We are back in a volatile period and attempting to make any prognistications at the present time would be futile. We anticipated a strong bounce after the Inauguration but instead the major indexes gave up considerable ground, 6% and more, despite an accumulation day on Wednesday as more details emerged on the possible stimulus plan.

Instead, we would like to share with you two articles that we found interesting in our reading this week.

The first makes a case for the stock market being a measuring device, not a forecasting tool; that it is measuring sentiment and when sentiment shifts the markets shift also.

Markets Measure; They Don’t Forecast

If, like me, you have been disappointed with the returns from the leveraged ETF's, then the second article gives an excellent, although lengthy, illustration of why you are most likely to lose money if you hold on to them for more than a day.

Warning: Leveraged and Inverse ETFs Kill Portfolios

No new features this week.

We have corrected bugs in the beta HSB backtest script and the Recent breakouts report, which was omitting HSB breakouts.

Breakout Analysis for Year-to-date

The table below shows all the breakouts since the start of the year, their maximum gain to their highest intraday price since breakout and their last closing price as of 1/23/09.

Note that although the most breakouts have come the Head and Shoulders Bottom pattern, the best performers have come from the cup-with-handle pattern. Note also that these stocks have a very high Relative Strength Rank being ranked in the top 10% of all stocks by this measure. That these should be providing the best returns will come as no surprise to our subscribers as we have maintained for many years that the RS Rank is best predictor of performance after breakout.

The most important conclusion to draw from this table is that it is essential to take profits early. The old advice of letting your winners run will probably mean that you will end up with a loss in this volatile market.