Weekly Newsletter 12/05/08
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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  
The downward trend continued this week due mainly to Monday's sharp drop of 9% for the NASDAQ and S&P 500 and almost 12% for the Russell 2000. Since then investors have been 'bottom fishing' and the S&P 500 has managed three accumulation days and the NASDAQ and Russell 2000 two.

Since the low of the year on November 21, the major indexes have made some nice gains with the Russell 2000 appreciating by 24.2%, the S&P 500 by 18.3% and the NASDAQ Composite by 16.5%. The late afternoon surge on Friday allowed all the five indexes we follow to complete a head and shoulders bottom pattern similar to the one shown below for the Russell 2000. Unfortunately, the pattern was not completed on heavy volume so we are reluctant to predict any further upward movement. Should we get some heavier follow-through volume on Monday, then our target price for this base is 510 for the Russell, or a gain of something over 20%. The target is obtained by measuring from the neckline to head (low) and then adding it to the point where the pattern is completed. (The pattern is considered complete when the price rises above the neckline). As all the indexes are in a similar pattern, the target for the market as a whole is also approximately 20%.

Russell 2000 HSB

The number of successful breakouts increased to five this week with a positive gain by Friday of  3.6%. The number of breakdowns was also five, down from eight the previous week. We're not suggesting there's a trend here but the ratio of breakouts to breakdowns bears watching in the days ahead.

Economic conditions and the light volume we have seen this week lead us to believe we are seeing a bear market rally but there could still be some interesting short term gains to be made before the current rally peters out.
 New Features this Week Additional Value that we added this week
New Watchlist Format

Our site first began operation in October 2001. At that time we focused solely on the cup-with-handle formation and our first watchlist display page was designed for that pattern. As we added new patterns, we developed a new display for each of them and inconsistencies arose, in part because the characteristics of each pattern varies. We are conscious that this lack of consistency can be confusing to subscribers so we are moving towards a more consistent watchlist presentation style.

We have prototyped a new format  and are introducing it today for the Head and Shoulders Bottom (HSB) watchlist. We are retaining the existing HSB presentation style for the time being. You'll find the new format  under the Mine for Candidates > Long Positions > H & S Bottom (beta) menu choice.

For a limited time this is available to all site visitors, including guests, who can see the very latest HSB watchlist data.

We'd like your feedback on the new format and its support information (Help, Methodology, Trading Hints) so we can improve it and extend it to the other patterns. Please let us know what you think by responding to the Support Forum topic 'New Watchlist Format'. Improvements that we know we need to make are adding a filter and back testing options.
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 Trend
Dow 8635.42 -2.19% -34.9% down
NASDAQ 1509.31 -1.71% -43.09% down
S&P 500 876.07 -2.25% -40.34% down
Russell 2000 461.09 -2.55% -39.81% down
Wilshire 5000 8737.14 -2.33% -41.04% down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
-1.71 %
Dow Jones
-23.04 %
Dow Jones
-29.27 %
Dow Jones
-34.9 %
 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)
+ 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 5 11.77 5.29% 3.64%
Last Week 3 12.23 7.22% 5.96%
13 Weeks 168 12.62 14.23%
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 TSYS Telecommunications System 107
Top Technical SINT Si International 45
Top Fundamental DV Devry Inc 49
Top Tech. & Fund. NCIT NCI Inc 59
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 TSYS Telecommunications System 102
Top Technical TSYS Telecommunications System 102
Top Fundamental TSYS Telecommunications System 102
Top Tech. & Fund. TSYS Telecommunications System 102
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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