Weekly Newsletter 01/30/09
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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  
Despite the negative trend, there were several highly successful breakouts this week with four closing the week with gains of over 10%. and eight making intra-day gains above that level. As we recommended last week, breakouts can be profitable in this market but you must take your gains quickly.

The markets closed their worst January performance ever with another distribution day on Friday. To put that in perspective, the S&P history goes back 81 years and the DJI 113 years. A flurry of buying (by the PPT?) allowed the DJI to close just above the 8,000 level for the weekend. 8,000 is seen as an important psychological level.

The fourth quarter GDP numbers confirmed the recession and we are likely in for a worse first quarter ahead. GDP will probably stay negative through 2009. But this doesn't mean the markets will continue downward during 2009 as a change in sentiment could rapidly turn things around as fear turns to greed. Sentiment turned increasingly negative this week due to the pummeling the proposed stimulus plan has taken from Republican Congressmen and many economists on the right and the left. The mantra that tax cuts are necessary to help small businesses is meaningless unless there is demand for the products and services small businesses have to offer. Unfortunately, there seems to be too little in the stimulus package to help demand in the short term. RGE Monitor had the following assessment of the plan yesterday:

  • Stimulus with highest bang-for-buck: Unemployment insurance, payroll tax relief, food stamps will alleviate impact on lower income groups (since they consume a larger share of their income) and help boost consumer demand
  • Second best options: Infrastructure spending and aid for states have high multiplier effects but are not timely. 
  • Least effective: Tax incentives are more timely and well targeted compared to infrastructure spending. But consumers might save most of the tax cuts ... tax cuts for businesses will be less effective ... Tax incentives for first-time home buyers inefficient since other factors (tighter credit, income/job losses) will continue to constrain home demand. Tax cuts will exacerbate the impact on fiscal deficit
We expect that the plan will be improved and investor sentiment will turn around as the plan is signed into law.

Until then, the outlook for stocks is bearish. The chart of the NASDAQ shows a descending triangle which usually leads to a downside breakout. However, patterns that have worked in the past are no longer reliable as intervention and manipulation have been commonplace over the last year.

NASDAQ Composite
 New Features this Week Additional Value that we added this week
iPhone Interface Under Development

We are making an early version of  an iPhone-ready version of the site available to subscribers. You can use it at http://www.breakoutwatch.com/mobile. After logging in, using your normal username and password, you will see a menu which will expand as you tap each line to show you the sub-menus. Tapping the item, or any other main menu line, will collapse the sub-menu and show the new one. Tapping a sub-menu will take you to the relevant page. Using the tap and/or pinch gestures on each page makes the site quite useable on most pages. To return to the menu, tap the menu button at the top of the screen.

Let us know what you think. Here are a couple of screen shots.

iPhone LoginiPhone Login
This Week's Top Tip Tips for getting the most out of our site
Take profits early and cut your losses quickly.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 8000.86 -6.96% -8.84% Down
NASDAQ 1476.42 -6.06% -6.38% Down
S&P 500 825.88 -7.24% -8.57% Down
Russell 2000 443.53 -7.85% -11.2% Down
Wilshire 5000 8335.63 -7.24% -8.27% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
0.47 %
Dow Jones
-14.2 %
Dow Jones
-29.36 %
NASDAQ Composite
-6.38 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Diversified Utilities Long Distance Carriers Long Distance Carriers Long Distance Carriers
 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 10 8.92 12.87% 5.05%
Last Week 5 8.31 15.02% 7.66%
13 Weeks 113 9 18.06%
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 ALTH Allos Therapeutics Inc. 107
Top Technical JJSF J&J Snack Foods Corp 47
Top Fundamental GMCR Green Mountain Coffee Roasters 59
Top Tech. & Fund. GMCR Green Mountain Coffee Roasters 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 NNDS Nds Group Plc Ads 58
Top Technical GLD streetTRACKS Gold Shares ETF 27
Top Fundamental GLD streetTRACKS Gold Shares ETF 27
Top Tech. & Fund. GLD streetTRACKS Gold Shares ETF 27
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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