Weekly Market Overview

U.S. stocks trended down this week as growing concerns about the housing market and consumer spending sparked renewed worries about stagflation. A series of poor jobs reports, declining interest rates, a rise in oil prices, increasing credit card delinquencies, and deepening troubles in the housing market all strongly point to this direction. The Federal Reserve insists that these rate cuts are necessary in order to boost the economy, which it deems more important than the consumer. The result is a bet that the economy will turn around at the cost of skyrocketing consumer prices - a theory that, if wrong, could spark the feared stagflation and send the economy into new lulls. In the end, these negative concerns about the future combined with positive interest rate activity is making this market extremely volatile.

Top 10 Stocks to Watch this Week

Fundamental Analysis

1. Tyco Electronics (TEL) - After recently spinning off from Tyco this stock is down almost 10%, but is starting to catch the attention of value investors. The company is trading well below its peers with strong cash flows. It is also a victim of the spin-off effect, which has made it an even greater value to opportunistic investors. We believe that this company will outperform in the long-term.
2. Capital Southwest (CSWC) - Activist investor Ned Sherwood came out with an analysis on this company showing a $200/share valuation. The only thing holding shares back are practices by the company that can easily be changed if they so desire. Unfortunately, the company seems resistant to change now, but this is definitely a stock to watch incase they change their mind.
3. United Online (UNTD) - Classmates.com is one of the fastest growing social networking websites on the Internet and this company plans to spin it off real soon. Investors should keep an eye on this development as spin-offs not only represent great investment opportunities, but the social networking space is red hot with names like Facebook and Myspace in the news constantly.
4. The Brinks Company (BCO) - Activist hedge funds Pirate Capital and MMI Investments are still fighting the company to unlock value through a divesture of several key businesses. Given the difficult credit market, some are now questioning whether or not this is possible. However, if credit markets improve and they hedge funds are successful during the next annual meeting, this stock could soar.
5. Ceridian Corporation (CEN) - This activist target has agreed to bend to the pressure of the hedge funds and is definitely a company to watch ahead of its annual meeting where it will fight to retain its incumbant board members. If Pershing Square is successful in installing its own board members, we could see significant share appreciation.
   

Technical Analysis

1. Barrick Gold Corporation (ABX) - Intermediate-Term Bullish Continuation Diamond.
2. Central European Distribution Corporation (CEDC) - Intermediate-Term Bullish Symmetrical Continuation Triangle.
3. Omnivision Technologies  Incorporated (OVTI) - Intermediate-Term Bullish Head and Shoulders Bottom.
4. Petroleo Brasileiro Sa Petrobras (PBRA) - Intermediate-Term Bullish Upside Breakout.
5. Cogent Incorporated (COGT) - Intermediate-Term Bullish Double Bottom.
   

Stock of the Week : Elan Corporation (ELN)

Elan Corporation (NYSE: ELN) is a pharmaceutical turnaround story that may soon get even better. The pharmaceutical company had a brush with bankruptcy in 2002 and reported a wider-than-expected loss of $405 million for 2007. However, the company said it expects a sharp turnaround in 2008, forecasing revenue growth of over 30 percent and possibly exceed $1 billion, driven by sales of its flagship multiple sclerosis drug Tysabri. The company currently receives 50 percent of the revenues from the drug when sales exceed $700 million. Altogether this turnaround story already has shares trading near their 52-week high, but many investors believe that they could get much higher next year. (Read More)

Article of the Week : Short Selling for the Average Investor

Short selling has traditionally been a technique reserved for the expert traders and investors, but a new set of ETFs released by ProShares may quickly change the landscape. Now, average investors can do more than just sit on the sidelines in a bear market – they can “safely” purchase ETFs that will enable them to profit from declines in the marketplace without being forced to open a margin account. (Read More)

Final Words

The market remains depressed and investors should be careful when investing in these climates. It is best to keep in stocks with international exposure and no credit risk.