Weekly Newsletter 10/10/08
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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  
As the markets closed on Friday we were cautiously optimistic that Friday's trading may have set a floor under the markets and that we may even have seen the bottom, at least for a few months. That optimism was tempered following a promising but disappointing news conference by Treasurer Paulson.

First the good news:
The four indexes we track all closed substantially higher after testing double and triple bottoms. The support level for the DJI was at around 8000, for the S&P 500 at around 850, for the NASDAQ Composite at 1550 and for the Russell 2000 at 470. Although the DJI and S&P 500 closed down it has to be considered that they recovered from very deep declines as did the NASDAQ and Russell 2000 which closed in positive territory and posted their first accumulation day in 15 sessions. The DJI and possibly the S&P 500 would have closed positive were they not weighed down by a fall in energy stocks as crude oil for November delivery fell 10%.

The Lehman Brothers CDS auction was concluded at around 3pm without the dire consequences for financial stocks that had been feared. This sparked an immediate recovery as it appears no one firm would fail. (A contrarian view is that the rally was due to short covering as the shorts did not want to be exposed to unpredictable Government intervention over the weekend).

Treasurer Paulson announced "We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed necessary to promote financial market stability,". This was a welcome about-face from two weeks ago when the emphasis was on buying derivatives (toxic assets) only and he refused to consider purchasing mortgages directly and injecting liquidity into banks.

Now the bad:
Paulson did not go as far as he should have done. In addition to taking equity positions in banks, he should also guarantee inter-bank loans, as the British have done. This seems essential if banking institutions are to have the confidence to start lending to one-another again.

The G7 statement on Friday was weak. It contained the usual trite catchphrases - take decisive action, all necessary steps, take action where appropriate, etc. but lacked any specificity. We will hopefully get a more substantive final communique over the weekend.

The TED spread continued to increase and again closed at a new high on Friday. Until the TED returns to its normal range, the markets will continue their volatility.

The Big Picture has an interesting set of 10 bullish charts showing the rarity of the position the markets are in and postulating that we are near the bottom. The discussion following the charts is also food for thought as it presents some diverse, not always comforting, views.
 New Features this Week Additional Value that we added this week
Our real-time alerts processing has undergone a change. Access to real time quotes became prohibitively expensive for us following the NASDAQ acquiring the Inet exchange. Consequently, we have had to adjust our processing of real time alerts and have now implemented the following processing:
  • the real time price of stocks on our watchlists is sampled every minute from 9:30 when the markets open.
  • volumes for stocks on our watchlists are sampled with a 20 minute delay beginning at 9:50.
  • the projected volumes for the purposes of sending the email alerts is adjusted for the 20 minutes delay.
  • Between 9:30 and 10:00 am, alerts are sent when the breakout(down), price is met.
  • After 10:am, alerts are sent when the breakout, or breakdown, price AND the projected breakout(down) volume is met.
  • The same rules are applied to listing volumes on the Alert Monitor.
This Week's Top Tip Tips for getting the most out of our site
No tip this week.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD
Dow 8451.19 -18.15% -36.29%
NASDAQ 1649.51 -15.3% -37.81%
S&P 500 899.22 -18.2% -38.76%
Russell 2000 522.39 -15.66% -31.81%
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
-15.3 %
Russell 2000
-22.07 %
Russell 2000
-24.09 %
Russell 2000
-31.81 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
REIT - Healthcare Facilities Long Distance Carriers Long Distance Carriers REIT - Healthcare Facilities
 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. 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 1 23.69 3.65% -5.52%
Last Week 7 24.31 26.85% 5.15%
13 Weeks 333 24.38 13.94%
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 HEV ENER1 INC NEW 90
Top Technical SINT Si International 29
Top Fundamental SINT Si International 29
Top Tech. & Fund. SINT Si International 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 RGLD Royal Gold Inc 50
Top Technical RGLD Royal Gold Inc 50
Top Fundamental RGLD Royal Gold Inc 50
Top Tech. & Fund. RGLD Royal Gold Inc 50
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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