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Ken's Mailbag Q&A 1/19/11 - Is Negative Breadth On Featured Stocks Reason For Concern?
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


Subscriber Questions:

January  18, 2011

Dear Ken,

Should we be concerned when there is an expanding number of companies on the Leaders List making new 52 week highs while there is negative breadth on the Featured Stocks page such as that which occurred today? Is this any early warning sign in any way? Thanks!  Marcus

 
Ken's Response:

 January 19, 2011

Dear Marcus,

Thanks for asking a great question and helping me bring up some more detailed comments on the Featured Stocks list. Yesterday losses were posted by 15 out of the 25 high-ranked leaders now listed on the Featured Stocks page. Meanwhile, there was a total of 113 high-ranked companies from the CANSLIM.net Leaders List that made new 52-week highs and appeared on the CANSLIM.net BreakOuts Page up from 85 on Friday's session.

One day of negative breadth on the Featured Stocks list alone should not be cause for any great concern, so the occurrence yesterday would not be construed as an early warning sign of any importance. Note that the blue chip Dow Jones Industrial Average, which has been a recently noted laggard index, outperformed the Small-Cap indexes yesterday. Meanwhile, defensive groups including the Gold & Silver Index ($XAU +1.29%) and Healthcare Index ($HMO +0.79%) were among the session's best performers shown in the Industry Group Watch section of the After-Market Update. In sum, the action was a sign of some rotation of funds away from leading "growth" areas which recently enjoyed great gains. 

While you have brought up the subject of the Featured Stocks list, what might be a warning sign and some cause for concern is the list's gradual contraction over recent weeks.  There were 30 on December 1st, but there are only 24 today.  While some new candidates have shown up highlighted as noteworthy, more in recent weeks have been dropped from the Featured Stocks list after damaging sell signals were noted. The expansion or contraction in the list should be viewed as a telling indication of the current market (M criteria) environment. Note that near the Bear Market lows in early 2009 there were as few as 5 stocks on the list. 

Please let me know if there is any way I can be more helpful to you in your efforts.

Best regards,

Kenneth J. Gruneisen
Founder & Contributing Writer for CANSLIM.net
www.canslim.net

About Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program.  Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.

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