Weekly Newsletter 02/11/11
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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 continued to move higher on above average volume. The volatile Russell 2000 outpaced the other major indexes we follow but large cap stocks represented by the Dow Jones 30 is showing the best gain for the year so far driven by higher energy and commodity prices. Market participants seem to think that companies that are global competitors are best positioned to take advantage of the world wide recovery while the economy at home continues to struggle, and will likely do so for several years as home prices continue to fall and unemployment remains high.

While the domestic economy is struggling, not so the markets as cheap money continues to fuel what is increasingly looking like another asset bubble - this time in stocks. Chartoftheday.com provides the following chart showing just how much the major indexes have retraced since the bottom.

Market Retracement

Until the Fed's Quantitave Easing policy is relaxed, it would seem that the markets will continue to move higher. Our "Bollinger Bands" charts show daily prices with envelopes at one and two standard deviations away from the closing price mean. The chart of the closing price of the NASDAQ Composite shows that over the last six months the index has mostly trended higher in a range between the +1 and +2 standard deviation (SD) regions. Only rarely has it consolidated to the -1 SD band and never to the -2. This implies that the downside risk is lower than the probability of upside gains, at least for now. Since the beginning of February the index has traded above the +1 SD and you can see from the chart that this trend has often continued for several weeks before a short consolidation occurs.

NASDAQ Composite

The number of confirmed breakouts rose to 24 this week, well above the 13 week average of 14. The highest fliers were Photronics, inc (PLAB) with again of 22.5% and Federal Agricultural Mortgage Corporation (Farmer Mac) (AGM) with a 13.4% gain.
 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 next week.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12273.3 1.5% 6.01% Up
NASDAQ 2809.44 1.45% 5.9% Up
S&P 500 1329.15 1.39% 5.69% Up
Russell 2000 822.11 2.75% 4.91% Up
Wilshire 5000 14044.5 1.64% 5.68% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
2.75 %
Russell 2000
14.3 %
Russell 2000
34.88 %
Dow Jones
6.01 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Farm & Construction Machinery Metal Fabrication Silver Auto Parts Stores
 Most Improved Industry (by change in technical rank2)
Broadcasting - TV
+ 88
Computer Based Systems
+ 100
Toy & Hobby Stores
+ 164
+ 203
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 24 14.54 4.55% 3.04%
Last Week 18 13.85 9.26% 5.55%
13 Weeks 224 15.77 13.16%
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 HIL Hill International Inc. 105
Top Technical BEE Strategic Hotels & Resorts Inc. 101
Top Fundamental MELI MercadoLibre, Inc. 41
Top Tech. & Fund. MELI MercadoLibre, Inc. 41
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 LZR Emergent Group Inc 85
Top Technical TNAV TeleNav, Inc. 84
Top Fundamental TNAV TeleNav, Inc. 84
Top Tech. & Fund. TNAV TeleNav, Inc. 84
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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