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Saturday, February 24, 2007

Weekly Market Update - Minor Decline

Weekly Market Call

Not much news this week and what there was was not particularly positive. As a result, the Dow and the S&P took a bit of a breather while the NASDAQ decided to perk up and hit a new 6-year high. The Russell 2000 also tacked on another one percent this week and now leads all the major indexes with a year-to-date gain of 4.9%

Probably the biggest news of the week was that the core CPI for January was up 0.3%. This was the largest gain since June but did not do much to ignite fears of inflation and the market largely shrugged it off.

In other news, commodity prices continued firming and oil pushed above $61 per barrel. Once again, the market shrugged it off. A few large caps reported earnings and it was a non-event. Fed policy committee meeting minutes were released on Wednesday. They were a bit more bearish in tone than Bernanke's recent remarks but appeared to have little effect on the market.

ETF Comments

Indexes - If you are watching the ETFs that track the major indexes, it appears QQQQ has now joined the party and is setting new highs as SPY and DIA have been doing so consistently lately. The TradeRadar SELL signal has now been definitely reversed.

Commodities - With oil up this week, XLE gained but is still a way from making a new high or even establishing a clear up trend. Caution is advised.

Technology - XLK is still looking a lot like QQQQ but stopped just short of making a new high this week. XLK continues to benefit as rotation out of energy continues and money looks to move into the next undervalued growth area which the market thinks is tech.

Housing - XHB slipped this past week and on the basis of several weeks of lackluster performance now merits a weak TradeRadar SELL signal. The unstoppable IYR has run into some headwinds but is nowhere near generating a SELL signal. The turmoil in the sub-prime mortgage lending market seems to be having at most just a small effect on these two ETFs.

Biotech - XBI was up this week, continuing its recovery from its early January low. It continues to flash the TradeRadar potential BUY signal that was first mentioned last week. An excellent article discussing the various ETFs in the Biotech sector can be found here.

TradeRadar Stock Picks

The Pick o' the Month for February, which called for selling QQQQ and buying QID, the UltraShort QQQ ETF, continues to look like a pretty dumb move. Having closed the week at $50.25, we are now down $2.43 or 4.6%. During this time period QQQQ gained 2.8%. This is a real disappointment. I felt confident that these kinds of plays using TradeRadar could be done when both the long and the short ETFs are showing strong signals. In this case, TradeRadar did show a good SELL signal for QQQQ and showed a pretty decent BUY signal for QID. My sense that this was a real contrarian position caused me some trepidation and it now appears that I should have exercised more caution about about going short in a rising market.

Luckily, some of the other picks fared better this week. Generex (GNBT) closed the week at $1.90 yielding a gain of 12% after receiving a Buy recommendation from the Jesup & Lamont brokerage. Tarragon Corp. (TARR) also closed up this week at $12.77 and we are now showing a gain of almost 10%. PacificNet (PACT) regained some of the ground lost last week and managed to close at $6.17. Our gain in PACT has dwindled to only 18% but, having reported two new contracts this week, I still feel this one is worth holding on to.

In summary, the TradeRadar stock picks are not setting the world on fire but we seem to be in positive territory for all of them except QID.

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