The market slide continued on Friday with a distribution day for all the major indexes. As we anticipated last week, the NASDAQ Composite is headed for a test of support at its 200 day moving average and then at its March low of 2603.



The 200 dma is always a psychologically important level so we may see a bounce off that level before the downward slide resumes.

I believe we have been in a share market bubble and while the bubble may not actually burst, as it did at the end of 2007, there is certainly some air that is going to come out of the balloon. Stock prices had reached their pre-recession levels and yet the level of demand in the economy was nowhere near its 2007 level. Stock prices were supported by cheap money and quantitative easing but with QE2 coming to an end this month, the slide seems likely to continue unless we get some positive economic news. 

No new features this week.

Breakdowns Offer the Best Potential for Returns

The number of breakouts this week was just six while there were twenty-nine breakdowns.

When the number of breakdowns vastly overwhelms the number of breakouts then its clear that one should either be on the sidelines or taking some short positions. Betting on breakouts when the market is falling is generally a losing proposition although this week there were several breakouts that gave excellent returns. JVA jumped 84% before closing the week with a 57% gain and PCYC jumped 17% before closing for a 10% gain. For the six breakouts this week the average intraday gain was 20% and the average close was up 12%. Maybe it's tempting on this evidence to think that those stocks that do breakout against the trend can offer better returns, but longer term analysis shows that this is usually a losing proposition.

Instead I would suggest looking for breakdowns from our Flat Base, Head and Shoulders Top and 50 MDA Breakdown lists. Since June 1, there have been sixty-six breakdowns and only five of these are above their breakdown price. Some of them are well below it, as the following table shows.

Breakdowns Since June 1

Date	Symbol	List	B'down Price	Last Close	Gain % at Last Close
6/1/2011	TZOO	SS	73.18	57.47	27.30%
6/7/2011	PBY	SS	13.5	10.61	27.20%
6/1/2011	BKD	HS	25.55	22.59	13.10%
6/3/2011	DECK	HS	85.8	77.66	10.50%
6/2/2011	ICON	HS	23.46	21.45	9.40%
6/1/2011	CLR	HS	65.72	60.31	9.00%
6/1/2011	VPHM	HS	19.32	17.76	8.80%
6/2/2011	EXXI	HS	32.73	30.43	7.60%
6/3/2011	ACAS	HS	9.38	8.75	7.20%
6/1/2011	DDM	HS	62.45	58.54	6.70%
6/2/2011	BDJ	FB	8.64	8.12	6.40%
6/6/2011	NVTL	SS	5.33	5.01	6.40%
6/1/2011	XCO	FB	20.1	18.97	6.00%
6/3/2011	AZPN	HS	16.24	15.33	5.90%
6/1/2011	CAT	HS	102.16	96.79	5.50%
6/3/2011	CAT	HS	102.16	96.79	5.50%
6/2/2011	OAS	SS	28.48	27.09	5.10%
6/2/2011	UGI	SS	32.34	30.92	4.60%
6/2/2011	AEL	HS	12.67	12.13	4.50%
6/3/2011	CE	HS	48.62	46.65	4.20%
6/2/2011	PSLV	HS	16.78	16.12	4.10%
6/6/2011	EXPR	HS	20	19.31	3.60%
6/3/2011	IJJ	FB	83.39	80.55	3.50%
6/6/2011	FTK	HS	8.44	8.17	3.30%
6/8/2011	SNPS	FB	26.12	25.28	3.30%
6/1/2011	BWA	HS	70.07	67.93	3.20%
6/1/2011	CNX	HS	50.34	48.83	3.10%
6/6/2011	ATW	HS	41.51	40.28	3.10%
6/6/2011	IJT	FB	78.15	75.77	3.10%
6/6/2011	AGP	HS	67.31	65.36	3.00%
6/1/2011	FTK	HS	8.41	8.17	2.90%
6/1/2011	ATLS	HS	24.51	23.85	2.80%
6/3/2011	ICF	FB	72.09	70.12	2.80%
6/10/2011	ATLS	HS	24.51	23.85	2.80%
6/6/2011	FNX	FB	34.62	33.73	2.60%
6/6/2011	IJJ	FB	82.68	80.55	2.60%
6/9/2011	IYR	FB	60	58.48	2.60%
6/10/2011	MOVE	SS	2.15	2.1	2.40%
6/1/2011	ASX	HS	6.13	6	2.20%
6/6/2011	ADX	FB	10.89	10.66	2.20%
6/10/2011	ASX	HS	6.13	6	2.20%
6/1/2011	PNC	FB	60.34	59.07	2.10%
6/3/2011	AN	SS	34.02	33.33	2.10%
6/6/2011	CWB	FB	41.44	40.61	2.00%
6/10/2011	PKO	FB	28.4	27.83	2.00%
6/3/2011	UGI	SS	31.5	30.92	1.90%
6/2/2011	EXAS	HS	7.29	7.17	1.70%
6/2/2011	IFF	HS	62.55	61.48	1.70%
6/10/2011	EXAS	HS	7.29	7.17	1.70%
6/6/2011	HNT	HS	30.69	30.2	1.60%
6/2/2011	SLV	HS	35.74	35.25	1.40%
6/2/2011	SIVR	HS	36.43	35.96	1.30%
6/3/2011	CNW	HS	36.95	36.52	1.20%
6/10/2011	IBB	FB	104.5	103.31	1.20%
6/10/2011	TR	FB	28.08	27.75	1.20%
6/2/2011	WABC	FB	48.03	47.66	0.80%
6/6/2011	HS	HS	41.44	41.17	0.70%
6/10/2011	CB	FB	63.95	63.6	0.60%
6/1/2011	AKS	HS	15.26	15.215	0.30%
6/6/2011	FXZ	FB	24.32	24.25	0.30%
6/10/2011	LG	FB	36.09	36.1	0.00%
6/10/2011	GAM	FB	27.3	27.38	−0.30%
6/7/2011	WTI	HS	23.34	23.46	−0.50%
6/7/2011	MSEX	FB	17.78	18.02	−1.30%
6/6/2011	CVH	HS	33.5	34.02	−1.50%
6/2/2011	ZQK	SS	4.4	4.56	−3.50%
Average Gain					3.95%