their respective 50-day moving average (DMA) lines which effectively ended the 34-week rally which began with confirmation on the March 12, 2009 follow-through day. Volume was reported higher on the NYSE and Nasdaq exchange,indicating large institutional selling. Decliners trumped advancers by over a 8-to-1 ratio on the NYSE and by over a 5-to-1 ratio on the Nasdaq exchange which illustrates how weak this market actually is. There were 0 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, which marked the first time since May 15th that no Leaders List stocks reached new 52-week highs.  New 52-week highs still outnumbered new 52-week lows on the NYSE, however new lows outnumbered new highs on Nasdaq exchange for the first time since August 17th.

Stocks plunged around the world as the US market officially slid into a correction, ending its robust 34-week long rally. This was one of the strongest sprints in the market's history! The small-cap Russell 2000 Index led the way higher and surged nearly +83% since its March lows! The tech-heavy Nasdaq Composite surged a very impressive +73% before hitting a near term top of 2190.54 on October 21, 2009. The S&P 500 Index jumped +65% during the past eight months while the Dow Jones Industrial Average rallied +56% during that period. Now that this robust rally is over one would be very wise to raise cash and return to a very defensive stance. The fact that all of the major averages except the Dow Jones Industrial Average have sliced below support suggests that the bears have gained the upper hand.  A strong defense may be your best offense.

No one knows for sure how low this correction will take the market, so instead of guessing we shall simply continue to react intelligently to what we see happening. This simple, yet effective, strategy has served investors well through previous bearish periods. Better times will come, and trying to "force a trade" is rarely a good idea. Instead, be patient and let the market come to you.

In other news, the US dollar continued its week long advance which dragged a slew of stocks and commodities lower. On the economic front, the Commerce Department said new home sales slid -3.6% last month which sent a slew of housing stocks lower. So far, housing stocks have failed to make any sort of progress as they continue to make their way through one of the worst housing busts (i.e. housing depressions) since World War II. Norway's central bank was the first European central bank to raise interest rates since the credit crisis began in late 2007. Norway is the world's fifth-largest oil exporter and decided to raise rates a quarter point from a record low as it signaled that more increases may follow as the global economy continues to improve. This sparked fears that other central banks will follow suit as they prepare to remove their massive coordinated stimulus packages that topped $12 trillion, according to the International Monetary Fund.

PICTURED: The S&P 500 Index closed below its 50 DMA line and 8-month upward trendline, which signals the 34-week rally is over and the market is back in a correction.

The Gold & Silver Index ($XAU -5.09%) was smacked with a large loss, serving as a poor "safe haven" in a broadly declining market environment.  The Oil Services Index ($OSX -4.28%) outpaced the Integrated Oil Index ($XOI -2.69%) to the downside while energy-related shares suffered as badly as any other group.  The tech sector weakness put greater weight on the tech-heavy Nasdaq Composite Index as the Biotechnology Index ($BTK -3.97%), Semiconductor Index ($SOX -2.80%), Internet Index ($IIX -2.27%), and Networking Index ($NWX -1.25%) unanimously declined.  The Healthcare Index ($HMO -2.35%) fell ill along with all other industry groups.

Longtime readers of this commentary should surely recognize the importance that is placed on following the action in the financial group of stocks. The Broker/Dealer Index ($XBD -2.77%) fell for its 8th time in the past 10 trading sessions.  

Charts courtesy www.stockcharts.com

PICTURED: The Bank Index ($BKX -3.29%) fell for the 9th time in 10 trading sessions, closing -13.39% off its $49.28 high. It sent an ominous message by its technical violation of recent chart lows.  That breach added emphasis to the rapidly deteriorating market environment (M criteria), since the financial group is such a reliable leading indicator.

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.