Weekly Newsletter 10/15/10
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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 NASDAQ Composite is approaching resistance at 2535. If it breaks through that point it will be at its highest since May 2008.

We see that since the latest rally began in early September, the NASDAQ's relative strength compared to the S&P 500 has steadily improved. This trend has even accelerated in the last week as the S&P 500 has been hurt by falling financials in response to uncertainty over the extent of the impact of the foreclosure mess and continued economic uncertainty.

NASDAQ Composite

The Fed seems almost certain to announce further stimulative measures in November, with the likelihood that the extra liquidity will find its way into equities, we can expect the NASDAQ to continue to outperform the indexes in the weeks to come.

Note also that the 50 day moving average is about to cross the 200 day moving average which technicians will see as another positive indicator.

Some analysts believe that the stimulative effect is already priced into the markets and that the smart money will "sell the news" when the Fed makes its announcement in November. But you should read this article from David Kotok which makes a persuasive case for a bull market of several year's duration. Here are the highlights:
  • "We expect an upward movement in stock prices through yearend because of the Fed’s actions."
  • "He [Bernanke] wants inflation to reach a target of slightly under but around 2%.   It is presently under 1%."
  • "Safety in policymaking requires him to get sustainably above his target before he takes policy to neutral.  That may take years to achieve."
  • "Stocks are products of two inputs.  They need lower interest rates, which allows the equity risk premium to be higher. Lower rates are here for a long while. In addition, stocks need the corporate ability to finance at those low interest rates.  Both are in place and will be sustained for an “extended period.”  Stocks also need high productivity and low labor-cost pressure.  Both are in place. "
The article references the Median CPI measured by the Cleveland Fed.

 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

When should you Sell?

Our Sell assistant can help you make this difficult decision. It's included in our "Tradewatch" service which is free to Platinum subscribers

The Sell Assistant uses our Sell Model (see Sell Model Methodology) to determine if it thinks it is time to sell yet. By completing the form below and clicking the 'What's Your Opinion' button, we will produce a chart of the stock and if the Sell model thinks you should have sold it already, it will annotate the chart with the sell signal date and calculate a return based on the next day's opening price. Note that the Sell Assistant does not use a stop loss figure, but relies on its internal model to determine when to issue a sell signal. The Sell Assistant can be used for any stock, although it is only useful on stocks that were in a confirmed uptrend on the date of purchase.

Sell Assistant

If the Sell Model does not find a sell signal, you can click the 'Create Sell Alert' button and create a sell alert. You now have several options:

  • enter a stop loss figure either as a percentage or absolute value of your buy price
  • enter a trailing stop percentage, which will trigger an alert if the closing price falls by that percentage from the highest intraday price after the buy date
  • enter a target price which will trigger an alert when the stock closes above the target price
  • specify if the Sell Assistant is to use RS rank as part of the sell decision process. In this case, the RS rank must be less than the RS rank at purchase for the sell signal to be issued. Specifying 'No' is the more conservative approach, but strong performers will be allowed to run if you answer yes. Read this link for further discussion.
  • Override the Sell Assistant's default of sending an alert whenever any market signal goes to 'exit'

Create Alert

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11062.8 0.51% 6.09% Up
NASDAQ 2468.77 2.78% 8.8% Up
S&P 500 1176.19 0.95% 5.48% Up
Russell 2000 703.16 1.35% 10.9% Up
Wilshire 5000 12326.8 1.07% 7.21% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
2.78 %
Russell 2000
9.56 %
Dow Jones
0.4 %
Russell 2000
10.9 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Beverages - Brewers Beverages - Brewers Beverages - Brewers REIT - Residential
 Most Improved Industry (by change in technical rank2)
Nonmetallic Mineral Mining
+ 71
Nonmetallic Mineral Mining
+ 97
+ 185
Personal Computers
+ 181
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 19 25.92 7.08% 3.83%
Last Week 50 24.08 8.94% 5.26%
13 Weeks 340 26.54 16.08%
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 HSWI HSW International, Inc. 109
Top Technical GLPW
Top Fundamental PH Parker Hannifin Corporation 33
Top Tech. & Fund. LPSN LivePerson Inc. 91
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 MGPI MGP Ingredients Inc. 80
Top Technical MGPI MGP Ingredients Inc. 80
Top Fundamental JLL Jones Lang Lasalle Inc. 43
Top Tech. & Fund. JLL Jones Lang Lasalle Inc. 43
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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