The credit woes that plagued the market in August got a bit of reprieve following the euphoria of the big Fed rate cut, but stark reminders are emerging within the financial statements of financial companies as  they begin reporting earnings.  The ramp up in oil prices may be finally be causing some concern as well.  From my perspective the reasons for selling don’t matter much though.  All I’m concerned with is price and volume movement and support/resistance levels.  We can all debate until we’re blue in the face how severe the credit woes are or how long housing will remain mired in a slump or at what point oil prices become a major concern for the economy.  What stands out to me most is the high volume reversal of last Thursday and subsequent back to back distribution days yesterday and today resulting in a break of the upward trend lines of the major indices.  The action indicates a top at least temporarily.  In my after market report last Thursday, I discussed the major resistance area of the Nasdaq but after re-reading what I wrote I realized that I didn’t highlight the selling intensity as well as I should have.  It was very important, topping like action and I should have centered around that more than I did.  The bottom line is that all indications point to further deterioration in the coming weeks.  Preserve that capital and consider locking in profits quicker.

Note the big intraday reversal in the Nasdaq on Oct 11th.  The intraday high on that day just happened to touch major resistance at the top of a long upward trend.  Coincidence?  No way.  Today we broke through a steep shorter term upward trend line and there is a good chance that the Nasdaq will deteriorate further and test the next level of support at those July highs around 2725.

The S&P wasn’t able to hold above the July highs very long and broke through its own upward trend line for good today with some significant volume behind it.  While the selling wasn’t particularly intense today, it does mark the 3rd day of distribution in just the last 4 trading days.  There isn’t any major support from here until we get to around 1500 so there is some room left to the downside from here.

The Dow is hanging on by a thread at support of its upward trend line but volume levels indicate that won’t last long.  I think we’ll at the very least test 13600 in the coming days.

It’s interesting that the Russell never touched the July highs.

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day October 16th 2007

Nasdaq: DOWN .58% today with volume 2% ABOVE  average
Nasdaq ETF (QQQQ) DOWN .47%, volume 52% ABOVE average
Dow: DOWN .51%, with volume 17% ABOVE the average
Dow ETF (DIA): DOWN ..61%, volume 10% BELOW the average
S&P ETF (SPY): DOWN .79%, volume 12% BELOW the average
Russell Small Cap ETF (IWM): DOWN 1.1%, volume 42% BELOW the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Today’s selling wasn’t particularly intense as indicated by the action in leading stocks.  Volume levels did not indicate institutions were dumping large numbers of shares.

Summary:

* Decliners led Advancers 251 to 112
* Advancers were up an average of 1.46% today, with volume 3% ABOVE average
* Decliners were down an average of 1.94% with volume 4% BELOW average
* The total SI Leading Stocks Index was DOWN .89% today with volume 2% BELOW average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Gold,  Internet Infrastructure, Gold Miners, Software, Agriculture
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Retail, Homebuilders, Semis

* Today’s Market Moving Industries/Sectors (UP):
Oil

* Today’s Market Moving Industries/Sectors (DOWN):
Home Construction, Biotech, Internet, Financial, Realty, Oil & Gas Services (fairly broad selling today)

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Sorry, short on time tonight so no stock of the day today but you might like to have a look at these leading stocks that above the 50 and 200 day moving averages and moved up with significant volume today:

QMAR, LULU, RICK, TEF, ESLT, DAR, SOLF and RVBD

A Silver Membership at SelfInvestors for just $19.95/month gets you all the tracking tools for leading stocks, IPO’s and ETF’s!  More details here.

It’s been a busy weekend for me so no market analysis this weekend.  I’ll have an update on the technicals mid next week. 

Today’s action shouldn’t have been too much of a surprise given the run we’ve had off that big capitulation day back in August.  With volume levels waning and the Nasdaq approaching key resistance of its upward trend line, the move was simply unsustainable.  When you consider that the Nasdaq is up over 18% in two months, a pull back of 5 to 10% wouldn’t be out of the ordinary. Eventually, the market looks for an excuse to sell and today it got it in the form of hawkish comments from European Central Banker Alex Weber.  Yes it is truly a global economy with world markets intertwined.   If the US Fed won’t get tough on inflation, leave it up to our neighbors to be the buzz kill.

Said Weber:

“If risks to price stability are threatening to materialize, monetary policy can’t lose sight of its primary mandate — even if that means no longer supporting the robust economy or becoming restrictive,” Weber, who also heads Germany’s Bundesbank, said in the text of a speech in Munich today. There may be an “additional need” to raise interest rates, given the “expected acceleration in euro-region inflation over the coming months.”

Today’s action was certainly a change of character for this market as sell volume picked up substantially but I don’t think this is the beginning of the end.  Key support levels at those July highs remain intact so we’ll just have to see how we hold up there.  It isn’t time to abandon ship and head for the exits, although taking profits in those China high fliers and some of the IPO’s would have been a good idea this week.  I think tomorrow’s action will be fairly important.  Will retail sales and PPI data on the agenda for tomorrow, will it send the the market into another tailspin and confirm the selling of today?  It’s anyone’s guess but as I’ve been saying for several days now it’s best to remain cautious up here.

Tonight I have just one chart for you which illustrates how far the Nasdaq has come within a longer term upward trend.. and how far it could drop and still be considered in a bull market.

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day October 11th 2007

Nasdaq: DOWN 1.4% today with volume 28% ABOVE  average
Nasdaq ETF (QQQQ) DOWN 1.59%, volume 83% ABOVE average
Dow: DOWN .45%, with volume 17% ABOVE the average
Dow ETF (DIA): DOWN .37%, volume 32% ABOVE the average
S&P ETF (SPY): DOWN .48%, volume 16% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 1.13%, volume 12% BELOW the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks led the way today but as with the general market, there was no volume conviction behind the move.

Summary:

* Decliners led Advancers 257 to 94
* Advancers were up an average of 2.02% today, with volume 103% ABOVE average
* Decliners were down an average of 1.05% with volume 31% ABOVE average
* The total SI Leading Stocks Index was DOWN 1.32% today with volume 51% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Gold, Broker/Dealers, Internet Infrastructure, Gold Miners, Agriculture, Software
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Homebuilders

* Today’s Market Moving Industries/Sectors (UP):
Gold, Retail, Oil Services

* Today’s Market Moving Industries/Sectors (DOWN):
Internet, Semis, Water Resources, Clean Energy, Ishares Software

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Today’s stock is ..  a choose your own adventure. 

Here’s a list of SelfInvestors Leading Stocks that moved with volume today and are above both the 50 and 200 day moving averages (in order of fundamental rank)::

JA Solar (JASO)
Sterlite Industries (SLT)
Zumiez (ZUMZ)
Yingli Green Energy Holdings (YGE)
GigaMedia (GIGM)
Qiao Xing Mobile (QXM)
Global Sources (GSOL)
T-3 Energy Services (TTES)
Telefonica S.A. (TEF)
China Petroleum (SNP)
TomoTherapy (TTPY)

Interested in tracking leading stocks throughout the day.. how about IPO’s and ETF’s?  It’s all here.

Today, as it has been for much of the past few weeks, the market seemed to go up not because of any great news, but a lack of any major bad news that could jolt the market into believing that the credit/subprime concerns ARE NOT just an aberration.  For much of the day, we meandered sideways but after the Fed released its minutes a surge of buying hit sending the indices to a sizable gain.  It seems these days that the market will never go down and with uninspiring volume behind these moves it’s enough of a reason to play mr. contrarian and avoid getting overly aggressive up here.  There continues to be outstanding short term trading opportunities, particularly in the China plays but to be initiating positions for the long haul here is probably a mistake.  The retail numbers come out Friday and we ramp up earnings next week.  With the Nasdaq nearing some resistance at the upper level of a wide channel, the market may be soon be looking for excuses to take profits.  Now may be a good time to find excuses to take profits of your own. 

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day October 9th 2007

Nasdaq: UP .59% today with volume 2% BELOW  average
Nasdaq ETF (QQQQ) UP .43%, volume 31% BELOW average
Dow: UP .87%, with volume 19% BELOW the average
Dow ETF (DIA): UP .93%, volume 47% BELOW the average
S&P ETF (SPY): UP .94%, volume 55% BELOW the average
Russell Small Cap ETF (IWM): UP .81%, volume 48% BELOW the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks led the way today but as with the general market, there was no volume conviction behind the move.

Summary:

* Advancers led Decliners 242 to 105
* Advancers were up an average of 2.17% today, with volume 2% BELOW average
* Decliners were down an average of 1.05% with volume 14% BELOW average
* The total SI Leading Stocks Index was UP 1.22% today with volume 5% BELOW average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Gold, Broker/Dealers, Internet Infrastructure, Gold Miners, Agriculture, Software
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Homebuilders

* Today’s Market Moving Industries/Sectors (UP):
Nanotech, Nuclear Energy, Energy, Real Estate, Oil & Gas Services, Internet Infrastructure

* Today’s Market Moving Industries/Sectors (DOWN):
None

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Today’s stock is Innerworkings (INWK), another highly rated IPO that debuted in the 4th quarter last year and broke out of a long base to a new all time high today.

ABOUT: 

InnerWorkings, Inc. is a provider of print procurement solutions to corporate clients in the United States. The Company creates bid process to procure, purchase and deliver printed products as part of an outsourced enterprise solution and in individual transactions. Its applications and database, PPM4, creates an integrated solution that stores, analyzes and tracks the production capabilities of its supplier network, as well as quote and price data for each bid the Company receives and print job it executes. Through its network of over 5,000 suppliers, the Company offers a range of print, fulfillment and logistics services. It procures printed products for clients across a range of industries, such as advertising, consumer products, publishing and retail. In October 2006, the Company acquired Applied Graphics, Inc., a provider of print management and print-on-demand services. In March 2007, it acquired Spectrum Printing Systems. In July 2007, the Company acquired Brown+Partners, Inc.

FUNDAMENTALS: 

Innerworkings (INWK) is in the publishing business so it doesn’t receive some of the hype that the hot China or solar IPO’s receive, but it is one of the highest rated IPO’s that I track with a fundamental score of 27/30.  The small company has been profitable since 2003 and has been roughly doubling profits ever since.  Growth is expected to moderate a bit, but the company is still expected to post earnings growth of more than 50% this year and next.  If the company has a negative, it’s the low margin printing business that it works in with net margins around 5%.  Return on Equity is an excellent 24% so management is strong and they own a good portion of their company with 25% ownership.  Both key characteristics of a big winner. 

TECHNICAL:  

Below is a look at the weekly chart and shows a long cup with handle base (handle a bit steep) with a subsequent breakout around 17.50 from the large handle.  This offered the first chance at an entry in the stock.  It wasn’t long before the stock tackled all time highs around 19 which it cleared today with above average volume and remains in a buyable entry for a 2nd entry point.  You should be paying particular attention to top IPO’s breaking out of bases with volume and INWK is no exception.  The only thing I’d like to see is more volume come into the stock.  It’s been a little weak during the rise over the past couple weeks.  Considering the overall market is overbought and looking tired, the best course of action is to probably wait it out on INWK and get on a pullback to the first entry around 17.50 if it does so with light selling volume. 

SELFINVESTORS RATING: With a total score of 51/60 (27/30 for fundamentals, 24/30 for technical), Innerworkings (INWK) is a very good SelfInvestors breakout candidate.

Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation.  Please do your own research and make a personal decision based on your own tolerance for risk.  I currently do not own a position in INWK.