Weekly Newsletter 06/07/08
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Market Summary Weekly Breakout Report Top Breakout Choices Top 2nd Chances New Features Tip of the Week
Prior editions of this newsletter with our valuable Tips of the Week are available here.
 Weekly Commentary  
Weekly Commentary

Market Summary

S&P 500 in Head and Shoulders Bearish Pattern, NASDAQ Weakens

The S&P 500 all but completed a bearish head and shoulders top pattern on Friday as it closed at the neckline. Theory (see here) suggests that we can expect a further decline of about 4% from this point but the economic fundamentals (more later) suggest that the bear market decline will be greater than that before we hit bottom.

S&P 500

The NASDAQ may also go on to complete a head and shoulders top pattern but for now it looks like a double top.

NASDAQ

Some analysts dismissed Friday's unemployment numbers as being an out-of-trend aberration due to school-leaving teenagers joining the work force but we discount that as seasonal adjustments can account for that kind of event. We find more convincing the idea that more people are looking for work because their finances are being squeezed by higher food and energy costs. We continue to believe that Nouriel Roubini is the most accurate prophet of our economic future:

A contracting economy, falling employment for months now, the worst US housing recession since the Great Depression, collapsing home values, millions of households underwater with an incentive to walk away from their home, a shopped out and saving-less and debt burdened US consumer buffeted by falling home prices, falling HEW, falling stock prices, rising debt servicing ratios, oil at $130 a barrel and gasoline at $4 a gallon, collapsing consumer confidence and falling employment are all taking the toll on the economy, on financial markets, on banks, on the shadow financial system and on money markets and credit markets. We were in the eye of the storm rather than past the storm; and the recent events and developments suggest that the worst is ahead of us, for the economy, for equity markets, for credit markets and for money markets."

Following Friday's debacle, we would normally expect the markets to gap down on Monday. However, nothing is as it seems in the current Lewis Carroll market. Somewhat incredibly Paulson and Bernanke were actually able to talk the dollar up this week, despite downgrades of the monolines and more doubts about Lehman Brothers' liquidity, until reality prevailed. Watch out for Lehman Brothers earnings that are due on Tuesday. Although they deny it, they are rumored to be borrowing heavily from the Fed. 


 New Features this Week Additional Value that we added this week

Improved Performance

The recent hacking of our server caused us to move to new hardware. This had the benefit of substantially improving site performance by about 50%. The result is that our daily calculations before publishing the watchlists now run in about half the time allowing us to publish the watchlists and daily reports before 7pm EST.  Our subscribers are also experiencing improved response time for watchlists and charts. has also improved

 

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

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Signal
Dow 12209.8 -3.39% -7.95% enter
NASDAQ 2474.56 -1.91% -6.7% enter
S&P 500 1360.68 -2.83% -7.33% enter
Russell 2000 740.37 -1.05% -3.35% N/A
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
-1.05 %
Russell 2000
12.16 %
Russell 2000
-5.75 %
Russell 2000
-3.35 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Independent Oil & Gas Independent Oil & Gas Agricultural Chemicals Agricultural Chemicals
 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 25 22.23 5.04% 1.18%
Last Week 27 21.85 7.82% 2.26%
13 Weeks 293 23.77 30%
6.22%
Sector
Industry
Breakout Count for Week
ENERGY
Oil & Gas Equipment & Services
3
ELECTRONICS
Semiconductor - Specialized
2
ENERGY
Oil & Gas Drilling & Exploration
2
HEALTH SERVICES
Medical Appliances & Equipment
2
COMPUTER SOFTWARE & SERVICES
Security Software & Services
1
COMPUTER SOFTWARE & SERVICES
Business Software & Services
1
CONSUMER NON-DURABLES
Textile - Apparel Footwear & Accessories
1
CONSUMER NON-DURABLES
Cleaning Products
1
ELECTRONICS
Semiconductor Equipment & Materials
1
ELECTRONICS
Semiconductor - Memory Chips
1
ELECTRONICS
Semiconductor - Integrated Circuits
1
ENERGY
Independent Oil & Gas
1
FINANCIAL SERVICES
Closed-End Fund - Equity
1
INTERNET
Internet Software & Services
1
MANUFACTURING
Industrial Electrical Equipment
1
MANUFACTURING
Industrial Equipment & Components
1
METALS & MINING
Nonmetallic Mineral Mining
1
METALS & MINING
Steel & Iron
1
RETAIL
Auto Parts Stores
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 WH WSP HOLDINGS LIMITED 118
Top Technical MXB MSCI INC 55
Top Fundamental EGLE Eagle Bulk Shipping Inc 64
Top Tech. & Fund. EGLE Eagle Bulk Shipping Inc 64
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 GW Grey Wolf Inc 91
Top Technical VLTR Volterra Semiconductor Corp 54
Top Fundamental MPWR Monolithic Power Systems 52
Top Tech. & Fund. MPWR Monolithic Power Systems 52
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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