Weekly Newsletter 10/14/11
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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 reversal signal (TRS) for the NASDAQ Composite reversed itself to upward mode on Monday. Over at The Big Picture, the consensus is that this a bear market rally from an oversold position. Perhaps the strongest technical support for this view is that the index has risen 7.6% for the week on volume that was 30% below the 50 day average and rallies built on weak volume rarely last. Certainly threats, both technical and fundamental, remain. The next technical resistance level is at the 200 dma level, less than 1% above Friday's close, and after that 2862, 7.3% higher.

The fundamental threats to a continued rally are the lack of consumer spending to create demand and the continued threat of bank failures in Europe and the risk of contagion to domestic banks. Although the Commerce Department reported an increase in retail sales in September - and by extension an increase in demand - these were seasonally adjusted numbers and the raw data actually shows a decrease in spending (382 billion in September vs  402 billion in August). Consumer spending will continue to be constrained until the unemployment rate comes down and the housing market begins to recover (some estimates are that it has another 7% to fall). By Sunday we should know the outcome of the G20 meeting, which is sure to produce an optimistic press release, but the doubts about the stability of the banks, and therefore market volatility, will likely remain.

NASDAQ Composite

We sent out 55 breakout alerts this week but despite the healthy gains for the NASDAQ Composite and the Russell 2000, the number of confirmed breakouts this week was only four. This is because volumes were so low that few stocks met the daily volume requirement to be confirmed.

 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

We are working on extending our TRS methodology to individual stocks and hope to have some preliminary results next week. In the interim, use the Stock Timeliness Checkup tool as an guide to when to enter or exit a short or long position.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11644.5 4.88% 0.58% Down
NASDAQ 2667.85 7.6% 0.56% Up
S&P 500 1224.58 5.98% -2.63% Up
Russell 2000 712.46 8.57% -9.08% Up
Wilshire 5000 12783.6 6.35% -3.81% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
8.57 %
NASDAQ Composite
-4.37 %
NASDAQ Composite
-3.5 %
Dow Jones
0.58 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Personal Computers Personal Computers Personal Computers Personal Computers
 Most Improved Industry (by change in technical rank2)
Broadcasting - TV
+ 55
Recreational Vehicles
+ 76
Food - Major Diversified
+ 172
Drug Related Products
+ 182
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 4 11.15 25.11% 24.6%
Last Week 10 12.08 3.77% -3.39%
13 Weeks 245 12.23 6.64%
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 INWK InnerWorkings, Inc.  91
Top Technical TIN Temple-Inland, Inc.  58
Top Fundamental OPNT
Top Tech. & Fund. CELL
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 PPDI Pharmaceutical Product Development, Inc.  55
Top Technical PPDI Pharmaceutical Product Development, Inc.  55
Top Fundamental PPDI Pharmaceutical Product Development, Inc.  55
Top Tech. & Fund. PPDI Pharmaceutical Product Development, Inc.  55
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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