Weekly Newsletter 06/30/07
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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

The markets recovered somewhat from last week's sell-off and the major indexes closed modestly higher. The DJI gained 0.36%, the NASDAQ Composite added 0.55% while the S&P 500 closed barely higher by just 0.05%. Steadying influences that allowed this mild recovery were:

  • predictions from the Federal Reserve's Open Market's Committee that modest economic growth would continue despite the housing sector meltdown;
  • an improved outlook for technology stocks following analyst upgrades on Cisco and Intel and better than expected profits by ORACLE
  • a drop in year-on-year inflation as measured by the core PCE deflator to below 2% - the Fed's target range.

The gains were constrained by ongoing concerns that the losses from sub-prime lending are still being hidden from scrutiny. On Friday, Bloomberg reported that the ratings agencies were slow to write down credit ratings on $200 billion dollars in loans, that this was just the beginning and that eventual losses "may rival the savings and loan crisis of the 1980s and 1990s". Nervousness was further aggravated by news that the SEC is investigating the two Bear Sterns hedge funds that are in difficulties.

While the economic picture is improving we continue to be cautious about the immediate prospects for the markets. We showed last week that the S&P 500 may be forming a head and shoulders pattern and more evidence of weakness appeared this week despite the index's narrow gain. The index rose above its 50 day moving average 3 times intraday but failed to close above the 50 dma each time and closed the week 6 points below it. Repeated breakdowns through the 50 dma is one of the criteria we use to select stocks for our '50 dma Breakdown' list of stocks for possible shorting.

The number of confirmed breakouts fell to 12 this week, but as usual they comfortable beat the indexes by gaining an average of 1.62% by Friday's close.

 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

Stay in Cash during the Holiday Week.

As we said last week and was confirmed on Friday, markets are likely to be volatile until the extent of the subprime CDO (Collateralized Debt Obligations) debacle is known. Additionally, trading is likely to be light as the markets are closed on Wednesday for the July 4 holiday and many will take the whole week off.

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 13408.6 0.36% 7.59% enter
NASDAQ 2603.23 0.55% 7.78% exit
S&P 500 1503.35 0.05% 6% enter
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
0.55 %
NASDAQ Composite
-0.89 %
NASDAQ Composite
-0.58 %
NASDAQ Composite
7.78 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Industrial Equipment Wholesale Industrial Equipment Wholesale Tobacco Products, Other Tobacco Products, Other
 Most Improved Industry (by change in technical rank2)
+ 54
+ 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 13 19.31 4.28% 1.65%
Last Week 11 19.38 2.15% -2.6%
13 Weeks 324 20.38 12.03%
Breakout Count for Week
Diversified Machinery
Regional - Midwest Banks
Information Technology
Application Software
Drug Manufacturers - Other
Scientific & Technical Instruments
Semiconductor - Integrated Circuits
Internet Software & Services
Telecom Services - Domestic
Wireless Communications
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 CUP Peru Copper Inc 107
Top Technical AKS Ak Steel Holding Corp 43
Top Fundamental CPX Complete Production Services Inc 30
Top Tech. & Fund. SIMO Silicon Motion Technology Corp 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 IGTE Igate Corporaion 86
Top Technical PCLN Priceline.com Inc 46
Top Fundamental ALY Allis-Chalmers Energy Inc 0
Top Tech. & Fund. ALY Allis-Chalmers Energy Inc 0
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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