Weekly Newsletter 02/23/08
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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

Friday's controversial late rally allowed the large cap indexes of the DJI and S&P 500 to close higher for the week, while technology and small-cap stocks, as represented by the Russell 2000 declined. For the week, the DJI and S&P 500 gained 0.27% and 0.23% respectively while the NASDAQ slipped 0.79% and the Russell 2000 lost 0.87%.

Friday's action showed again how difficult it is for the non-professional trader to profit in this market. Massive intra-day swings in just a few minutes like we saw on Friday, and have seen several times in the last few months, bring suspicions of market manipulation and a loss of confidence that the markets are indeed 'free'.

Friday's recovery was sparked by a speculative report on CNBC that a bailout of bond insurer AMBAC was possible early next week. The plan is similar to others floated previously that separates the profitable municipal bond business from the risky, and loss making, securitization business. While this is potentially beneficial to the municipal borrowers who will be able to get more reasonable rates on the bond issues, it is problematic for the securitization component because unless enough liquidity becomes available to back the insurance obligations, financial institutions face more writedowns because the insurance on their mortgage-backed bonds become less valuable. Other bond insurers are expected to adopt a similar restructuring. If a resolution is not achieved early next week, then we can expect another sharp sell-off. Even if a restructuring is achieved, it seems unlikely to resolve the underlying insolvency of the mortgage-backed insurance business. The New York Times reports that AMBAC hopes to raise $3 billion but Bloomberg reports that AMBAC faces losses on $566 Billion in debt and the banks risk losing $70 Billion if AMBAC loses its AAA rating.

The following chart of the NASDAQ Composite is fairly representative of the market as a whole now. Volatility has lessened and volume has fallen below the 50 day moving average which was elevated by the high volumes in mid-January. The Bollinger Bands have narrowed as the index trades within a narrower range. This indicates a consolidation is in progress and a breakout to the up or downside is possible. The most likely outcome, however, is break to the downside that will test January's lows due to the underlying financial system woes.


 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

No Tip this Week


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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 12381 0.27% -6.66% enter
NASDAQ 2303.35 -0.79% -13.16% exit
S&P 500 1353.11 0.23% -7.85% enter
Russell 2000 695.43 -0.87% -9.22% N/A
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
0.27 %
Dow Jones
-4.62 %
Dow Jones
-7.46 %
Dow Jones
-6.66 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Cigarettes Cigarettes Cigarettes Major Integrated Oil & Gas
 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 11 11.38 2.97% 1.18%
Last Week 12 10.85 4.46% -0.52%
13 Weeks 167 11.69 9.38%
Breakout Count for Week
Diversified Communication Services
Specialty Chemicals
Toys & Games
Paper & Paper Products
Drug Manufacturers - Other
Independent Oil & Gas
Oil & Gas Drilling & Exploration
Medical Practitioners
General Entertainment
Communication Equipment
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
Top Technical BEAS Bea Systems Inc 42
Top Fundamental MCRS Micros System Inc 47
Top Tech. & Fund. VMSI Ventana Medical Systems 27
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 SVR Syniverse Technologies 60
Top Technical VCP Votorantim Celulose Papl 0
Top Fundamental RTSX Radiation Therapy Services 48
Top Tech. & Fund. RTSX Radiation Therapy Services 48
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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