The markets are telling us they expect that the debt ceiling will be raised, there will be no default and the Government shutdown will be short-lived with little or no lasting effect on corporate profits. At least, that's what a reading of Thursday's sudden reversal and Friday's follow through would imply. Thursday's action reversed our trend indicator for the DJI and S&P 500 to a positive reading while or NASDAQ indicator had remained positive throughout, although Wednesday's close below the 50 day moving average was ominous at the time.

Despite the market optimism, at the time of writing there is no deal in sight, so uncertainty and volatility will continue until there is one.



Friday's action brought out 30 breakout attempts with seven confirmed at the 1.5 times average daily volume level. Solar City (SCTY) opened at 4.8% above its breakout price on growth estimates of 100% in the coming year. If you were quick to catch it before it exceeded our suggested 5% limit then you could have made 10% on the day as it closed 16.5% above its breakout price. Another big mover was Spirit Airlines which closed 11.6% above its breakout price but it gapped up by 5.6% at the open, so was already out of range.

Change to confirmed breakout requirement

Based on new analysis reported below, The volume requirement for a confirmed breakout has been raised to 175% of ADV. This change will be reflected in all reporting on and after Monday,10/14/2013.

New Menu

Not a new feature, but I have re-written the menu code. It should be almost transparent to you but should result in slightly better page load times. This lays a foundation for new functionality and eventually improved support for tablets and phones.

New Breakout Criteria and Suggested Strategy

I have completed a revision of our suggested breakout strategy. Based on backtest results since April, 2013, I am now suggesting the following breakout criteria for cup-with-handle breakouts:

• Minimum RS Rank: 94
• Industry Rank Percentile: top 50% (corresponds to industry ranks <= 112)
• Confirmation Volume: 175% of average 50 day volume

I now suggest you set your filters on the cup-with-handle watchlist as follows: