Market Summary

Last week, we anticipated that the markets would fall if the Fed did not deliver the expected 0.5% interest rate cut. Sure enough, the markets dropped like a stone immediately after the 0.25% cut was announced and the major indexes gave up most of the previous week's gains. The markets rallied the next morning on news of a massive injection of liquidity but the markets were not convinced the new 'fix' would hold and they sold off for the rest of the day until massive buying in the last 15 minutes by the 'Plunge Protection Team' (PPT) allowed the next day's headlines to read that the market had rallied on the injection of liquidity. Our chart of the intraday S&P 500 trading on Wednesday (12/12/07) illustrates what happened.

The pattern of sell-off followed by PPT action resumed the next day and again on Friday but this massive market manipulation could not prevent the major indexes from giving up the gains of the last month. For the week, the DJI lost 2.1%, the NASDAQ Composite dropped 2.6% and the S&P 500 gave up 2.44%.

Advance news of Friday's inflation numbers was probably available to the FOMC when they made their interest rate decision which explains why they only cut by 0.25%. With inflation accelerating the Fed and Treasury are now caught on the horns of a dilemma. A further cut in interest rates will likely increase inflation so there is little room to move rates lower. On the other hand further injections of liquidity will also increase inflation, so there seems to be little the Administration can do now to ward of the anticipated hard landing. In fact, if a realistic price deflator were used to adjust GDP numbers, we are probably already in recession.

If so, then the markets are likely to fall further. The S&P 500 chart shows a bearish triple-top pattern. Although we may see another rally before year's end, the trend looks downward from here.

The number of breakouts fell to nine this week. However, as usual, they comfortably beat the market averages with an average gain of 2.73% by week's end.

No new features this week.

Industry Analysis

Our industry analysis tools allow you to answer the key questions related to the analysis of stocks by industry, either from the top down (i.e. drill down from an industry sector) or bottom up (i.e. from the individual stock to its industry group).

1. What industry sector does a stock belong to?
2. What are the competitors in that industry?
3. How does the performance of that industry compare to others over the last 12 months?
4. Which stocks in an industry present a possible entry point now?

Industry Browser

Our Industry Browser allows a top-down search by industry or search by individual stock. The Industry Browser is found under Evaluate > Industry Analysis from our main menu.

Entering a symbol will cause the tool to return an expanded industry list tree showing the Industry components to which the symbol belongs. The industry components are ranked in order of technical merit as measured by our CET indicator.

For example, entering symbol OMCL on 12/13/07 would have given the following display.

Clicking the industry name will bring up a list of the members of the industry group ranked in order of Relative Strength Rank. For the 'Computer Based Systems' group we obtain:

Note that in the 'List' column, there is a ' CwH' entry for OMCL. That indicates that OMCL currently appears on our cup-with-handle watch list and therefore could present an entry point opportunity if it breaks out.

Clicking the 'chart' icon next to the Industry Group name will show a chart of the industry's performance relative to other industries over the past 12 months.

To find the best (or worst) performing industries, then use our industry rankings and performance page which is accessed which is also accessed from Evaluate > Industry Analysis on the main menu.

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