MORNING MARKET COMMENTARY   - Friday, March 19, 2010
Volume Totals Cool As Indices Finish Little Changed
Adam Sarhan, Contributing Writer, www.CANSLIM.net

The major averages traded between positive and negative territory for most of the day after the dollar rose and investors digested a slew of economic data. Volume totals were reported lower on the Nasdaq exchange and on the NYSE compared to the prior session. Decliners led advancers by nearly a 3-to-2 ratio on the NYSE and on the Nasdaq exchange. There were 46 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 77 issues that appeared on the prior session. New 52-week highs again overwhelmingly trumped new lows on both exchanges.

The US dollar rallied after speculation increased that the Federal Reserve will raise its discount rate in the near future. The discount rate is the rate the Fed uses to charge banks for direct loans, was last raised after the market closed on Feb. 18, 2010. The Fed raised its discount rate by a quarter percentage point to +0.75% and said the move would encourage banks to rely more on money markets for short-term liquidity needs which would help stimulate the system.

Economic news was mixed: consumer prices were mild, leading economic indicators rose +0.1% last month while jobless claims slid. The Labor Department said weekly jobless claims dropped by -5,000 to 457,000 last week. Meanwhile, consumer prices were unchanged for the first time since March 2009. The Conference Board said the index of leading indicators rose +0.1% in February which was the 11th consecutive gain.   

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 recent volume totals were below average as benchmark S&P 500 Index rallied above its January highs.

The Healthcare Index ($HMO +3.07%) was a standout gainer Thursday, yet a very important vote among policymakers in Washington DC on healthcare reform is approaching, and uncertainty looms large over the impact it may have on corporate earnings in the healthcare and insurance industries.  Energy-related shares were among session's laggards as the Oil Services Index ($OSX -2.76%) and Integrated Oil Index ($XOI -0.85%) fell, and the Gold & Silver Index ($XAU -0.69%) ended with a small loss. The Bank Index ($BKX -1.22%) and Broker/Dealer Index ($XBD -0.57%) traded with a slightly negative bias, and the Retail Index ($RLX +0.04%) ended virtually unchanged. The tech sector was mixed, with modest gains from the Internet Index ($IIX +0.20%) and Biotechnology Index ($BTK +0.30%) offset by slightly bigger losses for the Networking Index ($NWX -1.14%) and Semiconductor Index ($SOX -0.66%).

Charts courtesy www.stockcharts.com

PICTURED: The Broker/Dealer Index ($XBD -0.57%) is encountering resistance near prior chart highs and remains -5.4% off its October 2009 recovery high.  Financial stocks are important leading indicators that regular readers of this report know weigh heavily into the assessment of the overall market outlook.  By comparison, the Bank Index has rallied about +5% above its October 2009 highs and clearly outpaced the Broker/Dealer Index.  In the near term we will watch closely to see if the Broker/Dealer Index can make more progress which, technically, would bode well for the outlook.

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