Weekly Newsletter 03/08/08
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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

NASDAQ Composite Tests January Support Level

The market's decline continued this week as the economy weakened and the parlous condition of the banking industry became more acute. We have become accustomed recently to late afternoon rallys (usually sparked by CNBC reporting a new monoline rescue - see below) and Friday's trading didn't disappoint, except this time the rally didn't hold and the major indexes suffered another distribution day. The rally came just as the NASDAQ was testing its January 23 low. Although it closed just above that level, a 5-year chart shows that the index broke through its 5-year trend line with the next support level at 2012, a decline of another 10%.

You will recall that the rally that started on January 23 was sparked by the stimulus package and a 0.5% rate cut by the Fed. We can now say that those measures have failed to support the markets. More intervention is on the way, as we saw on Friday morning when the markets rallied early, despite the larger than expected job losses, as the Fed announced an extra $100 billion in the next month to support bank lending and overcome a worsening liquidity crisis, but the rally was short lived and it looks increasingly likely that the Fed will act to lower interest rates further before the March 18 meeting. This is not likely to improve matters however as financial institutions are lowering their exposure to risk (de-leveraging is the in-vogue phrase of the day) rather than taking on new ones. More rate cuts will only serve to damage the dollar further and increase the inflation rate. Cuts may promote investment but can do little to solve the vicious circle of falling asset prices forcing asset sales that further reduce asset values.

The Group of Ten meet in Basle this weekend and we must hope that they can produce a rabbit out of a hat. Gillian Tett of the Financial Times has an analysis of the challenges they face. Solving the S&L crises was easy by comparison.

In the face of this doom and gloom I'll share some levity with you from The Big Picture:

Rumour of second bail out rumour coming in Ambac.

Word is that CNBC have heard from a source close to the fire escape that the Monolines are worried that there will be no new rumours about possible rescues around until the recent rescues are proved to have failed.

That means that there'll be no Friday evening prop for the stock markets.

A source close to the industry said that a consortium is "being put in place to work on new rumours but we can't be sure that these rumours will actually be ready for another five business days."

News of the rumoured rumour of salvation sent MBIA and AMBAC up .01% in pre-market trading. Hank Paulson was rumoured to be delighted with the patriotic rumours, a source close to him on his lifeboat off the coast of Hawaii said Thursday. Ben Bernake has placed pencils in his ears and is wearing his favourite underpants on his head.

-David McCreadie and Dan Davies

 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

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 11893.7 -3.04% -10.34% enter
NASDAQ 2212.49 -2.6% -16.58% exit
S&P 500 1293.37 -2.8% -11.92% enter
Russell 2000 660.11 -3.8% -13.83% N/A
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
-2.6 %
Dow Jones
-12.71 %
Dow Jones
-9.3 %
Dow Jones
-10.34 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Cleaning Products 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 20 13.62 4.36% -0.52%
Last Week 39 13.31 4.07% -2.11%
13 Weeks 204 14.85 8.74%
Breakout Count for Week
Closed-End Fund - Equity
Independent Oil & Gas
Aerospace/Defense Products & Services
Agricultural Chemicals
Cleaning Products
Drug Delivery
Printed Circuit Boards
Oil & Gas Drilling & Exploration
Closed-End Fund - Foreign
Meat Products
Farm Products
Farm & Construction Machinery
Specialty Retail, Other
Drugs Wholesale
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 GMET GeoMet Inc 104
Top Technical TUX Tuxis Corporation 74
Top Fundamental OMG Om Group Inc 45
Top Tech. & Fund. OMG Om Group Inc 45
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 EGO El Dorado Gold Corp 108
Top Fundamental HSP Hospira Inc 33
Top Tech. & Fund. HSP Hospira Inc 33
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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