The major averages traded between positive and negative territory before ending the session only slightly lower while investors digested the latest round of mixed economic data. Volume, an important indicator of institutional sponsorship, was reported lower than Monday's totals which indicated large institutions were not aggressively dumping stocks. Advancers were evenly matched with a similar number of decliners on the NYSE and on the Nasdaq exchange. There were 27 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 68 issues that appeared on the prior session. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

At 9:00AM EST, the S&P/Case-Shiller® home price index was released. The index is used as a proxy for the housing market and tracks monthly changes in the value of residential real estate in 20 metropolitan areas across the country. October's reading came in at 146.58 vs.September's 146.51, for a -7.3% year-on-year rate vs. a -9.4% decline in September. Housing stocks, sold off on the news which illustrates that the ailing housing market is still not out of the proverbial woods.  

At 10:00AM EST, the Conference Board released an upbeat report on consumer sentiment. The Conference Board's consumer confidence index increased by 2.3 points to 52.9. The survey covers five thousand consumers across the country each month and is used as a proxy for consumer spending. Typically, stronger consumer confidence translates into stronger consumer spending but they are not directly correlated each month.

Looking at the market, the action remains constructive. The Dow Jones Industrial Average, small cap Russell 2000 Index, S&P 500 Index and Nasdaq Composite and NYSE Composite indices are all trading near fresh 2009 highs. The inverse relationship with the US dollar has eased in recent weeks as both stocks and the greenback have rallied in tandem. Ideally, one would like to see leadership and volume expand over the next few weeks as the major averages continue advancing. 

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Commodity-linked areas were laggards on Tuesday as the Gold & Silver Index ($XAU -1.06%), Oil Services Index ($OSX -0.87%), and Integrated Oil Index ($XOI -0.38%) drifted lower. The Healthcare Index ($HMO -0.57%) also ended with a modest loss.  The Bank Index ($BKX -0.26%) and Broker/Dealer Index ($XBD -0.04%) edged lower, as did the Retail Index ($RLX -0.07%).  Most tech areas also showed a slightly negative bias as the Semiconductor Index ($SOX -0.41%), Internet Index ($IIX -0.28%), and Biotechnology Index ($BTK -0.15%) posted small losses while the Networking Index ($NWX +0.09%) finished with a tiny gain.

Charts courtesy www.stockcharts.com

PICTURED: The Networking Index ($NWX +0.09%) has extended its winning streak to 7 sessions, and recently rallied above its 50-day moving average line toward prior chart highs. 

China Automotive Systems (CAAS -$1.01 or -4.95% to $19.38) fell today on lighter volume (but still above average) after 3 consecutive considerable gains backed by heavier above average volume indicated accumulation. The Chinese maker of power steering systems had briefly negated all of its bullish action since rising from an advanced "3-weeks tight" type of chart pattern. However, it found prompt support near its short-term average line and positively reversed on 12/23/09 after a gap down and pullback near support at its 50-day moving average (DMA) line. It is now extended from an ideal buy point  CAAS was featured 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.  The stock's prior appearance in this Featured Stock Update section on 12/11/09  under the headline "Volume Drying Up While Hovering Near All-Time Highs" warned that "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 9 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.