Weekly Newsletter 12/14/07
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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

Last week, we anticipated that the markets would fall if the Fed did not deliver the expected 0.5% interest rate cut. Sure enough, the markets dropped like a stone immediately after the 0.25% cut was announced and the major indexes gave up most of the previous week's gains. The markets rallied the next morning on news of a massive injection of liquidity but the markets were not convinced the new 'fix' would hold and they sold off for the rest of the day until massive buying in the last 15 minutes by the 'Plunge Protection Team' (PPT) allowed the next day's headlines to read that the market had rallied on the injection of liquidity. Our chart of the intraday S&P 500 trading on Wednesday (12/12/07) illustrates what happened.

The pattern of sell-off followed by PPT action resumed the next day and again on Friday but this massive market manipulation could not prevent the major indexes from giving up the gains of the last month. For the week, the DJI lost 2.1%, the NASDAQ Composite dropped 2.6% and the S&P 500 gave up 2.44%.

Advance news of Friday's inflation numbers was probably available to the FOMC when they made their interest rate decision which explains why they only cut by 0.25%. With inflation accelerating the Fed and Treasury are now caught on the horns of a dilemma. A further cut in interest rates will likely increase inflation so there is little room to move rates lower. On the other hand further injections of liquidity will also increase inflation, so there seems to be little the Administration can do now to ward of the anticipated hard landing. In fact, if a realistic price deflator were used to adjust GDP numbers, we are probably already in recession.

If so, then the markets are likely to fall further. The S&P 500 chart shows a bearish triple-top pattern. Although we may see another rally before year's end, the trend looks downward from here.

S&P 500

The number of breakouts fell to nine this week. However, as usual, they comfortably beat the market averages with an average gain of 2.73% by week's end.

 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

Industry Analysis

Our industry analysis tools allow you to answer the key questions related to the analysis of stocks by industry, either from the top down (i.e. drill down from an industry sector) or bottom up (i.e. from the individual stock to its industry group).

  1. What industry sector does a stock belong to?
  2. What are the competitors in that industry?
  3. How does the performance of that industry compare to others over the last 12 months?
  4. Which stocks in an industry present a possible entry point now?
Industry Browser

Our Industry Browser allows a top-down search by industry or search by individual stock. The Industry Browser is found under Evaluate > Industry Analysis from our main menu.

Entering a symbol will cause the tool to return an expanded industry list tree showing the Industry components to which the symbol belongs. The industry components are ranked in order of technical merit as measured by our CET indicator.

For example, entering symbol OMCL on 12/13/07 would have given the following display.

Industry Browser

Clicking the industry name will bring up a list of the members of the industry group ranked in order of Relative Strength Rank. For the 'Computer Based Systems' group we obtain:

Computer Based Systems

Note that in the 'List' column, there is a ' CwH' entry for OMCL. That indicates that OMCL currently appears on our cup-with-handle watch list and therefore could present an entry point opportunity if it breaks out.

Clicking the 'chart' icon next to the Industry Group name will show a chart of the industry's performance relative to other industries over the past 12 months.


To find the best (or worst) performing industries, then use our industry rankings and performance page which is accessed which is also accessed from Evaluate > Industry Analysis on the main menu.

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 13339.8 -2.1% 7.03% enter
NASDAQ 2635.74 -2.6% 9.13% enter
S&P 500 1467.95 -2.44% 3.5% enter
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
-2.1 %
Dow Jones
0.19 %
Dow Jones
2.94 %
NASDAQ Composite
9.13 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Major Integrated Oil & Gas Major Integrated Oil & Gas Personal Computers Air Services, 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 10 16.23 5.07% 2.46%
Last Week 17 16.08 6.91% 1.74%
13 Weeks 224 16.85 15.66%
Breakout Count for Week
Medical Instruments & Supplies
Foreign Regional Banks
Research Services
Major Integrated Oil & Gas
Beverages - Soft Drinks
Medical Appliances & Equipment
Auto Dealerships
Gas Utilities
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 DVD Dover Motorsports Inc 81
Top Technical SHEN Shenandoah Telecomm 24
Top Fundamental FLR Fluor Corp (New) 33
Top Tech. & Fund. GLDN Golden Telecom Inc 29
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 PZE Petrobras Energia Part Sa 52
Top Technical RUSHB Rush Enterprises Inc Cl B 29
Top Fundamental BAP Credicorp Ltd 30
Top Tech. & Fund. BAP Credicorp Ltd 30
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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