Weekly Market Overview
There are several big happening recently that investors should be watching closely. The first is obviously the mortgage crisis that is only growing worse, now that New Century Financial was denied credit to continue its operations. Many other subprime lenders also warned that their earnings may be in danger due to an increasing amount of defaults. In the end, it is likely that this sweep will cause stricter regulations on a mortgage market that has grown increasingly loose in terms of lending standards during the past decade. Opportunities here lie in playing the subprime mortgage weaknesses and any possible larger restrictions on lending standards.

The second big thing to watch is China, which recently reported a trade surplus that nearly tied the record at $23.76 billion. Many predict that this large surplus will further push US lawmakers to encourage China to force its currency to a more appropriate level or face massive export taxes. This could affect many Chinese companies that are now enjoying what some consider unfair trading advantages over US firms. Opportunities here lie in locating Chinese firms that could be hurt by new legislation as well as US firms that could benefit.

Finally, the hedge fund industry is beginning to fear new regulations from Washington after similar actions were taken overseas. Among the proposed changes is a clause that would tax private equity firm fees at the standard rate instead of at the capital gains rate - a difference of almost 20%! Any actions against private equity and hedge funds could cause a slowdown in the amount of deals that we have been seeing recently. The groups are only now beginning to organize in Washington to lobby on their own behalf - we have yet to see how this will turn out.


Top 10 Stocks to Watch this Week
Fundamental Analysis
Our top five stocks to watch for fundamental investors are:

1. Cost-U-Less, Inc. (CULS) - There are two hedge funds currently involved with this stock, both calling for the company to put itself up for sale. One of the hedge funds has even said it would make an offer. If the two hedge funds are successful in lobbying management, the company should sell for at least $12 per share - a 40% gain. (More CULS articles...)
   
2. Temple Inland Inc. (TIN) - The company announced today that it would be following Carl Icahn's advice and breaking up the company. Shares spiked over 14% on the news, up almost 30% since we first began coverage! We believe that the value unlocked in these transactions will exceed the premium seen today; however, it may take awhile for these actions to materialize.
   
3. Ceridian Corporation (CEN) - Bill Ackman propposed that Ceridian spin off its Comdata division since the two share almost no synergies. Moreover, he said that the segment was being held back by the parent company. This is another great spin off opportunity that would help both the parent company and the child company... and Bill Ackman definitely knows what he is doing! Meanwhile, those close to the situation say that investment bankers are trying to find buyers for both businesses - a move which is angering the two activist hedge funds. Last week, Ackman sued the company, demanding that they release letters between Board Directors that they believe contains evidence supporting their thesis that the company has been having problems. (More CEN articles...)
   
4. Applebees International Inc. (APPB) - The Breeden Partners recently filed a series of Schedule 13Ds suggesting that the company improve several defficiencies, including its excessive executive compensation. If these issues are appropriately addressed, it could help the company save millions and increase their share price significantly. (More APPB articles...)
   
5. Electro Scientific Industries (ESIO) - Nierenberg Investment Management first lobbied this company to take several actions to return shareholder value. Since then, they have been joined by another hedge fund. Combined, these two should have enough leverage to at least warrant a response by management. If they are successful, it could mean special dividends or other measures aimed at unlocking value. (More ESIO articles...)
   

Technical Analysis
Our top five stocks to watch for technical analysts are:

1. Grant Prideco Inc. (GRP) - Intermediate term ascending continuation triangle.
   
2. Lam Research (LRCX) - Intermediate term continuation wedge.
   
3. Canadian National Resources Inc. (CNQ) - Long-term continuation diamond.
   
4. Verasun Energy Corp (VSE) - Intermediate term head and shoulders bottom.
   
5. Leucadia National Corp (LUK) - Long-term head and shoulders bottom.
   

Stock of the Week : Ceridian Corporation (CEN)
We believe that this Ceridian is a stock worth a second look in today's market. Everyone knows that Pershing Square and Relational Investors are attempting to force Ceridian to spin-off its Comdata unit, which could unlock millions in value. However, the company recently announced that it has hired an investment banker and those close to the situation are saying that these bankers are approaching private equity and corporate buyers who may be interested in acquiring the whole company. Late last week, the hedge fund also revealed that it was being sued by Ackman, who demanded that it turn over letters that may help prove its case to shareholders in the event of a proxy fight. This is a win-win situation for investors, who stand to gain from a buyout premium and/or a Comdata spin-off! This makes CEN a stock worth watching closely over the next few weeks!

Read More on SECInvestor.com…


Filing of the Week : Form 10-K
Most investors look to 10-K filings when looking for information about a company. These filings are classified as "Annual Report" filings that encompass a company's yearly financials and relevent information. They contain an overview of the company, how they did last year, a detailed overview of their financials, and management discussion and analysis. Newer 10-Ks may also contain executive compensation discussion and analysis. These filings are required reading before investing in any company!

You can easily track these SEC filings with e-mail and RSS alerts using SECFilings.com!


Tip of the Week : Leverage Up with LEAPs
LEAPs are Long Term Equity Anticipation Options - or options that have an expiration date set years in the future instead of mere months. Many popular stocks offer these options for long-term shareholders that would either like to leverage up or hedge against their open position. The options themselves can offer investors increased leverage if they are confident in the stock's future - after all, options are cheaper than buying the underlying stock. Alternatively, some investors find it useful to use these options to hedge against other long-term plays - most notably, long-term shorting. Shorting stocks can be risky in the event of a sudden strike of good fortune for the company, so these options can be used to limit the downside for those speculators. Either way, LEAPs are an excellent tool that every investor should check out!


Final Words
The economy seems to be turning to the upside lately with little volatility compared to last week. Despite this bullish mood, however, it is important to remember the many fundamental factors that stack against the economy - most notably the mortgage crisis and China trade issues. Good luck trading!