Weekly Newsletter 07/14/07
Login   Trial   Guest
You are receiving this email because you are or were a BreakoutWatch.com subscriber, or have subscribed to our weekly newsletter. This newsletter summarizes the breakout events of the week and provides additional guidance that does not fit into our daily format. It is published each weekend.
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

Last week we were optimistic that the upward trend would continue and that was confirmed by the S&P 500 setting two consecutive new highs on Thursday and Friday. The possibility of completion of a head and shoulders top for the S&P which we saw three weeks ago is now defunct. The DJI also set new highs and the NASDAQ Composite is at its highest level since January 2001. For the week the DJI rose 2.17%, the NASDAQ Composite gained 1.52% and the S&P 500 added 1.44%. Volumes were above their weekly average and the NASDAQ has overtaken the DJI as the best performing index for the year to date after lagging for several months.

Why are the markets showing such resiliency in the face of fundamentals that should produce a downturn:

  • rising food and energy costs cutting into consumer discretionary spending
  • falling home equity withdrawals
  • collapse of the housing market
  • tightening credit?

The conventional answers that analysts gave this week were:

  • improving retails sales at Wal-Mart
  • Merger and Acquisition activity
  • Warren Buffet buying into Hovnanian
  • Company stock buy-backs
  • Short covering

While these explain the short term 'noise' of day-to-day gyrations they do not account for a market that has defied all expectations of a strong correction since November last year. Our search for an answer has led to the following underlying factors:

  • the falling dollar makes investments in US markets appear cheap
  • the falling dollar swells the profits of US multinationals doing business overseas increasing the attractiveness of their shares
  • expansion of the money supply by the Fed
  • historically low interest rates

These factors combine to increase the liquidity in the markets and support the upward trend. AMG Data Services reports that net inflows including ETF activity, into equity funds were $3.867 billion in the week ended 7/11/07.

Our conclusion is that while liquidity continues to increase the party will go on.

There were fourteen confirmed breakouts this week that had gained an average 3.78% by week's end.

 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

Efficient Market Hypothesis vs Technical Analysis

I've been reading a very important new book called 'Evidence Based Technical Analysis' by David Aronson. The book is important because it describes an approach to the development and testing of Technical Analysis techniques that are based on objective scientific methods. Along the way it debunks many of the traditional TA approaches because they are untestable. This book will contribute to our own backtesting approach in future tool development.

One of the topics discussed in the book is the Efficient Market Hypothesis (EMH). EMH proposes that in a perfect market all available information is incorporated into a stock's price and that any new information is immediately absorbed by market traders to adjust the price. If EMH is correct, then the current price of a stock incorporates all useful information about the stock and there can be no predictive value in the price. In contrast, technical analysis (TA) assumes that there is predictive value in the current price (and volume) in relation to historical prices and volumes. In other words, TA and EMH cannot exist side by side.

The book effectively destroys the EMH in a chapter entitled 'Theories of Non-Random Price Motion' and the chapter makes fascinating reading as a justification for TA.

Readers will be disappointed though if they are hoping for specific recipes for TA methods that work. Instead the book provides a guide for how developers of TA methods should approach their work. We will be guided by it in future.

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.

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.

14 Day Platinum Trial
(you will need to allow pop-ups from breakoutwatch.com to see the subscription form)


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.

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.

14 Day Platinum Trial
(you will need to allow pop-ups from breakoutwatch.com to see the subscription form)


 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Signal
Dow 13907.2 2.17% 11.59% enter
NASDAQ 2707 1.52% 12.08% enter
S&P 500 1552.5 1.44% 9.46% enter
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
2.17 %
NASDAQ Composite
2.84 %
NASDAQ Composite
3.06 %
NASDAQ Composite
12.08 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Industrial Equipment Wholesale Industrial Equipment Wholesale Foreign Utilities Tobacco Products, Other
 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 16 18.46 5.33% 3.38%
Last Week 11 19.08 3.52% 1.26%
13 Weeks 321 20.31 12.02%
4.53%
Sector
Industry
Breakout Count for Week
FINANCIAL SERVICES
Closed-End Fund - Equity
2
AUTOMOTIVE
Trucks & Other Vehicles
1
BANKING
Foreign Regional Banks
1
BANKING
Savings & Loans
1
COMPUTER SOFTWARE & SERVICES
Business Software & Services
1
DIVERSIFIED SERVICES
Business Services
1
DRUGS
Biotechnology
1
ELECTRONICS
Semiconductor - Specialized
1
INSURANCE
Life Insurance
1
INSURANCE
Property & Casualty Insurance
1
INTERNET
Internet Information Providers
1
MANUFACTURING
Diversified Machinery
1
TELECOMMUNICATIONS
Wireless Communications
1
TRANSPORTATION
Air Services, Other
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 NTO Northern Orion Resources 95
Top Technical DYS Distribucion Y Serv D&S 28
Top Fundamental SIMO Silicon Motion Technology Corp 46
Top Tech. & Fund. SIMO Silicon Motion Technology Corp 46
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 CALD Callidus Software Inc 79
Top Technical MPWR Monolithic Power Systems 37
Top Fundamental ICE Intercontinental Exchange Inc 34
Top Tech. & Fund. ICE Intercontinental Exchange Inc 34
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.

If you received this newletter from a friend and you would like to receive it regularly please go to the BreakoutWatch.com site and enter as a Guest. You will then be able to register to receive the newsletter.

Copyright © 2007 NBIcharts, LLC dba BreakoutWatch.com. All rights reserved.
" BreakoutWatch," the BreakoutWatch.com "eye" logo, and the slogan "tomorrow's breakouts today" are service marks of NBIcharts LLC. All other marks are the property of their respective owners, and are used for descriptive purposes only.


To unsubscribe from further breakoutwatch.com newsletters, please click here. You may also submit a written request to breakoutwatch.com, PO Box 790861, Paia, Hi 96779. Upon receipt, unsubscribe requests will be processed within 14 days.