Weekly Newsletter 05/03/08
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Market Summary Weekly Breakout Report Top Breakout Choices Top 2nd Chances New Features Tip of the Week
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 Weekly Commentary  

Market Summary

S&P 500 and NASDAQ Break Through Resistance

Both the NASDAQ Composite and S&P 500 broke out from their double-bottom bases this week and simultaneously broke the medium term downward trend line. Both indexes gained for the third week in succession and have gained in four out of the last six weeks. The NASDAQ is approaching its 200 day moving average, which is the level needed before our market model signals an 'enter' for that index.

S&P 500

NASDAQ

Why are the markets rising while the economic fundamentals continue to deteriorate and will the trend continue?

Firstly, we think the economic fundamentals are deteriorating despite the loss of fewer jobs than expected and the supposed fall in unemployment. The Fed's statement on Tuesday confirmed that further weakening can be expected and their move on Friday to increase the Term Auction Facility funds by 50% and relax standards for the Term Securities Lending Facility (TSLF) to include AAA/Aaa-rated asset-backed securities shows they expect the liquidity situation to get worse before it gets better. We have long held that the Administration and Fed would do everything in their power to support the markets this year and Bernanke seems to have found the silver bullet with the combination of interest rate and discount window rate cuts together with the TAF and TSLF loans. Loans under these facilities mounted to $413 billion by April 30 and will clearly go higher. Acknowledged writedowns on mortgage losses amount to at most $250 billion so there is a comfortable surplus of capital that can be put to work. It was intended that these loans be used to relieve the credit crunch but there is little evidence that is happening (in fact it seems to be getting worse so it's reasonable to assume that this excess is being invested in the equity markets rather than to expand credit. If this reasoning is correct, then we can expect markets to move higher until the perceived risk of lending money is lower than the perceived risk of equity investments.

The number of breakouts (42) and the gains they make (3.6% for the week) continues to improve so we are taking the unusual step of sharing with our newsletter subscribers the full list of breakouts in the last week. This list is normally only available to our subscribers. You will note that the breakouts all came from a cup-with-handle pattern and were all market leaders (as measured by their high RS Rank values showing that they mostly outperformed over 90% of the market over the last 12 months) .

BreakoutWatch Sustained Breakouts for Week Ending 05/02/08
B'out
Date
Symbol Base B'Out
Price
B'out Day
Close
B'out
RS
Last
Close
Current %
off BOP
*Gain at
Intraday High
Expected
Gain %
05/02/08SPNCwH46.9747.3392.0047.330.77%1.66%58
05/02/08SMCwH45.0045.3090.0045.30.67%1.11%54
05/02/08SIRTCwH22.3522.3998.0022.390.18%0.67%64
05/02/08NUVACwH40.6340.7490.0040.740.27%1.48%44
05/02/08MVLCwH30.0030.2586.0030.250.83%2.17%48
05/02/08CDSCwH9.409.5099.009.51.06%3.19%99
05/01/08VITCwH9.189.2498.008.79-4.25%5.66%100
05/01/08ULTICwH33.2435.3090.0035.857.85%9.99%47
05/01/08STDCwH21.8121.8987.0021.77-0.18%0.96%56
05/01/08SBSCwH51.8752.9090.0054.084.26%5.07%45
05/01/08PVTBCwH35.8235.8681.0038.176.56%7.34%40
05/01/08OTTRCwH37.8138.7088.0037.7-0.29%8.41%32
05/01/08ORITCwH15.2515.8286.0016.236.43%12.46%56
05/01/08NPOCwH37.6838.3282.0037.880.53%6.69%42
05/01/08MANTCwH48.6649.5395.0048.44-0.45%4.81%52
05/01/08GTICwH20.7021.6896.0021.644.54%6.09%73
05/01/08CNQRCwH35.8536.7695.0038.67.67%10.66%63
05/01/08CIRCwH50.7551.0590.0049.91-1.66%1.85%50
05/01/08CEDCCwH63.6965.3297.0064.911.92%4.8%55
05/01/08BMRCwH26.8827.4486.0027.241.34%3.24%37
05/01/08BABYCwH19.9520.9888.0021.47.27%8.02%62
05/01/08ATKCwH110.95113.2983.00113.692.47%3.01%30
04/30/08VIVCwH6.686.7594.007.3710.33%17.07%107
04/30/08SPSSCwH42.4642.6483.0041.73-1.72%2.12%52
04/30/08PDACwH54.4655.1293.0058.87.97%11.4%54
04/30/08OTEXCwH35.7437.1695.0037.815.79%6.97%61
04/30/08OISCwH49.5850.0693.0049.29-0.58%4.76%64
04/30/08MPWRCwH21.9122.6394.0023.99.08%11.27%58
04/30/08LFUSCwH37.7337.7785.0035.61-5.62%1.91%34
04/30/08ITUCwH26.9728.0587.0029.9611.09%19.95%58
04/29/08TECHCwH70.5070.7884.0071.992.11%8.09%40
04/29/08GLWCwH26.3026.5383.00272.66%3.8%47
04/29/08CGNXCwH23.3425.8493.0025.027.20%13.32%60
04/28/08WWYCwH64.2376.9183.0075.9918.31%24.82%45
04/28/08SIRTCwH22.3422.3598.0022.390.22%0.72%66
04/28/08NTESCwH20.8821.5684.0023.512.55%15.8%60
04/28/08GACwH13.3414.1092.0015.6917.62%25.94%85
04/28/08ARLPCwH40.3441.7581.0041.733.45%5.78%48
04/28/08ARDCwH47.5047.8798.0044.45-6.42%3.89%67
04/28/08ACLCwH156.90159.4081.00159.131.42%3.15%39
 New Features this Week Additional Value that we added this week

No New Features this Week

 

 

This Week's Top Tip Tips for getting the most out of our site

No Tip This Week

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Signal
Dow 13058.2 1.29% -1.56% enter
NASDAQ 2476.99 2.23% -6.61% exit
S&P 500 1413.9 1.15% -3.71% enter
Russell 2000 725.74 0.53% -5.26% N/A
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
2.23 %
NASDAQ Composite
2.47 %
Dow Jones
-3.95 %
Dow Jones
-1.56 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
REIT - Healthcare Facilities REIT - Healthcare Facilities Cleaning Products Major Integrated Oil & Gas
 Most Improved Industry (by change in technical rank2)
Aluminum
+ 54
Aluminum
+ 99
Long Distance Carriers
+ 213
Long Distance Carriers
+ 210
Charts of each industry rank and performance over 12 months are available on the site

1The Market Signal is derived from our proprietary market model. The market model is described on the site.
2The site also shows industry rankings based on fundamentals, combined technical and fundamentals, and on price alone (similar to IBD). The site also shows daily industry movements.
 Weekly Breakout Report How confirmed breakouts performed this week
# of Breakouts
Period Average1
Max. Gain During Period2
Gain at Period Close3
This Week 42 18.54 7.2% 3.62%
Last Week 30 16.15 10.27% 4.96%
13 Weeks 252 19.38 12.05%
4.14%
Sector
Industry
Breakout Count for Week
BANKING
Foreign Money Center Banks
2
COMPUTER SOFTWARE & SERVICES
Business Software & Services
2
DRUGS
Biotechnology
2
ENERGY
Oil & Gas Equipment & Services
2
HEALTH SERVICES
Medical Instruments & Supplies
2
INTERNET
Internet Software & Services
2
MANUFACTURING
Industrial Electrical Equipment
2
AEROSPACE/DEFENSE
Aerospace/Defense Products & Services
1
AEROSPACE/DEFENSE
Aerospace/Defense - Major Diversified
1
AUTOMOTIVE
Auto Parts
1
BANKING
Regional - Northeast Banks
1
BANKING
Regional - Midwest Banks
1
COMPUTER SOFTWARE & SERVICES
Multimedia & Graphics Software
1
COMPUTER SOFTWARE & SERVICES
Application Software
1
COMPUTER SOFTWARE & SERVICES
Technical & System Software
1
DIVERSIFIED SERVICES
Business Services
1
ELECTRONICS
Semiconductor - Specialized
1
ELECTRONICS
Scientific & Technical Instruments
1
ENERGY
Independent Oil & Gas
1
ENERGY
Oil & Gas Drilling & Exploration
1
FINANCIAL SERVICES
Diversified Investments
1
FOOD & BEVERAGE
Meat Products
1
FOOD & BEVERAGE
Confectioners
1
FOOD & BEVERAGE
Beverages - Wineries & Distillers
1
HEALTH SERVICES
Medical Appliances & Equipment
1
INTERNET
Internet Information Providers
1
MANUFACTURING
Industrial Equipment & Components
1
MEDIA
Movie Production, Theaters
1
METALS & MINING
Nonmetallic Mineral Mining
1
REAL ESTATE
REIT - Office
1
TELECOMMUNICATIONS
Communication Equipment
1
TELECOMMUNICATIONS
Telecom Services - Foreign
1
UTILITIES
Foreign Utilities
1
UTILITIES
Electric Utilities
1
1The average number of breakouts in each week over the previous 13 weeks.
2This represents the return if each stock were bought at its breakout price and sold at its intraday high.
3This represents the return if each stock were bought at its breakout price and sold at the most recent close.
 Top Breakout Choices Stocks on our Cup-and-Handle list with best expected gain if they breakout
Category
Symbol
Company Name
Expected Gain1
Best Overall AIRV AIRVANA, INC. 109
Top Technical IPAR Inter Parfums Inc 50
Top Fundamental TYL Tyler Technologies 57
Top Tech. & Fund. FTI Fmc Technologies 53
1This is the gain predicted by our Expected Gain model if the stock breaks out. Expected Gains for all cup-and-handle stocks are published on our site.
 Top Second Chances Stocks that broke out this week and are still in buyable range
Category
Symbol
Company Name
Expected Gain1
Best Overall VIT VAN KAMPEN HI INC 100
Top Technical VIT VAN KAMPEN HI INC 100
Top Fundamental CEDC Central European Dist 55
Top Tech. & Fund. ARD Arena Resources Inc 67
1This is the gain predicted by our Expected Gain model after the stock has broken out which uses the volume on breakout as a predictive term. Because the model variance is +/- 38% the expectation can be negative.

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