Portable Alpha Daily

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Wednesday, September 06, 2006

Large Cap Value and Small Cap Core

The domestic markets didn’t exactly spring into action yesterday as many investors expected. Trading volume was basically on par with that of the last few weeks, despite the institutional traders returning to their desks. I didn’t expect a huge rally yesterday since it’ll probably take some time to digest the economic reports from last week, but I am expecting a pick-up in volume over the next few days. Further reports today and throughout the week will give investors a better idea of the inflation risk we’re currently facing. If the data indicates inflation remains under control, that should be enough stimulus for another decent rally. If, however, the data fails to calm inflationary fears, that might be enough for the Bears to overpower the Bulls and pull the markets down again.

This blog is only a few months old and I’m still trying to decide the best way of sharing my investment views. I think lately the posts have gotten too long, so I’m trying to consolidate as best I can. Your thoughts and suggestions on how I can improve the blog are welcome. Have a great day!

Short-Term Technical Indicators
Seven out of eight improved overnight with the NYSE Advance / Decline line the only indicator weakening. All eight indicators are stronger than last week’s, last month’s and last year’s levels.

Long-Term Market Model
The model officially shifted to “Bullish” on August 23rd and continues to strengthen.

Investor Sentiment
The Market Volatility Index (VIX) and NASDAQ Volatility Index (VXN) increased significantly yesterday. The Total Put / Call Ratio and the Equity Put / Call Ratio declined marginally, while the Index Put / Call Ratio increased modestly.

Asset Allocation
I recommend between 75% and 85% equity allocation within the actively managed portion of the overall investment portfolio. The remaining 15% to 25% should be in cash or bonds until we see further confirmation of a bullish trend developing.

Top Two Major Market Index Derivatives
Russell 2000 (IWM) and Fidelity NASDAQ Composite (ONEQ)

Top Two Style-Boxes
Small Cap Core (JKJ) and Large Cap Value (JKF).

Top Two Sectors
Semiconductors (IGW) and Real Estate (IYR)

Today’s Highlighted Securities

The top rated Small Cap Core companies with initial “Buy” recommendation dates:
  1. Veritas DGC Inc. (VTS) - 7/28/2006
  2. OM Group Inc. (OMG) - 8/11/2006
  3. Valmont Industries Inc. (VMI) - 8/10/2006
  4. Brush Engineered Materials Inc. (BW) - 8/10/2006
  5. Manitowoc Co. Inc. (MTW) - 8/10/2006
The top rated Large Cap Value companies with initial “Buy” recommendation dates:
  1. Phelps Dodge Corp. (PD) - 8/11/2006
  2. Advanced Micro Devices Inc. (AMD) - 8/27/2006
  3. Reynolds American Inc. (RAI) - 6/15/2006
  4. Bellsouth Corp. (BLS) - 1/25/2006
  5. Lockheed Martin Corp. (LMT) - 8/1/2006


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