The indices have already chalked up impressive percentage gains from their respective October lows, with the Dow Industrials up almost 24%, the S&P 500 Index up nearly 22%, and Nasdaq Composite up more than 33%. Nothing goes straight up, and some would say that the indices are due for some weakness on profit taking. At this point, however, investors should remain confident about the market until they see any reason to believe otherwise. The market seems to have built a good deal of momentum, and it would take a few tough distribution days to really become worrisome. Rather than the defensive areas, lately much of the strength has been in the technology sector. We are seeing fewer failed breakouts and good action in areas that normally fuel a healthy rally.

Some uncertainty has been removed while things we mentioned last month as possible market catalysts such as the elections, and FOMC meeting (which included a ½ point interest rate cut) are now behind us. Encouraging economic reports have included a dip in jobless claims and strong 4% growth in third-quarter GDP.

If you are continuing to track the major indices then you noticed the recent pattern of one or two up days on heavier volume followed by a couple of days where the market digests the gains on lighter trading. This is just the kind of action you want to be seeing at the start of a new bull market. Readers of IBD might have also noticed in recent weeks that the major indices formed cup-with-handle chart patterns and then broke out. This is not a guarantee that the major indices can’t turn downward, but if that happens it would be surprising to see a bad technical failure and October’s lows retested. Lately the market has a lot of momentum, more high ranked leaders are breaking out and not failing.

If you missed the first few breakouts out of the gate you probably shouldn’t chase them and pay a price more than 5% above their pivot point. An "opportunity of a lifetime" comes along every couple of weeks in the stock market so don’t get flustered. The next time you see a high-ranked leader breaking to new highs on above average volume, lifting off from a base at least six weeks in duration, you might not want to be hesitant.

Bear markets leave many investors too petrified to jump in even when the right things start happening. The right things have finally been happening. Hopefully this doesn’t come to you as something surprising to hear. In this newsletter we’ve continually been preaching caution, defense, and the importance of capital preservation so that our readers would have a load of sidelined cash for just such a time. Now, failing to latch onto some ideas from the first group of new leaders can have you missing out on a lot of the market’s easiest big gains.

Fundamentally sound stocks within 10-15% of their highs are great candidates to keep on your watch list. The best stock selections are likely to come from a group that has plenty of other stocks confirming that the idea you are considering is in a strong sector that the market is favoring. I always take the time to look at the new highs list every day, and know that it is wise to consider stocks from within a group that is among the top five groups with the most new highs showing up.

As contrary indicators go, we can find some encouragement in the fact that over the past couple of weeks the percentage of bullish advisors has been tapering off a bit, rather than continuing to climb. Also, a number of clients I have recently talked to about purchasing a couple of emerging leaders have voiced concern that the market has already rallied a lot and that it might be due for another pullback. It is actually good that a lot of people are scared and pessimistic. If it people were unanimously bullish there would be very little fuel left to drive the market higher. Right?

Here’s another interesting point to look at. Downgrades! For some odd reason it seems that analysts these days are anxious to issue downgrades based upon valuations. Most stocks have been shrugging off such news, and with the market willing, they will probably continue higher. But among some of the strongest emerging new leaders in the latest rally I have seen a number of really great looking stocks hit with virtually senseless downgrades. In some cases these ridiculous fools are saying that the stocks have reached their target so they are reducing them from "strong buy" to "buy", or from "buy" to "hold", or from "over-weight" to "market perform" in those special cases where they really want to sound like they know what is going on.

I am not just saying this to jump on an easy target to make fun of these days, and it is not as if any of these calls seem to be doing much damage. Mind you, this is just another great contrary indicator. When I see it happening it almost makes me glad to see it, and it definitely makes me wonder if maybe they are on the short side! For if they were really long the stock, wouldn’t they simply raise their target and pound the table saying you should buy it? Who really knows what to make of these analysts’ opinions? If you say it is a "hold" you must think it has potential to go up, so why doesn’t it make sense to buy it? Oh, is that too risky? Then why hold it?

Eon Labs Inc (Nasdaq – ELAB)
One of the top choices in the Medical-Generic Drugs group that is ranked 16th among IBD’s 197 Industry Groups. It has high ranks and has marched steadily higher since its May IPO. A close above its November 14 highest-ever close at $24.38 would grab our attention, especially if volume surges. Its up/down volume ratio of 2.0 makes it very clear the stock is trading higher volume on up days and lighter volume on down days.

Verisity Limited (Nasdaq - VRST)
This is a high ranked leader in the Computer-Graphics group, and a company that was first mentioned in our "Ideas Worth a Closer Look" section back in April of this year. At that time its breakout promptly failed, disappointing us and then spending eight months consolidating. In the past month it has jumped back above its 200-day moving average and in the past week it spiked up on heavy volume to get back within striking distance of all-time highs.

Blue Rhino Corporation (Nasdaq – RINO)
In the last couple of years this company has come a long way, but it is difficult to not mention it after its latest high-volume breakout from a six-week base of consolidation. It is a leader in the Consumer Products-Misc category, and has been coming through again and again with big earnings and sales increases over the year earlier numbers. It is extended a bit above its 50-day moving average where it found recent support. Maybe this RINO will keep on charging.

Nutraceutical Intl Corp. (Nasdaq –NUTR)
Building a long, flat base since it was mentioned in our "Ideas Worth a Closer Look" section in September, this lightly traded issue popped to new highs last week as volume rose above its average trading levels for the past six sessions straight. It has high ranks and confirming strength in the Cosmetics/Personal Care group going for it. That fact that it is small (only 11.1 million shares are outstanding) could lead to an explosive rise in price if institutional demand continues to grow.

Zebra Tech Corp Cl A (Nasdaq – ZBRA)
The same remarks concerning LXK might be said for ZBRA, as some investors think a $64.22 stock is lacking in explosive upside potential. If they moved the decimal point over a notch and called it a $6.42 stock with 315 million shares (instead of the 31.5 million outstanding that it really has) the same group of amateurs would likely get excited. There are legitimate reasons that this particular company has such high ranks and a very bullish chart. It is attracting strong interest from institutional investors, and these pros don’t flinch at the higher price tag.

Ross Stores Inc. (Nasdaq – ROST)
This is a high-ranked leader in the Retail-Apparel/Shoe group that should be no stranger to long-time CANSLIM fans. It was among the first ideas featured at CANSLIM.net back as early as 1997. Consumers these days are more cost conscious, and the discount retailers seems to be outpacing other parts of the retail group. Its chart is bullish and its ranks are high. If volume kicks into high gear and the price rises through $46, 47,48 what else can we assume but things are looking great.

Gilead Sciences Inc. (Nasdaq – GILD)
Truly a high-ranked leader in the Medical-Biomed/Biotech group. That group is presently ranked 6th among IBD’s 197 Industry Groups. It has a bullish chart but it would be nicer to see an eyebrow-raising high volume day with a nice jump over $40. One thing that is a bit of a bother is that its 195 million shares outstanding make it a bit larger than what we consider the most ideal size (30 million).

Waste Connections Inc. (NYSE – WCN)
A leader that sports high ranks and a bullish chart in the Pollution Control-Svcs group. Unfortunately its recent rise to new highs seems to have happened a bit casually, where normally we’d expect to see a big bang, and confirmation of its recent new highs in its Relative Strength line would also be helpful. One other thing that stands out as worrisome would be its sub par Accumulation/Distribution rank. Those might be areas to watch for improvement.

Lexmark International A (NYSE – LXK)
Many novice investors who think that high-priced stocks don’t have as much potential for big gains are likely to pass on this high ranked leader from the Computer-Peripheral Eqp group. The truth is that is the best-ranked overall leader in the group and clearly is a favorite of institutional investors based on solid fundamental growth. It appears ready to break above its May 2001 highs in the $70 range and begin another leg up. Don’t be surprised if it actually turns out to be cheap at the current price.

Some of you may be saying right now, "What in the world is she going to write about this month?!". Well, if you are a fan of CANSLIM, you know exactly what I am going to write about! In this article, the mice are the small investors and the elephants are the large institutions.

It has been more than seven weeks that the market has been in an up trend. Even though the chances of are pull back are unavoidable, it is clear to see that the path to recuperation is being paved for us and we must be prepared to follow it.

Many investors are still nursing stocks that have faltered and practically died, like Lennie in Steinbeck’s "Of Mice and Men", who continued to carry and stroke a dead rabbit for quite some time. It is important to concentrate your investment dollars in your winning stocks and not continue to hold or keep buying more of the losers. CANSLIM followers know that by following a 7-8% selling discipline, you cut your losses before they destroy you.

Most of the wealth is usually created during the beginning of a new bull market. The sad part is that most of us are not sure as to when the bear is headed for hibernation and the bull is sharpening its horns. That has been the big question for the past months if not years. As we all know by now, the economists and analysts don’t always know the answers. You are better off taking your clues from the charts of the major indexes. If you are glued to CNBC in search of the answer, you won’t be able to make rational decisions for your portfolio.

One of the keys to taking advantage of a new bull market is to watch what the Elephants are doing! You know, the banks, investment companies and pension funds. The Institutional Investors! Large sums of money are being held on the sidelines waiting eagerly for the next gravy train! That new Bull Market is closer as we speak, and once the Institutions start pouring in their money, you must be prepared to jump right in! Making sure that you don’t buy when a stock has gotten extended (more than 10% from its breakout) is one of the keys to our success!

Let me offer you a quick sample of how important it is for you to follow these Institutions. Do you remember back in March of 2000 when stocks started to tumble? While I am sure you don’t really want to discuss it, if you take time to look at the charts of the companies that got clobbered you can identify a distinctive pattern that they all have. This very important chart action is clearly revealed in the declines in price accompanied by a larger than average volume. Hold on and let me rephrase that - "Accompanied by HUGE volume!" If that did not scare you, I don’t know what can. In the movie "Amityville Horror" the new owners enter the house and they hear a ghostly voice that says, "GET OUT!" Well, that’s what investors should have done because that is what the charts were saying, and that is exactly what the elephants were doing. Which do you think could cause such big ripples, the elephants or the mice?

But Wait! The same thing happens when the market turns around and stock prices start escalating! Yes, when you see stocks hitting new price highs accompanied by huge volume it is a pretty clear sign that it is time to get in. Unlike the ghostly voice that scares you away, this time it is more like when you are going to a holiday party, and when you knock on your neighbor’s door you hear a cheerful and pleasant, "COME IN!"

With a new Bull Market on the horizon you must be prepared. In the same way that the actions of the elephants, the institutional investors’ (the "I" in CANSLIM) moves were noticeable at the outset of the collapse, if you recognize their moves now it will enable you to foresee the possible heights of stocks and get on board.

Ever Considered Using a Buy Stop Order?
You should be able to spot more ideal purchase candidates if you continuously monitor the high-ranked leaders that are trading up on above average volume. One strategy that you might use if you don’t have the ability to watch the market all day long involves the use of "buy stop" orders. This kind of order is the opposite of a "sell stop" order, which investors commonly call a "stop loss" since it becomes an order to sell only if the stock drops to a certain point, often preventing more substantial losses. With a "buy stop" order you pick a point (such as the pivot point) at which you would like to have your buy order triggered. When the stock trades up to your designated price your order then becomes a market order to buy.

Why not go ahead and buy the stock earlier and a little cheaper if you like it? Because you really only want to get into it once you’ve seen real proof that the buying demand there is sufficient enough to drive the price to new highs. We are not trying to be psychic like television’s infamous Miss Cleo. No! We are not guessing what might happen, but simply reacting to what is actually happening. This technique might make sense in those cases where you don’t have time to react.