MORNING MARKET COMMENTARY   - Tuesday, March 16, 2010
Major Averages End Quiet Session Mixed Ahead of Fed Decision on Rates
Adam Sarhan, Contributing Writer, www.CANSLIM.net

The major averages ended mixed as concern spread that China and India may begin seeking measures to curb their robust economies as inflation picks up. Compared to the prior session, volume fell on the NYSE and Nasdaq exchange. Decliners led advancers by almost a 3-to-2 ratio on the NYSE and on the Nasdaq exchange. There were 43 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, down from the 58 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

The US dollar rallied which put pressure on dollar denominated assets; mainly, stocks and commodities. Two important economic reports were released on Monday: Industrial production and the Empire State manufacturing index. US industrial production unexpectedly grew +0.1% last month while manufacturing in the New York region rose for an 8th consecutive month.

On Tuesday, the Federal Reserve is slated to announce its latest decision on interest rates and give its opinion on the state of the US economy. Analysts believe that the Fed will hold rates steady and largely reiterate its comments from its last meeting about the state of the economy. Inflation in Asia jumped to a 16-month high last month which led many analysts to believe that the Chinese and Indian Central banks will begin raising rates in the near future to curb their economy and combat inflation.

Looking at the market, since the March 1, follow-through-day (FTD) the market and a batch of leading stocks steadily rallied. The fact that we have not seen any serious distribution days since the FTD bodes well for this nascent rally. It is also a welcome sign to see the market continue to improve as investors digest the latest round of stronger than expected economic and earnings data.Remember that now that a new rally has been confirmed, the window is open to start buying high quality breakouts. Trade accordingly.

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PICTURED: The benchmark S&P 500 Index is challenging its recovery highs while Nasdaq Composite and Small-Cap Indices have rallied on to new highs.

The Biotechnology Index ($BTK +0.93%), Healthcare Index ($HMO +0.24%), and Retail Index ($RLX +0.41%) posted modest gains while offsetting weakness in other groups kept the major averages from making headway.  Financial shares showed mixed action as the Broker/Dealer Index ($XBD -0.52%) ended with a small loss while the Bank Index ($BKX +0.20%) edged higher.  Commodity-linked areas traded with a slightly negative bias as the Oil Services Index ($OSX -1.16%), Integrated Oil Index ($XOI -0.68%), and Gold & Silver Index ($XAU -0.32%) suffered small losses. The Internet Index ($IIX +0.00%) and Networking Index ($NWX +0.03%) held their ground, meanwhile the Semiconductor Index ($SOX -1.39%) was a standout laggard in the tech sector.

Charts courtesy www.stockcharts.com

PICTURED: The Semiconductor Index ($SOX -1.39%) fell for a third consecutive loss, ending -5.52% off its recovery high.  Of the tech sector indexes routinely followed in this section it is the only one without a solid year-to-date (YTD) gain.  This suggests that chip-related companies as a group are lagging, while other industry groups within the tech sector have been showing better leadership (L criteria) and could offer investors more ideal buy candidates with better odds of working out favorably on the long side.

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