From - Sat Sep 23 00:16:55 2006 X-Account-Key: account6 X-UIDL: UID38805-1107311665 X-Mozilla-Status: 0001 X-Mozilla-Status2: 10000000
|Weekly Newsletter 09/23/06|
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The promising outlook that we saw for the markets at least through to the election took a hit this week as evidence of a sharp slowing in economic activity brought fears of a looming recession. The Fed's decision to hold interest rates steady on Wednesday was in-line with the markets' expectations, but a sharp downturn in economic activity in the mid-Atlantic region reported by the Philadelphia Federal Reserve on Thursday brought a wave of profit taking that continued on Friday. This left the major indexes below water for the week. The DJI lost 0.46%, the NASDAQ Composite dipped 0.75% and the S&P 500 lost 0.39% after flirting with a new 5-year high on Wednesday. The market's are now much more concerned about the prospects of a recession than they were just a few days ago, when the concern was more with inflationary pressure causing the Fed to raise rates further. Oil has dropped nearly $20 a barrel from its high, but the focus now is on mounting evidence of a slowing economy and some are now predicting a reduction in interest rates early next year. Treasury yields are also causing concern as the 30-year bond yield has fallen in the last week. It is just above the 3-month yield, but below the 6-month. A further fall below the 3-month level would signal yield inversion and definitely add to investors fears of a recession. Colin Twiggs reports in his trading diary that the chance of a recession in the next four quarters has increased to 35%. This is higher than it has been over the last five years but below the 50% tipping point.
Despite these fears, the NASDAQ looks technically sound although it did close below its 200 day average on Friday. A close below the PSAR (the dotted line) early next week would coincide with a failure of support at the 9/5/06 high and confirm a short term correction. The distribution day count is at 3 over the last 13 days. Two of these will drop off the count in the next two sessions, so unless we get two distribution days on Monday and Tuesday of next week, our market signal will remain at enter for the NASDAQ.
|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|
Tradewatch Buy at Open Simulations back to 2003
We continue to look at results from our Tradewatch simulation tool this week. Last week, we found some very promising results when combining the Buy at Open strategy with the standard Sell Assistant model and staying out of the market when any of our market signals were at exit. We also introduced a tie-breaker option to use when there were more buy opportunities than available portfolio positions. A subscriber, David C., pointed out that there were too few trades from which to draw conclusions about the best choice of tie-breaker, so this week we have backtested the simulation to our earliest available data in April, 2003.
Firstly, allow me to remind you of the options available through the Portfolio Simulation screen.
We ran through all the options available on this screen for an opening capital of $100,000 from April 2003 through to Friday, September 22 for portfolio sizes from 2 to 25 positions and found the best returns occurred as follows:
Due to the computing resources needed to run the simulation over this period of, we can't make the data prior to 2005 available, but you can get a spreadsheet of results for all combinations here. You can see the actual trades the simulation made for the top returning combination here.
For comparison, the ten worst returns were for the following combinations:
The conclusions I draw from this are that:
This tool is still undergoing testing and enhancement. I encourage you to try different options, and if you find any errors then please let me know. Also, let me know what you think of this tool and how to improve it.
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 firstname.lastname@example.org.
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 email@example.com.
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|Market Summary||Overview of market direction and industry rotation|
|Weekly Breakout Report||How confirmed breakouts performed this week|
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|
|Top Second Chances||Stocks that broke out this week and are still in buyable range|
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