Market Summary

Last week investors were comfortable that the 'Goldilocks' economic environment for stocks was in place. But this week, three bears appeared that threatened this complacent outlook. Papa Bear came in the form of a much larger than expected jump in the CPI with both the headline and core inflation rate exceeding analysts expectations. Mama Bear was inflationary pressure from rising oil prices as tension with Iran mounts. Baby Bear was a growing threat to economic growth, and the financial sector in particular, from a credit crunch that could follow falling home values. Large cap stocks fell for three days in succession with the DJI closing the week with its biggest percentage loss since August 11 last year of 0.94%. The S&P 500 was down 0.3% while the NASDAQ Composite was the only major index to close in the black with a comfortable gain of 0.75%.

While there is not yet cause for alarm, there is increasing concern that the burst housing bubble will have a more serious impact than has been felt so far. There is talk of a vicious spiral in which lenders tighten credit qualification rules as mortgage defaults increase which in turn lowers housing demand and home prices fall further. The risks are described and analysed in this Morgan Stanley newsletter. The markets started taking these risks more seriously on Friday as shares of sub-prime lenders fell sharply.

The NASDAQ, which was making progress as larger cap stocks fell, pulled back on Friday on slightly higher volume. While a correction was expected after two weeks of gains, the uptick in volume was a sign that the current upward move may be moderating. The chart is little changed from last week with the index still constrained within an upward sloping channel. A pullback towards the 50 day moving average seems like the most likely move from here. The distribution day count stands at three in the last fourteen days, while a count of five in fifteen days is necessary before our market signal switches. The biggest threat to technology now seems to come from the slow uptake of the new Vista operating system which has the potential to slow hardware upgrades and affect manufacturers and vendors that form the PC food chain.

The number of confirmed breakouts increased by 50% this week to 39 for an average gain by week's end of 2.1%. Seven stocks made gains over 5% while double-digit gains were made by Bruker Biosciences (BRKR) which closed 16.3% above its pivot and Clayton Holdings (CLAY) with a gain of 16.17%. Our current Buy at Open list is showing thirteen open positions with an average gain of 10% and our TradeWatch model portfolio, including programmed buys and sells, is showing a 12.4% return year-to-date, including brokerage commissions.

New Service Level - Bronze

Please see today's Top Tip below.

Expanded Daily Email Content

Our daily email called "Today's Breakouts and Top Ten Report" was enhanced to provide you with more information without having to login to the site. The enhancements include:

• the market statistics section from our Market Analysis page. This shows our equivolume charts of the three major indexes which are annotated with accumulation and distribution days
• links to enlarged equivolume charts, stock charts and CANTATA Evaluator for every stock listed in the day's breakouts, breakdowns and Top Ten list
• these links will open in a new 'window' within the daily email. This gives you immediate access to critical information without having to login to the site
• To take advantage of these new links you must:
  • have your login 'remembered' from the login button on the site home page. This puts a harmless cookie in your browser that prevents you from having to login every time
  • have javascript enabled in your email client

You can see a sample of the new daily email for Thursday, February22, 2007 here.

New Menu Choice 'Email Archive'

The daily emails are now available from the site for the last 30 days. They are accessed from the new 'Email Archive' menu choice which replaces the 'Newsletter Archive'.

The Newsletter archive is now a sub menu under Email Archive.

New Service Level - Bronze

Our enhanced daily email is designed to support a new service level which fits below our current 'Silver' level service. The Bronze service provides easy access through the daily email to the day's breakouts, breakdowns and our Top Ten potential breakouts for the next day as ranked by our CE metric. It is primarily aimed at subscribers who are interested only in confirmed breakouts and/or our market analysis. The new Bronze level provides:

• Daily Email which now includes market analysis
• Weekly Newsletter
• Email Archive (daily email and weekly newsletter)
• Access to Charts and CE pages for the stocks mentioned in the daily email from links on the email
• No need to access the site - key information, charts and analysis are available directly from the email (requires javascript enabled email client)
• Login privileges to the site for:
  • information not accessible from the daily email
  • ask questions or post suggestions to the Support and Strategy Forums
  • access to learning center
• Bronze subscriptions can also be enhanced with subscriptions to TradeWatch including T/A charts and the Sell Assistant

The cost of the new Bronze service is less than 50c a day for a monthly subscription and there are discounts for longer subscription periods.

The rates are:

New subscribers can subscribe to a Trial of all our services and then choose Bronze when their Trial expires. The $9.95 Trial subscription will be credited to your first months Bronze subscription. Subscriptions are non-refundable. Existing subscribers who want to subscribe to Bronze can do so when their current subscription expires.

If you have previously subscribed to a Trial, but did not take out a full subscription, you can still subscribe at the Bronze level and get the $9.95 credit by logging in with your old username and password.

If you were a previous subscriber at any level, we would love to have you back. You can login with your old username and password and renew at the Bronze level.

Investment Advisors Using our Service

TradeRight Securities, located in a suburb of Chicago, is a full services investment management company and broker/dealer. They have been a subscriber, and user, of BreakoutWatch.com for some time now. They practice CANTATA and use Breakoutwatch.com as a “research analyst”. You can learn more about TradeRight Securities at: www.traderightsecurities.com. If you’re interested in speaking to a representative, simply call them toll-free at 1-800-308-3938 or e-mail gdragel@traderightsecurities.com.

PivotPoint Advisors, LLC takes a technical approach to investment planning and management. A breakoutwatch.com subscriber since May, 2004, they use breakouts, market signals, and now TradeWatch to enhance returns for their clients. Learn more at http://pivotpointadvisors.net or contact John Norquay at 608-826-0840 or by email at john.norquay@pivotpointadvisors.net.

Note to advisors: If you would like to be listed here, please contact us. As a service to those who subscribe to us, there is no additional charge to be listed here.