Weekly Newsletter 10/17/08
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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  
The DJI made its biggest one week gain measured from close to close since March 21, 2003 after a week of erratic trading which saw the VIX reach its highest level ever on Friday. For the S&P 500 it was the best week since February and for the NASDAQ the best since August 8. The performance could have been better were it not for a late sell-off on Friday driven either by traders closing positions before the weekend, mutual fund redemptions or the settling of options contracts.

Friday also saw the TED Spead ease the most for the week as it fell by 11%. But as the following chart  of the TED spread over the last year shows, it has a long way to fall before inter-bank lending will revert to its more normal level. We can think of the TED spread as an index of fear - a measure of the extent to which banks distrust one another and fear they will not be repaid for any loans they make. Until this fear index comes down volatility will continue.

TED Spread

We usually study the NASDAQ chart because that's where we expect growth stocks to come from and despite this weeks gains our equivolume chart shows that the index is still under distribution with only one accumulation day in the last twenty.

NASDAQ Equivolume Chart

Stocks have become so beaten down that there are very few breakout choices at the moment with just eight on our cup-with-handle list  which usually has the most choices. Our head and shoulders bottom list, which probably holds the most promise if the rally continues, has 12 choices. 

By far the most rewarding selections have been from our short sale lists. Over the last 13 weeks we selected 205 breakdowns which gave an average return of 84% to their intra-day low from the breakdown price. Breakdowns continue to perform well with nine this week for an average 1 day retun of 5%.

Tables

B'down Date Symbol Base B'down
Price
B'down Day
Close
B'Down day
% Gain
10/15/08 FDRY HS 16.98 15.54 9.27
10/15/08 FNFG HS 14.91 13.97 6.73
10/15/08 LAZ HS 36 35.05 2.71
10/15/08 NCI SS 17.21 16.26 5.84
10/15/08 DWA HS 27.2 26.7 1.87
10/15/08 NUVA HS 45.11 43.25 4.30
10/15/08 THOR HS 24.9 24.73 0.69
10/14/08 SCHW HS 23.03 20.97 9.82
10/14/08 PACW HS 27.84 26.77 4.00
Average one day gain 5.03

 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.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD
Dow 8852.22 4.75% -33.27%
NASDAQ 1711.29 3.75% -35.48%
S&P 500 940.55 4.6% -35.95%
Russell 2000 526.43 0.77% -31.28%
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
4.75 %
Dow Jones
-24.04 %
Russell 2000
-26.99 %
Russell 2000
-31.28 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Long Distance Carriers Long Distance Carriers Long Distance Carriers REIT - Healthcare Facilities
 Most Improved Industry (by change in technical rank2)
Aluminum
+ 54
Aluminum
+ 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 22.62 0% 0%
Last Week 1 23.69 3.65% -26.58%
13 Weeks 317 23.69 13.62%
-20.27%
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
Category
Symbol
Company Name
Expected Gain1
Best Overall HEV ENER1 INC NEW 87
Top Technical SINT Si International 26
Top Fundamental GXDX GENOPTIX, INC. 37
Top Tech. & Fund. GXDX GENOPTIX, INC. 37
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
Category
Symbol
Company Name
Expected Gain1
With no breakouts this week, there are no second chances.
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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