Weekly Newsletter 04/05/08
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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

The Fed's decision to open the discount window to non-bank financial institutions has put a floor under the markets, at least for the time being. It is clear that there is now little risk that even a medium sized bank-like institution will be allowed to fail, let alone a large one, so the market volatility related to the risk of systemic financial system failure has abated. Debate rages about the wisdom, even legality, of the Fed's action, but it has restored confidence for now. This has allowed the S&P 500 to gain 9% from its intra-day low on March 17. Almost half of that (4.2%) was gained in the last week. The NASDAQ Composite has also seen an over 9% gain with a rise of 4.9% this week.

The markets seem to be trading on the implicit assurance that the Fed and the President's Working Group on the Financial Markets ("PPT") will support the markets in this election year (as we have predicted since last August 4) and are also relying on assurances that the economy will recover in the second half of this year. In this environment, technical analysis is of doubtful value but we note that the S&P 500 ( and other indexes also) have established a double-bottom and are approaching their pivot point. A breakout above 1396 for the S&P 500 would be bullish but the index must first overcome resistance at 1388.


While the market technicals are improving, the economic fundamentals are worsening. Friday's employment report showed a loss of 80,000 jobs in March and the third monthly decline. This number will probably be revised lower next month, just as February's were today. The figures include a gain in Government employment so the private sector loss was 93,000. Approximately an additional 100,000 are eligible to enter the work force each month so clearly unemplyment will rise beyond the 5.1% reported today. Paradoxically, this is good news for stocks because rising unemployment holds down wages. This improves a company's bottom line, as will the cost of debt servicing as interest rates fall. A further 05% cut in rates on April 30 will be more good news.

So in the short term, it seems probable stocks will rise but earnings season begins on Monday which will determine if the rally continues or sputters.

 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 12609.4 3.22% -4.94% enter
NASDAQ 2370.98 4.86% -10.61% exit
S&P 500 1370.4 4.2% -6.67% enter
Russell 2000 713.73 4.47% -6.83% N/A
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
4.86 %
Russell 2000
-1.49 %
Dow Jones
-10.36 %
Dow Jones
-4.94 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
REIT - Healthcare Facilities Cleaning Products 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 10 12.85 5.35% 3.58%
Last Week 6 13.08 8.47% 5.8%
13 Weeks 193 13.85 9.9%
Breakout Count for Week
Regional - Mid-Atlantic Banks
Semiconductor - Integrated Circuits
Closed-End Fund - Equity
Medical Instruments & Supplies
Specialized Health Services
Industrial Electrical Equipment
Home Furnishing Stores
Specialty Retail, Other
Regional Airlines
Foreign 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 NGD New Gold Inc 102
Top Technical TUX Tuxis Corporation 80
Top Fundamental ADBL Audible Inc 67
Top Tech. & Fund. ADBL Audible Inc 67
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 VVUS Vivus Inc 107
Top Technical SBSI Southside Bancshares Inc 55
Top Fundamental POWI Power Integrations Inc 0
Top Tech. & Fund. POWI Power Integrations Inc 0
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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