Weekly Newsletter 07/30/10
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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  

Just as the economy is sending mixed signals, so are the technical indicators. Our trend indicators for the NASDAQ and Russell 2000 reversed to "Up" this week but the weekly NASDAQ chart shows a "Doji" pattern that reflects a more or less equal balance between bulls and bears with the bias being with the bears. The anticipation of continued strong earnings reports which drove the indexes higher last week has now turned to fear that earnings in the next quarter will not meet expectations. We think this fear is justified, for reasons discussed below, and August will see a continued decline in the major indexes.


Friday's declining GDP figures and falling consumer confidence indicate that the recovery is not going well. Regular readers may recall that on 06/04/2010 I drew attention to the Consumer Metrics Institute growth index indicator that implied that GDP for the second half of the year could be of the order of -2%. Following the release of the second quarter GDP numbers on Friday they have published some analysis that suggests that a negative second half is indeed possible. Their key points are that
  • Suppliers increased inventories in the first quarter more than initially measured in anticipation of increasing consumer demand accounting for the 1% upwards revision in GDP
  • consumer demand was anemic in the second quarter and inventory build-up slowed
  • weak consumer demand will lead to a cut back in inventories and a continuing fall in GDP
Read their commentary at http://www.consumerindexes.com

Of course the US GDP is but one component of the world economy and many US companies operate globally so there is not a direct correlation between US GDP and the stock markets.  Many companies will continue to grow if the global recovery continues. There will continue to be breakout opportunities, although fewer of them as this weeks breakout numbers, compared to last weeks, show.

 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 section will return at the end of August after the kids return to school.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 10465.9 0.4% 0.36% Up
NASDAQ 2254.7 -0.65% -0.64% Up
S&P 500 1101.6 -0.1% -1.21% Down
Russell 2000 650.89 0.04% 2.65% Up
Wilshire 5000 11492.9 -0.13% -0.04% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
0.4 %
Dow Jones
-9.17 %
Russell 2000
8.11 %
Russell 2000
2.65 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Oil & Gas Pipelines Oil & Gas Pipelines Specialty Eateries 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 18 7.54 3.55% 1.11%
Last Week 22 7.54 8.82% 5.06%
13 Weeks 101 8.92 14.44%
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 RQI Cohen & Steers Quality Income Realty Fund Inc. 115
Top Technical NR Newpark Resources Inc. 98
Top Fundamental MED Medifast Inc. 56
Top Tech. & Fund. FNSR Finisar Corp. 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 BJGP BMP Sunstone Corporation 97
Top Technical EZCH EZchip Semiconductor Ltd. 63
Top Fundamental EZCH EZchip Semiconductor Ltd. 63
Top Tech. & Fund. EZCH EZchip Semiconductor Ltd. 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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