November 7th, 2005

Here we are, again, at the top of that lousy

Here we are, again, at the top of that lousy trading range. Having successfully weathered hurricanes, peaking of oil prices, another jacking of interest rates, the support levels of the major indices at their resistance levels were not penetrated.

  • The NASDAQ has increased 6.9% since October 12 after hitting its bottom upward-sloping resistance trendline.
  • The DJ30 held at 10221 and, over 8 days, it shot up nearly 3.5% to 10586 where it is bumping into a downward-sloping resistance trendline.
  • And, finally, the SP-500, the index against we measure performance, recovered from its 1165 support level and rebounded 3.83% since October 12 and is less than 2% under a new resistance level at 1243-45. See the August 27 postings for longer term perspective of the SP500.

Having said this, where are we going from her? What seems to be working now? The oil & gas stocks were highly rated during most of the year, their ranking, according to the IBD list of 197 Industry Groups, has slipped. Home builders and other real estate industry stocks appear to be topping out. Industry groups that have moved up 50 positions in their rankings or are currently among the top 100 sectors include:

Sector No. of Stocks 11/4/05 10/7/05 9/7/05 8/7/05
Internet-Content (39) 1 18 38 32
Transportation-Equip Mfg (12) 4 2 5 46
Computer-Manufacturers (16) 6 45 28 161
Telecom-Fiber Optics (21) 8 32 11 34
Banks-Foreign (27) 9 89 48 75
Elec-Parts Distributors (10) 14 49 105 90
Financial Services-Misc (47) 16 42 47 110
Metal Ores-Gold/Silver (69) 20 11 120 65
Transportation-Svcs (10) 27 61 126 149
Computer Sftwr-Security (31) 35 34 77 107
Transportation-Truck (32) 37 70 150 138
Computer Sftwr-Desktop (16) 39 55 149 180
Bldg-Wood Prds (18) 43 41 151 139
Comml Svcs-Security/Sfty (48) 47 37 30 109
Transportation-Airline (34) 48 117 141 95
Bldg-A/C & Heating Prds (14) 52 58 54 106
Bldg-Mobile/Mfg & Rv (19) 53 44 84 126
Medical-Drug/Diversified (22) 60 116 121 147
Transportation-Rail (13) 70 99 156 105
Computer Sftwr-Educ/Entr (24) 71 137 145 93
Computer-Networking (54) 75 67 154 184

What is intriguing about the list is: 1) Internet-Content moved to the highest rank of all of IBD industry groups last week and 2) seven other internet and tech related groups have had similar significant moves up in ranking since August 7.

Stocks in the Internet-Content group that are most interesting include:

  1. Monster.com (MNST) which I first mentioned in the July 31 watchlist list with a breakthrough at 31; I reiterated a positive opinion in the November 2 posting. MNST has, in fact, broken through the resistance trendline and closed yesterday at 35.23. (Incidentally, MNST could just as easily have been categorized in the Commercial Svces-Staffing Industry Group, another Group riding a positive momentum wave. Others in that group include BBSI, first mentioned here on Sept 18, RHI, KFRC, GVHR and LRW.)
  2. iVillage (IVIL) is another in this Group that broke through it’s resistance at 6.50 in September and has risen to 7.85.
  3. CNET first broke through a resistance at 11.5 towards the end of July; it has been stalled at a new resistance level around 14 since September.
  4. eDiet.com, after breaking through a downward-sloping resistance trendline with high volume at the end of July hit a old resistance line at 5.25. Retrenchment from that line has been on low volume so there’s a good probability that it will be breached if the market continues moving up.

Financial Services-Misc is another Industry Group that has quickly run up in the rankings … from 110th on August 7 to 16th last week. One of the 47 stocks in this group is Moneygram International (MGI), a stock I included in a breakthrough watchlist in my very first posting, July 31 when it was 21.04 and a resistance level at 22. It wasn’t until mid-October that a trigger notice was issued as the stock gapped through resistance line and ran up to 25.65, 23% in 13 trading days.

I’ll be issuing another breakthrough watchlist shortly.

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