Weekly Newsletter 05/24/08
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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 Finds Support While S&P 500 Collapses

A change of position by the Federal Reserve sent the market reeling on Wednesday and only low volume on Friday ahead of the long weekend saved it from a hammering on Friday. The minutes of the last FOMC meeting showed there was only weak support for further interest rate cuts as committee members feared that the risks of inflation were now equal to the risks of a weakening economy. This alarmed investors who have been happy to see lower rates and an expanding money supply even if it does lead to inflation because asset prices rise while debts are reduced in value. The NASDAQ rebounded from its primary support level (horizontal line on chart) on Friday and has yet to fall to the lower trend channel, but we can expect a test of that level at the lower Bollinger Band early next week.


The S&P 500 has already fallen through its primary support level and lower trend line and we can expect it to move downward further as consumption contracts under the weight of higher energy costs, tighter credit and falling house prices.

S&P 500

Although it appears the recent rally was a bull trap as we feared, I don't discount the possibility that the Treasury or Fed will come up with something new to forestall a test of the March low. Tuesday's action could be grim as investors return from the long weekend, and if so some intervention on Tuesday or Wednesday is possible.

The financial sector is weakening again and the next shoe to drop could be Countrywide. The prospects of the merger with Bank of America proceeding are looking slimmer and a bankruptcy by Countrywide would send new shock waves through the sector.

There were fewer breakouts this week as the contraction took the momentum out of the markets, but they still showed a profit by week's end whereas the major indexes tumbled more than 3%.

Finally, we wish all our subscribers a safe and happy holiday weekend.

 New Features this Week Additional Value that we added this week

No New Features this Week



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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 12479.6 -3.91% -5.92% enter
NASDAQ 2444.67 -3.33% -7.83% enter
S&P 500 1375.93 -3.47% -6.29% enter
Russell 2000 724.1 -2.3% -5.47% N/A
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
-2.3 %
NASDAQ Composite
0.8 %
Dow Jones
-3.86 %
Russell 2000
-5.47 %
 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 Agricultural Chemicals Agricultural Chemicals
 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 12 22.31 6.11% 1.34%
Last Week 39 22.23 6.52% -0.53%
13 Weeks 300 23.15 18.19%
Breakout Count for Week
Oil & Gas Drilling & Exploration
Networking & Communication Devices
Scientific & Technical Instruments
Meat Products
Beverages - Brewers
Home Health Care
Diversified Machinery
Industrial Metals & Minerals
Diversified 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 NLS Nautilus Group Inc (the) 114
Top Technical UTEK Ultratech Inc 58
Top Fundamental RICK Rick's Caberet Intl 77
Top Tech. & Fund. EGLE Eagle Bulk Shipping Inc 55
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 PSEM Pericom Semiconductor Cp 68
Top Technical PSEM Pericom Semiconductor Cp 68
Top Fundamental KEG KEY ENERGY SVCS INC 57
Top Tech. & Fund. PSEM Pericom Semiconductor Cp 68
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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