Weekly Newsletter 08/12/11
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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  

Our trend indicators have turned negative for all the major indexes except the DJI.

Last week we noted that the NASDAQ Composite had completed a head and shoulders top and that the target cover price, based on the distance between the neckline and the head, was around 2310*. In fact, the low this week was set on Tuesday at 2332, quite close to the predicted target. Whether or not this week's low represents a bottom is very much open to question.

While the markets almost certainly over-reacted to the global downturn, rumors of European bank insolvency and US debt downgrade, the prospects for the US and global economies in the short to medium term are weak. Barry Ritholz poses the question  "Are we already in recession" and answers it by saying "Given yesterday’s data showing both imports and exports falling, we may have an implied Q2 GDP revised lower by 0.8% to 0.5% annualized growth - putting Q2 into the negative category." If so, then this week's bounce may prove to be of the dead cat variety and we may in fact be already in a bear market.

NASDAQ Composite

* In fact we said 2100 when we meant 2310. This was corrected in the online version of the newsletter.

 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

The volatility present in the market this week creates opportunities for very short term traders, but is a challenge for most of us as the indexes can move by hundreds of points in a few minutes. Only computers can compete in this trading environment. In fact, as this Bloomberg article shows, trading volumes tripled due to computer driven high frequency trading. I think it is better to stay on the sidelines until volatility returns to more normal levels.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11269 -1.53% -2.66% Up
NASDAQ 2507.98 -0.96% -5.46% Down
S&P 500 1178.81 -1.72% -6.27% Down
Russell 2000 697.5 -2.4% -10.99% Down
Wilshire 5000 12367.6 -1.57% -6.94% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
-0.96 %
Dow Jones
-10.53 %
Dow Jones
-8.18 %
Dow Jones
-2.66 %
 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)
Auto Parts Wholesale
+ 49
Tobacco Products - Other
+ 95
Music & Video Stores
+ 182
Closed-End Fund - Debt
+ 198
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 7 12.15 3.4% 1%
Last Week 75 12.62 -2.09% -10.27%
13 Weeks 287 13.15 6.53%
-10.75%
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 NGD New Gold Inc. (USA) 70
Top Technical TMF Direxion Daily 30-Yr Trsry Bull 3X Shrs 38
Top Fundamental NGD New Gold Inc. (USA) 70
Top Tech. & Fund. NGD New Gold Inc. (USA) 70
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 MFN Minefinders Corp. Ltd. (USA) 59
Top Technical MFN Minefinders Corp. Ltd. (USA) 59
Top Fundamental EGO Eldorado Gold Corporation (USA) 45
Top Tech. & Fund. MFN Minefinders Corp. Ltd. (USA) 59
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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