Bull Radar

Style Outperformer:

Small-cap Value (+1.61%)

Sector Outperformers:

Airlines (+5.11%), I-Banks (+2.29%) and Telecom (+1.87%)

Stocks Rising on Unusual Volume:

TLK, INTU, PZE, NGLS, CSUN, BCSI, SKIL, BMRN, AKAM, PLCE, ZUMZ, NCIT, GXDX, HEES, CNQR, ALO, PTE, XSD, OKS, TUC, MR, KG, LEH, DKS, HLF and TTC

Stocks With Unusual Call Option Activity:

1) SCHW 2) APWR 3) AKAM 4) CREE 5) LEH

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Friday Watch

Late-Night Headlines
Bloomberg:
- General Motors Corp.(GM) will spend more than $500 million to build a new small car in Ohio, part of a campaign to replace slow-selling trucks with more fuel-efficient models just as oil prices begin to retreat from record highs. Chief Executive Officer Rick Wagoner announced the investment today in Lordstown, where GM will assemble the Chevrolet Cruze in 2010. Ford Motor Co., Toyota Motor Corp. and Nissan Motor Co. plan similar moves. The race to supplant trucks with cars echoes the push in the 1990s to add sport-utility vehicle factories as gasoline below $1.25 a gallon made those trucks cheap to drive. The automakers are now planning to shut or reconfigure their truck plants as $4- a-gallon fuel scares buyers away.
- Global cotton consumption will drop in the next year, rather than increase as expected a month ago, because of a decline in China, the world’s biggest user, UK-based research firm Cotlook Ltd. said. The consumption estimate includes a decline of 300,000 tons in China because of rising production costs, a shortage of electricity and an “unfavorable” economic climate, Cotlook said. World production will reach 24.05 million tons, 78,000 tons more than expected last month, as rains improved crop prospects in India, the largest grower after China.
- Dell Inc.(DELL), the third-biggest server maker, posted the biggest gains in the market for computers used to run corporate networks and Web sites last quarter, according to research firm Gartner Inc. Dell's server sales rose 15 percent, compared with an 11.5 percent gain at top-ranked International Business Machines Corp.(IBM) and a 2.9 percent increase at second-place Hewlett-Packard Co.(HPQ), Stamford, Connecticut-based Gartner said today in a statement.
- Gap Inc.(GPS), the largest U.S. clothing retailer, said second-quarter profit rose 51 percent after it discounted fewer jeans and T-shirts. The shares rose 3.6% in after-hours trading.
- Foot Locker(FL) rose 8.3% in extended trading. The owner of more than 3,750 shoe stores said annual profit may profit may be as high as 85 cents a share excluding some charges. Analysts polled by Bloomberg estimated 71 cents on average.

Wall Street Journal:
- Time Warner Inc.’s(TWX) Warner Bros. Pictures plans to make fewer films and spend more money on them following the success of “The Dark Knight,” citing President Jeff Robinov. Robinov wants to release as many as eight movies a year by 2011, many of them centered on characters from the studio’s DC Comics unit.
- Freddie Mac executives are sounding out private-equity firms and other investors about the possibility of buying new common or preferred shares in the mortgage company.

IBD:
- Network General Acquisition Gives NetScout(NTCT) A Good Hand To Play.

CNNMoney.com:
- Job boom could be coming soon. Economists at the Univ. of Michigan predict that 3.5 million jobs will be created in the next two years.

NY Post:
- Barack Obama's long-lost half-brother has surfaced in Kenya - living like a recluse on less than $1 a month and hiding his family ties.

USA Today.com:
- Airline profitability shows progress as fuel costs ease.

Financial Times:
- Investors pulled their money out of Russia in the wake of the Georgia conflict at the fastest rate since the 1998 rouble crisis, new figures showed on Thursday. Russian debt and equity markets have also suffered sharp falls since the conflict began on August 8, with yields on domestic rouble bonds increasing by up to 150 basis points in the last month. The moves come as President Dmitry Medvedev faces pressure from business leaders concerned that the impact of the global credit crisis is starting to be felt in Russia.
- Economic growth has shown scant sign of returning to the eurozone in August with private sector output contracting for the third consecutive month, an influential survey revealed on Thursday. Purchasing managers' indices suggested the 15-country zone remained on the brink of recession, with the performances of Germany and France deteriorating noticeably in August.

TimesOnline:
- The International Olympic Committee has ordered an investigation into mounting allegations that Chinese authorities covered up the true age of their gold-medal winning gymnastics star because she was too young to compete. An IOC official told The Times that because of "discrepancies" that have come to light about the age of He Kexin, the host nation’s darling who won gold in both team and individual events, an official inquiry has been launched that could result in the gymnast being stripped of her medals.
- Russia fighting machine is showing its age, say military analysts.

Livemint.com:
- Apple’s(AAPL) iPhone 3G set to create waves in India. Few diminutive devices have so besotted the world’s imagination in recent times as Apple Inc.’s iPhone. The second edition of the mobile phone officially launches in India on Thursday midnight.

Thanh Nien:
- Many companies listed on Vietnam’s stock exchanges plan to cut their earnings estimates this year because of a slowing economy.

Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (PLCE), target $44.
- Maintain Buy on (HNZ), target $59.
- Reiterated Buy on (TECD), target $45.
- Reiterated Buy on (FE), target $82.

Night Trading
Asian Indices are -.75% to +.25% on average.
S&P 500 futures -.17%.
NASDAQ 100 futures -.20%.

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Earnings of Note
Company/EPS Estimate
- (ANN)/.48
- (PERY)/-.02
- (SKIL)/.07

Upcoming Splits
- (SYNA) 3-for-2

Economic Releases
- None of note

Other Potential Market Movers
- None of note

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Mixed as Gains in Commodities, Homebuilders Offset Losses in Airline, Financial Shares

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In Play

Stocks Mixed into Final Hour as Rising Oil and Credit Angst Offset Short-Covering and Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Gaming longs, Alternative Energy longs and Medical longs. I added to my (WMS) long and took profits in another long today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is slightly lower, sector performance is mostly positive and volume is light. Investor anxiety is about average. Today’s overall market action is bullish. The VIX is falling 5.2% and is still above-average at 19.34. The ISE Sentiment Index is about average at 154.0 and the total put/call is about average at .93. Finally, the NYSE Arms has been running below average most of the day and is currently .64. The Euro Financial Sector Credit Default Swap Index is rising 1.5% today to 89.83 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is rising .96% today to 145.99 basis points. The TED spread is falling 1.91% to 1.11. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 4 basis points to 2.23%, which is still down 40 basis points in about six weeks. Once again, considering the decline in financials and rise in oil, the broad market trades very well. I still believe recent broad market action indicates more of a consolidating of recent gains before another surge higher rather than a topping before another move lower. The many bears have had several days of bad headlines and have not been able to capitalize. One of my longs, Apple Computer(AAPL), is down another 1.1% today and has pulled back 6 points from its recent high. This morning RBC Capital said Mac market share could hit 4.2% in calendar 09. I think this number is very conservative and overall analyst forward estimates are still way too low. The stock looks attractive at current levels for both long and short-term investors, in my opinion. Nikkei futures indicate an +73 open in Japan and DAX futures indicate an +58 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less financial sector pessimism and bargain-hunting.

Today's Headlines

Bloomberg:
- Lehman Brothers Holdings Inc.(LEH), the fourth-biggest U.S. securities firm, is a candidate for a hostile takeover, Ladenburg Thalmann & Co. analyst Richard Bove said. He raised his rating on the shares to ``buy.'' ``Management is unwilling to sell out at a deeply distressed value,'' Bove wrote in a note to clients. ``The stage is set for a hostile bid to take over the whole company.''
- Billionaire Sam Zell, founder of the largest publicly traded apartment landlord in the U.S., is investing in distressed debt instead of real estate stocks or property and expects a housing recovery early next year. ``We believe that the opportunities, particularly in difficult situations, are in the debt,'' said Zell, who is looking to buy both real estate debt and distressed corporate debt now trading at a discount. Zell declined to put a dollar value on his expected debt investments, saying only that they would be ``significant.''
- Russia began withdrawing some tanks, artillery and troops from Georgia, stepping up a military pullout required under a cease-fire, as Georgia's leader said Russia is expanding its ``occupation'' of the country. All Russian troops and hardware sent into Georgia on Aug. 8 will be pulled back into a peacekeeping zone by the end of the day tomorrow, Anatoly Nogovitsyn, deputy chief of Russia's General Staff, told reporters today in Moscow.
- The market for short-term debt backed by assets including mortgages and car loans jumped a seasonally adjusted 3.5%, the biggest gain in at least seven years, according to the Federal Reserve. The US asset-backed commercial paper market rose $25.4 billion to $749.9 billion for the week ended Aug. 20, the Fed said.
- Inflation’s Peak Signaled by Tame Labor Costs: John Berry.
- Fadel Gheit, managing director of oil and gas research at Oppenheimer, says oil prices are ‘inflated,’ should fall. (video)
- Russia risks running out of storage capacity for corn, wheat and barley after the best harvest in at least 15 years, threatening a government plan to expand agricultural output and exports.
- U.S. and Iraqi negotiators produced a draft agreement on how long U.S. troops will stay in Iraq and the scope of their mission after 2008, Foreign Minister Hoshyar Zebari said, adding that a process leading to parliamentary consideration will begin tomorrow.
- Oil jumped more than $5 as the US dollar slumped and worries over the potential of Russian pipeline disruptions rose.
- Dick's Sporting Goods Inc.(DKS) climbed the most in four years in New York trading after posting second- quarter profit that fell less than some analysts estimated.
- Bally Technologies Inc.(BYI), second- largest U.S. maker of slot machines, climbed as much as 6.9 percent in New York trading after reporting fourth-quarter profit rose 69 percent and reiterating its full-year forecast.
- Argentina’s government may increase price caps on crude oil, a measure that would lower profits for Exxon Mobil(XOM) and Royal Dutch Shell, who buy outside supplies for their refineries in the South American country, oil-pricing service Platts said.

NY Times:
- We have all the oil we need.

- Rumored iTunes Music Subscription: $130 Per Year.

Reuters:
- Apple Inc (AAPL) has agreed with Mobile TeleSystems on the sale of iPhones in Russia and retail sales will begin in October, a market source told Reuters on Thursday.

Alpha Bank:
- Russia’s economy will grow at a slower rate in the second half of the year because of higher borrowing rates in the wake of the country’s clash with Georgia and a slowdown in the construction industry. Interbank lending rates jumped as high as 10% as $7 billion left the country after Russia sent tanks into Georgia on Aug. 8. “The conflict with Georgia and the nervousness created by the government’s criticism of Mechel Steel have substantially damaged the economic outlook” in the second half, Natalia Orlova, Alpha Bank’s chief economist in Moscow, wrote today. Russia’s banking industry is already experiencing a liquidity shortage, with about $45.2 billion of tax payments looming in October. If capital inflow isn’t re-established in Sept., the central bank and the Finance Ministry will have to use “all the instruments available” to support the banking system, Orlova said. In the “worst-case scenario,” the central bank could be forced to cut the mandatory reserve requirements for lenders, which it raised this year to fight inflation, she said. Loans to the construction industry, particularly for residential housing, have become more expensive in the wake of the US subprime mortgage market collapse, Orlova said.

Het Financieele Dagblad:
- Higher prices are feeding into wages, European Central Bank Governing Council member Nout Wellink said.

Radio Television Hong Kong:
- Hong Kong Chief Executive Donald Tsang will make curbing inflation a priority, citing Tsang. Hong Kong’s inflation unexpectedly accelerated in July to 6.3%, matching the fastest pace in more than a decade.