Market Summary

(Somewhat foreshortened this week due to the holiday weekend - please have a safe and happy July 4 Holiday. My wife and I are celebrating our recently acquired US Citizenship).

The markets consolidated this week after last week's strong selloff and ended by posting small gains overall. The DJI gained just 0.05%, the NASDAQ Composite 0.2% and the S&P 500 0.24%. Considering the conflicting overall mix of factors influencing the markets, we can be thankful for small mercies, but the short term outlook continues to be for the sideways trend to continue. A cloud on the horizon is that the NASDAQ has suffered 4 distribution days in the last 6 sessions and our market model will signal an exit if the count gets to 5 in 15 sessions.

Consistent with the slight upwards trend, the number of confirmed breakouts rose slightly from 34 to 38. Also, consistent with the narrower trading range of the markets, breakouts achieved smaller gains than their recent averages. Nevertheless, there were some significant gains to be had, both intraday and over the week. SOLD broke out a short handle on Tuesday on 4 times average volume and achieved a 25% gain over its pivot by Friday before closing for a 23.4% gain overall. PANL broke out on Wednesday, pulled back slightly on Thursday and then reached 21.4% over its pivot on Friday before profit taking took it back to a 10.7% gain. Another strong performer was DCGN which broke out on Tuesday and continued to rise on significantly above average volume to peak with a 16.6% gain on Thursday. Friday saw it slip back to a 7.5% gain on light volume.

Oil and Gas together with Healthcare continued to provide the most breakouts and Oil & Gas remained the top performing sector with Transportation-Equipment Manufacturing being the most improved sector.

The results of our filter competition shows that you can significantly improve your chances of picking above average breakouts by judicious choice of your filters. See our Top Tip this week for results and analysis.

Filter Competition Results

We are pleased to be able to present the results of our filter competition and hope it will be helpful to all of you. One person, a Gold subscriber, produced a set of filters that produced the best result in both categories, and gained himself a 6 month Platinum subscription.

The competition was based on using our backtest feature to select the best set of filters in two categories:

1. Best average breakout gain at close on the day of breakout
2. Best average maximum gain since breakout.

An additional requirement was that the filters had to select at least 60 breakouts - an average of approximately 1 a day over the 3 month backtest period. Several of you chose to keep your filters at a more restrictive level, rather than enter the competition, so we are also presenting the filter set that gave the best maximum gain since breakout overall.

Best Average breakout gain at close on the day of breakout

and

Best Average Maximum Gain Since Breakout

These were the winning filters in both categories:

The result is a 47% improvement in average gain on breakout day, and a whopping 63% improvement in average maximum gain following breakout.

Best Maximum Gain since Breakout Overall (hors competition)

If you are happy to be more selective, then you can achieve better results as the following backtest results show. Although highly selective and giving few breakouts, these filters beat the average gain after breakout by 94%!