Portable Alpha Daily

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Wednesday, July 04, 2007

Mid-Week Alpha

U.S. stocks closed higher Tuesday and extended Monday’s rally as investors focused less on declines in pending home sales and factory orders and more on a healthy flow of merger news.

Real Estate was the only sector down for the day. Leadership for the shortened session was provided by Energy along with Technology, Financials and Industrials. All of those sectors were mentioned as areas of alpha generation in Monday’s commentary, with the exception of Financials, which in our opinion remains suspect until the issue of sub-prime lending works it way thoroughly through the system.

Not much can be concluded from the market activity thus far in the week. We see some improvement in the technical condition of the markets, now more resembling the conditions of early January 2007 rather than those which prevailed in mid-March of this year. We continue to feel that the recent positive bias remains in place, but with low trading volumes volatility will remain a concern.

Most investors will pay close attention to employment data released on Friday by the Labor Department, which includes unemployment and payroll growth for June. Given the job market's strong impact on consumer spending, which is the backbone of the U.S. economy, Friday’s report is really the only important event for the rest of the week.

The second-quarter earnings season will officially begin on July 9, 2007 which will certainly provide direction for next week. Some investors are now voicing concerns that more and more reporting companies will not continue to provide “guidance” for future earnings estimates. In our opinion, companies no longer providing guidance are making a good decision as it will put the burden upon the analyst and investors to do their own homework. We believe this trend will continue to spread amongst additional companies hopefully resulting in a return to conservatism with regard to Corporate Governance.

We remain conservatively allocated in line with the recommendation of the AAS Market Model which 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 1815. Of those reviewed, 362 are rated "Buy," 558 are rated "Sell" and 895 "Neutral”. While we remain conservatively bearish, our Model Fund and Stock Portfolios are allocated around 38-50% invested and 63-75% in cash

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 between 63-75% cash and 38-50% long.

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

Top AAS Rated Major Market – Fidelity Nasdaq Composite (ONEQ 6/1/07)

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

Top AAS Rated Sector for Alpha – iShares Goldman Sachs Natural Resources (IGE 3/19/07)

Top AAS Rated Long Stocks for Alpha

Deckers Outdoor Corp. (DECK 9/7/06)

Blue Coat Systems Inc. (BCSI 3/1/07)

Cummins Inc. (CMI 1/31/07)

Apple Inc. (AAPL 4/24/07)

Precision Castparts Corp. (PCP 9/20/06)

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

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

Google, Inc. (GOOG 5/29/07)

Martin Marietta Materials (MLM 11/6/06)

Robbins & Myers Inc. (RBN 6/12/07)

Top AAS Rated Short Stocks for Alpha

Beazer Homes USA Inc. (BZH 1/25/07)

Rogers Corp. (ROG 12/6/06)

Hovnanian Enterprises Inc. (HOV 12/21/06)

Meritage Homes Corp. (MTH 12/18/06)

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


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