Date:  May 11, 2008

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Fundamental Data provided by Investors Business Daily  

F.I.T. STOCKS

Finding High Quality Growth Stocks to Build Healthy Investment Habits.  

Market Update

MARKET HEALTH:  Market in Confirmed Rally

The rally light remains GREEN! The major indexes finished down for the week with the DOW losing 2.4%, the S&P minus 1.8%, and the NASDAQ finishing with a 1.3% loss.  These losses could be expected as we have seen a steady run to the upside since the March 20 rally confirmation.  Even with the push downwards many of our F.I.T. Stocks went on to have gains and show resilience against the markets down fall. 

Once again Oil was the big news last week as prices continue to rise to new highs, creating concerns of inflation.  However, we have been riding the energy wave at F.I.T. Stocks and many of our energy related stocks did quite well.  Other news that hampered the markets was the huge quarterly loss in insurance company AIG.  They lost 7.81 billion which was a much larger number than was anticipated.  This was just another hit to the credit markets and financial stocks.  Depending on who you listen to there will be more STING to come from these credit markets, or on the other hand, there seems to be a light at the end of the tunnel.  This is why one should learn to study the markets and the index charts for price and volume.  This type of daily activity will keep you in touch with what the market is really saying. 

So what is the market saying to us now, and what should we look for next week?  First, the pull back in the markets was actually a healthy sign.  The markets were due for this pull back as they had reached overbought levels.  The key will be for the markets to sustain their support levels (check charts below). Second, monitor your F.I.T. Stocks to see how they are holding up.  Third, watch for distribution days, when the markets head down on stronger volume than the day before.  Last week we had such a day on Wednesday.  Several distribution days within 2-3 weeks may cause the markets to falter.  Take the time each night after the markets have closed to check the charts of the major indexes and the F.I.T. Stocks you own for their price and volume movement.  This healthy habit will always keep you tuned in to the stock market and your stocks and lead you on your way to building healthy investment habits.

We have left up last weeks newsletter charts so you can compare them to this week.  Notice the breaks of the downwards trend lines.

NASDAQ

LAST WEEK

THIS WEEKS

Last week you can see how the NASDAQ has come down to test its support line at about 2400.  This week we would like to see that support level hold up.  The NASDAQ is still above the down trend it recently broke through and also has the support of a horizontal trend line.  The NASDAQ, to stay healthy should remain above this 2400 level next week.  The white arrow indicates the distribution day that took place on Wednesday.  Notice the higher volume than the previous day.  Keep an eye on these distribution days, as a few heavy distribution days within a few weeks time period can end the party for any healthy rally.

S&P 500

Last Weeks  

THIS WEEKS

The NASDAQ and S&P still remain in very similar patterns.  What is interesting in this S&P chart is that the previous downwards sloping trend line, the horizontal resistance line, and the beginning of hopefully a new upwards trend line, are all currently intersecting and have precisely the same support level of about 1380.  The S&P must hold on to this support level for this market to remain healthy.  Lets look for a nice bounce off of the 1380 level for the S&P next week, if not we will throw up the yellow caution flag.  Be patient and monitor the markets and your stocks daily.

Stock: Caterpillar 

Symbol: CAT

 Fundamentals:  9.8 out of 10

Industry:  Machinery Construction                                                   Industry Strength: 9 

Technical Pattern: Cup with Handle                                                 Avg. Volume: 6,967,800

Pivot or Buy Point: $85.63

Stop Loss: $79.63 or 7%

Profit 1: $94.19 or 10%

Profit 2: $102.75 or 20%

Caterpillar a growth stock?  Well, were in a global world and countries like China and India are building like crazy.  There is also a boom in mining and energy and Caterpillar is the manufacturer of this construction and mining equipment.  Currently, CAT is forming a great Cup with Handle pattern.  CAT is right now in the 4th week of the handle, and volume is drying up in that handle.  Also, as the right side of the base has built, there are 4 weeks of great accumulation.  When CAT breaks above the high of the handle jump in at the buy point of $85.63 and confirm the move with strong volume.