The market ended higher on Friday and higher for the week as investors digested the latest round of economic and earnings data. The market remains in a correction which began on October 28, 2009, having just completed Day 5 of its new rally attempt. Advancers narrowly led decliners on the NYSE while the opposite was true on the Nasdaq exchange. There were 30 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, higher than the 20 issue that appeared on the prior session. In terms of new leadership, the recent action has yielded little worth noting, however new 52-week highs are still outnumbering new 52-week lows on the NYSE and Nasdaq exchange. 

Stocks closed higher on Monday which marked Day 1 of a new rally attempt. In other news, C I T Group filed for Chapter 11 bankruptcy protection and the ISM factory index rose to 55.7 in October which was the fastest growth rate for that index in 3 years! Elsewhere, the Commerce Department said construction spending unexpectedly rose +0.8% in September which suggested an uptick in spending. 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!

The market ended mixed on Tuesday which marked day 2 of the current rally attempt. Before Tuesday's open, Warren Buffett announced his plans to buy Burlington Northern Santa Fe Corp. (BNI +0.26%) for a $44 billion cash and stock deal which is his largest buy-out ever. Meanwhile, Stanley Works (SWK -0.87%) said it will take over Black & Decker Corp. (BDK -0.70%) which sent both stocks higher. Buffett said his acquisition was an “all-in wager” on the nation’s economic future. Buffett also said that his purchase was a bet on the US economy and that he was optimistic about the future. In other news, the International Monetary Fund (IMF) reported that it sold 200 metric tons of gold to the Bank of India. This alleviated a major amount of overhead supply and helped send gold futures surging to a fresh all-time high.

Before Wednesday's opening bell, ADP released its monthly employment report and said that US employers slashed -203,000 jobs in October, which was lower than the Street's estimate of a -227,000 decline. Then, at 10:00AM ET, the ISM released its service sector index which at 50.6 signaled growth and was in line with the Street's average forecast. Readings above 50 signal growth and readings below 50 signal contraction. A few hours later, at 2:15PM ET, the Federal Reserve surprised no one when they decided to keep rates steady near historic lows as the economy continues to "recover."

Stocks surged on Thursday well above the critical +1.7% threshold which is needed to produce a proper FTD, but volume, a critical component of institutional demand, was lower than Wednesday's levels which technically prevented the market from producing a proper FTD. Remember, that a proper FTD can occur anytime after Day 3 of a new rally attempt and needs the following three factors to occur: 1.) At least one of the major averages to rally +1.7% or more 2.) Volume needs to be heavier than the prior session and 3.) a new batch of high ranked leaders need to breakout of sound bases. Looking forward, a new FTD could emerge anytime in the next few days or weeks as long as Monday's lows are not breached.

Before Friday's opening bell, the Labor Department said US employers slashed -190,000 jobs in October which was higher than the -175,000 the Street had expected. Meanwhile, the unemployment rate soared to a 26-year high of -10.2% in October which exceeded the average estimate for a 9.9% rate. This was the first time the unemployment rate topped 10% since September of 1983. In addition, Friday's jobs report reiterated the Fed's thoughts that interest rates will remain low until the labor market recovers. The market remains in a technical "correction" until a proper FTD emerges, so the investment system's M criteria argues against new buying efforts.

PICTURED: The S&P 500 Index climbed above its near-term resistance line this week but remains in a "correction" until a new FTD emerges.Looking forward, we will continue to count the days of this rally attempt and wait for one of two events to occur: a.) a proper follow-through day (FTD) will emerge which will change the status of this rally attempt to a "confirmed rally" or b.) Monday's lows will be taken out which means the day count will be reset and this rally attempt will be over.

Group action on Friday was mixed. The Networking Index ($NWX -0.43%) and Semiconductor Index ($SOX -0.40%) ended with small losses while the Internet Index ($IIX +0.27%) and Biotechnology Index ($BTK +0.84%) posted small gains.  The Bank Index ($BKX -0.23%) inched lower while the Broker/Dealer Index ($XBD +0.40%) posted a small gain. The Retail Index ($RLX +1.70%) was among the better gainers, and some defensive posturing continued to lift the Healthcare Index ($HMO +1.37%) and the Gold & Silver Index ($XAU +1.83%). Meanwhile, modest weakness in the energy group led to small losses for the Integrated Oil Index ($XOI -0.67%) and Oil Services Index ($OSX -0.58%).

Charts courtesy www.stockcharts.com

PICTURED: The Gold & Silver Index ($XAU +1.83%) has posted 5 consecutive gains, rallying above its 50-day moving average (DMA) line toward prior chart highs.

ArcSight, Inc. (ARST +$1.43 or +5.77% to $26.23) rallied today with above average volume to a new all-time high from a short consolidation in a very tight trading range above its 50-day moving average (DMA) line. Its color code remains green while dismissing its 10/15/09 high as a new pivot point, with concern that it is now a later stage breakout without a recent base of substantial length. ARST stubbornly held its ground and it has encountered very little distributional pressure since its 9/04/09 breakout. Its 50 DMA line is an important technical support level to watch on pullbacks.

Keep in mind that ARST was considered a "late-stage" breakout possibility when featured after it had already made a considerable 5-fold rally from its November '08 low. ARST was first featured in yellow at $19.91 in the 9/01/09 mid-day report with an annotated daily graph (read here) and it was also featured with more detailed analysis in the September 2009 CANSLIM.net News with an annotated weekly graph (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.