On Friday the major averages ended mixed as investors digested a slew of economic data from the past week. Volume, an important indicator of institutional sponsorship, was reported lighter than Thursday's totals on the NYSE and on the Nasdaq exchange. Advancers led decliners by about a 2-to-1 ratio on the NYSE and by about a 3-to-2 ratio on the Nasdaq exchange. There were 25 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, one better than the total of 24 issues that appeared on the prior session. New 52-week highs substantially outnumbered new 52-week lows on the NYSE, yet the leadership was less substantial on the Nasdaq exchange.

Stocks ended mixed on Monday as the dollar edged higher and commodities pulled back. This theme prevailed for most of the week and began on Friday December 4, 2009 when the Labor Department smashed estimates and said November's nonfarm payrolls slid by only -11,000 as the unemployment rate eased to 10%, down from a 26-year high of 10.2%. Gold and crude oil got smacked this week both pulling back sharply. After rallying for several weeks, on Thursday December 3, 2009 gold negatively reversed after hitting a new all time high of $1,226.40 and hasn't looked back since. Crude oil slid as below $70 a barrel in New York as demand waned and the supply rose.

Federal Reserve Chairman Ben Bernanke gave a speech at the Economic Club of Washington D.C. and said it was too early to determine the sustainability of this recovery. Bernanke also said that he sees modest economic growth in 2010 and does not believe inflation is a threat at this point. He also said that tight credit markets and a 10% unemployment rate could hinder future economic growth.

Stocks slid on Tuesday after a series of negative headlines hit the wires: tepid economic data was released from Germany, several credit-rating companies highlighted the risk of huge government deficits in the developed world, Greece's credit rating was downgraded, and Dubai World's Nakheel PJSC said it lost $3.65 billion. Stocks advanced on Wednesday thank in part to a late day decline in the US dollar. Japan's government said that the world's second largest economy grew at a +1.3% annualized rate last quarter which was way below the +4.8% reported last month. The sharp downward revision caught nearly everyone off guard and sparked concern that a double dip recession is likely. In Europe, Standard & Poor's lowered Spain's credit outlook to "negative" and said they were concerned with the country's slow economy and massive deficit spending. 

Stocks edged higher on Thursday after positive trade data offset concerns about an increase in weekly unemployment claims. Before Thursday's opening bell, the Labor Department said jobless claims topped expectations and rose last week to 474,000 after falling for five straight weeks. However, the bulls found comfort in the fact that the four-week average, which smooths out the data and is less volatile, slid to its lowest level since September 2008. Elsewhere, the Commerce Department said the trade deficit narrowed to $32.9 billion in October. The report showed that exports surged in October thanks in part to a weaker dollar. Furthermore, this was the sixth consecutive month that exports rose which bodes well for the US economy. On Friday, investors cheered after two better-than-expected reports were released: retail sales and consumer confidence. However, stocks came under a little pressure in the afternoon when the House of Representatives passed legislation to create a Consumer Financial Protection agency which will monitor risk at large financial firms.

Important Support & Resistance Levels: Looking at the recent action in the market, the major averages continue acting well as they remain perched just below resistance (their respective 2009 highs) and above their respective 50-day moving average (DMA) lines. Both these factors are considered healthy and bodes well for this 8-month rally. The Nasdaq continues to experience formidable resistance just above 2,200 while the benchmark S&P 500 Index faces resistance just above 1,115. The blue chip Dow Jones Industrial Average remains the strongest of it peers and currently faces resistance just above 10,500. Until the major averages close above or below support or resistance, expect the bracketed (sideways) action to continue.

PICTURED: The tech-heavy Nasdaq Composite Index has been encountering resistance near prior chart highs.  Any violation of its 50-day moving average line would hurt its outlook and possibly lead to a retest of prior chart lows just above the 2,000 level.

Gains from influential groups helped the major averages on Friday as the Retail Index ($RLX +1.29%) posted a gain and the Bank Index ($BKX +1.02%) and Broker/Dealer Index ($XBD +0.31%) rose.  However, weakness in most other groups largely offset the impact of their positive bias.  The Gold & Silver Index ($XAU -2.10%) was among the worst laggards as the defensive group continued consolidating after its prior winning streak.  The Biotechnology Index ($BTK +0.20%) posted a modest gain, but weakness in the Semiconductor Index ($SOX -1.00%), Internet Index ($IIX -0.49%), and Networking Index ($NWX -0.35%) pressured the tech sector lower and dragged the tech-heavy Nasdaq Composite Index into the red.   The energy group had a quiet day as the Integrated Oil Index ($XOI -0.07%) and Oil Services Index ($OSX -0.02%) finished virtually unchanged.

PICTURED: The ticker symbol GLD stands for a tracking fund from S&P that closely tracks the price of gold bullion.  Following a prior run up, a wave of distribution was followed by nearly 8 months of base building before the next leg up began.  Massive volume indicates heavy distributional pressure during the present 7-session losing streak, which is a sign that smart money is locking in gains after another great run up.

China Automotive Systems (CAAS +$0.03 or +0.15% to $20.46) finished the session with a small gain on light volume.  Volume totals have dried up in recent days while it has been consolidating near all-time highs.  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 the 11/30/09 mid-day report (read here) while it also cleared its 2004 all-time high and quickly traded more than +5% above its prior highs.  It is now more than +16% above its pivot point, so it may be 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 this stock is already up more than 8-fold from its March lows. 

The daily chart below shows recent quarters with sales revenues accelerating greatly and earnings increases getting bigger, and it has a good annual earnings history (A criteria). Increasing ownership from a handful top-rated funds is encouraging news concerning the I criteria of the investment system, as the number of top-rated funds rose from 4 in Dec '09 to 10 in Sept '09.  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.