U.S. Stocks Snap Rally as Analysts Ponder Scope for Further Gains

Something significant just happened: the Standard & Poor's 500 Index fell four consecutive days for the first time this year, breaking its longest-ever rally without a four-day correction, according to the team at www.bespokeinvest.com. Since setting a new all-time high on Aug. 2, the S&P 500 has dropped 3.5 percent.

The green trend line on the chart connects the year's low on Jan. 2 to the dip in late June. Two other dips occurred in March and May. All three proved good buying opportunities. While the current correction has taken stocks closer to the trend line, we're not there yet -- which is what the strategists are telling us this morning.

Stategas Research's Chris Verrone takes the analysis one step further, noting that 20 percent of S&P 500 stocks are still above their 20-day moving averages, slightly above the 8-10 percent threshold he says typically marks a trade-able bottom.

So I'm compiling a shopping list of candidates: stocks to buy when Verrone and others sound the "all clear." We screened the 900 largest companies in the U.S. (S&P 500 plus S&P 400) for estimated earnings growth of at least 25 percent, and prince-to-equity ratios of less than 10x, that is, high growth at a low price. Only ten names made the list:

The group is up an impressive 32 percent so far this year, so I suspect we're on the right track. If we loosen our criteria slightly (growth of 20 percent and P/E of as much as 10.5x) a few more names appear. We include them exclusively for blog readers: Ensco Plc (ESV), Goldman Sachs Group Inc. (GS), Noble Corp. (NE), Travelers Cos Inc.(TRV), United Rentals Inc. (URI), XL Group (XL).

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