Psychos and Casinos

Traders,

Well, the money's pouring down and the people all look down

And it's floating out of town

I hit the second deck and I spent my paycheck

And my wife that I just met, she's looking like a wreck

-- Wilco, Casino Queen

Our current position:

Market Vulnerable to Further Downside

In this week's edition you will find:

• Where We Are
• What Was Important About Last Week
• What We Are Watching For This Week
• A Word On Discipline

The following sections can now be found on our home site:

• The Growth Stock Landscape
• What We Like - What We Have
• This Week's Scans

Where We Are:

Taking a look at the overall markets:

Within a week, the broader market turned from propitious to pigeon-hearted.

We interpret back to back distribution days as a signal to heed caution.

Our Red Flag is out because market conditions are not supportive of buyers. This does not mean we anticipate a collapse.

We avoid long-term market speculation, and concern ourselves with what is going on NOW.

The turning point for the week occurred on the Fed’s announcement to raise interest rates a quarter point.

Hurricane Rita’s effect on price action won’t be clear until the weather in Texas clears.

We’re not so quick to blame heavy selling on Rita, though there clearly is logic to Energy buying given the concentration of oil industry assets in the Gulf.

Banks led the charge south for the week, and could be key if we see further breakdown from that sector in that Banks represent the largest weighting in the S&P 500.

Technology issues were down, though from a technical perspective, have not turned bearish. There’s hope.

Traders long Energy and select Basic Materials continue to enjoy success.

Going into next week, we won’t be surprised to see a broad market bounce. And if the market does bounce, we’ll keep track of volume for an indication of what side of the market institutional players are taking.

Volume considerations indicate there may be significant battle of institutional sentiment in play. Often when heavy buying is followed up by heavy selling consolidation takes place, as no clear trend is established.

Whatever happens, we’ll place our bets accordingly.

And for this week’s read: Psychopaths could be best financial traders?

Technically speaking:

The Dow Industrial Average ($INDU), -2.09%, found support at a lower trend line, and is now below its major moving averages.

The S&P 500 ($SPX), -1.83%, is now below its major moving averages.

Nasdaq ($COMPQ), -2/01%, is sandwiched below its 50-day moving average, and above its 200-day moving average.

Russell 2000 ($RUT), -2.46%, is also sandwiched below its 50-day moving average, and above its 200-day moving average.

Volume indications turned down. Back to back distribution days are never a good sign for the market. Volume over the past two weeks tilt the scale slightly to the bears.

New Highs - New Lows broke down to negative territory for the first time since May for a strong bearish signal.

Investors Intelligence continues to show a dominance of bullish money managers when tends to be bearish.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 20+-year Note Holdr (TLT), found support at a lower trend line, and is sandwiched below its 50-day moving average, and above its 200-day moving average.

The U.S. Dollar Index ($USD), advanced for the second week in a row, and is poised to launch from a lower base.

The Gold Miners Index ($XAU), broke out to new highs, and is a relative strength winner over the past two weeks.

The Dow Jones AIG Commodity Index ($DJAIG), hit an all time high.

Consumer Staples ($CMR), fell apart, and faired far worse for the week than Consumer Cyclicals ($CYC). Both vehicles are below their major moving averages.

Technology ($DJUSTC), has held up relatively well to the broader market, and is sandwiched below its 50-day moving average, and above its 200-day moving average.

The Semiconductor Index ($SOX), broke below its 50-day average, though remains above its 200-day average. The sector is not showing any technical bias.

Banks ($BKX), were whacked by sellers, and have found support at its head-and-shoulders-neckline.

Broker Dealers ($XBD), continue to hold technical strength on the back of stellar earnings reports from sector key players.

Retail ($RLX), poured down and remain a relative strength loser over the past month.

Internet ($IIX), are exhibiting durability in a weak market.

Healthcare ($HCX), have negated a breakout to new highs made two weeks ago. We have turned our bullish bias to neutral.

Biotech ($BTK), hit a new high, then turned down. It’s still trend up here.

REIT's ($DJR), have now made a lower high, and are vulnerable to further downside.

Homebuilders ($DJUSHB), have also made a lower low and are vulnerable.

Transportation ($TRAN), is below its major moving averages. No solid directional signal.

Airlines ($XAL), continue their path down. So much for a trend line bounce.

Defense ($DFX), fell south of its multi-week consolidation, and is vulnerable to breaking its uptrend.

Energy ($IXE), rocketed to yet another new high.

Utilities ($UTY), hit a new high then turned down, erasing last week’s gains. The sector is still trend up.

The top 10 industry groups from the 6 month RS screen are:

• INDUSTRIAL EQUIP WHOLE
• SEMICONDUCTOR-INTGRTD
• DRUG MANUFACTURERS OTH
• SEMICONDUCTR-MEMORY CH
• DRUG DELIVERY
• SEMICONDUCTOR-BROAD LI
• GOLD
• HEALTHCARE INFO SVCS
• BIOTECHNOLOGY
• INVESTMNT BROKERAGE-NA

What Was Important About Last Week

STOCKS:

• Procter & Gamble (PG) maintained its profit forecast for the quarter which ends in September.
• Nike (NKE) reported earnings of $432.3 million for its first quarter, a 32% increase from a year ago.
• Goldman Sachs (GS) said earnings were $1.62 billion for the fiscal third quarter, up 84% from a year ago.
• Morgan Stanley (MWD) announced earnings down 83% from a year ago, due to a one-time heavy charge. Results still beat Wall Street forecasts.
• Oracle (ORCL) reported fiscal first quarter profits slightly higher from a year ago, as it met Wall Street forecasts.

ECONOMY:

• The Fed raised the federal funds rate by a quarter percentage point to 3.75%.
• Crude-oil prices posted their biggest one-day gain on record, and closed the week above $62 a barrel.
• U.S. home construction and permits for new construction declined for the second straight month, but are still near historically high levels.

What We Are Watching For This Week

Key earnings releases:

• MONDAY: Jabil Circuit, Inc. (JBL), Walgreen (WAG)
• TUESDAY: Lennar Corporation (LEN), Paychex (PAYX)
• WEDNESDAY: Red Hat, Inc. (RHAT), Research In Motion Limited (RIMM)
• THURSDAY: PepsiCo (PEP)
• FRIDAY: Novamerican Steel (TONS)

On the economic front we have potential market movers with:

• MONDAY: Existing Home Sales
• TUESDAY: Consumer Confidence, New Home Sales
• WEDNESDAY: Durable Orders,
• THURSDAY: Chain Deflator-Final, GDP-Final, Initial Claims, Help-Wanted Index
• FRIDAY: Personal Income, Personal Spending, Mich Sentiment-Rev., Chicago PMI

The Following Sections Are Now On Our Home Site:

• The Growth Stock Landscape
• What We Like - What We Have
• This Week's Scans: • SETUPS • BREAKOUTS • BASE BUILDING • SHORTS

This Week's Word On Discipline:

“ If you do not conquer self, you will be conquered by self.” -- Napoleon Hill

Learn To Listen, Listen To Learn

Traders,

Learn to listen, listen to learn

You gotta learn to listen, before you get burned

-- The Ramones

Our current position:

BUYERS' EDGE INTACT

In this week's edition you will find:

• Where We Are
• What Was Important About Last Week
• What We Are Watching For This Week
• A Word On Discipline

The following sections can now be found on our home site:

• The Growth Stock Landscape
• What We Like - What We Have
• This Week's Scans

Where We Are:

Taking a look at the overall markets:

The Bull remains intact and healthy.

As the market shook off bad news coming from the economy, we’re encouraged to see a strong number of buyers out in force for the week.

But what we talk about here is mostly in the past.

We see no indication that this market is in presently in trouble, but our collection of evidence is a never ending process.

Sure we have a handful of bearish macro trends in place such as the VIX, Investors Intelligence, and higher energy prices; but going into next week the bullish flag is out.

Technology shares have been consolidating nicely, and we see some of the big names paving the way north.

Broker Dealers remain trend up as new highs continue to be pegged in.

We still see a troubled technical condition for Banks, but technical conditions can change like fashions – we don’t assume bearish head-and-shoulders patterns will be fulfilled as often as some technicians want to believe.

Growth Stocks are happening. While new highs are mostly coming from energy, there are also good setups from Basic Materials and Health.

Going forward, we want to see leadership from Technology oriented stocks.

The Semiconductors have been acting promising of late, though should they break out to new highs on the year, they will face a key technical zone.

Historically, Semiconductor strength goes hand in hand with the broader market strength. What we’re concerned with here is trends, and whether or not Semis can trend up is a question that remains to be answered.

We will continue to listen to the market for further instructions.

Technically speaking:

The Dow Industrial Average ($INDU), +0.86%, is challenging the upper portion of a four month trading range.

The S&P 500 ($SPX), +1.45%, traded within last week’s range, and is poised to breakout to new highs.

Nasdaq ($COMPQ), +0.71%, continues to hug its 50-day moving average while poised for new highs.

Russell 2000 ($RUT), +2.62%, is trading in step with the Nasdaq as it too is holding its 50-day average.

Volume indications continue to point up with accumulation dominating over the past two weeks.

New Highs - New Lows weren’t as strong as the week prior, and continue to represent mild weakness.

The Advance/Decline Line drifted higher for the week in step with the broader market.

Investors Intelligence maintains a bearish signal with a dominance of bullish money managers. This is a contrarian’s indicator.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 20+-year Note Holdr (TLT) fell and is parked on a upward, weekly trendline.

The U.S. Dollar Index ($USD) edged higher for the week as it closed just below its 50-day moving average.

The Gold Miners Index ($XAU) roared higher and is just shy of a new multi-year high.

The Dow Jones AIG Commodity Index ($DJAIG) lost ground, though continues to hold a bullish bias above its major averages.

Consumer Staples ($CMR). continue to consolidate in a year long range as they hold an edge in relative strength over Consumer Cyclicals ($CYC).

Technology ($DJUSTC) traded within last weeks range while poised to launch from a multi-year base.

The Semiconductor Index ($SOX) is holding a bullish cup-and-handle pattern, though will face a significant resistance level at 500, should it break out.

Banks ($BKX) are consolidating under its 50-day moving average, while trading in a bearish head-and-shoulder. Just because the pattern is bearish, it does not mean it will play out that way. Understand this.

Broker Dealers ($XBD) pushed into new high territory for the week as it remains a relative strength winner.

Retail ($RLX) continues to lag as it sunk to its 200-day average.

Internet ($IIX) edged higher for the week as it holds ground above its major moving averages.

Healthcare ($HCX) pulled back for the week, though its dominat trend remains up.

Biotech ($BTK) hit a new high.

REIT's ($DJR) had lackluster action as it continues to cool after hitting new highs two months ago.

Homebuilders ($DJUSHB) lost ground, though remain above a base breakout mark.

Transportation ($TRAN) slid below its 200-day moving average.

Airlines ($XAL) had a dramatic week as they broke below a key trendline that market a multiyear lower base.

Defense ($DFX) consolidated in what is now a 8-week range.

Energy ($IXE) remains trend up above all its moving average, and is just shy of a new high.

Utilities ($UTY) hit a fresh high in their charge north.

The top 10 industry groups from the 6 month RS screen are:

• INDUSTRIAL EQUIP WHOLE
• TECHNICAL SERVICES
• SEMICONDUCTR-MEMORY CH
• SEMICONDUCTOR-INTGRTD
• DRUG DELIVERY
• DRUG MANUFACTURERS OTH
• HEAVY CONSTRUCTION
• BIOTECHNOLOGY
• HEALTHCARE INFO SVCS
• SEMICONDUCTOR EQUIP MA

What Was Important About Last Week

STOCKS:

• Airline companies Delta (DAL) and Northwest (NWAC) filed for bankruptcy.
• No. 1 U.S. electronics retailer Best Buy (BBY) reported second-quarter earnings up 25% from a year ago, though fell short of Wall Street forecasts.
• Nokia (NOK) raised its third-quarter outlook, with increased demand for cellphones and better-than-expected pricing power.
• Lehman Brothers (LEH) said it earned $879 million in the quarter ended Aug. 31, an increase of 74% from a year ago. The results were far better than Wall Street anticipated.
• Bear Stearns (BSC) said earnings for its third quarter, which ended were up 34% from a year ago, beating Wall Street estimates.

ECONOMY:

• U.S. retail sales fell sharply last in August, do largely to a fall in automobile sales.
• The consumer price index rose 0.5% in August, less than economists expected.
• The University of Michigan's consumer sentiment index fell to 76.9 in September from 89.1 last month. This a bigger decline than after the Sept. 11, 2001, terror attacks.
• The U.S. current account deficit, shrunk to $195.7 billion, though was still near the first quarter's record deficit. The U.S. borrows $2 billion a day from foreigners.

What We Are Watching For This Week:

Key earnings releases:

• MONDAY: Carnival Corporation & Carnival plc (CCL), Nike (NKE)
• TUESDAY: Circuit City Stores Inc. (CC), Goldman Sachs (GS)
• WEDNESDAY: Bed Bath & Beyond Inc. (BBBY), Biomet, Inc. (BMET), CarMax, Inc (KMX), FedEx (FDX), Morgan Stanley (MWD),
• THURSDAY: General Mills, Inc. (GIS), KB Home (KBH), Oracle (ORCL)
• FRIDAY: none

On the economic front we have potential market movers with:

• MONDAY: none
• TUESDAY: Building Permits, Housing Starts, FOMC policy announcement
• WEDNESDAY: none
• THURSDAY: Initial Claims, Leading Indicators
• FRIDAY: none

The Following Sections Are Now On Our Home Site:

• The Growth Stock Landscape
• What We Like - What We Have
• This Week's Scans: • SETUPS • BREAKOUTS • BASE BUILDING • SHORTS

This Week's Word On Discipline:

“Do not consider painful what is good for you.” --Euripedes

Trouble Waiting To Happen

Traders,

I turned on the news to the Third World War

Opened up the paper to World War IV

Just when I thought it was safe to be bored

-- Warren Zevon, Trouble Waiting to Happen

Our current position:

BUYERS' EDGE INTACT

In this week's edition you will find:

• Where We Are
• What Was Important About Last Week
• What We Are Watching For This Week
• A Word On Discipline

The following sections can now be found on our home site:

• The Growth Stock Landscape
• What We Like - What We Have
• This Week's Scans

Where We Are:

Taking a look at the overall markets: With buyers continuing to cast their votes in force, the market continues to improve its overall technical structure.

Outside of Hurricane Katrina, it was a very light news week for the markets.

We are encouraged to see technology shares well bid for. As goes the sentiment for technology, so usually goes the overall market.

Energy related stocks continue to lead the action.

The all important Semiconductors and Broker Dealers continue to point up.

Even the recently battered REITs and Homebuilders have turned around, though have lost ground in relative strength to the broader market.

Banks continue to appear fragile, while caught in a bearish head-and-shoulder pattern.

Individual stocks breaking out are sticking – so far. As intermediate-term breakout buyers, this is what we want to see.

We take things week by week.

As traders, it is very important to have a clear understanding of the time frame we trade in.

We can simultaneously respect and reject market mavens Warren Buffet and Bill Gross, who have bearish thoughts on the U.S. equity market, because our time frame is different than theirs.

Buffett and Gross base their strategy on fundamentals, while ours are primarily on technicals.

Buffett is a value player, Gross a bond strategist, but we’re growth stock players.

Our goal is to measure market strength on a week by week time frame, and take advantage of explosive growth stocks. When the climate for buyers turns bad, we'll stop and hold our money.

Buffett and Gross may very well be right at some point, there very well may be trouble waiting to happen.

In the meantime, we’re happy with what we have.

There is no reason why we all can’t make money. But it’s impossible for us to make it at the same time.

Technically speaking:

The Dow Industrial Average ($INDU), +2.21%, sparked up for the week and is poised to take out its bearish right shoulder, which would be very bullish. The S&P 500 ($SPX), +1.93%, closed just shy of yearly highs. Nasdaq ($COMPQ), +1.61%, is trading above all its major moving averages. Russell 2000 ($RUT), +2.22%, is trading above all its major moving averages.

Volume indications: Overall volume was higher, with the Nasdaq making three accumulation days, and the S&P 500 and Dow making two accumulation days a piece, we have solid indication of institutional players in buy mode.

New Highs - New Lows: We had another strong week of upside sponsorship, though the ratio did not take out last week’s high, which gives bearish divergence on the week.

The Advance/Decline Line: There is bearish divergence evident in this week’s action.

Investors Intelligence: Continues to show more than half of money mangers as bullish.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 20+-year Note Holdr (TLT) posted a loss for the week, though remains within its upward trending channel.

The U.S. Dollar Index ($USD) rose slightly for the week, though has been trend down for two months.

The Gold Miners Index ($XAU) pushed higher for the week. The miners index is in the process of forming a base, while the commodity gold is showing a more bullish technical structure as it consolidates under its highs. Typically the miners lead the commodity.

The Dow Jones AIG Commodity Index ($DJAIG) pulled back after breaking out last week.

Consumer Cyclicals ($CYC) remain technically weaker than its counter part, Consumer Staples ($CMR), which is just under its yearly highs and is poised to breakout.

Technology ($DJUSTC) is poised to breakout of a two year base to new highs.

The Semiconductor Index ($SOX) are trend up, though face significant resistance at the 500 level.

Banks ($BKX) continue to trade in a bearish head-and-shoulder.

Broker Dealers ($XBD) broke out for the week.

Retail ($RLX) rebounded after five weeks of losses.

Internet ($IIX) took out its bearish right shoulder to make a bullish statement.

Healthcare ($HCX) broke out to a new high.

Biotech ($BTK) hit a new high.

REIT's ($DJR) continued to recover ground lost after a few weeks of selling last month.Homebuilders ($DJUSHB) also continued to recover ground lost after a few weeks of selling last month.

Transportation ($TRAN) sold off for the sixth week in a row and is trading below its major moving averages.

Airlines ($XAL) remain vulnerable while trading below a major trend line.

Defense ($DFX) made up for last week’s selling and continues to consolidate in a two month range.

Energy ($IXE) hit another new high.

Utilities ($UTY) hit another new high.

The top 10 industry groups from the 6 month RS screen are:

• HEAVY CONSTRUCTION
• OIL GAS REFINING MRKTN
• SEMICONDUCTOR-INTGRTD
• DRUG MANUFACTURERS OTH
• TECHNICAL SERVICES
• SEMICONDUCTR-MEMORY CH
• INDUSTRIAL EQUIP WHOLE
• HEALTHCARE INFO SVCS
• BIOTECHNOLOGY
• DRUG DELIVERY

What Was Important About Last Week

STOCKS:

• Intel (INTC) and Texas Instruments (TXN) reported strong demand for notebook computers and cell phones.

ECONOMY:

• 10,000 people left jobless by the storm filed for unemployment benefits last week, numbers are expected to increase.

What We Are Watching For This Week:

Key earnings releases:

• MONDAY: Campbell Soup (CPB)
• TUESDAY: Best Buy Co., Inc. (BBY), The Kroger Co. (KR), Vivendi Universal (V)
• WEDNESDAY: none
• THURSDAY: Adobe Systems (ADBE), Bear Stearns (BSC), Pier 1 Imports, Inc. (PIR)
• FRIDAY: none

On the economic front we have potential market movers with:

• MONDAY: none
• TUESDAY: Core PPI, PPI, Trade Balance, Treasury Budget
• WEDNESDAY: Retail Sales, Retail Sales ex-auto, Capacity Utilization, Industrial Production,
• THURSDAY: Business Inventories, Core CPI, CPI, Initial Claims, NY Empire State Index, Philadelphia Fed
• FRIDAY: Current Account, Mich Sentiment-Prel.

The Following Sections Are Now On Our Home Site:

• The Growth Stock Landscape
• What We Like - What We Have
• This Week's Scans: • SETUPS • BREAKOUTS • BASE BUILDING • SHORTS

This Week's Word On Discipline:

"Be more concerned with your character than with your reputation. Your character is what you really are while your reputation is merely what others think you are." -- John Wooden

No Expectations - Folks

Traders,

Sharp wit party Oh don't make me go

They'll be making good points and I don't want to know

-- Game Theory, I turned Her Away

Our current position:

Modest Upside Bias, Market Vulnerable

In this week's edition you will find:

• Where We Are
• What Was Important About Last Week
• What We Are Watching For This Week
• A Word On Discipline

The following sections can now be found on our home site:

• The Growth Stock Landscape
• What We Like - What We Have
• This Week's Scans

Where We Are:

Taking a look at the overall markets:

A spike in volume on the week came in to support the Bulls' cause.

With broad market participation in the upside move, the technical picture for the S&P and Nasdaq appears promising.

But the complete technical picture is a bit more complicated as the Dow continues to form a bearish head-and-shoulders.

Looking at individual sector action: Energy remains king, Semiconductors and Broker Dealers are relative strength winners (though suspiciously sluggish for the week), and Banks are sagging under their major moving averages.

We are encouraged to see a strong number of new highs posted for the week.

And we take note that we could be at the beginning of sector rotation from Transportation and Defense into Health and Biotechnology.

And of course, the event of the week was Hurricane Katrina. Donations to the Red Cross may be made here: http://www.redcross.org/donate/donate.html

The tragedy of Katrina from a psychological perspective is immeasurable. From an economic standpoint, it will clearly take a toll. But from the market’s response - it is encouraging to see the event shaken off.

The speculation attributed to increased volume on the week comes from the perspective that the Fed will halt interest rate hikes to handle the economic damage of the hurricane.

How much there is to this speculation is not clear insofar as the extent of the damage and what the Fed will actually do.

As traders, we want to continue to monitor price and volume to better understand what kind of trend will take form. Perhaps Katrina’s impact will mark a significant juncture for the market – perhaps not. It’s too early.

Right now, energy prices are the biggest concern for the market. It is often the case when hysteria hits an investment vehicle, that it sucks in all available buying power, only to top out with nothing left to sustain it.

We continue to believe that higher energy prices are likely in the future, but whether it’s a straight trend up, or small and/or large cycles of booms and busts is an entirely different form of speculation.

We are always uncomfortable buying vehicles the general public is bullish on.

The fundamental picture for oil (which is NOT our area of expertise) has drawn fierce debate from some very smart cats, with very good track records.

Some smart folks such as economist Brian Wesbury see no crisis: http://research.claymore.com/docs/Oil%20Bubble%208-29-2005.pdf

While other smart folks such as super trader Jim Rogers have their sights on oil at over $100 per barrel: http://www.stuff.co.nz/stuff/0,2106,3390814a12,00.html

Our motto is to “trade what is, and not what should be.” Whatever may be the case with oil, we will be sure to take advantage of our technical setups and reel in profits while cutting losses short.

And we also adhere to our axiom of NO EXPECTATIONS. The market is a beast. Forming opinions can be a very dangerous habit when it comes to speculation.

Technically speaking:

The Dow Industrial Average ($INDU), +0.48%, continues to be the technically weakest of the major indexes as it trades below its 50 and 200-day averages in bearish head-and-shoulders fashion.

The S&P 500 ($SPX), +1.07%, made a solid move north, though closed the week just below its 50-day moving average. It’s still trend up here.

Nasdaq ($COMPQ), +0.96%, traded in step with S&P as it closed just below its 50-day average.

Russell 2000 ($RUT), +2.26%, sizzled for the week, and remains trend up with a close above its 50-day average.

Volume Indications: All of the major indexes share three days of accuulation and three days of distribution for the past two weeks. However, after weighing it all out, the buyers hold an edge over the sellers.

New Highs - New Lows showed solid strength to the upside during the past week. There was a significant increase in New Highs, while New Lows stagnated with the same numbers it has posted over the past three weeks.

The Advance/Decline Line broke free of a downtrend in an exhibition of bullishness. It remains in the lower portion of it range over the past years.

Investors Intelligence portrays money managers as 51.1% bullish and 27.3% bearish. We continue to perceive this as bearish as the crowd usually gets it wrong. Just when and where – we can’t say.

Key chart action for the week:

Charts courtesy of Stockcharts.com

The 10-year Note Holdr (TLT) traded higher for the fourth week in a row and is challenging the top of a two-year wide base.

The U.S. Dollar Index ($DXC) continues to deteriorate and is decisively below its 50-day moving average.

The Gold Miners Index ($XAU) pushed higher and is poised for a 6-month high.

The Dow Jones AIG Commodities Index ($DJAIG) soared to a new high and is challenging the opper portion of an upward channel.

Consumer Cyclicals ($CYC) and Consumer Staples ($CMR) both made upside progress for the week, with no clear winner in relative strength. The staples long consolidation give it he technical appearance of being the stronger sector.

The Semiconductor Index ($SOX) continued to consolidate for the week, though are technically bullish. We could argue that action here is a little disappointing considering the relative weakness against the overall market on the week. But what’s a week?

Banks ($BKX) attempted to make a stand, though are still trading in bearish head-and-shoulders formation.

Broker Dealers ($XBD) continued to consolidate in what is now a seven week range.

Retail ($RLX) continued to plunge for the third week in a row. The sector may find support around its 200-day average at the 440 level.

Internet stocks ($IIX) continue to behave sluggish, and are trading in a sloppy head-and-shoulders. Not much to go on here.

Software ($GSO) is taking shape. Increased relative strength could potentially move the sector clear of a down-trend. No forecast yet, just something to keep an eye on.

Healthcare ($HCX) was a big winner on the week. The sector is poised for new highs.

Biotech ($BTK) busted out to new highs. This will bode well for health.

REIT's ($DJR) rebounded for the week. It’s still trend up here, though the technical picture is not as strong as it was a few weeks ago.

Homebuilders ($DJUSHB) made a stand at their key support, former breakout level.

Transportation ($TRAN) is sluggish with a close below its 50-day average.

Airlines ($XAL) turned down for the week and made a strong statement with a close below a lower trend line. The sector is at a critical level.

Defense ($DFX) sold off for the second week in a row.

Energy ($IXE) screamed to another new high.

Basic Materials ($A1BSC) remains caught arund the half way point of 3/05’s high and 5/05’s low.

Utilities ($UTY) hit a new all-time high.

The top 10 industry groups from the 6 month RS screen are:

• SEMICONDUCTOR-INTGRTD
• HEAVY CONSTRUCTION
• DRUG MANUFACTURERS OTH
• SEMICONDUCTOR-BROAD LI
• TECHNICAL SERVICES
• DRUG DELIVERY
• SEMICONDUCTR-MEMORY CH
• SEMICONDUCTOR-SPECIALI
• INTERNET SERVICE PROVI
• SEMICONDUCTOR EQUIP MA

What Was Important About Last Week

STOCKS:

• Wal-Mart (WMT) reported same store sales up 3.3% in the month in Aug. 26, which was just short of Wall Street expectations.

ECONOMY:

• U.S. employers added 169,000 nonfarm jobs to payrolls in August. The unemployment rate fell to 4.9%, which is the lowest rate since before the Sept. 11, 2001.
• The U.S. poverty rate came in at 12.7% of the population last year. The rate has been trending up on a year over year basis.
• The U.S. GDP grew at a 3.3% annualized pace for the second-quarter. This is just slightly below expectations.
• It has been estimated that the cost of Katrina could hit $100 billion. There is speculation that the Fed will halt rate hikes in lieu of Katrina.

What We Are Watching For This Week:

Key earnings releases:

• MONDAY: Holiday
• TUESDAY: Shuffle Master, Inc. (SHFL).
• WEDNESDAY: Albertson's (ABS), Comverse Technology (CMVT), Hovnanian Enterprises, Inc. (HOV).
• THURSDAY: America's Car-Mart, Inc. (CRMT), Barr Pharmaceuticals, Inc. (BRL), Quiksilver (ZQK).
• FRIDAY: none

On the economic front we have potential market movers with:

• MONDAY: Holiday
• TUESDAY: ISM Services
• WEDNESDAY: Productivity-Rev., Fed's Beige Book
• THURSDAY: Initial Claims, Wholesale Inventories, Consumer Credit,
• FRIDAY: Export Prices ex-ag., Import Prices ex-oil

The Following Sections Are Now On Our Home Site:

• The Growth Stock Landscape
• What We Like - What We Have
• This Week's Scans:
• SETUPS • BREAKOUTS • BASE BUILDING • SHORTS

This Week's Word On Discipline:

“Either you think, or else others have to think for you and take power from you, pervert and discipline your natural tastes, civilize and sterilize you. " -- F. Scott Fitzgerald