Weekly Newsletter 07/09/10
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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 markets made their best weekly gains in over a year as traders anticipate a strong 2nd quarter earnings season when compared to the same quarter last year. We deliberately used the term 'traders' not investors because 'investors' seem less enthusiastic as world wide withdrawals from mutual funds topped $11 billion and inflows into money market funds were the biggest in 18 months. (Source : Reuters)

Investors Business Daily is stating that the indexes are in a confirmed up-trend. It would seem that they are basing this on the recovery from the day's low on July 1 and then calling a follow-through day on July 7. Although they may be subsequently proved correct if the rebound is sustained, we think their reasoning is suspect as a look at the equivolume chart* for the DJI shows.

DJI Equivolume

Day 1 of their rally was actually a distribution day. Although we grant that the majority of the volume may have come in the recovery phase, the distribution continued on day 2 and undercut the previous day's low both in the low of the day and at the close. In fact, July 2 should count as day 1 of the rally, in which case a follow through day (a gain of at least 2% beginning on the fourth day) has not yet occurred. However, How to Make Money in Stocks, does allow an exception of a follow-through day on the third day of a rally if the first, second and third days are very powerful. Even granting that we are in a short week with depressed volume, volumes were not impressive and only the move up on the 7th July could be classed as powerful.

Identical arguments can be made for the NASDAQ equivolume chart.

NASDAQ Equivolume

We suspect that a confirmed up trend sells more newspapers and investors.com subscriptions than a down trend :).

Finally, a look at the NASDAQ daily chart shows that three rally attempts since April have failed so it is too early to become excited over the latest one as there have been no game changing events to suggest that things are different, this time. In fact, American's are cutting back on their credit card debt and increasing their savings. While good for investment in the long term, this will not lead to a consumer led recovery in the near term.


* An equivolume chart denotes volume by the width of bar. We also display the volume compared to the 50 day average below the bar.

 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
This feature will return following the summer school break.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 10198 5.28% -2.21% Up
NASDAQ 2196.45 5% -3.2% Down
S&P 500 1077.96 5.42% -3.33% Down
Russell 2000 629.43 5.09% -0.73% Down
Wilshire 5000 11225.8 5.37% -2.36% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
5.42 %
Dow Jones
-10.46 %
Russell 2000
-2.35 %
Russell 2000
-0.73 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Specialty Eateries Specialty Eateries Toy & Hobby Stores Housewares & Accessories
 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 8.23 2.92% 1.78%
Last Week 4 9.31 5.99% 4.48%
13 Weeks 119 9.62 14.85%
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 GGAL Grupo Financiero Galicia S.A. 120
Top Technical NTL Nortel Inversora S.A. 53
Top Fundamental LULU Lululemon Athletica Inc. 59
Top Tech. & Fund. LULU Lululemon Athletica 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 VIT VanceInfo Technologies Inc. 63
Top Technical SUSS Susser Holdings Corporation 50
Top Fundamental VIT VanceInfo Technologies Inc. 63
Top Tech. & Fund. VIT VanceInfo Technologies Inc. 63
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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