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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

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