Weekly Newsletter 11/24/12
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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  

The major indexes recovered strongly with the NASDAQ Composite gaining almost 4%. The Bullish mood appeared to come from a belief that Congress will act before the economy goes over the 'fiscal cliff', or that at least the cliff will not be as steep as feared as consumer confidence and the housing market improved. Optimism was also buoyed by improving Chinese economic data and rising European markets. Volume was understandably weak due to the Thanksgiving Holiday and a shortened trading session on Friday.

NASDAQ Composite

Our market trend indicators continue to point upwards (more on these indicators below). The NASDAQ is almost back to its 50 day moving average level and could face resistance there if the current (overly, in my view) optimistic mood dissipates.

 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

Market Trend Indicators

Last week we promised to take a look at our market trend algorithms as it appeared they had not reacted to the steep decline that began on November 7 as the NASDAQ crashed through its 50 day moving average and lost 2.5%.

Our Trend Reversal Signals (TRS) were developed in response to backtesting we did on CAN SLIM's follow through day rules in March 2011. Our conclusion was that the rules are difficult to apply systematically and were generally unreliable. Our goal was to produce an easily quantifiable and more reliable set of rules for identifying both upwards and downwards trend reversals.

The rules we developed were based on a smoothed version of the Stochastic RSI with overbought and oversold levels calibrated differently for each major index and the Accumulation/Distribution Line. The TRS we developed required that a signal generated by the Stoch RSI had to be confirmed by the trend in the Acc/Dis Line.

The chart shows signal reversals over the last year with change to 'up' indicated by '^' and change to down indicated by 'v'. While the signals have performed well, it is clear that the model is better at picking 'up' trends than 'down' trends. We are working on improving this but the Thanksgiving Holiday interrupted our work. We hope to have new results next week.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 13009.7 3.35% 6.48% Up
NASDAQ 2966.85 3.99% 13.88% Up
S&P 500 1409.15 3.62% 12.05% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
3.99 %
S&P 500
-0.14 %
S&P 500
6.93 %
NASDAQ Composite
13.88 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Lumber - Wood Production Lumber - Wood Production Lumber - Wood Production Lumber - Wood Production
 Most Improved Industry (by change in technical rank2)
Personal Services
+ 32
Auto Parts Wholesale
+ 80
Meat Products
+ 132
Foreign Money Center Banks
+ 171
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 13 19.92 3.32% 2.48%
Last Week 22 19.62 -0.74% -2.06%
13 Weeks 337 20.62 5.69%
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 POWR PowerSecure International, Inc. 102
Top Technical POWR PowerSecure International, Inc. 102
Top Fundamental SLCA U.S. Silica Holdings Inc 63
Top Tech. & Fund. PRXL PAREXEL International Corporation 38
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 MIPS MIPS Technologies, Inc. 85
Top Technical EPAM EPAM Systems Inc 44
Top Fundamental TREE Tree.com Inc 62
Top Tech. & Fund. TREE Tree.com Inc 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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