On Thursday's session the major averages negatively reversed (opened higher but closed lower) after a the European Central Bank (ECB) held rates steady and disappointing economic data was released. Volume, an important indicator of institutional sponsorship, was mixed compared to Wednesday's levels; higher on the NYSE and lower on the Nasdaq exchange. As a result, the NYSE indexes marked a distribution day as they fell on higher volume but the Nasdaq avoided one since volume receded. Advancers were outnumbered by decliners by almost a 2-to-1 ratio on the NYSE and by over a 2-to-1 ratio on the Nasdaq exchange. There were 44 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the total of 46 issues that appeared on the prior session. Leadership among high-ranked growth stocks had dried up in recent weeks, so the expansion in new highs this week has been a welcome improvement. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Before Thursday's open, the Labor Department said that 457,000 jobless claims were reported last week which was just under the Street's estimates. Before Friday's opening bell, the Labor Department is slated to release November's jobs report. The latest estimate on Wall Street is that employers slashed -100,000 jobs last month and the unemployment rate held steady at +10.2% which is the highest level in 26 years. If the report shows that the economy lost 100,000 jobs in November it will be the smallest monthly decline in payrolls since March 2008.

Elsewhere, the Institute for Supply Management (ISM) said its service index fell below the boom/bust line of 50, to 48.7 last month. The reading was below economists' estimates of 52 and signaled contraction for the first time in several months. Bloomberg.com defines the ISM non-manufacturing index as: "The ISM surveys nearly 400 firms from 60 sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade." Since the service sector compiles a large portion of the economy, this reading is a great proxy for the underlying health of the economy.

Dr. Ben Bernanke spent the day defending his job, and the Federal Reserve, on Capitol Hill as congressmen spent hours asking him questions about the financial crisis.  One of the most controversial topics, was when Bernanke denounced a congressional audit of the Fed. Most analysts believe that he will easily get approved for a second term but the jury is still out whether or not the Fed will maintain its immunity from future congressional audits. Congress wants the ability to audit the Fed and review the Fed's monetary policy to ensure the central bank does not succumb to the political pressure. Last month, the House Financial Services Committee voted to approve a proposal to audit the Fed backed by Ron Paul. 

Looking at the market, the action remains mixed to slightly positive as the major averages continue consolidating their recent move just below resistance. Each of the major averages are having a difficult time trading above important resistance levels in recent weeks as the market continues building its latest base. Leadership, a critical component of a healthy rally has narrowed sharply in recent weeks as the market continues consolidating.  Currently, the three areas of strength are: large cap technology, gold, and small-cap and mid-cap China-based stocks. Ideally, one would like to see the market averages rally above resistance as high quality leadership expands.

PICTURED: The Nasdaq Composite Index pulled back after encountering resistance on Thursday.

Defensive areas took some of the hardest hits on Thursday as the Healthcare Index ($HMO -3.19%), Gold & Silver Index ($XAU -2.28%), and Oil Services Index ($OSX -2.45%) were smacked with losses.  Financial shares weighed on the market as the Bank Index ($BKX -3.02%) and Broker/Dealer Index ($XBD -1.68%) continued to struggle.  The Semiconductor Index ($SOX +1.15%) provided some leadership for the tech sector while the Internet Index ($IIX -0.69%), Networking Index ($NWX -0.54%), and Biotechnology Index ($BTK -0.36%) suffered modest losses.

A technical problem at the CBOE caused a problem much of the day with data reported for the Retail Index ($RLX -1.22%).  A handful of retailers reported disappointing sales for November, which pressured the retail group and definitely hurt investor sentiment.  Among the retailers making negative headlines was Aeropostale Inc (ARO -11.47%), a previously strong leader which was dropped from the Featured Stock list on 11/05/09 and has slumped well below its 200-day moving average (DMA) line since. 

Charts courtesy www.stockcharts.com

PICTURED: The Internet Index ($IIX -0.69%) is sporting the largest year-to-date gain of the industry indexes routinely tracked in this section.  While financial shares and other areas have recently struggled, the Internet Index remains in healthy shape, trading above its 50 DMA line and near its 2009 highs.

ArcSight, Inc. (ARST -$0.51 or -2.08% to $23.98) gapped up today but then negatively reversed and closed with a loss on light volume below its 50-day moving average (DMA) line. The 50 DMA line is always an important technical support level to watch on pullbacks. In this case, concerns were also raised when it undercut a prior chart low, the next technical support.  It has shown resilience this week after recently noted technical sell signals, however the 50 DMA appears to now be acting as a resistance level.

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.