Weekly Newsletter 08/05/11
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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  

Friday's employment numbers and encouraging news from Europe (we've heard that before) allowed the DJI to close higher on Friday while the other major indexes remained in the red, despite an afternoon rally. The good news is that the indexes closed much higher than their intra-day lows. On this basis a CAN SLIM* believer would start counting this as day one of a potential rally. The prospects are not rosy, however, as we shall see.

As I write this, I learn that Standard and Poor's has downgraded the rating of long-term federal debt to AA+ from AAA. While the impact of this is far from clear, it can hardly be positive. With 48 hours before the Asian markets open, there is time for a sober assessment by the international markets so the impact on domestic markets may not be as severe as if the markets were opening tomorrow.

The NASDAQ Composite completed a head and shoulders top pattern on Thursday when the index closed below its neckline level of 2600. The standard method for estimating the possible fall from the neckline price indicates that the index could fall to around 2310. That's a further 11% from today's close and a 20% drop from the July 7 high water mark. In our analysis of the probability that a H&S Top will fall to its target level, we found that the target is met in 59% of cases (see  Head & Shoulders Top Target Success Rates), so there is certainly a heavy downside risk.

NASDAQ Composite

We recorded 120 confirmed breakdowns this week with an average loss (gain if you were short) of 7.5%. As you can see from the following table, many stocks provided a very nice return if you were fortunate enough to be short them.


B'down Date Symbol Base Loss % at
Last Close
Loss % at
Intraday Low
8/2/2011 WLT SS 60.10% 64.30%
8/2/2011 FOE SS 40.80% 43.80%
8/3/2011 TTI SS 25.90% 28.70%
8/4/2011 WTW SS 23.40% 32.50%
8/1/2011 EXXI HS 22.50% 31.60%
8/2/2011 GLDD SS 21.10% 23.40%
8/5/2011 WTW SS 20.70% 29.50%
8/2/2011 LYB HS 19.70% 31.30%
8/2/2011 WFT HS 17.60% 22.80%
8/3/2011 GLDD SS 17.10% 19.40%
8/4/2011 SVM SS 16.60% 24.40%
8/2/2011 ETFC HS 16.00% 20.60%
8/4/2011 CECO HS 15.80% 16.30%
8/2/2011 XBI FB 15.70% 16.40%
8/2/2011 ARMH HS 13.20% 16.80%
8/3/2011 PXD SS 13.20% 17.40%
8/3/2011 ACAS SS 12.70% 16.10%
8/2/2011 IBB FB 12.20% 13.60%
8/2/2011 SQM HS 11.60% 16.50%
8/4/2011 RDC SS 11.60% 17.80%
8/4/2011 GMO SS 11.30% 23.00%
8/4/2011 SGMS HS 11.20% 14.70%
8/2/2011 SGMS HS 11.10% 14.60%
8/4/2011 CSE SS 11.00% 11.00%
8/2/2011 CMI SS 10.70% 16.00%
8/4/2011 IVN SS 10.60% 16.80%
8/4/2011 ACAS SS 10.40% 13.70%
8/4/2011 TEN HS 10.40% 17.70%
8/4/2011 CXO SS 10.20% 13.40%
8/4/2011 PAAS SS 9.50% 13.30%
8/2/2011 DSW HS 9.00% 14.70%
8/4/2011 DSW HS 9.00% 14.70%
8/2/2011 IWR FB 8.90% 10.60%
8/2/2011 TWX HS 8.80% 11.40%
8/3/2011 FRI FB 8.80% 9.40%
8/3/2011 VNQ FB 8.00% 8.90%
8/3/2011 IYR FB 7.90% 8.80%
8/4/2011 APC SS 7.90% 13.30%
8/1/2011 RSP FB 7.80% 9.80%
8/2/2011 TWX FB 7.80% 9.40%
8/2/2011 RSP FB 7.70% 9.60%
8/1/2011 FEX FB 7.60% 9.70%
8/5/2011 CSE SS 7.60% 7.60%
8/2/2011 FEX FB 7.30% 9.50%
8/2/2011 FXU FB 7.20% 8.90%
8/3/2011 RWO FB 7.20% 8.60%
8/5/2011 PPO SS 6.90% 12.10%
8/2/2011 CMCSA HS 6.60% 10.00%
8/1/2011 PWV FB 6.40% 8.80%
8/4/2011 SIMG SS 6.40% 9.10%
8/4/2011 WSH HS 6.40% 8.70%
8/3/2011 PEG SS 6.30% 8.00%
8/4/2011 POT SS 6.20% 11.00%
8/1/2011 DISCA FB 6.10% 9.00%
8/3/2011 CYN FB 6.00% 6.40%
8/2/2011 IWB FB 5.80% 7.90%
8/2/2011 VTI FB 5.80% 7.90%
8/3/2011 SCHF FB 5.80% 8.00%
8/3/2011 CAB SS 5.60% 8.50%
8/3/2011 SCHE FB 5.60% 8.00%
8/3/2011 VEU FB 5.40% 8.40%
8/1/2011 SDY FB 5.30% 7.30%
8/1/2011 VIG FB 5.30% 7.50%
8/2/2011 BRFS HS 5.30% 11.90%
8/2/2011 ETR FB 5.30% 7.10%
8/2/2011 VOO FB 5.20% 7.40%
8/3/2011 VT FB 5.20% 7.70%
8/3/2011 VWO FB 5.20% 7.80%
8/3/2011 VXUS FB 5.20% 8.30%
8/3/2011 SCHB FB 5.10% 7.40%
8/4/2011 ELGX HS 5.10% 11.00%
8/1/2011 FVD FB 5.00% 7.10%
8/3/2011 VEA FB 5.00% 8.20%
8/3/2011 VV FB 5.00% 7.20%
8/4/2011 VWO FB 5.00% 7.60%
8/3/2011 SCHX FB 4.80% 7.10%
8/4/2011 SCHE FB 4.80% 7.30%
8/3/2011 IVV FB 4.60% 6.90%
8/3/2011 VOO FB 4.60% 6.80%
8/3/2011 SPY FB 4.50% 6.90%
8/2/2011 VYM FB 4.40% 6.80%
8/5/2011 SIMG SS 4.30% 6.90%
8/4/2011 NTG FB 4.20% 10.00%
8/5/2011 WFT SS 3.70% 8.20%
8/3/2011 DIA FB 3.60% 6.00%
8/3/2011 IWF FB 3.60% 6.10%
8/3/2011 OEF FB 3.40% 5.90%
8/5/2011 AWF FB 3.40% 7.20%
8/5/2011 MSZ FB 3.30% 6.80%
8/2/2011 WEC FB 2.90% 5.10%
8/3/2011 PBJ FB 2.60% 5.40%
8/4/2011 FXG FB 2.60% 5.30%
8/2/2011 AGN FB 2.50% 5.60%
8/4/2011 XXV FB 2.00% 3.00%
8/5/2011 LVS SS 2.00% 10.10%
8/5/2011 NGD SS 2.00% 8.90%
8/3/2011 XLU FB 1.70% 3.50%
8/4/2011 IPGP HS 1.70% 6.70%
8/5/2011 FFC FB 1.70% 7.80%
8/5/2011 RFMD SS 1.70% 5.60%
8/5/2011 WES FB 1.70% 9.10%
8/3/2011 WMT FB 1.60% 4.00%
8/4/2011 GDP SS 1.50% 6.20%
8/5/2011 PGX FB 1.50% 5.50%
8/3/2011 AEP FB 1.20% 4.00%
8/5/2011 INT SS 1.10% 5.90%
8/5/2011 JGT FB 1.10% 3.40%
8/5/2011 TTT FB 1.10% 3.80%
8/4/2011 PGN FB 1.00% 2.40%
8/2/2011 INT SS 0.90% 5.60%
8/5/2011 WYNN SS 0.80% 6.20%
8/4/2011 AEE FB 0.60% 3.00%
8/5/2011 ERC FB 0.50% 4.40%
8/3/2011 NSM SS 0.40% 1.00%
8/5/2011 EDD FB 0.40% 2.60%
8/4/2011 NSM SS 0.30% 0.90%
8/4/2011 UNS FB −0.40% 2.50%
8/5/2011 BWF FB −0.70% 1.40%
8/5/2011 PHB FB −0.70% 1.00%
8/5/2011 NJR FB −1.80% 0.90%





Average Loss

7.49%


 New Features this Week Additional Value that we added this week
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This Week's Top Tip Tips for getting the most out of our site

If the technical analysis of the NASDAQ presented above proves even partly correct, there will be some profitable opportunities if you go short.

We have three watchlists that provide stocks that present shorting opportunities. You may wish to review the methodology we use to develop each list and also the trading hints for each.

Watchlist (Acronym)
Methodology LInk
Trading Hints Link
50 DMA Breakdown (SS)
methodology
trading hints
Head & Shoulders Top (HST)
methodology
trading hints
Flat Base (FB)
methodology
no trading hint


 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11444.6 -5.75% -1.15% Up
NASDAQ 2532.41 -8.13% -4.54% Down
S&P 500 1199.38 -7.19% -4.63% Up
Russell 2000 714.63 -10.34% -8.81% Down
Wilshire 5000 12564.8 -7.9% -5.46% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
-5.75 %
Dow Jones
-9.45 %
Dow Jones
-5.36 %
Dow Jones
-1.15 %
 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)
Long Distance Carriers
+ 52
Telecom Services - Foreign
+ 87
Music & Video Stores
+ 190
Closed-End Fund - Debt
+ 193
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 9 12.62 4.23% -3.57%
Last Week 40 13 1.62% -10.16%
13 Weeks 283 14 7.22%
-10.55%
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
Category
Symbol
Company Name
Expected Gain1
Best Overall LSI LSI Corporation 89
Top Technical TSRX Trius Therapeutics, Inc. 70
Top Fundamental ZNH China Southern Airlines Limited (ADR) 37
Top Tech. & Fund. ZNH China Southern Airlines Limited (ADR) 37
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
Category
Symbol
Company Name
Expected Gain1
Best Overall EM Emdeon Inc. Class A Common Stock 77
Top Technical DBP PowerShares DB Precious Metals Fd (ETF) 16
Top Fundamental AUY Yamana Gold Inc. (USA) 62
Top Tech. & Fund. AUY Yamana Gold Inc. (USA) 62
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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