Weekly Newsletter 09/30/11
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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  

Last week we anticipated a possible head and shoulders top (HST) pattern forming for the NASDAQ Composite. This week saw the right shoulder form on Tuesday and the pattern was completed when the index closed below the neckline on Friday. The HST is one of the most reliable bearish continuation patterns as we discussed in our July 16, 2011 newsletter. The chart shows that there is the potential for support at around 2320 but the target price for this pattern is just below 2200, That's 10% below Friday's close and 30% below this year's high. (The target price is measured down from the neckline a distance equal to the distance from the neckline to the top).

NASDAQ Composite

Friday also saw the trend reversal signal for the NASDAQ turn bearish putting three of our signals on a downward trend.

There were 26 breakdowns this week compared to just 10 breakouts. This is another bearish indicator in addition to the chart above and our trend reversal signals.

 New Features this Week Additional Value that we added this week

At the request of a subscriber I have modified the Stock Timeliness tool to include the results for short positions.

There is now a 'Long' button (see below) which will simulate opening a position when the trend is 'up' and closing it when the trend changes to down. Both the buy and sell prices are from the next day's open.

The 'Short' button simulates opening a short position when the trend is 'down' and covering the position when the trend turns to 'up'. Again, the next day's opening prices are used.

I was also asked to add the maximum drawdown in each case - I'll add that next week.

This Week's Top Tip Tips for getting the most out of our site

Example of Using the Stock Timeliness Checkup Tool for Short Positions

Here is an example of applying the Stock Timeliness tool to Bank of America (BAC) since October 1, 2007 until yesterday using the DJI Trend Reversal signals.

If you had traded BAC using long position reversals only you would have made 24% profit - not bad considering the stock lost 87%!

BAC using DJI TRS long

If, however, you had traded BAC using short positions only, you would have made 109%.

BAC short

It is informative to use the tool to compare the performance for a given stock against the different index signals. Try it and have fun!

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 10913.4 1.32% -5.74% Down
NASDAQ 2415.4 -2.73% -8.95% Down
S&P 500 1131.42 -0.44% -10.04% Up
Russell 2000 644.16 -1.27% -17.8% Up
Wilshire 5000 11771.9 -0.74% -11.42% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
1.32 %
Dow Jones
-13.27 %
Dow Jones
-11.82 %
Dow Jones
-5.74 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Personal Computers Personal Computers Personal Computers Cigarettes
 Most Improved Industry (by change in technical rank2)
Drugs - Generic
+ 47
Drugs - Generic
+ 66
+ 133
Drug Stores
+ 191
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 10 12.15 4.08% -1.89%
Last Week 23 12.92 3.11% -3.89%
13 Weeks 264 13.46 7.1%
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 GUT Gabelli Utility Trust   106
Top Technical RTSA iPath Short Extended Russell 2000 TR Index ETN&nbs 48
Top Fundamental AAPL Apple Inc.   35
Top Tech. & Fund. AAPL Apple Inc.   35
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 PMM Putnam Managed Municipal Income Trust   72
Top Technical BOM Powershares DB Base Metals Double Short ETN & 54
Top Fundamental BTA BlackRock LT Municipal Advantage Trust   49
Top Tech. & Fund. BTA BlackRock LT Municipal Advantage Trust   49
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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