I mentioned yesterday "the Dow has hit major support here at the 200 day moving average and the upward trend line around 12800 but as we’ve seen with major support levels in both the Nasdaq and S&P, the momentum to the downside puts this major support level at risk".   Many times areas of big support such as this support area in the Dow don’t provide support right at the line, particularly when emotions are high and fear based selling kicks in.  Rather, you often get some kind of capitulation – a large flush of weak hands, people scrambling to get sell orders in.  Essentially throwing in the towel.  An exhaustion of weak hand selling, bargain hunting and some big time short covering can fuel unbelievable rallies as we saw today.  After all that, the Dow still has support of its 200 day moving average and upward trend line.  The lows of today will act as a line in the sand, an area of significant support.   The move at the end of the day today was forceful and it is enough of a springboard for a dead cat bounce.  However, let’s keep in mind that most of the move today was in the worst hit industries such as financial, homebuilers and REIT’s.  Has anything changed really? No.  The market was way oversold and just needs to retrace some of the downward move.  As I’ve said before the big money will be made on the short side and any bounces, particularly weak volume bounces provide areas for short entries.  You have to believe that there are lots of people out there that have been piling up significant losses are just itching to get out with a wash or much smaller losses.  We have room to run a bit here, but this is NOT the time to be getting aggressive on the long side.  Patience.  I’ll have a full run down of the charts in the Weekly Report on Sunday night.  

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day August 16th 2007

Nasdaq: DOWN .32% today with volume 38% BELOW  average
Nasdaq ETF (QQQQ) DOWN .98%, volume 146% ABOVE average
Dow: DOWN .12%, with volume 64% ABOVE the average
Dow ETF (DIA): UP .23%, volume 162% ABOVE the average
S&P ETF (SPY): UP .75%, volume 154% ABOVE the average
Russell Small Cap ETF (IWM): 2.06%, volume 199% ABOVE the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks did not do well today despite the big market reversal.

Summary:

* Decliners led Advancers 213 to 129
* Advancers were up an average of 2.34% today, with volume 43% ABOVE average
* Decliners were down an average of 3.06% with volume 83% ABOVE average
* The total SI Leading Stocks Index was DOWN 1.02% today with volume 68% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Still Just Bonds!
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Broker/Dealers, Gold Miners, Utilities, Materials, Retail

* Today’s Market Moving Industries/Sectors (UP):
Regional Banks, REITs, Homebuilders, Financial

* Today’s Market Moving Industries/Sectors (DOWN):
Gold, Gold Miners, International Real Estate

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Today’s stock is a stock I covered back in February when it first broke out of a base – Morningstar (MORN).  Most of the leading stocks that I track that moved with volume today were stocks that had beaten down  and were recovering from oversold conditions.  Morningstar (MORN) was one of the few near all time highs that moved with volume.  See my previous commentary on Morningstar (MORN).  Here’s an updated look at the current technical action:

I first highlighted the stock when it broke out above 47 back in February.  It quickly spiked 20% higher before settling into another base.  It wasn’t until the company reported outstanding earnings that the stock gapped up with record volume out of a cup with no handle base to a new all time high.  Very bullish action.  The stock is now digesting some of those gains and nearing another entry point.  I’m going to be looking to get in between 55 – 57.

Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation.  Please do your own research and make a personal decision based on your own tolerance for risk.  I currently do not own a position in Morningstar (MORN)

Today was yesterday, it was Ground Hog’s Day.  Nothing changed and everything is the same except for one thing which I’ll get to in a minute.  Just like yesterday, decent economic data wasn’t enough to overcome the credit concerns.  A fairly tame reading on CPI and healthy regional manufacturing (even news of Buffet buying some BAC) weren’t enough to offset the daily dose of downgrades and credit concern comments.   Today was Ground Hog’s Day but with a change in strategy.  It’s time to begin paring back short positions and keeping the eyeballs peeled for opportunity on the long side.  Not long term opportunity, but bounce opportunity in the short term on the long side.  Let’s go to the charts:

The Dow has hit major support here at the 200 day moving average and the upward trend line around 12800 but as we’ve seen with major support levels in both the Nasdaq and S&P, the momentum to the downside puts this major support level at risk.  However, I think we are getting closer and closer to a significant bounce in the market.  What I’ll be doing at some point tomorrow is paring back short positions and begin looking for the best long opportunities to dabble in.  I continue to believe that the best place for most investors right now is cash.

The Nasdaq took out very important support around 2500, setting it up for a test of the next level of significant support around 2350 at some point, which is the neckline of a large head and shoulders topping formation.  Before that happens though we should get a sizable bounce to test resistance at the area around the top of the shoulder and 200 day moving average (~2525).

The S&P is much closer to the next key level of support around the neckline of a big head and shoulders formation.  I still think we’ll test resistance before it hits that level but I certainly wouldn’t be making large bets that that will happen.  As I mentioned above I’m paring back short positions and "looking" for good bounce plays on the long side.

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day August 15th 2007

Nasdaq: DOWN 1.6% today with volume 2% BELOW  average
Nasdaq ETF (QQQQ) DOWN 1.9%, volume 46% ABOVE average
Dow: DOWN 1.29%, with volume 4% ABOVE the average
Dow ETF (DIA): DOWN 1.26%, volume 47% ABOVE the average
S&P ETF (SPY): DOWN 1.38%, volume 54% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 1.45%, volume 27% ABOVE the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks were hit hard again today as small to mid caps bear the brunt of the selling, but the selling wasn’t particularly intense again today.

Summary:

* Decliners led Advancers 303 to 39
* Advancers were up an average of 1.41% today, with volume 6% ABOVE average
* Decliners were down an average of 3.17% with volume 4% ABOVE average
* The total SI Leading Stocks Index was DOWN 2.65% today with volume 4% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Just Bonds!
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Broker/Dealers, Financial, Utilities, Materials, Semis

* Today’s Market Moving Industries/Sectors (UP):
None

* Today’s Market Moving Industries/Sectors (DOWN):
Homebuilders, Gold Miners, Transports, Materials, Water Resources

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Today’s stock is LKQ Corp (LKQX), which broke out of an ascending base and quickly shot up 20% before retracing the entire move during recent market weakness.

ABOUT:  LKQ Corporation is a provider of recycled light vehicle original equipment manufacturer (OEM) products and related services. The Company is also a provider of aftermarket collision replacement products and refurbished wheels. LKQ Corporation operates over 100 facilities offering its customers a range of replacement systems, components and parts to repair light vehicles. It participates in the market for recycled OEM products, as well as the market for collision repair aftermarket products. LKQ Corporation obtains aftermarket products and salvage vehicles from a variety of sources.
FUNDAMENTALS: KNXA is a very small company (just over 100 million in sales last year) but one that is experiencing a big growth spurt since first becoming profitable in 2005 when the company posted earnings of .40/share (compared to a loss of .22/share a year earlier).  The company continued the earnings momentum  last year by posting earning growth of 140%.  This kind of growth isn’t expected to continue but estimates do call for growth of around 30% over the next couple years.  Net margins are solid at around 13%, but ROE isn’t impressive at 8% and has been declining in the past couple years.  All in all, this is a very good company but not what I would consider elite.

FUNDAMENTALS:  LKQX is a company with a long history of growth.  In fact, since turning profitable in ’01, it has posted impressive growth of 155%, 43%, 15%, 37% and 27% over the past 5 years and is expected to continue to post growth of 25 – 30%.  This is organic growth behind strong sales.  On the margin front, the company is just OK with net margin just above the industry average at 6%.  Return on equity is solid at 12% and continues to rise year after year indicating strong management. 

TECHNICAL:  LKQX gapped up out of a cup with handle base on July 17th with record volume to new all time highs, paused in a short flat base then surged again another 20%.  During this market correction, the stock has digested all of that 20% move and could go a bit lower from here, offering an ideal entry point.  Sell volume still remains above average, so until sellers are showing signs of abating I’d avoid the stock.  However, when that time comes I believe it will offer an outstanding entry, perhaps near the 50 day moving average around 27.

SELFINVESTORS RATING: With a total score of 50/60 (26/30 for fundamentals, 24/30 for technical), LKQ Corp (LKQX) is a very good breakout play.

Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation.  Please do your own research and make a personal decision based on your own tolerance for risk.  I currently own a small position in LKQX and will be looking to add a little more when this pullback is complete.

After what appeared to be the beginning of some kind of stabilization in this volatile market yesterday, credit concerns hitting the airwaves again today spooked the market into a sustained selling frenzy, dropping the Dow and S&P to 4 month lows.  The financial heavy S&P has nearly wiped out its entire gain for the year.  Poor results out of Home Depot (HD) and Walmart (WMT) were tempered a bit by a tame read on the PPI, but news from Sentinel Management that is was seeking approval to halt redemptions and Thornburg Mortgage saying that it was delaying payment on its dividend payment and that  significant disruptions in the mortgage market have caused a "sudden and unprecedented" decline in the market prices of their AAA-rated mortgage securities was more than the market could bear.  If there is any positive that could be taken from today it’s that volume levels were curiously light.  Selling volume in the Nasdaq was well below average indicating that the big fellas were not dumping shares en masse today.  The S&P is in the most trouble and closing at the 4 month low and below a one year trend line sets it up for further deterioration in the near future.  The last time it closed below the 200 day moving average and that one year trend line was on Aug 3.  That marked the beginning of a big 3 day rally up to resistance so keep an eye on another oversold bounce from these levels.  The Dow has psychological support at 13000 and the Nasdaq sits just a hair below critical support at 2500 so tomorrow will be very important.  A likely scenario is that the market will continue the selling momentum in the morning and follow that with some fairly healthy buying by the end of the day.  However, I continue to believe that rallies of any magnitude just delay the inevitable deterioration of the market and provide a fresh round of short opportunities. 

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day August 14th 2007

Nasdaq: DOWN 1.7% today with volume 15% BELOW  average
Nasdaq ETF (QQQQ) DOWN 1.7%, volume 5% ABOVE average
Dow: DOWN 1.57%, with volume right at the average
Dow ETF (DIA): DOWN 1.28%, volume 6% ABOVE the average
S&P ETF (SPY): DOWN 1.53%, volume 26% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 1.75%, volume 1% BELOW the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks were hit hard today as small to mid caps bear the brunt of the selling, but volume was not heavy.

Summary:

* Decliners led Advancers 305 to 37
* Advancers were up an average of 1.15% today, with volume 12% ABOVE average
* Decliners were down an average of 2.99% with volume 7% BELOW average
* The total SI Leading Stocks Index was DOWN 2.54% today with volume 5% BELOW average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Just Bonds!
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Broker/Dealers, Financial, Utilities, Gold Miners, Home Builders

* Today’s Market Moving Industries/Sectors (UP):
None

* Today’s Market Moving Industries/Sectors (DOWN):
Homebuilders, Realty, Retail, Broker/Dealers, Gold Miners

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation. 

Sorry, no stock of the day today.  Just one leading stock that I track moved up with volume today – Nvidia (NVDA)!  This is very unusual even for a big down day like today.

It was a very busy week for the Model Portfolio as I continue to seek profits on both sides of this volatile market.  As I’ve been saying for the past several weeks here, I starting hedging with short positions a bit too early and it hurt my performance as I misssed out on much of the rally from April to July.  A few people were even kind enough to remind me that they weren’t missing the rally.  Gotta love the gloating.  You won’t find me gloating much in this segment of the Weekly Report when I’m right just as you won’t find me kicking myself for lack of performance when I’m wrong.   Keeping your emotions in check and remaining level headed is critical.  The main purpose of this segment is to provide 100% transparency in my performance in the hopes that maybe other advisory services will have the balls to do so.. and as a reminder that it isn’t always easy to profit big in the market (despite what what many services will have you believe).  Hopefully, you can learn from my successes and failures just as I continue to learn from my own successes and failures.  I won’t always be right, but I will continue to remain confident and trust what the charts are telling me, which was to get short again when the market surged last week to key resistance levels (resistance at necklines in both Nasdaq and Dow head and shoulders tops).  A flurry of short positions have been added over the past 2 weeks, several were closed out this week for quick gains in CSS (13%), DRQ (10%), AVY (9%), CE (9%) and VLCM (9%).  On the long side, a position in Given Imaging (GIVN) was closed out for an 8% loss.  The short strategy has paid off big in the past 2 weeks and I believe that this is where the big money will be made over the next several months, but I do think the bulk of the selling will be on hold for a bit.  Five new Quick Strike Profit plays (basically swing trades) on the long side were initiated toward the end of the week to take advantage of a few oversold, very bullish looking stocks.  Profits and losses will continue to be taken/cut quickly in this environment.  In all, the portfolio surged again last weak, vaulting 3.4% higher, bringing the YTD performance to 9.7% which is nearly 4x the performance of the S&P.  What a difference a couple weeks make.  While it may seem like I’m way to aggressive in this environment it should be noted that I’ve been trading small positions and am carrying what might be my largest cash position in a few years.  Overall current allocation is 52% long, 5% short and 43% cash.

::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Water Utilities: 11.00%
2. Residential Construction: 9.55%
3. Recreational Goods: 8.85%
4. REIT – Healthcare Facilities: 7.85%
5. General Entertainment: 7.75%
6. Rubber & Plastics: 6.85%
7. Manufactured Housing:  6.25%
8. Closed End Fund Debt: 6.20%
9. Medical Equipment Wholesale: 6.10%
10. Home Furnishing Stores: 5.80%

– Top 10 Worst Performing Industries For the Week –

1. Toy & Hobby Stores: -10.25%
2. Consumer Services: -6.45%
3. Aerospace/Defense: -4.75%
4. Tobacco Products: -4.50%
5. Heavy Construction: -4.35%
6. Movie Production – Theaters: -3.85%
7. Trucks & Other Vehicles: -3.70%
8. Personal Computers: -3.60%
9. Small Tools & Accessories: -3.20%
10. Copper: -2.85%

– Top 5 Best Performing ETFs For the Week –
 
1. US Natural Gas (UNG)  11.55%
2. Ishares Home Construction (ITB) 8.95%
3. KBW Regional Banking (KBW) 8.15%
4. Powershares Clean Energy (PBW) 6.50%
5. SPDR Homebuilders (XHB) 6.15%

– Worst 5 Performing ETF’s –

1. US Oil (USO)  -5.00%
2. Germany Fund (GF) -4.90%
3. Central Europe & Russia Fund (CEE) -3.80%
4. Market Vectors Steel Fund (SLX) -3.75%
5. Asa Gold (ASA) -3.65%

:::  IPO’s Worth Watching for This Week :::

There are two outstanding IPO’s coming to market this week, led by VMware (VMW) which could be one of the hottest IPO’s of the year.  No slouch is Cosan Limited (CZZ), a Brazilian sugarcane producer which provides perhaps the best way to play the ethanol boom. 

1. VMWare (VMW):  VMware develops software that creates and manages virtual machines — computer functions spread across multiple systems that act as one. Companies use VMware’s software to more efficiently integrate and manage server, storage, and networking functions, thereby lowering the operating costs of their computing resources. VMware also provides consulting, support, and training services. The company has marketing relationships with computer hardware vendors including Dell, Hewlett-Packard, and IBM. Founded in 1998, VMware was acquired by EMC for about $625 million in cash in 2004.  Trading set to begin on Tuesday.

2.  Cosan Limited (CZZ): One of the largest growers and processors of sugarcane in the world, Cosan turns its raw material into refined sugar and ethanol. Operating primarily out of Brazil’s south central state of Sao Paulo, the company runs 17 mills, two refineries, two port facilities and numerous warehouses. In addition to its ethanol and sugar products, the company is exploring electricity generation operations using sugarcane by-products. Although Cosan was formed in 2000 and has grown primarily through the acquisition of existing sugar mills, the company can trace its roots back to a single sugar mill established in 1936..  Trading set to begin on Thursday.

::: Upcoming Economic Reports (8/13/07 – 8/17/07) :::

Monday:         Retail Sales, Business Inventories
Tuesday:       PPI, Trade Balance
Wednesday:  CPI, Industrial Production, Capacity Utilization, Crude Inventories
Thursday:      Housing Starts, Building Permits, Initial Claims, Philly Fed
Friday:            Mich Sentiment – Prelim

::: Upcoming Notable Earnings Reports :::

Earnings season is beginning to wind down…

Tuesday:

Internet Gold (IGLD), Companhia Paranaense de Energia (ELP), Canadian Solar (CSIQ)

Wednesday: 

Copa Holdings (CPA)
                 
::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::

1. Big Rally, But Not Broad – Financials Lead, Leaders Lag; Stock of Day – Life Time Fitness (LTM)

2. Mindray Medical (MR) Breaks Out After Earnings; Ctrip.com (CTRP) Plunges But Still Bullish

3. General Growth Properties (GGP) CFO Continues Insider Buying Spree

4. Trade of the Day – Basin Water (BWTR) Breaks Out of Bullish Triangle

5. Cisco (CSCO) & Middleby (MIDD) Breakout On Earnings

6.  Bulls Running..Right to Resistance; Stock of Day – Kenexa (KNXA)

7. Perficient (PRFT) Add to Breakout On Earnings

8.  Rumors & Transparency Problems With Subprime Persist

9.  ETF Review: Metals, Europe, Small Caps Breaking Down

Houston we have a transparency and communication problem.  News out of France’s largest bank BNP Paribas that it froze 2.2 billion in funds from withdrawals citing US subprime concerns contradicts a statement from Paribas CEO just a week earlier citing that "our corporate and investment banking division is not impacted by the US subprime crisis because our exposure to subprime is negligible".  Oh really?  Actions speak louder than words.  The news got the US market off to a horrendous start with the Dow futures pointing below 200 points.  Keeping the whipsaw action alive, buyers stepped in right away and the market was significantly off the lows heading into the lunch hour. However, persistent rumors of problems with Goldman Sachs hedge funds sent the market into an afternoon spiral it couldn’t escape.  What will happen when Goldman comes out of hiding and comes clean?  How much of the concern was priced in today?  It’s just really difficult to tell.  I think at this point we all can agree (ahem, US govt exluded) that the subprime issue is fairly widespread and will get significantly worse towards the end of the year and on into next year.  The uncertainty, the rumors and denials, the lack of transparency all makes it incredibly difficult to value the market which in turn creates tremendous volatility and can be a weight around the neck of this market for quite awhile.  Not even the most sophisticated, esoteric trading systems know how the heck to trade this market.  As I’ve been saying for a few weeks now.. while there are tremendous opportunities for the day and swing trader on both sides of the market, it is best for most investors to get out for now.  Technically, this market continues to show signs of topping despite short outbursts of buying. Bull traps like this can wipe out profits quickly if not careful so stay vigilant and preserve capital for trading in times of more certain trends.

I mentioned yesterday, that I would consider getting more aggressive on the long side if we could retrace the 3 day surge to resistance with light selling volume.  Obviously that isn’t happening but key support levels still remain in place across all indices.  Tomorrow should be very interesting.  There is lots of momentum to the downside and Countrywide Financial made a statement after the bell indicating "unprecedented disruptions" in credit markets could affect its financial condition.  According to the Wall St Journal, additional hedge funds have raised concerns after the close of trading.  Renaissance Technologies, told investors that a key fund has lost nearly 9% just in the first week of August and Highbridge Capital Management said one of its funds was down a whopping 18% in the first week of August and 16% for the year. We already know about much of the problems with Countrywide but jitters abound on any new credit concerns.  Stay tuned and stay out.

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day August 9th 2007

Distribution across all indices.

Nasdaq: DOWN 2.16% today with volume 50% ABOVE  average
Nasdaq ETF (QQQQ) DOWN 2.31%, volume 73% ABOVE average
Dow: DOWN 2.83%, with volume 32% ABOVE the average
Dow ETF (DIA): DOWN 1.11%, volume 54% ABOVE the average
S&P ETF (SPY): DOWN 2.96%, volume 84% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 2.34%, volume 94% ABOVE the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks were hit hard as indicated by the average decline of 3.81%!  I mentioned a few days ago I had not seen an average decline above 3% since I started tracking these leading stocks.  Well, we’ve reached a new low.

Summary:

* Decliners led Advancers 267 to 75
* Advancers were up an average of 2.32% today, with volume 109% ABOVE average
* Decliners were down an average of 3.81% with volume 82% ABOVE average
* The total SI Leading Stocks Index was DOWN 2.46% today with volume 88% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Nanotech, Clean Energy
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Broker/Dealers, Utilities, Financial, Health Care

* Today’s Market Moving Industries/Sectors (UP):
Home Construction

* Today’s Market Moving Industries/Sectors (DOWN):
Oil & Gas Services, Banks, Financials, Retail

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation. 

Sorry, no stock of the day for today.

Today was a microcosm of what what we’ve been seeing the past few weeks, which has been ruled by sharp swings in both directions intraday.  CSCO got things started off in the green with positive results and comments from CEO John Chambers saying that global business is the strongest he’s seen in his career.  However, rumors that Goldman Sachs would make some negative comments after the bell erased large gains in a matter of minutes.  It wouldn’t be a typical day of trading without a complete reversal back in the opposite direction after GS denied the rumor now would it?  The bottom line is that this is a schizo market with itchy trigger fingers on the part of both buyers and sellers.  The volatility can create fantastic swing and day trade opportunities, but as I’ve said before this market is best left alone for most investors right now.  We were certainly oversold and due for a bounce, but the biggest 3 day surge in a few years?  It really is mind boggling and difficult to make any sense of. 

From a technical perspective, there are a few things at work.  Technically, we are now in a confirmed rally but I just can’t trust it with the way this market reacts to any kind of comment or rumor.  If we can retrace at least half of this move with light selling volume, I’d be willing to get more aggressive on the long side, but we can’t ignore the fact the Dow is carving out a picture perfect head and shoulders top and that both the Dow, Nasdaq and Russell are fast approaching key resistance levels.  Will the market ignore the technical damage and march to new highs like it did in April?  I certainly wouldn’t be making large bets that the market will make a habit of this.  Right now what we have is a case of contradictions not only from a technical standpoint but from comments about what is going on in the credit market and unfortunately it’s probably not going to go away anytime soon.  Only time will tell. 

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day August 8th 2007

Accumuluation across all indices

Nasdaq: UP 2.01% today with volume 57% ABOVE  average
Nasdaq ETF (QQQQ) UP 1.1%, volume 18% ABOVE average
Dow: UP 1.14%, with volume 15% ABOVE the average
Dow ETF (DIA): UP 1.11%, volume 54% ABOVE the average
S&P ETF (SPY): UP 1.39%, volume 42% ABOVE the average
Russell Small Cap ETF (IWM): UP 3.04%, volume 74% ABOVE the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks fared much better today than they did on Monday, outperforming the major indices.

Summary:

* Advancers led Decliners 258 to 66
* Advancers were up an average of 3.59% today, with volume 88% ABOVE average
* Decliners were down an average of 2.22% with volume 83% ABOVE average
* The total SI Leading Stocks Index was UP 2.14% today with volume 87% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Nanotech, Clean Energy, Technology, Consumer Staples
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Broker/Dealers, Financial, Gold, Home Construction

* Today’s Market Moving Industries/Sectors (UP):
Home Construction, Clean Energy, Realty, Gold Miners, Water Resources

* Today’s Market Moving Industries/Sectors (DOWN):
Bonds, Telecom

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Today’s stock is Kenexa Corp (KNXA), which broke out of a long one year base ahead of its earnings report after the bell today (it’s down nearly 5% after hours which may offer a better entry point).

ABOUT:  Kenexa Corporation provides software, services and content that enable organizations to recruit and retain employees. The Company’s solutions are built around a suite of configurable software applications that automate talent acquisition and employee performance management best practices. It offers the software applications that form the core of its solutions on an on-demand basis. The Company complements its software applications with tailored combinations of outsourcing services, consulting services and content. Kenexa sells its solutions to large and medium-sized organizations through its direct sales force.

FUNDAMENTALS: KNXA is a very small company (just over 100 million in sales last year) but one that is experiencing a big growth spurt since first becoming profitable in 2005 when the company posted earnings of .40/share (compared to a loss of .22/share a year earlier).  The company continued the earnings momentum  last year by posting earning growth of 140%.  This kind of growth isn’t expected to continue but estimates do call for growth of around 30% over the next couple years.  Net margins are solid at around 13%, but ROE isn’t impressive at 8% and has been declining in the past couple years.  All in all, this is a very good company but not what I would consider elite.

TECHNICAL:  Today, the stock broke out from a long one year base with big volume to new all time highs, BUT the company did report after the bell and guided next quarter in line to lower which took the stock down nearly 5% in after hours.  This may present a better entry or could derail the stock entirely.  If the stock can find support at the point of breakout around 39 I’d be willing to initiate a small position.  While the base is a bit on the sloppy side, you can’t argue with the bullishness of a stock breaking out of a long base to new all time highs.

SELFINVESTORS RATING: With a total score of 49/60 (24/30 for fundamentals, 25/30 for technical), Kenexa Corp (KNXA) is a solid breakout play.

Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation.  Please do your own research and make a personal decision based on your own tolerance for risk.  I currently DO NOT own a position in KNXA.

Another wild day on Wall St. with the Dow erasing all of Friday’s losses with volume heavier than Friday.  After the opening pop was sold off, it looked like the indices might swim in a sea of red all day.  However, the severely oversold financial sector found excuses to rally on a Merril Lynch upgrade, news of a Wells Fargo buy back and an S&P analyst saying the market overreacted to the Bear Sterns outlook.  The theme for the day was bargain hunting in the worst hit industries – mortgage, brokers, banks & utilities.   Considering that leading stocks did not fare all that well and that this was not a broad based rally there is reason to remain skeptical, but the move was strong enough to potentially push the market up to new resistance levels over the next several days  (S&P 1500, Dow 137000 and Nasdaq 2620).  With the Fed rate decision tomorrow, volatility won’t subside anytime soon.  There have been quite a few attacks on the credibility of the Fed of late for maintaining that the subprime issues are for the most part contained, so it should be interesting to see if their language changes this time around.  No rate change is expected.

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day August 6th 2007

Nasdaq: UP 1.44% today with volume 22% ABOVE  average
Nasdaq ETF (QQQQ) UP 1.16%, volume 39% ABOVE average
Dow: UP 2.18%, with volume 21% ABOVE the average
Dow ETF (DIA): UP 1.52%, volume 15% ABOVE the average
S&P ETF (SPY): UP 1.68%, volume 76% ABOVE the average
Russell Small Cap ETF (IWM): UP .86%, volume 116% ABOVE the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  In what has become a bit of a trend in the past few weeks, leading stocks continue to lag the broader market, just as they did today.

Summary:

* Advancers led Decliners 220 to 127
* Advancers were up an average of 2.45% today, with volume 42% ABOVE average
* Decliners were down an average of 2.42% with volume 57% ABOVE average
* The total SI Leading Stocks Index was UP .67% today with volume 48% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Consumer Staples (market clearly getting defensive)
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Broker/Dealers, Utilities, Financials, Home Construction

* Today’s Market Moving Industries/Sectors (UP):
Regional Banks, Financial, Utilities, Broker/Dealers

* Today’s Market Moving Industries/Sectors (DOWN):
Oil, Commodities, Gold, Gold Miners, Oil & Gas Services

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Today’s stock is a stock I first highlighted back in late January and it moved with such gusto today I decided to feature it again here.  I won’t go through all the fundamental and technical details again – you can read that in the first post here.

You can see in the chart below the nice trend along the 200 day moving average and the big breakout today with record volume.  An outstanding company with an even better looking chart.

Disclosure: I currently do not own a position in Life Time Fitness (LTM).

With the exception of adding another short play and adding a few trades for quick profits on the long side, I didn’t do much with the Model Portfolio last week.  That’s partly due to trying to get a few days of vacation as well as playing conservatively while I let this wild market play out a bit and stabilize.  The strategy of maintaining a portfolio with a significant cash allocation along with a few shorts and long bounce plays has paid off.  The portfolio edged up a bit by .1% in a week that saw the indices slide even lower.  The Model Portfolio year to date performance of 6.3% is now well ahead of the S&P gain of just 1%.  During the week, I initiated another short trade to replace a short trade that was closed in XL Capital (XL) for a quick 8% gain.  On the long side, just one new position was initiated while two Quick Strike Profit plays were closed for a net wash – one in Omniture (OMTR) for a 10% gain and one in Labor Ready (LRW) for a 10% loss.  Total allocation of the portfolio currently stands at 50% cash, 20% short and 30% long.

::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Technical Services: 4.45%
2. Nonmetallic Mineral & Mining: 4.30%
3. Scientific & Technical Instruments: 4.10%
4. Healthcare Information Service: 3.75%
5. Resorts & Casinos: 3.25%
6. Regional Airlines: 2.95%
7. Agricultural Chemicals:  2.70%
8. Farm Products: 2.70%
9. Small Tools & Accessories: 2.60%
10. Drug Stores: 2.50%

– Top 10 Worst Performing Industries For the Week –

1. Surety & Title Insurance: -17.90%
2. Medical Practitioners: -14.25%
3. Hospitals: -12.65%
4. Mortgage Investment: -11.90%
5. Toy & Hobby Stores: -9.90%
6. Investment Brokerage National: -7.65%
7. Marketing Services: -7.25%
8. Savings & Loans: -6.30%
9. Processing Systems & Products: -6.25%
10. Personal Computers: -6.15%

– Top 5 Best Performing ETFs For the Week –
 
1. Morgan Stanley China  (CAF)  7.75%
2. Central Europe / Russia Fund (CEE) 4.35%
3. Powershares Nanotech (PXN) 3.45%
4. Mexico Fund (MXF) 3.30%
5. Latin American Discovery Fund (LDF) 3.20%

– Worst 5 Performing ETF’s –

1. HLDRS Internet Infrastructure (IIH)  -6.10%
2. Morgan Stanley Asia Pac (APF) -5.45%
3. HLDRS Oil Services (OIH) -5.35%
4. Ishares Oil Equipment (IEZ) -4.15%
5. Indonesia Fund (IF) -4.00%

:::  IPO’s Worth Watching for This Week :::

1. E-House China Holdings (EJ):  Established in 2000, E-House specializes in helping customers (both international and domestic real estate developers) buy and sell residential properties through its subsidiaries. The largest real estate agency in China, the company provides a variety of real estate brokerage, consulting, and related services through a network of more than 1,800 sales professionals in about 30 cities across the country. E-House focuses on serving clients in the metropolitan areas of Shanghai, Wuhan, and Hangzhou in China. The company also offers brokerage services in Hong Kong and Macau.Trading set to begin on Wednesday.

2.  Masimo Corp (MASI): The company’s Signal Extraction Technology (SET) noninvasively monitors arterial blood-oxygen saturation levels and pulse rates in patients. Masimo’s product range offers pulse oximeters in both hand-held and stand-alone (bedside) form. Recent developments include carbon monoxide (CO) monitoring features, as well. The company licenses SET-based products to more than 35 medical equipment companies, including Cardinal Health, Medtronic, Welch Allyn, and Zoll Medical. Product benefits include provision of real-time information and elimination of signal interference, such as patient movements.  Trading set to begin on Wednesday.

3.  Paragon Shipping (PRGN): The company owns three Handymax and three Panamax carriers that are available as time charters for one to two years. Its ships, which have a total capacity of 350,000 dwt (deadweight tons), carry bauxite, iron ore, coal, grain, fertilizers, and phosphate worldwide.   Trading set to begin on Friday.

4. HireRight (HIRE): HireRight provides Web-based pre-employment screening services for human resources and security professionals. The company helps businesses perform background verification, drug screening, and skills and behavioral assessment for prospective new hires. Serving about 1,400 customers, HireRight’s main product offering includes its Extended Workforce Screening Solution suite of software applications.Trading set to begin on Wednesday.

5. WuXi PharmaTech (WX):  The company provides laboratory and manufacturing services for customers in the pharmaceutical and biotechnology industries. Its core lab services business offers research and development, discovery chemistry, service biology, and pharmaceutical development services. WuXi’s ancillary manufacturing operations mainly produce advanced intermediate drugs and active drug ingredients; the company ships about 10 tons of pharmaceuticals and ingredients annually. Top customers include such leading global drug makers as Pfizer and Merck which each account for about 14% of sales.  Trading set to begin on Thursday.

6.  Tully’s Coffee (TULY):  The firm operates and franchises a chain of nearly 130 coffeehouses offering a variety of specialty blend coffees along with baked goods, espresso, and related supplies, mostly in Washington, California, and a handful of other western states. About 90 locations are company-owned; the rest are franchised. Tully’s also sells branded coffee and related products to supermarkets and food service operators through its wholesale division, which distributes to some 4,000 grocery stores, including Kroger and Albertsons.  Trading set to begin on Friday.

7.  Quicksilver Gas Services (KGS):  The firm operates and franchises a chain of nearly 130 coffeehouses offering a variety of specialty blend coffees along with baked goods, espresso, and related supplies, mostly in Washington, California, and a handful of other western states. About 90 locations are company-owned; the rest are franchised. Tully’s also sells branded coffee and related products to supermarkets and food service operators through its wholesale division, which distributes to some 4,000 grocery stores, including Kroger and Albertsons.  Trading set to begin on Tuesday.

8.  MercadoLibre (MELI):  Its online trading service enables individuals and businesses to electronically arrange the sale and purchase of items in more than 2,000 categories. In addition to its auction and classified listing services, Mercadolibre offers an online payment service to further facilitate electronic transactions. The company serves more than 18 million registered users in 13 countries in Latin America; more than half of sales come from Argentina. Sales come from listing fees, fees based on the value of goods sold, and ancillary services. Online auction giant eBay owns nearly 20% of Mercadolibre.  Trading set to begin on Friday.

::: Upcoming Economic Reports (8/6/07 – 8/10/07) :::

Monday:         None
Tuesday:       FOMC Rate Decision, Consumer Credit
Wednesday:  Wholesale Inventories, Crude Inventories
Thursday:      Initial Claims, Factory Orders
Friday:            Export / Import Prices, Treasury Budget

::: Upcoming Notable Earnings Reports :::

Monday:

j2 Global Communications (JCOM), Mindray Medical (MR), Quality Systems (QSII), Metalico (MEA), Herbal Life (HLF), Banco Bradesco (BBD), Ctrip.com (CTRP), TransDigm Group (TDG)

Tuesday:

Perini (PCR), Integra LifeSciences (IART), Huron Cosulting (HURN), Credicorp (BAP), Banco Itau (ITU), Iconix Brands (ICON), Cisco (CSCO), Arena Resources (ARD), Harris Corp (HRS), Boston Beer (SAM)

Wednesday: 

Allis-Chalmers (ALY), Hansen Natural (HANS), InnerWorkings (INWK), Holly (HOC), Divx (DIVX), Uniao de Bancos (UBB), Perficient (PRFT)
                 
Thursday:

Nvidia (NVDA), Suntech Power (STP), Global Sources (GSOL)

::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::

1. ETF Watch – Healthcare, Pharma & Retail Breaking Down

2. DXP Enterprises (DXPE) & Silicon Motion Tech (SIMO) Plunge After Earnings Misses

3. Trade of the Day – Transcend Services (TRCR) Meets Resistance, Offers Short Entry

4. Navteq (NVT), Trimble (TRMB) & Garmin (GRMN) Mapping Out New Highs Following Earnings

5. Short Term Capitulation, But Leaders Lag

6.  Trade of the Day – Broken Support Lines Create Short Opportunity in CGI Group (GIB)