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MORNING MARKET COMMENTARY
- Monday, February 06, 2012
For the week, the Dow Jones Industrial Average finished up +1.5%, the S&P 500 Index rose just over +2%, and the Nasdaq Composite Index was the outperformer, adding on over +3%. The volume totals on Friday were reported higher than the prior session on both the NYSE and on the Nasdaq exchange, indicating that institutional investors had an increased appetite for buying shares. Breadth on the exchanges was solidly positive as the NYSE and Nasdaq exchange both saw advancers leading decliners by about 4-1. Stocks hitting new 52-week highs trounced new 52-week lows on both exchanges. There were 156 high-ranked companies from the CANSLIM.net Leaders List that made new 52-week highs and appeared on the CANSLIM.net BreakOuts Page, surging well into the triple digits from the prior session total of 95 stocks. There were gains for 19 of the 23 high-ranked companies currently included on the Featured Stocks Page.
Wall Street capped off the week with an impressive rally. The S&P 500 Index extended its best start to a year since 1989 as positive employment data brought bids to risk assets. Non-farm payrolls in January increased 243,000, well above the consensus projection of 140,000, marking the largest gain since April of last year. In turn, the unemployment rate dropped to its lowest level since February 2009 at 8.3%. Meanwhile, an ISM report on non-manufacturing industries showed its best growth since February of 2011 and separately, factory orders increased +1.1% in December. The Dow closed at its highest level in almost 3 1/2 years, and the Blue Chip index continued to be buoyed by large gains in financials as Bank of America (BAC +5.23%) and JP Morgan Chase & Co (JPM +1.94%) rallied. Shares of Estee Lauder Companies Inc (EL -2.33%) were down after providing disappointing third-quarter guidance. Acme Packet Inc (APKT +9.06%) managed a positive reversal following weak early action after earnings missed analyst projections. Insurance broker AON Inc (AON -2.65%) was off after reporting a slightly better than expected quarter. Brocade Communications Systems (BRCD +1.37%) gained amid reports private equity firm Blackstone may make a bid to acquire the company. The further expansion in leadership (stocks making new 52-week highs) has maintained and improved the current confirmed market uptrend. As this commentary has repeated, the M criteria requires a healthy crop of strong leaders for any sustained market advance. While the market has recently produced a larger crop of stocks hitting new highs, it always remains important for investors to be selective in choosing high-ranked buy candidates while being disciplined and following sound rules for buying and selling. The most timely stocks worthy of consideration under the fact-based system are included on the Featured Stocks Page. There members can drill down and review all prior analysis and annotated graphs via the links provided. Via the Premium Member Homepage links to all prior reports and webcasts are always available. PICTURED 1: The Nasdaq Composite Index finished near an 11-year high as its streak of 5 weekly gains lifted the tech-heavy index above its 2007 and 2011 highs. PICTURED 2: The S&P Small Cap 600 Index has rallied to a new all-time high. This news bodes well for fans of the fact-based system supported at CANSLIM.net, since our focus is on growth-oriented companies which typically are small-cap stocks. Financial shares helped spearhead Friday's bug gains for the major averages as the Bank Index ($BKX +3.28%) and Broker/Dealer Index ($XBD +3.52%) posted big gains. The Networking Index ($NWX +4.74%) led the tech sector, followed by the Semiconductor Index ($SOX +1.77%), Internet Index ($IIX +1.92%), and the Biotechnology Index ($BTK +0.84%). The Retail Index ($RLX +1.73%) rose, and strength in energy-related shares gave the Oil Services Index ($OSX +1.75%) and Integrated Oil Index ($XOI +2.10%) a solid boost. While investors showed a greater appetite for risk, defensive groups slumped again, with the Healthcare Index ($HMO -1.27%) and Gold & Silver Index ($XAU -1.18%) as the session's standout decliners. Charts courtesy www.stockcharts.com PICTURED 1: The Bank Index's ($BKX +3.28%) gain helped it distance itself from the 200-day moving average (DMA) line and prior resistance which now acted as support. Regular readers of this commentary should recognize that the continuation of bullish action recently noted in the financial group bodes very well for the broader market outlook. This is because the financial groups have established a reliable track record as leading indicators. Charts courtesy www.stockcharts.com PICTURED 2: The Broker/Dealer Index's ($XBD +3.52%) gain helped it rally above its 200 DMA line and above prior resistance. Regular readers of this commentary should recognize that the continuation of bullish action recently noted in the financial group bodes very well for the broader market outlook. This is because the financial groups have established a reliable track record as leading indicators.
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