Our NASDAQ Composite trend indicator turned upwards on Thursday as the index recorded an accumulation day. The turn upwards came as the index continued to find support intraday at the 200 dma level while closing higher on Monday, Tuesday and Thursday. Our trend indicators for the S&P 500 and DJI remain negative. The NASDAQ is the more volatile index and the trend indicator is tuned to that volatility so it is typical that the NASDAQ indicator would turn before the other two.

It is difficult to assess the meaning of Friday's reversal which left the index in negative territory for the week. It could be due to profit taking, a potential hit to economic growth due to Hurricane Sandy's devastation or a reaction to the increase in the unemployment rate, In any case, one day's results do not make a statistic or identify a trend, so we prefer to believe that the trend is now upwards and the number of successful breakouts will increase, until there is more evidence to the contrary.

Note that although the number of successful breakouts fell this week compared to last week, the net return was a positive 2.6%.

No new features this week. If you haven't yet done so, take a look at our free facebook app. We are working on adapting this to mobile platforms.

How to Use the Stock Timeliness Checkup Tool

Now that the NASDAQ trend has turned upwards, how can we use that to determine which breakouts we should invest in?

Lets consider two stocks that are ranked highest on our cup-with-handle watchlist now, OMG and KTCC. Note that KTCC is a pure technology stock (computer peripherals) while OMG is purely retail.

If we run the Stock Timeliness Tool over the last five years (which gives us a sample of bear and bull markets) we see that if we bought and sold (went long) OMG based on the NASDAQ trend indicator, we would have gained a return of 58% . In contrast, if we used the indicator to trade KTCC then we would have gained 212%.

This tells us that if we get a breakout alert on KTCC and OMG in the next day or so, we would probably be better served to invest in KTCC as it has historically made better gains when the NASDAQ has been in an uptrend.

The results of running the Stock Timeliness Checkup tool on each stock is shown in these two tables. You can see the details of the analysis by running the tool for yourself which is found under Evaluate > Analytical Tools.