Weekly Newsletter 07/22/11
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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 major indexes made healthy gains for the week but on less than average volume, except for a volume spike on Thursday in response to a new bailout plan for Greece and rumors of a debt ceiling deal. All the major indexes are in a cup-with-handle pattern similar to that shown for the NASDAQ Composite. That means they all face resistance at their pivot and left cup levels. For the NASDAQ that's 2879 and 2888, respectively.

NASDAQ Composite

So far, the markets have expected that the debt ceiling will be raised, but if no plan emerges over the weekend we may see some selling on Monday. It seems there are three possible outcomes, in order of those that I perceive are most likely
  1. The debt ceiling will be raised with $1-4 trillion cut over ten years and no increased tax revenues (Obama capitulates).
  2. The debt ceiling will be raised short term without cuts or tax increases (either Obama invokes 14th amendment or Reid/McConnel fallback planadopted)
  3. The debt ceiling will be raised with $1-4 trillion cut over ten years with revenue increases coming from broadening the tax base (house Democrats join non-TP Republicans to pass gang-of-six type proposal)
Outcomes one and three will lead to continued economic contraction and job losses and so will be bad for the markets, but over what time frame is unclear as there will likely be a relief rally due to the debt ceiling being raised. Outcome two is the best outcome and will lead to a market rally, I believe. I say the best, because IMHO the debt crisis is a long term, not a short term crisis. Spending and revenues need to be brought into balance, but not while we face a new recession.

The number of breakouts jumped from 17 to 34 this week, reflecting the positive moves of the indexes.

Those of you who read the daily email will have noticed that the market commentary appears there only sporadically of late. The reason is that my boys are out of school and daily excursions to beach, forest, etc. leave me far from my computer at mid-morning as market closes here at 10am here in Hawaii

 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 wil return next week.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12681.2 1.61% 9.53% Up
NASDAQ 2858.83 2.47% 7.76% Up
S&P 500 1345.02 2.19% 6.95% Up
Russell 2000 841.82 1.57% 7.42% Up
Wilshire 5000 14229.3 2.06% 7.07% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
2.47 %
Dow Jones
-0.29 %
Russell 2000
8.88 %
Dow Jones
9.53 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Personal Computers Personal Computers Cigarettes Health Care Plans
 Most Improved Industry (by change in technical rank2)
Regional - Midwest Banks
+ 0
Regional - Midwest Banks
+ 0
Regional - Midwest Banks
+ 0
Regional - Midwest Banks
+ 0
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 28 12.85 6.45% 3.68%
Last Week 17 12.23 7.9% 4.37%
13 Weeks 200 14.54 10.66%
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 KOG Kodiak Oil & Gas Corp. 114
Top Technical DSCI Derma Sciences, Inc. 73
Top Fundamental PCLN priceline.com Incorporated 38
Top Tech. & Fund. PCLN priceline.com Incorporated 38
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 FXEN FX Energy, Inc. 88
Top Technical DBLE Double Eagle Petroleum Co. 76
Top Fundamental DXPE DXP Enterprises, Inc. 56
Top Tech. & Fund. DXPE DXP Enterprises, Inc. 56
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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