Weekly Newsletter 04/17/09
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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  

There were several things to feel good about with this week's market action but there are still storm clouds on the horizon.

As our chart of the NASDAQ shows, the index has recovered 33% since its March 9 low and on Thursday broke out of its double bottom base. The gain of over 20% qualifies the index as being in a 'bull' market. The index is now 6% positive for the year.


The number of successful breakouts is steadily increasing as is the quality of gains they are making. Take a look at this report of all breakouts since March 9 and note the number of dark blue cells in the final column - these are breakouts that rose by over 20% following breakout. Our Gold and Platinum subscribers were notified of these winning stocks as they broke out and our Bronze and Silver subscribers were notified on breakout day in our daily email.

The major banks are reporting profits, although this is somewhat illusory since mark-to-market rules were relaxed; they are borrowing from the Fed and FDIC at very low rates of interest and bolstering their balance sheets with tax-payer funds.

Can this rally be sustained? We don't know of course, but bear market rallies of 33% are not unkown.The most famous is the 48% rally from mid-November 1928 to April 1930. Certainly there is cause for doubt that the rally can go much higher.

  • Industrial production for March declined 1.5% over February and 12.8% year on year. This is the biggest year on year decline since WWII.
  • The Wall Street Journal reported banks could suffer as much as $250 billion in commercial real estate losses and 700 regional banks could fail because of that exposure
  • The IMF estimates that global bank losses will be $4 trillion with about half that being in the US. If so, there is more pain to come for the banking sector, although they may not be forced to admit their true losses.
  • Results of the bank stress tests will be known shortly. We can expect that there will be a positive spin, but if the results show that some banks are healthier than others, then pity those shown to be weakest. Goldman-Sachs desire to repay TARP funds presents the Adminsitration with a dilemma described in the Goldman exit.
  • There is no sign that consumer spending is rising which is a prerequisite for higher earnings and higher stock prices. In fact the savings rate is increasing leading to what JMK called the paradox of thrift. So although there are theoretically more funds available to finance investment, until confidence is restored there will be a scarcity of borrowers.

However, should confidence continue to improve, then we can expect a lot of money currently in cash, bonds and treasuries to pour into the market giving us the mother of all rallies.

 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 Trend
Dow 8131.33 0.59% -7.35% Down
NASDAQ 1673.07 1.24% 6.09% Up
S&P 500 869.6 1.52% -3.73% Down
Russell 2000 479.37 2.39% -4.02% Up
Wilshire 5000 8889.64 1.66% -2.17% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
2.42 %
NASDAQ Composite
9.4 %
NASDAQ Composite
-2.23 %
NASDAQ Composite
6.09 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Auto Parts Stores Auto Parts Stores Auto Parts Stores Cigarettes
 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 12 9.38 7.11% 4.17%
Last Week 16 9.62 14.77% 12.04%
13 Weeks 115 10.23 18.89%
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
Top Technical VNUS Vnus Medical Tech 62
Top Fundamental HMSY Hms Holdings Corp 48
Top Tech. & Fund. VNUS Vnus Medical Tech 62
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 FCFS First Cash Financial Svc 71
Top Technical ICUI Icu Medical Inc 54
Top Fundamental DGIT Digital Generation Syst 62
Top Tech. & Fund. DGIT Digital Generation Syst 62
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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