The MSW Index was busy today as 14 of the 27 stocks were up by 2% or more. For the day, the Index was up 1.33% but that includes the 5.95% drop in (HANS), a stock that I placed my sell at $95 and placed the MSW Index sell at $89.89 (our typical $60-$100 profit safety). Excluding the loss in (HANS), the index gained 1.62% (in addition to last week’s 4.65% gain. The fourteen stocks that moved ahead by 2% or more gained an average of 3.71% with True Religion (TRLG) leading the pack with a 7.52% gain.

The MSW energy stocks raced ahead with (GMXR) leading the pack with a 6.75% gain.
(UPL) was up 3.36%
(HYDL) was up 2.74%, did so on volume 151% larger than the 50-d m.a.
(HAL) was up 2.45%
(LUFK) was up 2.07%

The big winner from last week, Netlogic Microsystems (NETL), added another 2.48% on volume 139% larger than the 50-d m.a.

Finally, Under Armour (UARM) broke out above our buy zone of $40 with a 5.06% gain on volume only 19% larger than the 50-d m.a.

I will continue this analysis after I perform the typical “end of the day” research for tonight’s daily screen.

See you then,
Chris “Piranha”

The New High – New Low (NH-NL) ratio finished at 826-33 on Friday, the largest single day total since July 11, 2005 when it closed at 826-17. We have been following the weekly NH-NL weekly averages since the week of July 16, 2005 and have not had a more successful week than the past five days. This week’s average of 516-46 slightly edges out the week of July 30, 2005 when the ratio closed at 511-28. This was only the fourth week in the past six months where the weekly average closed above 500 new highs.

Below is a list of the weekly averages since July 16, 2005:
Saturday, July, 16, 2005: 503-21
Saturday, July 23, 2005: 382-23
Saturday, July 30, 2005: 511-28
Saturday, August 6, 2005: 465-38
Saturday, August 13, 2005: 250-62
Saturday, August 20, 2005: 124-59
Saturday, August 27, 2005: 129-62
Saturday, September 3, 2005: 267-71
Saturday, September 10, 2005: 375-48
Saturday, September 17, 2005: 253-63
Saturday, September 24, 2005: 226-157
Saturday, October 1, 2005: 255-116
Saturday, October 8, 2005: 197-144
Saturday, October 15, 2005: 46-317
Saturday, October 22, 2005: 73-220
Saturday, October 28, 2005: 111-162
Saturday, November 5, 2005: 241-93
Saturday, November 12, 2005: 231-111
Saturday, November 19, 2005: 248-155
Saturday, December 02, 2005: 312-73
Saturday, December 10, 2005: 309-77
Saturday, December 16, 2005: 293-104
Saturday, January 7, 2006: 473-47
Saturday, January 14, 2006: 500-32
Saturday, January 21, 2006: 348-46
Saturday, January 28, 2006: 516-46

As you can see, we are starting to gain some strength in January with two of the past three weeks averaging 500 new highs or greater. January has been one of the strongest months over the past year and the leaders are starting to gain momentum. Backing up the strength of the ratio has been the performance of the MSW Index over the past several weeks. As mentioned yesterday on the weekly screen, the MSW Index gained 4.65% this week, topping all of the major market indices and the IBD 100. Netlogic (NETL) was the biggest mover with a 20.25% gain, bringing its total gain on MSW to 56% since it was posted on 11/11/05. As you know, I only added one new stock to the Index this week, bringing the total to 27 stocks but I am studying a few others.

Looking at the NASDAQ, which was up 2.5% for the week, we can see how the Index moved back above the 2,275 level (the short term support/resistance line). The index also crossed back above the 50-d moving average on the largest positive weekly volume in the past two years.

Both the DOW and the S&P 500 crossed back above their respective 50-d moving averages with the DOW recovering the 10,750 support/resistance line. The small cap S&P 600 hit a new all-time high with a 3.4% gain while the MidCap 400 also hit an all-time new high with a 2.2% weekly gain.

Continue to monitor the major indices (price and volume), the NH-NL ratio and the individual stock market leaders. Here are some of our MSW Index leaders over the past few months:
(GMXR) – 90%
(CTRN) – 70%
(HANS) – 62%
(NETL) – 56%
(CRDN) – 52%
(ESRX) – 51%
(NWRE) – 42%
(OXPS) – 33%

Piranha

I started to cover Express Scripts (ESRX) in early October as it neared the $60-$100 range while forming a short term consolidation before attempting to make the big move. I officially added the stock to the MSW Index on 10/15/05 at $61.16 as it broke-out into this range. Below is what I said when I added the stock to our Index:

“Express Scripts, Inc. (ESRX) was added to the weekly screen as the stock will debut on the MSW watch list. It is above $60 and has a long history of strength so it is a prime candidate for the $60-$100 run. Some of you may think the stock is priced too high and has already run up too much for additional gains but I will counter by asking you to look at former MSW stocks that started coverage in the $60 range: HANS and BMHC. Also take a look at Tenaris (TS). The stock has been mentioned on a handful of daily screens and was named on our short list during last week’s final screen. The stock has entered the $60-$100 run and is currently sitting slightly above the 50-d m.a. which is a trend buying opportunity.” – 10/15/05

To date, (ESRX), (HANS) and (TS) all remain on the MSW Index with Tenaris (TS) making the biggest moves into new high territory in recent weeks.

I made these comments on the MSW Index about (ESRX) last Saturday:
“The stock failed to cross $90 two times this week. The resistance at this level continues to grow. A strong close above $90 is an instant buy. Rating: Buy with move above $90” – 1/21/06

Today, the stock is up over 3% and has finally broken above the resistance level at $90. With the move above $90, we are now in the final stretch of the $60-$100 run. The stock has gained a respectable 50% over the past three months on the MSW Index. I don’t know about you but I will always take a steady 50% gain in a $60 stock rather than roll the dice with a $5 stock that has no prior history of strength.

Now is the time to place the physical sell stop to protect the gains from the $60-$100 move. ESRX is just another example of a long line of stocks that easily trek from $60 to $90+ in a matter of months.

The image will enlarge to the proper size!

Piranha

Due to the special screen exercise I initiated to all members last night, I didn’t have a chance to upload a more traditional daily screen. Below is a condensed version of the typical daily screen from yesterday.

Four of the top ten performing industries on Wednesday came from the Metals/Steel sector. Half of the stocks located in the metal distributors industry made gains that resulted in new 52-week highs. A quick glace at IBD would show you that this industry group is ranked fourth out of 197 total groups with a 20.3% gain in 2006 (by far one of the early leaders in the new year.

On the flip side, six of the worst performing industry groups were oil and gas related as crude oil closed down $1.21 to $65.85. As I mentioned over the weekend, crude oil prices have not been climbing due to supply worries; they have been climbing due to growing concerns in Iran and Nigeria. Of the five energy related stocks on the MSW Index, (GMXR) and (LUFK) fared the best. Geo Resources (GMXR) is now up over 83% since it was added to the MSW Index on September 27, 2005 (it is up over 180% since the first daily screens it started to make last July). Lufkin is up almost 20% since making the MSW Index in mid-December.

The NASDAQ and DOW both moved lower on higher volume but the losses were minimal so the distribution doesn’t weigh as heavily on the recent count. The count now stands at five distribution days for the S&P 500 and NASDAQ over the past month of action. The DOW is still within 40 points of the long term support and resistance line that dates back to early 2004. The NH-NL ratio finished at 453-52 (a solid sign of strength among the leaders).

Some Interesting Stocks from Wednesday:

• LUFK – 63.60, bucking the trend as the stock brings its total gain to 19% on MSW
• GMXR – 43.92, a total gain of 83% in four months
• VIVO – 25.97, a big intraday reversal that has spilled over into a 5% loss today. Support sits at $23 with our Index entry at $24.16
• NMHC – 30.40, building a 19-month base with new 52-week highs and an ascending triple top breakout on the P&F charts.
• LCAV – 52.38, another new high for this former MSW stock from late 2004 and early 2005
• NETL – 33.03, up yesterday and up another 5% today as the stock continues to rise without taking a breather. Keep those physical stops set and allow them to trail the growing profits. With today’s gain, the stock is up 47% since the initial coverage on 11/12/05 at $23.56 (not bad for two months).
• CRDN – 54.55, topping $56 on Thursday, bringing the MSW Index gain to 48% since the initial coverage on 10/28/05
• KNOT – 14.44, as you know, we cut the stock from the MSW Index when it fell below the 50-d m.a. but it has since reversed, gathered strength and moved to new highs. It will not be back on the Index but I thought it deserved some notice.

Piranha

…The DOW broke below the 10,750 support line last week on the largest weekly volume (distribution volume) since October. It is making an attempt to recover the line today but is now using the level as resistance. Looking at the chart below, you can see how the 10,750 line has been used as support and resistance numerous times since early 2004. The price relative to the S&P 500 is still sitting at multi-year lows so don’t expect this index to lead the market any time soon and don’t place your analysis in the hands of a laggard index. Continue to monitor the NH-NL ratio which finished at 273-54 last night, well below the critical 500 new highs needed for a strong rally.

Looking at my monitor at 2:30pm:
The stocks in my portfolio are showing a profit.
The majority of the stocks on the MSW Index are in the black.

Today’s MSW % gain leaders (2:30pm):
(CTRN) – Citi Trends
(VIVO) – Meridian Bioscience
(CRDN) - Ceradyne

Image enlarges to “real size”.
- Piranha