Weekly Newsletter 10/28/11
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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

Only a brief newsletter this week as we are traveling to Lanai this afternoon (Friday) so my son can compete in a triathlon.

In ten years of operating breakoutwatch.com, we have never seen so many confirmed breakouts (88) in one week! This comes after what Bloomberg News descibed as the biggest monthly rally on record.

After meeting resistance at the 200 day level earlier in the week, the NASDAQ Composite rose above that level on Thursday and continued to close above it on Friday although there was a slight loss on the day.

NASDAQ Composite

The markets surged on Thursday but there are question marks over the reason for the rally. While popular opinion attributes gains to the outcome of the European summit there are real questions over what was actually achieved as we are still waiting for these promises to be backed by actual financial transactions. Certainly the bond markets were not convinced as yields in Spanish and Italian debt rose on Friday. Over at Political Calculations they draw attention to the fact that the markets were rising throughout October despite the European uncertainty and comments at the Big Picture draw attention to the end of October being the end of the fiscal year for many mutual funds. All this leaves us very uncertain about the future direction, while Barry Ritholz thinks we are good for a year end rally:

Year end rally:  I have mentioned seasonality several times over the past week, and this rally seems to be running (or perhaps front running) into the best 6 months of the year. This does not mean the secular bear market is over, but it could very well clear us for a few weeks as we “melt up“.

 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 will return next week.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12231.1 3.58% 5.65% Down
NASDAQ 2737.15 3.78% 3.18% Up
S&P 500 1285.08 3.78% 2.18% Up
Russell 2000 761 6.82% -2.89% Down
Wilshire 5000 13454.1 4.22% 1.23% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
6.82 %
Dow Jones
0.72 %
Dow Jones
-4.52 %
Dow Jones
5.65 %
 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)
Toy & Hobby Stores
+ 135
Toy & Hobby Stores
+ 145
Toy & Hobby Stores
+ 168
Toy & Hobby Stores
+ 192
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 88 15.23 5.55% 2.52%
Last Week 14 9.62 7.79% 5.35%
13 Weeks 277 16.46 6.75%
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
Company Name
Expected Gain1
Best Overall SEM
Top Technical SGEN Seattle Genetics, Inc.  66
Top Fundamental GNC GNC Holdings Inc  68
Top Tech. & Fund. TRCR Transcend Services, Inc.  0
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 KOG Kodiak Oil & Gas Corp  126
Top Technical HSTM HealthStream, Inc.  79
Top Fundamental HEI
Top Tech. & Fund. RRTS Roadrunner Transportation Systems Inc  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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