The major US averages marked Day 1 of a new rally attempt as they squeezed out a nominal gain on Monday after investors digested the latest flurry of economic and earnings data. Volume was reported lower on the NYSE and Nasdaq exchange, indicating that large institutional investors were not aggressively buying stocks while the indices advanced. Advancers led decliners by a narrow margin on the NYSE but trailed by narrow margin on the Nasdaq exchange. There were only 4 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, just better than the 3 issue that appeared on the prior session. In terms of new leadership, the recent action is a sign that there is none showing up.  New 52-week highs still outnumbered new 52-week lows on the NYSE, however new lows outnumbered new highs on Nasdaq exchange for a third consecutive day.

Over the weekend, troubled lender C I T Group (CIT -65.28%) filed for Chapter 11 bankruptcy protection after failing to secure financing. The stock gapped down on massive volume and closed near its lows as investors scrambled to unload shares. However, it was somewhat encouraging to see the major averages end higher on Monday in the face of that bad news, helped by positive economic data and a strong earnings report from Ford Motor (F +8.29%). The troubled car maker reported its first quarterly profit in more than two years which helped its shares gap above its 50-day moving average (DMA) line.

On the economic front, investors cheered after key manufacturing and home sales and construction spending exceeded analysts estimates. The Institute for Supply Management (ISM) said its factory index rose to 55.7 in October as US manufacturing grew by its fastest pace in more than 3 years! Remember that a weaker US dollar helps exporters sell their goods since dollar denominated assets become "cheaper" for foreigners. The Commerce Department said construction spending unexpectedly rose +0.8% in September which suggested an uptick in spending. Elsewhere, the National Association of Realtors said signed purchase agreements for homes grew by +6.1% as the housing market continues to make its way out of the worst housing collapse in several generations!

Monday marked Day 1 of a new rally attempt which means that as long as Monday's lows are not breached this rally-attempt remains intact, and the earliest a possible follow-through day could occur is this Thursday. However, if at any point, Monday's lows are taken out, then the day count will be reset. Remember that last week the market slid into a correction as the major averages sliced below support (50 DMA lines and 7-month upward trendlines). Defense is the best offense until a new healthy follow-through day is produced.

PICTURED: Monday marked Day 1 of a new rally attempt.  The blue chip Dow Jones Industrial Average rallied up from its latest test of its 50 DMA line.  Subsequent deterioration to new lows below that important short-term average would not bode well for the overall market outlook.

Defensive groups were among Monday's best gainers as the Healthcare Index ($HMO +1.02%) and Gold & Silver Index ($XAU +1.03%) rose, and modest gains in the energy group helped the Integrated Oil Index ($XOI +0.50%) and Oil Services Index ($OSX +0.67%) end higher. Other positive influences included the Retail Index ($RLX +0.86%) and the Bank Index ($BKX +0.90%), meanwhile the Broker/Dealer Index ($XBD -0.06%) failed to follow along. The tech sector was mostly quiet as the Semiconductor Index ($SOX +0.26%) posted a tiny gain, the Networking Index ($NWX +0.01%) held steady, and the Internet Index ($IIX -0.20%) inched lower. 

Charts courtesy www.stockcharts.com

PICTURED: The Biotechnology Index ($BTK +2.92%) was a standout gainer after Human Genome Sciences Inc. (HGSI +35.28%) reported positive data on a lupus drug. Amylin Pharmaceuticals, Inc. (AMLN +9.87%) and Vertex Pharmaceuticals Incorporated (VRTX +7.72%) were also among the group's top gainers. However, none of the above mentioned companies has the fundamentals (earnings history) to be included on the watchlist as a serious buy candidate for any strict followers using the investment system.

Ebix Inc (EBIX -$1.48 or -2.46% to $60.12) ended lower today on slightly higher volume, continuing its consolidation that began with the previously noted negative reversal from all-time highs on 10/26/09, followed by more worrisome distributional pressure. It is still well above prior chart highs and its 50-day moving average (DMA) line coinciding in the $54 area, the next important support level to watch. Since its last appearance on 10/13/09 under the headline "Computer Software Firm Is Extended From Latest Base it went on rallying to get even more extended, trading as much as +48% above its price when featured at $45.86 in yellow in the 8/28/09 CANSLIM.net Mid-Day BreakOuts Report (read here) as it was reaching a new all-time high. Prior to that, it formed the big cup-with-high-handle shaped pattern (finding great support at its 50 DMA line) since weak action prompted it to be dropped from the Featured Stocks list on 10/07/08. As shown in the annotated graph below, earnings increases in quarterly comparisons have been strong and above the +25% guideline, but previously noted earnings deceleration is of some concern.  It is preferred when earnings growth is strong and accelerating, not losing steam.

EBIX had traded up more than +59% after it was first featured in the March 2008 CANSLIM.net News (read here). At that time its average daily volume was only 4,900 shares, whereas today its average volume is at 244,600 shares. Today there are 10.6 million shares (the S criteria) in the public float, so its share price still could be very volatile in the event of heavy institutional buying or selling. The number of top-rated funds owning an interest in its shares rose from 31 in Dec '08 to 58 in Jun '09, which is a good sign concerning the I criteria of the investment system.  Return on Equity is now reported at +42%, well above the +17% guideline. Do not be confused by the 3:1 split that took effect on 10/09/08.

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.