With two more days of distribution last week and 5 total over the past two weeks, the market is changing character and ripe for consolidation/correction.  The bulls made another impressive stand on Friday as bears were not able to follow through on Thursday’s fairly intense selling, but the light, pre-holiday trading volume rendered the move insignificant.  We’ll have to wait until later next week as trading volume returns to more normal levels and an avalanche of ecomonic reports hit the market.  For now, it appears the bulls are beginning to run out of gas.  As we head into a historically weak period of the market, now is not a bad time to be sitting on a large cash position waiting for the next round of opportunities to emerge.

::: Model Portfolio Update :::

With the long awaited deterioration of the market setting in a bit, I positioned the portfolio to be more aggressive position on the short side (total allocation 35% on the short side) this week with 4 new small short positions.  During the week, 2 positions were closed for losses – one short position covered in BKS for a 10% loss and a long position in COGO closed quickly for a 5% loss after dropping below support of the 50 day moving average.  I will most likely sit with a 35% short position and look to add more long positions on any significant selling in the market.  I’m currently only 31% on the long side with a significant (34%) cash position.  After leaning the wrong way for much of the past several weeks, I’m still looking to get back in synch with this market after a strong performance in the first few months of the year.  With the YTD performance at 4% (compared to 6.9%), I’ve got my work cut out for me in the latter half of the year.

::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Gaming Activities: 6.05%
2. Resorts & Casinos: 4.95%
3. Long Distance Carriers: 4.95%
4. Computer Based Systems: 4.90%
5. Toy & Hobby Stores: 4.30%
6. Drug Delivery: 4.30%
7. Residential Construction:  4.05%
8. Building Materials & Wholesale: 3.20%
9. Pollution & Treatment Controls: 3.15%
10. Copper: 3.10%

– Top 10 Worst Performing Industries For the Week –

1. Diversified Utilities: -4.05%
2. Electric Utilities: -3.85%
3. Semiconductor – Broadline: -3.50%
4. Tobacco Products: -3.25%
5. Department Stores: -2.90%
6. Data Storage Devices: -2.90%
7. Silver: -2.70%
8. Auto Parts Stores: -2.20%
9. Electronics Wholesale: -2.10%
10. Publishing – Periodicals: -2.05%

– Top 5 Best Performing ETFs For the Week –
 
1. Chile Fund (CH)  7.80%
2. PowerShares Agriculture (DBA) 4.50%
3. Ishares Home Construction (ITB) 3.25%
4. SPDR Homebuilders (XHB) 2.60%
5. Powershares Clean Energy (PBW) 2.50%

– Worst 5 Performing ETF’s –

1. Herzfeld Caribbean Basin (CUBA)  -5.70%
2. Powershares Dynamic Utilities (PUI) -4.20%
3. SPDR Utilities (XLU) -4.05%
4. Ishares Utilities (IDU) -4.00%
5. HLDRS Utilities (UTH) -3.90%

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

Seems like a new solar related IPO hits the market every week and LDK Solar is another one that should generate significant interest.

1. LDK Solar (LDK): The company, via subsidiary Jiangxi LDK Solar, turns polysilicon into multicrystalline wafers, which are used in the construction of solar cells and solar modules. The company’s wafers are between 180 and 240 microns thick. It also provides wafer processing services to solar cell makers and sells polysilicon scrap. LDK uses virgin polysilicon and recycled material in its production process; it’s capacity is about 215 megawatts (MW) annually. Major customers include Canadian Solar, Chinalight Solar, Solarfun Power, and Solland Solar though most of the company’s revenues come from Chinese buyers. Founder Xiaofeng Peng owns about 83% of LDK.   Set to start trading on Friday.

2. Response Genetics (RGDX): Founded in 1999, the company develops technology used in a variety of clinical diagnostic tests for treating cancer. Its products remove and analyse genetic information from about 30,000 genes taken from cancer tumor samples. The tests help predict a patient’s response to chemotherapy and recovery from surgery, as well as the potential for cancer recurrence. Among its clients are Eli Lilly, Taiho Pharmaceuticals, and Roche Diagnostics.  Trading set to start on Thursday.

::: Upcoming Economic Reports (5/28/07 – 6/1/07) :::

Monday:        Holiday
Tuesday:       Consumer Confidence
Wednesday:  FOMC Minutes, Crude Inventories
Thursday:      Initial Claims, GDP (prelim), Chicago PMI, Construction Spending
Friday:           Nonfarm Payrolls, Unemployment Rate, Personal Income, Personal Spending
                      Core PCE Inflation, ISM Index, Pending Home Sales, Auto Sales

::: Notable Upcoming Earnings Reports I’ll Be Watching This Week :::

Tuesday: Verifone Holdings (PAY)
Wednesday: Joy Global (JOYG), HEICO Corp (HEIC)