The US stock market closed higher on the first full trading session after the Dubai news broke late last week. On Friday stocks sold off as investors unloaded their positions ahead of the the weekend. Monday's advancers led decliners by almost a 3-to-2 ratio on the NYSE awhile the mix was nearly even on the Nasdaq exchange.  As expected, volume totals were heavier than Friday's holiday-shortened trading session. There were 13 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page. New 52-week highs reported outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Stocks spent most of the session in the red but buyers showed up in the final hour which helped the major averages close higher on the day. Monday was the first full trading session since the Dubai news spread late last week. It was encouraging to see the major averages rally despite concerns regarding the possible default of Dubai World. Dubai World said that it is currently engaged in “constructive” initial talks with its lenders to restructure about $26 billion of debt. At this point, the world is beginning to accept the notion that Dubai World is an isolated incident and it will most likely be bailed out by one of its wealthy neighbors. Since no one knows for sure exactly how much debt is at stake, most investors believe that the total debt is under $100 billion (highest estimates). If that is the case, it is only a "blip" on the world's economic radar. More importantly, if Dubai is bailed out then it will become a moot issue.    

The US dollar fell on Monday which helped stocks and a slew of commodities. The Chinese government reiterated its stance regarding its stimulus package after India announced its economy grew at a very healthy rate of +7.9%, which topped estimates. The National Retail Federation released a report that showed that holiday traffic was up from the same period last year, but the average shopper spent $343.31 in stores and online over the Thanksgiving holiday weekend, less than the $372.57 spent last year.  The group reaffirmed its forecast for a -1% decline in spending for this holiday season.

PICTURED: The Nasdaq Composite Index bounced off its 50-day moving average (DMA) line as it continues tracing out a new base.  Further deterioration, however, would not bode well for the market outlook.  Sustained rallies require a healthy crop of leaders making new highs, so an expansion of leadership is critical to the present rally. 

Financial shares bounced on Monday and gains from the Broker/Dealer Index ($XBD +2.38%) and Bank Index ($BKX +3.35%) assisted the major averages substantially in following up the Thanksgiving holiday with a positive session. The Retail Index ($RLX -0.52%) lost ground, however there were small gains from the Biotechnology Index ($BTK +0.29%) and Internet Index ($IIX +0.29%) while the Networking Index ($NWX +0.03%) and Semiconductor Index ($SOX +0.07%) fought to hold their ground. The Oil Services Index ($OSX +0.83%) posted a modest gain, meanwhile defensive areas mostly lagged and the Healthcare Index ($HMO -0.99%) and Integrated Oil Index ($XOI -0.62%) ended lower.  The Gold & Silver Index ($XAU +0.10%) barely edged higher.

Charts courtesy www.stockcharts.com

PICTURED: The Internet Index made a stand at its 50-day moving average (DMA) line, a sign of healthy support in the group.  It is healthy compared to the financial indexes shown in last Friday's IGW section (read here), both of which are below their respective 50 DMA lines.

China Automotive Systems (CAAS +$2.42 or +14.29% to $19.35) finished the session with a considerable gain on heavy volume.  The Chinese maker of power steering systems was rising from an advanced "3-weeks tight" type of chart pattern as it showed up in yellow in today's mid-day report (read here).  Today it is also cleared its 2004 all-time high while quickly trading more than +5% above its recent highs.  It may be considered risky and unwise to be undisciplined about buying and chase it, yet the high-ranked leader may go on to produce more climactic gains.  Caution and discipline are especially critical for investors since it is already up more than 8-fold from its March lows.

Recent quarters show accelerating sales revenues and earnings increases, and it has a good annual earnings history (A criteria).  The weekly chart below shows a small number, but increasing ownership from a handful top-rated funds.  That is encouraging news concerning the I criteria of the investment system.  Meanwhile, the small supply of shares (S criteria) in its publicly traded float could contribute to great volatility in the event of more abrupt maneuvering by large and highly influential fund managers.

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.