Weekly Newsletter 10/01/07
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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

Our analysis is a little shorter than usual as we are travelling inter-island this weekend.

Last week we said "Market conditions altered in favor of growth and technology stocks .. as interest rates fell and the cost of acquisition and investment declined accordingly." This continued to hold true this week and the NASDAQ Composite was the best performing major index with a gain of 1.13%. This compares to the S&P 500 being almost flat with a gain of 0.07% while the DJI gained 0.55%. The NASDAQ is now the best performing index year-to-date with a gain of 11.85%.

If interest rates continue to fall then this propitious climate for growth and technology stocks will likely continue. Bloomberg reports "Interest-rate futures show most traders expect quarter-point rate cuts at the Fed's next two monetary policy meetings on Oct. 31 and Dec. 11. They assign an 84 percent probability of a quarter-point reduction next month, and 62 percent odds of an additional quarter-point move in December.". While the interest futures traders have been wrong before, the economic slowdown is likely to worsen due to the housing market's impact on the economy so we are likely to see the Fed continue to lower rates to ward off a full-fledged recession. Some commentators are observing a marked change in Fed policy in that they are attempting to get out ahead of a recession whereas under Greenspan the Fed was more reactive than proactive.

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 New Features this Week Additional Value that we added this week

No new features this week.

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

Technical Strength more important than Fundamentals in the Current Market

Breakouts continued to comfortably exceed the performance of the major indices with an average gain by weeks end of 3.83%. Several made gains over 5% and these also made some impressive intraday highs. Note that they were all from a cup-with-handle base and none of them had our highest fundamental ranking (see CE Zone column) . Regular readers will know that we always emphasize technicals over fundamentals and this once again illustrates our point.

Breakout Date Symbol Base CE Zone Week's Gain Intraday Gain
09/25/07 MM CwH 4-3 7.01% 11.55%
09/25/07 LNDC CwH 4-3 8.49% 11.23%
09/25/07 CHA CwH 4-2 21.12% 23.36%
09/24/07 CRM CwH 3-3 8.13% 9.04%
09/24/07 CHNR CwH 4-3 11.30% 33.89%

For a discussion of factors that affect breakout success and performance after breakout, see our newsletter of 1/13/07.

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 0% 0%
NASDAQ 0% 0%
S&P 500 0% 0%
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
-100 %
S&P 500
-100 %
S&P 500
-100 %
S&P 500
0 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Aerospace/Defense - Major Diversified Aerospace/Defense - Major Diversified Aerospace/Defense - Major Diversified Aerospace/Defense - Major Diversified
 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 16 12.31 -100% -100%
Last Week 28 11.77 -100% -100%
13 Weeks 13.31 0%
Breakout Count for Week
Closed-End Fund - Equity
Aerospace/Defense Products & Services
Foreign Money Center Banks
Business Software & Services
Diversified Investments
Diversified Machinery
Farm & Construction Machinery
Steel & Iron
Telecom Services - Foreign
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 TXI
Top Technical TXI
Top Fundamental TXI
Top Tech. & Fund. TXI
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
Top Technical
Top Fundamental
Top Tech. & Fund.
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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