Weekly Newsletter 06/16/06
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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  

Market Summary

Confusing, even contradictory, signals from the Federal Reserve Chairman and regional Presidents are whipsawing the markets. In April, Chairman Bernanke told a congressional committee that inflation was contained and a pause in monetary tightening may be possible. When the markets rallied he backtracked and said that they had misinterpreted his remarks. Then a week last Monday, he sparked a multi-day sell-off by saying that inflation was at the limit of acceptability. However, on Thursday of this week he commented that inflation expectations had lessened and a small rally that had begun on Wednesday blossomed into a full fledged 2-3% move to the upside by Thursday afternoon. But market optimism was dashed on Friday as two Federal Reserve regional presidents weighed in with more hawkish language. Fed Chairman Bernanke seems to be reacting to the latest data whereas he needs to take a longer view and communicate his expectations more clearly. The markets need a steady hand on the tiller to provide an environment in which they work efficiently.

In fact the fundamentals seem to have changed little over the last two weeks: inflation at 2.4% annually is moderate by historical standards, and the economy is slowing. Demand is weakening and there seems little reason to suppress demand further by raising interest rates again, although another 0.25% increase seems certain. But as long as the Fed keeps up its hawkish tone and policy stance, fears of a recession will rise and the markets will continue to decline for sound reasons.

For the week, the DJI closed higher by 1.13% but the other major indexes were lower. The NASDAQ Composite lost 0.24% and the S&P 500 0.06%. Wednesday saw each of the indexes turn higher and Wednesday's lows could mark the bottom of the current correction and the start of a new rally. We now wait for confirmation in the form of a follow through day which could come as early as Monday. As you might gather from the previous paragraphs, we are not optimistic.

If a follow-through day does occur, it will not change our market signal for the NASDAQ, at least in the near term. Our market model requires the NASDAQ to be above its 200 dma before it can return to enter, and the NASDAQ needs to gain at least 5% from its current level before that is achieved.

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 New Features this Week Additional Value that we added this week

There were no new features added this week.

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

Tips from Subscribers

Two subscribers offered their own tips for trading in the current market environment and I reproduce them here:

1) Tom from Indiana.

  • Consider stocks from the buy at open list
  • Consider stocks with a 4-3 or 4-4 rating
    + 17% ROE
    + positive quarterly earnings last three quarters
    + Cash flow > 20%
    + Increasing sales along with increased earnings
  • Have no more than 8 stocks at once in your portfolio
  • Buy only when market signal is in enter mode (unless selling short)
  • Register positions in the sell alert so that an email is sent when time to sell.
  • Consider selling stock when profits exceed 30% or sell alert is triggered
  • Have used the 8% stop loss but am weighing the possibility of using sell alert and setting no stop loss

You can read more about Tom's strategy and investing experience here.

2) Kevin from Florida.

  • I have an ameritrade streamer which I use to create various watch
    lists. I have the following streamer lists:
  • Top 10 breakout set ups from Breakoutwatch - if stock is up .5% by 10am, I will give it a shot
  • Buy at Open list - if stock is up .5% by 10am, I will give it a shot
  • Breakout alerts (your data) - buy the alert if I like the sector
  • Breakdown alerts (your data)- - if stock is down by .75% by 10am, I will give it a shot

You can read about Kevin's successful trades using this strategy in the last two weeks here.

Investment Advisors Using our Service

TradeRight Securities, located in a suburb of Chicago, is a full services investment management company and broker/dealer. They have been a subscriber, and user, of BreakoutWatch.com for some time now. They practice CANTATA and use Breakoutwatch.com as a “research analyst”. You can learn more about TradeRight Securities at: www.traderightsecurities.com. If you’re interested in speaking to a representative, simply call them toll-free at 1-800-308-3938 or e-mail gdragel@traderightsecurities.com.

PivotPoint Advisors, LLC takes a technical approach to investment planning and management. A breakoutwatch.com subscriber since May, 2004, they use breakouts, market signals, and now TradeWatch to enhance returns for their clients. Learn more at http://pivotpointadvisors.net or contact John Norquay at 608-826-0840 or by email at john.norquay@pivotpointadvisors.net.

Note to advisors: If you would like to be listed here, please contact us. As a service to those who subscribe to us, there is no additional charge to be listed here.

Get a 14 day Trial of our premium 'Platinum' service and TradeWatch for just $9.95 and if you subsequently subscribe to any subscription level we will credit your $9.95 to your subscription.

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 11014.5 1.13% 2.77% enter
NASDAQ 2129.95 -0.24% -3.42% exit
S&P 500 1251.54 -0.06% 0.26% enter
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
1.13 %
Dow Jones
-1.09 %
S&P 500
-0.83 %
Dow Jones
2.77 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Electr-Laser Systems Electr-Laser Systems Steel -Specialty Oil & Gas-Cdn Integrated
 Most Improved Industry (by change in technical rank2)
Auto & Truck-US & Fgn Mfg
+ 44
+ 87
Metal Prds-Fasteners
+ 144
+ 156
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 10 20.15 -0.16% -2.72%
Last Week 13 22 2.37% -1.24%
13 Weeks 314 22.31 12.19%
Breakout Count for Week
Banks-Super Regional
Retail-Home Furnishings
Textile-Apparel Mfg
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
Company Name
Expected Gain1
Best Overall MAIN Main Street Restaurant Group Inc 94
Top Technical HGR Hanger Orthopedic Group 59
Top Fundamental CRYP Cryptologic Incorporated 30
Top Tech. & Fund. FCFS First Cash Financial Svc 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
Company Name
Expected Gain1
Best Overall VFC Vf Corp 18
Top Technical VFC Vf Corp 18
Top Fundamental VFC Vf Corp 18
Top Tech. & Fund. VFC Vf Corp 18
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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