Weekly Newsletter 12/20/08
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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 rally that began on November 23 is looking tired, especially for large cap stocks. Despite big gains on Tuesday following the Federal Reserve's surprisingly large drop in interest rates and a morning rally on Friday after the Administration announced a loan to the auto makers, the major indexes have not closed above the recent high set on December 8. The DJI, S&P 500 and NASDAQ Composite all failed to sustain a rise above their 50 day moving average and volume, except for Friday, remains weak. In contrast, the Russell 2000 has held, just, above its 50 day moving average and has significantly outpaced the other indexes.

Although the S&P 500 is technically in a 'bull market' after it rose 20% from its lows, it now looks as though that was a bear market rally and the index is now forming a possible head and shoulders top. This is a bearish pattern and reinforces our view that the rally, at least in large cap stocks, may be rolling over. Note also that volume has been below average throughout December, even on days of significant gains indicating that the recent rally lacks conviction.

S&P 500

The Russell 2000 continues to set new highs. In contrast to the S&P 500 chart, note that the right shoulder is higher than the 'head' and that Friday's volume was significantly above the 50 day moving average.

Russell 2000

As part of the small cap recovery we are starting to see some significant small cap breakouts. The number increased to six this week after just two the week before and none before that. Average gain by week's end was a significant 3.3%. The star this week was ULBI (Ultralife Batteries) which broke out from a High Tight Flag Base to gain 10.47% by Friday's close. Another high flier was CSKI (China Sky One Medical) which gained 9% after breaking out from a cup-with-handle base.
 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
No tip this week.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 8579.11 -0.59% -35.32% Down
NASDAQ 1564.32 1.53% -41.02% Down
S&P 500 887.88 0.93% -39.53% Down
Russell 2000 486.26 3.81% -36.52% Down
Wilshire 5000 8924.03 1.41% -39.78% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
3.81 %		 Dow Jones
-24.67 %		 Dow Jones
-27.56 %		 Dow Jones
-35.32 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Long Distance Carriers Long Distance Carriers Long Distance Carriers Long Distance Carriers
 Most Improved Industry (by change in technical rank2)
Aluminum
+ 54		 Aluminum
+ 99		 Long Distance Carriers
+ 213		 Long Distance Carriers
+ 210
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 6 3.23 4.71% 3.32%
Last Week 2 9.85 1.38% -3.37%
13 Weeks 43 10.31 15.59%
 -2.19%
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
Category
Symbol
Company Name
Expected Gain1
Best Overall HLD SECURE AMERICA AC 104
Top Technical COGT Cogent Systems 49
Top Fundamental HTS HATTERAS FINANCIAL CORP 60
Top Tech. & Fund. HTS HATTERAS FINANCIAL CORP 60
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
Category
Symbol
Company Name
Expected Gain1
Best Overall VPHM Viropharma Inc 74
Top Technical TOWN TOWNE BANK (VA) 54
Top Fundamental VPHM Viropharma Inc 74
Top Tech. & Fund. SHEN Shenandoah Telecomm 74
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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