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Wednesday, May 30, 2007

Mid-Week Alpha

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since May 15, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 50% cash and 50% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Diamonds Trust, Series 1 (DIA 5/3/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Mid Cap Growth (JKH 5/29/07)

Top AAS Rated Sector for Alpha – iShares Dow Jones U.S. Energy (IYE 3/19/07)

Top AAS Rated Long Stocks for Alpha

Crocs, Inc. (CROX 5/9/07)

Cleveland-Cliffs Inc. (CLF 11/17/06)

Amazon.com, Inc. (AMZN 3/21/07)

Martin Marietta Materials, Inc. (MLM 11/6/06)

Apple Inc. (AAPL 4/23/07)

ITT Educational Services Inc. (ESI 2/8/07)

Chemed Corp. (CHE 3/8/07)

Fremont General Corp. (FMT 5/22/07)

Chaparral Steel Co. (CHAP 11/1/06)

U.S. Steel Corp. (X 2/28/07)

Top AAS Rated Short Stocks for Alpha

Rogers Corp. (ROG 12/6/06)

Komag Corp. (KOMG 12/11/06)

Cambrex Corp. (CBM 5/4/07)

Whole Foods Market Inc. (WFMI 5/2/07)

Advanced Medical Optics Inc. (EYE 5/24/07)

Monday, May 28, 2007

Alpha and the Week Ahead

Whether it was Alan Greenspan’s comments late in trading session Wednesday when he stated that the lofty level of the Chinese equity markets is unsustainable or investor's preparing for the long Memorial Day weekend, this week the Bull’s clearly elected to take their profits and go to the shore for a well deserved three day break.

In Friday’s slow pre-holiday trading session, stocks recovered some ground from Thursday’s declines aided by yet another wave of M&A activity which re-ignited positive moods among investors. The DJIA gained 66.15 points (+0.49%) to close at 13507.28. The S&P 500 gained 8.22 points (+0.55%) at 1515.73 while the NASDAQ rose 19.27 points (+0.76%) to close at 2557.19.

However, Friday’s gains were not enough to make up the losses from the previous four trading days. All three major indexes were down for the week. The DJIA had its seven week winning streak snapped, down 0.36% for the week. The S&P 500 declined 0.46% for the week after failing to break its previous closing record on multiple tries. The NASDAQ declined for a third straight week closing at and was off 0.05% for the week.

This week’s declines were also reflected in the continued weakening in the Technical Indicators which our Major Market Model follows. The NYSE advance/decline line was lower for a second week in a row. Although new highs continue to outnumber new lows on both the NYSE and the NASDAQ, the number of new highs continued to decline. A shift from large cap to small cap dominance is of significant importance to our model and the small cap Russell 2000 index outperformed other major indexes gaining 0.76% for the week.

Bond prices edged down Friday after this week’s news releases of new home sales, durable goods and jobless claims reports suggested the Federal Reserve will not cut interest rates in the near future. The five-year note fell 3/32 to yield 4.80 percent. The benchmark 10-year note slipped 5/32 to yield 4.86 percent and the 30-year bond was down 6/32 to yield 5.00 percent.

In currency trading, the Euro bought at $1.3430, down from $1.3460 late Wednesday. The greenback traded at ¥121.42, down from ¥121.65 in the previous session.

The AAS Market Model turned Bearish as of the close Tuesday, May 15, 2007. The total universe of stocks, ETF’s and mutual funds which we review on a daily basis is 1831. Of those reviewed, 568 are rated "Buy," 687 are rated "Sell" and 576 "Neutral”. The recommended allocation in the Model Fund Portfolio’s is 50% invested and 50% in cash, while in the Model Stock Portfolio the allocations have been reduced as individual securities lose their directional trend or violate an internal Sell rule.

The tone for the coming week will be set by the heavy dose of the economic data scheduled to be released which will give investors something new to digest. The FOMC meeting minutes will be released on Wednesday. The Q1 preliminary GDP is due on Thursday. And the most important data for the week is probably going to be the May employment report due out on Friday.

A quick review of our AAS market analysis indicates that the Large Cap holdings are leading the market of late with Large Cap Value being the style of choice. However, interestingly we see Small Cap Growth again begin to emerge as a Style leader after having slowed down over the past several months. This supports the shift taking place in our market model mentioned above.

Currently we are rating six of the ten S&P Sectors as AAS Buy’s led by Energy Select Sector SPDR (XLE), iShares S&P Global Telecom (IXP), Industrial SPDR (XLI), Technology SPDR (XLK), Materials SPDR (XLB) and Health Care SPDR (XLV).

Alpha Generating Equities to look at from within these sectors include:

Telecommunications: Cincinnati Bell Inc. (CBB), Embarq Corp (EQ), Verizon (VZ), Qwest Communication International (Q) and Sprint Nextel (S).

Energy: W-H Energy Services Inc (WHQ), Hornbeck Offshore Services Inc. (HOS), Peabody Energy Corp (BTU), Bristow Group Inc (BRS), Ashland Coal Inc (ACI).

Basic Materials: OM Group Inc (OMG), Chaporral Steel (CHAP), Reliance Steel and Aluminum Co (RS), Lyondell Chemical Co (LYO) and Alcoa Aluminum (AA).

Industrials: Barnes Group Inc (B), Armor Holdings (AH), Woodward Governor Co (WGOV), Edo Corporation (EDO) and KBR INC (KBR).

Health Care: Cryolife Inc (CRY), Chemed Corp (CHE), Bausch & Lomb Inc (BOL), Schering Plough Corp (SGP) and PDL Biopharma Inc (PDLI).

Technology: Novatel Wireless Inc (NVTL), Phoenix Technologies Ltd (PTEC), Acxiom Corp (ACXM), Maximus Inc (MMS) and Commscope Inc (CTV).

Current ProFund mutual funds that match up with these sectors would include: ProFund Ultra Sector Oil & Gas (ENPIX), ProFund Ultra Sector Telecom (TCPIX), ProFund Ultra Sector Basic Materials (BMPIX), ProFund Ultra Sector Industrials (IDPIX) and ProFund Ultra Sector Pharmaceuticals (PHPIX).

Several Fidelity funds which are currently rated AAS Buy and are from within these sectors include: Fidelity Select Energy Service (FSESX), Fidelity Select Telecommunications (FSTCX), Fidelity Select Natural Resources (FNARX), Fidelity Select Materials (FSDPX) or Fidelity Select Chemicals (FSCHX).

The Rydex family currently has only three members which are rated AAS Buy and are from within these alpha generating sectors including: Rydex Energy Services (RYVIX), Rydex Basic Materials (RYBIX) and the Rydex Telecommunications (RYMIX) fund.

Additional information on our firm may be found by clicking the following link, Alpha Advisor Service, LLC. Information concerning the availability of our newsletter is available by clicking AAS Information. Questions may be submitted to info@Alpha-Advisor.com.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since May 15, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 50% cash and 50% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Diamonds Trust, Series 1 (DIA 5/3/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Large Cap Value (JKF 5/3/07)

Top AAS Rated Sector for Alpha – iShares Dow Jones U.S. Energy (IYE 3/19/07)

Top AAS Rated Long Stocks for Alpha

Crocs, Inc. (CROX 5/9/07)

CPI Corp. (CPY 1/23/07)

Amazon.com, Inc. (AMZN 3/21/07)

ITT Educational Service Inc. (ESI 2/8/07)

Cleveland-Cliffs Inc. (CLF 11/17/06)

Martin Marietta Materials Inc. (MLM 11/6/06)

Apple Inc. (AAPL 4/24/07)

Chemed Corp. (CHE 3/8/07)

Chaparral Steel Co. (CHAP 11/1/06)

CIGNA Corp. (CI 1/29/07)

Top AAS Rated Short Stocks for Alpha

Chicago Mercantile Exchange (CME 3/15/07)

Public Storage Inc. (PSA 2/28/07)

Cognizant Technology Solutions Corp. (CTSH 4/2/07)

Rogers Corp. (ROG 12/6/06)

Komag Inc. (KOMG 12/11/06)

Review of Last Week’s Top AAS Rated Stocks

Wednesday, May 23, 2007

Mid-Week Alpha

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since May 15, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 50% cash and 50% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Diamonds Trust, Series 1 (DIA 5/3/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Large Cap Value (JKF 5/3/07)

Top AAS Rated Sector for Alpha – iShares Dow Jones U.S. Energy (IYE 3/19/07)

Top AAS Rated Long Stocks for Alpha

Crocs, Inc. (CROX 5/9/07)

CPI Corp. (CPY 1/23/07)

Amazon.com, Inc. (AMZN 3/21/07)

ITT Educational Services Inc. (ESI 2/8/07)

Chaparral Steel Co. (CHAP 11/1/06)

Apple Inc. (AAPL 4/23/07)

Martin Marietta Materials, Inc. (MLM 11/6/06)

Fremont General Corp. (FMT 5/22/07)

Nash-Finch Co. (NAFC 2/21/07)

Cleveland-Cliffs Inc. (CLF 11/17/06)

Top AAS Rated Short Stocks for Alpha

AptarGroup Inc. (ATR 5/10/07)

Public Storage Inc. (PSA 2/28/07)

Rogers Corp. (ROG 12/6/06)

Whole Foods Market Inc. (WFMI 5/2/07)

Cognizant Technology Solutions Corp. (CTSH 4/2/07)

Sunday, May 20, 2007

Alpha and the Week Ahead

Fueled by a benign CPI report and a continuation in the recent mind boggling level of corporate deal making, U.S. Equity Markets continued their bull run this past week as most of the major averages posted gains. Grabbing the headlines’ almost daily are the record breaking closing numbers of the Dow Jones Industrial Index which is up 8.8% year-to-date followed by the S&P 500 Index up 7.6% and the NASDAQ Composite Index up 5.9%.

But more amazing are the less spotlighted gains of the Dow Jones Utilities (up 16.8% thus far in ’07), the Dow Jones Transports (up 14.3%), the S&P Mid Cap 400 (up 11.7%) and the Energy Index up (11.4%). We have focused on all of these sectors in our commentary over the past several months as recommended areas of alpha generation.

Despite the record highs in the major indexes, the technical condition of the market has deteriorated some this week. The advance/decline lines for both the NYSE and the NASDAQ lost some ground, a sign that the bullish momentum is losing strength. An abundance of liquidity continues to support this market along with a fair amount of skepticism on the sentiment front.

The AAS Market Model turned Bearish as of the close Tuesday, May 15, 2007. Again, the Technical component of the model was the deciding factor. The total universe of stocks, ETF’s and mutual funds which we review on a daily basis is 1,833. Of those reviewed, 572 are rated "Buy," 653 are rated "Sell" and 608 "Neutral”. The recommended allocation in the Model Fund Portfolio’s was immediately reduced to 50% invested and 50% in cash while in the Model Stock Portfolio the allocations is being reduced as individual securities loss their directional trend or violate a internal Sell rule.

Market Outlook and Alpha Potential

Equities: Recently reported by Standard & Poor's Chief Technical Strategist Mark Arbeter, the technical picture for the S&P 500 indicates the benchmark will probably eclipse its record closing high of 1527.46, set on March 24, 2000, sometime in May or June of this year. If history can serve as a guide (but remember past performance is no guarantee of future results), we will likely see sub-par price performance in the first month following the setting of a new high, and then find above-average price appreciation in the three and six months after.

Bonds: Our friends at Vining Sparks point out that yields rose sharply over the past week as technical support failed amid a continuation of the mixed bag of economic reports. The five and ten-year Treasuries had their worst week since June of 2006 as both yields broke through April’s highs and closed in on January’s peaks, which were the highest yields seen since last summer. From a technical perspective, bonds now look quite attractive and a meaningful reversal should be considered quite possible. In addition to the technicals, seasonal factors tend to aid bonds at this time of year. In the past 20 years, five and ten-year yields have fallen 14 times in June, tying December and September as months with the best batting averages.

For those interested in seeking alpha during the week ahead we suggest starting with a hard look inside the Large Cap Value (JKF) and the Mid Cap Growth (JKH) Style boxes. Moving into sector analysis we suggest Energy (IYE), Natural Resources (IGE), Global Energy (IXC), Utilities (IDU), Basic Materials (IYM) or Telecom (IYZ).

Following this line of research the ten most attractive Mutual Funds or ETF’s would include: iShares MSCI Brazil(EWZ), ProFund Ultra Sector Oil & Gas (ENPIX), ProFund Ultra Dow 30 (UDPIX), Rydex Dynamic Dow (RYCVX), Oil Service HOLDRS (OIH), iShares S&P Latin America 40 (ILF), Fidelity Latin America (FLATX), Rydex Energy Services (RYVIX) or Fidelity Select Energy Service(FSESX).

Individual Equities Domestic or International to further research would include Encana Corporation (ECA), BCE Inc (BCE), Baker Hughes Inc (BHI), Valero Energy Corp (VLO), Grant Prideco Inc. (GRP), Alcoa Aluminum (AA), Embarq Corp (EQ), USX Marathon Group (MRO), Merck & Co Inc (MRK), Public Svc Enterprise Group (PEG), Entergy Corp (ETR), Freeport-McMoran Copper & Gold (FCX), Verizon (VZ), Excelon Corp (EXC), Enersis SA ADA (ENI), Qwest Communication International (Q), Suncor Energy Inc (SU), Schlumberger Ltd. (SLB) or Chevron Texaco Corp (CVX).

Additional information on our firm may be found by clicking the following link, Alpha Advisor Service, LLC. Information concerning the availability of our newsletter is available by clicking AAS Information. Questions may be submitted to info@Alpha-Advisor.com.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since May 15, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 50% cash and 50% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Diamonds Trust, Series 1 (DIA 5/3/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Large Cap Value (JKF 5/3/07)

Top AAS Rated Sector for Alpha – iShares Dow Jones U.S. Energy (IYE 3/19/07)

Top AAS Rated Long Stocks for Alpha

· CPI Corp. (CPY 1/23/07)

· Crocs, Inc. (CROX 5/9/07)

· Chaparral Steel Co. (CHAP 11/1/06)

· Amazon.com, Inc. (AMZN 3/21/07)

· Apple Inc. (AAPL 4/24/07)

· ITT Educational Service Inc. (ESI 2/8/07)

· CIGNA Corp. (CI 1/29/07)

· Cleveland-Cliffs Inc. (CLF 11/17/06)

· National-Oilwell Varco Inc. (NOV 3/7/07)

· U.S. Steel Corp. (X 2/28/07)

Top AAS Rated Short Stocks for Alpha

· Chicago Mercantile Exchange (CME 3/15/07)

· Public Storage Inc. (PSA 2/28/07)

· The Corporate Executive Board Co. (EXBD 12/1/06)

· Rogers Corp. (ROG 12/6/06)

· Simon Property Group Inc. (SPG 5/1/07)

Review of Last Week’s Top AAS Rated Stocks


Thursday, May 17, 2007

Mid-Week Alpha

Yesterday we sent our Platinum level subscribers an early morning alert indicating that our Major Market Model had turned bearish overnight and that we would be adjusting our model portfolio allocation recommendations accordingly in our next issue. We have done so and the adjusted allocations may be viewed below. Unfortunately we neglected to inform the private equity players on Wall Street of our market model change and as such the Dow again closed at record highs while both the Nasdaq and the S&P 500 enjoyed solid days.

The markets have been exceedingly bullish for the past several weeks - fueled by buyout and merger activity, stronger than expected first quarter earnings growth and a global economic boom. Inflationary concerns have been mostly muted and the meltdown in the sub-prime sectors has been moved to the back burner. Even the geopolitical front has been relatively quiet, save for some foiled terror plots and saber-rattling from Chavez. Unfortunately our market model isn’t designed to take these issues into account. It does however incorporate breadth analysis, which we believe is a very significant test of the markets staying power. And it’s the weakening of late in the breadth of the market that has culminated in a market model reversal from bullish to bearish.

This very well could be a short-term reaction to the last few trading sessions which have seen gains in the Dow but losses in the S&P 500 and Nasdaq. Or it could be an early warning of a dramatic market correction much more amplified than the one experienced in February. As the saying goes, it’s better to be safe than sorry, so it’s our decision to re-allocate the model portfolios into cash for the time being.

At Tuesday’s close over 55% of the NYSE volume was on the down side while over 75% of the Nasdaq volume was down. Yesterday, downside volume had declined to 38% on the NYSE and to 39% on the NASDAQ. Both the short-term moving averages of Breadth and Volume have been declining for the past week and are on the verge of crossing into negative territory. It will most likely take more than a little good news on the M&A front to turn these indicators around now that earnings season is just about over and most of the big boys will be heading to the Hampton’s soon.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since May 15, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 50% cash and 50% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Diamonds Trust, Series 1 (DIA 5/3/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Large Cap Value (JKF 5/3/07)

Top AAS Rated Sector for Alpha – iShares Dow Jones U.S. Energy (IYE 3/19/07)

Top AAS Rated Long Stocks for Alpha

CPI Corp. (CPY 1/23/07)

Crocs, Inc. (CROX 5/9/07)

Amazon.com, Inc. (AMZN 3/21/07)

ITT Educational Services Inc. (ESI 2/8/07)

Chaparral Steel Co. (CHAP 11/1/06)

CIGNA Corp. (CI 1/29/07)

Apple Inc. (AAPL 4/23/07)

Cleveland-Cliffs Inc. (CLF 11/17/06)

U.S. Steel Corp. (X 2/28/07)

Pre-Paid Legal Services Inc. (PPD 3/7/07)

Top AAS Rated Short Stocks for Alpha

Chicago Mercantile Exchange Holdings (CME 3/15/07)

Rogers Corp. (ROG 12/6/06)

The Corporate Executive Board Co. (EXBD 12/1/06)

Public Storage Inc. (PSA 2/28/07)

Whole Foods Market Inc. (WFMI 5/2/07)

Sunday, May 13, 2007

Alpha and the Week Ahead

A weak PPI report released on Friday, which hinted that fears of rising inflation were not warranted, was all that was necessary to send the bulls into a buying mode following Thursdays sell off. As has been the case of late, buyers were not far from the sidelines, waiting for an opportunity to take advantage of the sell off and extend the market’s recent winning streak.

Year-to-date, the Dow is up 6.9% while the NASDAQ has gained 6.1% and the S&P 500 Index is up 6.2%. On Friday, the Dow closed up 0.8 percent to 13,326.22 while the broader S&P 500 index moved higher 14.38 points to 1,505.85, finishing basically even for the week. The tech-heavy NASDAQ Composite closed up 28.48 points to 2,562.22, up 1.1 percent for the day but slipping 0.4 percent on the week.

Market breadth was once again positive. On the NYSE, winners topped losers 3 to 1 on volume of 1.41 billion shares. On the NASDAQ, advancers topped decliners by more than 4 to 1 on volume of 1.78 billion shares.

Bloomberg has reported that the majority of S&P 500 members having reported first quarter earnings have beaten analysts’ estimates. According to data compiled by Bloomberg, the average quarterly earnings at S&P 500 companies have climbed 12.5 percent, more than four times as much as analysts projected four weeks ago.

Treasury prices fell Friday as stocks climbed on easing inflation concerns, pushing investors away from the safe-haven of bonds. The five-year note fell 5/32 to yield 4.59%, while the benchmark 10-year note slipped 9/32 to yield 4.67% and the 30-year bond fell 14/32 to yield 4.85%. In currency trading, the Euro bought $1.3524, up from $1.3485 late Thursday. The U.S. Dollar bought ¥120.12, up from ¥120.06 the previous session. On the commodity front, oil futures rose 56 cents to settle at $62.37 a barrel, and now are up 2.2% on the year.

The AAS Market Model turned Bullish as of the close Friday, April 27, 2007. The total universe of stocks, ETF’s and mutual funds which we review on a daily basis is 1836. Of those reviewed, 557 are rated "Buy," 634 are rated "Sell" and 645 "Neutral.” We continue to recommend a portfolio allocation level of around 75% invested and 25% cash.

With that in mind, the number of AAS Buy rated Markets, Style Box and Sectors have increased both in frequency and in AAS Rating Score strength. In recent weekend reports we have focused on providing you with additional detail focused on a top-down approach to security selection. Today we would like to introduce another approach based upon the strength of the AAS Rating Score.

The first step was a screen for the 557 stocks currently rated an AAS Buy. We sorted them highest to lowest and then created a list of the Top 100 securities from that process. This smaller list was then sorted first by the One-Year AAS Score then secondly by the Five-Day AAS Score. The top 20 securities ranked by this process are listed below, we invite you to take a look at their recent price charts for alpha confirmation. If you are interested in the full list please submit an email request to info@Alpha-Advisor.com.

Cryolife Inc (CRY), AeroPostale (ARO), Apple Computers Inc (AAPL), USX-U S Steel (X), Central Vermont Public Service Corp (CV), Pre Paid Legal SVCS (PPD), Dollar Tree Stores Inc (DLTR), Chaporral Steel (CHAP), CROCS INC (CROX), Big Lots Inc (BIG), Manor Care Inc (HCR), Lubrizol Corp (LZ), Cleveland Cliffs Inc (CLF), Woodward Governor Co (WGOV), Tiffany & Co (TIF), Cummins Inc (CMI), Constellation Energy Group (CEG), Paccar Inc (PCAR), Entergy Corp (ETR) and lastly Franklin Resources Inc (BEN). Five members of this group happen to also be members of the AAS Model Stock Portfolio currently.

The symbols are listed in the descending order of Price Change over the past 5 trading sessions. While reviewing these charts keep in mind that the benchmark for the newsletter is the S&P 500 Index which was virtually flat for the past week and up 13.81% for the trailing twelve month period (252 Trading Sessions).

Additional information on our firm may be found by clicking the following link, Alpha Advisor Service, LLC. Information concerning the availability of our newsletter is available by clicking AAS Information. Or you may submit your questions to info@Alpha-Advisor.com.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bullish since April 27, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 75% cash and 25% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Diamonds Trust, Series 1 (DIA 5/3/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Mid Cap Core (JKG 3/20/07)

Top AAS Rated Sector for Alpha – iShares Dow Jones U.S. Utilities (IDU 3/12/07)

Top AAS Rated Long Stocks for Alpha

Crocs, Inc. (CROX 5/9/07)

Chaparral Steel Co. (CHAP 11/1/06)

Amazon.com, Inc. (AMZN 3/21/07)

U.S. Steel Corp. (X 2/28/07)

Apple Inc. (AAPL 4/24/07)

Varian Semiconductor (VSEA 3/27/07)

Cleveland-Cliffs Inc. (CLF 11/17/06)

Pre-Paid Legal Services Inc. (PPD 3/7/07)

Cummins Inc. (CMI 1/31/07)

Manitowoc Co. Inc. (MTW 3/16/07)

Top AAS Rated Short Stocks for Alpha

Google, Inc. (GOOG 12/18/06)

The Corporate Executive Board Co. (EXBD 12/1/06)

Rogers Corp. (ROG 12/6/06)

Rohm and Haas Co. (ROH 12/13/06)

Public Storage Inc. (PSA 2/28/07)

Review of Last Week’s Top AAS Rated Stocks

Thursday, May 10, 2007

Mid-Week Alpha

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bullish since April 27, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 75% cash and 25% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Diamonds Trust, Series 1 (DIA 5/3/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Mid Cap Growth (JKH 3/20/07)

Top AAS Rated Sector for Alpha – iShares Dow Jones U.S. Utilities (IDU 3/12/07)

Top AAS Rated Long Stocks for Alpha

Crocs, Inc. (CROX 5/9/07)

Chaparral Steel Co. (CHAP 11/1/06)

Amazon.com, Inc. (AMZN 3/21/07)

Varian Semiconductor (VSEA 3/27/07)

U.S. Steel Corp. (X 2/28/07)

Cleveland-Cliffs Inc. (CLF 11/17/06)

Reliance Steel & Aluminum (RS 1/23/07)

Apple Inc. (AAPL 4/23/07)

OM Group Inc. (OMG 5/9/07)

Pre-Paid Legal Services Inc. (PPD 3/7/07)

Top AAS Rated Short Stocks for Alpha

Chicago Mercantile Exchange Holdings (CME 3/15/07)

The Corporate Executive Board Co. (EXBD 12/1/06)

Google, Inc. (GOOG 12/18/06)

Rogers Corp. (ROG 12/6/06)

Public Storage Inc. (PSA 2/28/07)

Sunday, May 06, 2007

Alpha and the Week Ahead

Despite another up week, we believe that the market is due for another short-term pullback. At least that’s what our “gut reaction” is after another week of gains on modest earnings, decent economic reports and above average M&A activity. Nevertheless, our technical market model remains “cautiously bullish,” which in our case is more important than our gut feelings.

Speculation that the Federal Reserve will cut interest rates soon was revived by the news that jobs only grew by 88,000 in April following a 177,000 gain in March, a much smaller number than previously estimated. The jobless rate rose to 4.5 percent from 4.4 percent, which matched a five-year low. Hourly earnings also grew at a rate that trailed economists' forecasts. Concerns that the economy is slowing are also being bolstered by the releases of the S&P 500 companies having reported first-quarter earnings thus far. While the majority have reported an increase in year over year earnings growth, the rate appears to be coming in around 9%, down from the double digit gains of recent years, but better than the earlier expectations.

We now see alpha opportunities in 50% of the Major Markets which the newsletter tracks led the by the Dow (DIA) and S&P 500 (IVV) and the NASDAQ 100 (QQQQ). This is confirmed with both the Mid Cap Growth (JKH) and Large Cap Value (JKF) continuing to be rated an AAS Buy. A deeper review of the Sectors listed on the Market Overview page will highlight the emergence of the “Global” aspect of those sectors rated an AAS Buy. Drilling further into the Portfolio Builder page will surface the dominance of the Europe, Natural Resources, Utilities, International, Energy, Pharmaceutical, Healthcare, Technology and Communications sectors all rated an “AAS Buy.”

The candidates from all these sectors and cap groups are far too numerous for us to list in this commentary but we have extracted a manageable number for further examination. We have attempted to identify those candidatures which may be just beginning to emerge into a strong upward trend.

A few of the Stocks selected from the Sector Groups include the obvious winners from last week: Amazon.com Inc (AMZN), Varian Semiconductor Equip (VSEA), Novatel Wireless Inc (NVTL), Regeneron Pharm Inc (REGN), ArQule Inc (ARQL), Chaporral Steel (CHAP), Schering Plough Corp (SGP), Commscope Inc (CTV), Pharmanet Dev Group Inc (PDGI), W-H Energy Svcs Inc (WHQ), NetGear Inc (NTGR), PDL Biopharma Inc (PDLI), Myers Industries, Inc. (MYE), Portfolio Recovery Associates Inc (PRAA), Advanced Energy Industries Inc (AEIS), Pioneer Natural Resource Co (PXD), Baker Hughes Inc (BHI), Plexus Corp (PLXS), Flir Sys Inc (FLIR) and Atwood Oceanics (ATW).

It is in the area of ETF’s and Mutual Funds where we can begin to see the Global direction which money flow appears to be taking. While still employing the Top Down approach used above the following warrant your attention: ProFund Ultra Sector Oil & Gas (ENPIX), iShares MSCI South Africa (EZA), PowerShares Dynamic Oil & Gas (PXJ), iShares MSCI Malaysia (EWM), iShares MSCI Brazil (EWZ), iShares MSCI Sweden (EWD), iShares MSCI Netherlands (EWN), Rydex Energy Services (RYVIX), Oil Service HOLDRS (OIH), ProFund Ultra Dow 30 (UDPIX), Rydex Dynamic Dow (RYCVX), iShares MSCI Germany (EWG), ProFund Ultra Sector Utilities (UTPIX), Rydex Dynamic OTC (RYVYX), ProFund Ultra Sector Biotechnology (BIPIX), ProFund Ultra OTC(UOPIX), ProFund Ultra Sector Pharmaceuticals (PHPIX), iShares S&P Latin America 40 (ILF), Power Shares Dynamic Energy Explor. (PXE), Fidelity Select Energy Service (FSESX).

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bullish since April 27, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 75% cash and 25% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Diamonds Trust, Series 1 (DIA 5/3/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Mid Cap Growth (JKH 3/20/07)

Top AAS Rated Sector for Alpha – iShares Dow Jones U.S. Utilities (IDU 3/12/07)

Top AAS Rated Long Stocks for Alpha

Amazon.com, Inc. (AMZN 3/21/07)

Varian Semiconductor (VSEA 3/27/07)

Chaparral Steel Co. (CHAP 11/1/06)

Chemed Corp. (CHE 3/8/07)

Cleveland-Cliffs Inc. (CLF 11/17/06)

Dow Jones & Co. Inc. (DJ 5/4/07)

Manitowoc Co. Inc. (MTW 3/16/07)

Reliance Steel & Aluminum (RS 1/23/07)

Pre-Paid Legal Services Inc. (PPD 3/7/07)

Nash-Finch Co. (NAFC 2/21/07)

Top AAS Rated Short Stocks for Alpha

Chicago Mercantile Exchange Holdings (CME 3/15/07)

The Corporate Executive Board Co. (EXBD 12/1/06)

Google, Inc. (GOOG 12/18/06)

RTI International Metals (RTI 5/1/07)

Public Storage Inc. (PSA 2/28/07)

Review of Last Week’s Top AAS Rated Stocks