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With all the talk about Livemansion.com and the ‘Beer League’ movie, starring Artie Lange, it’s easy to forget Ckrush (OTCBB: CKRH) has some other projects going on too. In fact, one of them today got some serious backing for distribution in Canada. Peace Arch Entertainment, through its kaBOOM Entertainment division, has acquired the rights to distribute “National Lampoon’s TV: The Movie” in Canada.

This is actually a double-win for Ckrush. The first win is simply the idea of getting good sponsorship in a market that may otherwise be a tough nut to crack from the southern side of the border. And, Peace Arch Entertainment is no second-rate outfit…they have the rights to a whole library if impressive movie titles, while kaBOOM brings a high degree of marketing expertise to the table. So, even from just a revenue-based point of view, Ckrush is in good hands.

The other win is the message this kind of endorsement sends. The relatively small, somewhat unknown indie film company known as Ckrush is gaining a little more prowess every day. With each new layer of credibility, the company has a little better foothold in its market. And where the company goes, shares will follow. That’s not to imply this stock is no longer ’speculative’…it’s very speculative. However, the potential reward may certainly make it worth some risk.

Since our coverage began last month, we’ve seen shares trade in a range. The lower edge of the range is at 18 cents, while the upper edge can be as high as 40 cents (or more). It’s a little volatile, but the current price of 26 cents may be a relatively low entry level. It’s definitely worth a closer look.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

Back on August 15th we were singing a pretty positive tune about Network Installation (OTCBB: NWKI). After all, the company had just made a giant improvement in earnings and revenue, and a major debt restructure virtually eliminated all of the company’s potential share dilution. Better yet, Network was on track to repeat that performance in the future…what wasn’t to like?

Of course, if you were in a stock position before any of the news was released, then you’re probably still a little sea-sick. On the 11th, shares closed at 22 cents. On the 17th, they closed at 42 cents. On the 23rd, they closed at 32 cents. As of right now, they’re trading at 42 cents. That’s a heck of a lot of traveling for just a 19 day trip.

For those who can stomach the volatility - and even trade it - then congratulations…you did well. For anybody who is (understandably) hesitant to buy into volatility, or is worried the biggest piece of the potential gain was already reaped by someone else, then here’s your second chance. The stock has settled down now. All the would-be profit-takers, scalpers, swing traders, and nervous Nellie’s are pretty much done with their business, as the news has become a little stale. The volatility they tend to create is much less of a factor now. 

Left behind are the logical, rationale investors…which includes us to a large extent. And what do we see now? Just look at the chart. The stock survived all those wild swings, and has established a base around 33 cents. Back above the key moving average lines, and well above some significant resistance levels, we’d say it’s safe to get back in the water here. However, there’s still a little bit of lingering volatility, so you still want to be smart about your entry point.

In yesterday’s newsletter we took a look at crude oil futures. As a quick recap, our expectation was a very short-term price dip to somewhere around $67 per barrel, and then a rebound (again) of as much as $20. Of course, with crude priced around $69 and change at the time, we didn’t think we were quite at the bottom yet.

You may recall - and here’s the critical point - we said the short-term bottom would be marked by a media celebration of cheap oil and gasoline, with droves of people becoming certain we were permanently past our gas pump woes. In short, we felt (and still do) the price of crude would shoot higher only when the majority of interested parties thought that it wouldn’t. You know, expect it when you least expect it.

Well, we got our first major media installment of the ‘cheap oil’ chatter today, in a USA Today article. The link to the article appears below, but here’s a recap of the writer’s key points and quotes….

• Gasoline prices are falling fast and could keep dropping for months.
• “The only place they have to go is down,” says Fred Rozell, gasoline analyst at the Oil Price Information Service (OPIS). “We’ll be closer to $2 than $3 come Thanksgiving.”
• Michael Morris, analyst at the U.S. Energy Information Administration. “Wholesalers are trying to get rid of product. The growth in demand for gasoline has really tapered off,” he says.
• Petroleum traders, worried that prices are too high to last, are selling their holdings. That pushes prices down. They also believe hurricanes won’t disrupt Gulf of Mexico production, OPIS senior analyst Tom Kloza says.

What? Seriously? Those are some pretty bold statement from the same journalistic lemmings who said stocks were selling off yesterday on consumer confidence figures…all three major indices closed higher. Frankly, the article is a little incomplete, ignoring other major factors. However, it’s certainly fun to dream about, isn’t it?

Look, nobody would love to see cheap gas more than us, even if it means we were wrong about our call. But we would never - even in a journalistic way that didn’t include being held accountable - say anything with this much certainty. This amount of confidence is the arrogance we were warning you about. Point being, this kind of article indeed points to a bottom being made very soon.

Here’s the whole article. And just for the record, if we are wrong, the charts will tell us soon enough…and we’ll let you know about it right here. Heck, we may even be able to trade oil’s long-awaited breakdown.

Last Wednesday we mentioned Biocurex (OTCBB: BOCX) shares were being re-listed in the NASDAQ’s bulletin board system. Although nothing fundamentally changed about the company and its operations, for shares, getting rid of its pink-sheet status was bound to add an important layer of legitimacy…a crucial characteristic for any stock looking to move to the ‘next level’.

Well, BOCX closed out its last day as a pink sheet stock on Tuesday (the 22nd) at a price of 58 cents. As of right now, the price of 84 cents represents a 44.8% improvement in just four trading days. Like we said then, and as we’ll repeat now, where you’re listed can make all the difference. Fair and logical? Not a chance, but who said this dance makes any sense? All we know right now is that the bulletin board listing has been like night and day compared to its previous pink-sheet listing.

And yes, we still like the company. We’re encouraging investors to start looking for entry points on BOCX shares. One caveat though…the bid/ask data we’re seeing is either (1) non-existent, or (2) showing a ridiculously wide spread. Any bid/ask you see is probably not the actual selling/buying price at that moment. Real-time pricing data is tough to generate for any new listing…since right now, there’s only one market maker. The ‘last trade’ price (real-time or delayed) has been pretty reliable though. The point is, be strict with your entries. Use limit orders, and see if you can actually get some good real-time quotes from your broker (you may have to call) before you take any action. 

Note how Biocurex is trading at new multi-week highs, after breaking above key resistance at the 20-day and 50-day moving averages.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

Exactly one month ago today, Commerce Planet (OTCBB: CPNE) launched buydiscount.com…a subscription-based online discount club. Has it gone over with consumers? That would be an understatement. Several thousand new members have already been enrolled, with more and more being added each day.

If Buydiscount’s success mirrors that of one of Commerce Planet’s other arms, Onlinesupplier.com, then the company as well as its shareholders have a heck of a lot to look forward to. After all, the Planet has been on a roll - no, a rampage - when it comes to adding new members.

And speaking of that, now may be a great time to start adding shares to your position. Based on all sorts of good news and strong results, CPNE ran from 56 cents at the end of July to as high as $1.20 on Friday. Once that new high was hit, shares pulled back to as low as 86 cents. However, we also saw a strong mid-day rebound to push Friday’s close up to $1.01…so, traders are buying on the dip, encouraged by the support they saw around the 20 day line. The 20 day moving average has also served as support today, so from a risk-versus-reward perspective, this is about the most ’ideal’ entry point you could ask for.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

Not that it’s the end-all, be-all source of information within the financial world, but an article in yesterday’s edition of USA Today pretty much verifies (by an unbiased third-party) something we pointed out several weeks ago - auto manufacturers are a serious opportunity right now.

In the article (which you can read by clicking here), it becomes clear that the possibility of taking Ford (NYSE: F) private isn’t a totally crazy one. The Ford family owns 5% of the common stock, and 40% of the actual company. It doesn’t sound like much of a stake, but a few initiatives - at some expense, of course - could indeed make it possible. One of the analysts interviewed in the article even commented the company would benefit from not having all of its current shareholders to answer to…something any publicly-traded company would probably be interested in.

However, from our perspective, one of the other comments was the biggest head-turner. An analyst at the Center for Automotive Research (and no, we don’t quite know what that is either) said a private equity firm may value Ford shares anywhere between $20 and $40…something we don’t disagree with. Currently priced at $8, we know Ford’s stock is undervalued no matter which end of that $20-$40 range it’s actually worth. That’s why we mentioned Ford specifically in a blog entry a few days ago. We like the company more and more each time we see it take a step in the right direction. If you’re a little more adventurous, you may even look at Ford 2009 LEAPS. 

No matter what you do, if you’re in for the long-haul (which in this case, you should be), be prepared for some major corporate restructures. Obviously if Ford goes private, your shares will get cashed in at what should be a premium. But, don’t be surprised if the company’s divestiture of Jaguar, or the forging of new partnerships, also reshapes your initial investment. And, don’t worry if it does. In Ford’s case, the whole is NOT worth more than the sum of its parts…the ‘whole’ has actually proven to be relatively unimpressive. The ‘parts’ are better off on their own.

In the bigger picture, the story just validates a bullish stance we took on the auto industry back in mid-July. We said car makers were undervalued then, but they were also on track to correct the problem. At the time, the Dow Jones Automobile Index was trading at 158.13. Today, it closed at 177.85. That’s a 12.4% improvement over the five week period, and we think it’s just the beginning of the kinds of gains we expect to see over the coming months for the auto industry. With Ford setting the tone, we have to believe other manufacturers are also seeing a light at the end of the tunnel. Investors should too.

The promotional train just keeps rolling for Clearly Canadian (OTCBB: CCBEF), this time through broadcast television and radio outlets. The company was featured on a major Canadian business TV show last week, and has become an eight-week sponsor for a couple of high-profile radio stations in Canada. Once again, Clearly has managed to get a lot of promotional bang for a minimal promotional buck.

The television show featuring Clearly Canadian - via an interview with President Brent Lokash - was Report On Business Television, a program on one of Canada’s all-business TV stations. The show’s host, Pat Bolland, allowed Lokash to detail Clearly’s incredible turn-around story, and even share a glimpse of some future initiatives…which we can’t wait to hear about.

The radio sponsorships are more ‘visibility’ oriented. Clearly Canadian will be partnering with top Canadian radio stations JackFM (Vancouver) and FAN950 (Toronto), providing samples of their product at remote broadcasts and other events where the stations will be transmitting some of their shows. The company feels (and we agree) the demographic being reached by these radio broadcasts is the ideal audience…consumers who are apt to try flavored waters. The exciting part, however, is very simple - radio is enormously cost-effective.

Not that it needed much help, but we continue to be impressed by the work Clearly is doing to penetrate the market. A lot of companies would have stopped with where Clearly was a few weeks ago…once the turn-around was set into motion. That’s a dangerous mentality though, and a trap Clearly Canadian isn’t going to fall into. They know promotion is a constant, full-time job, and no stone can go un-turned. That’s the attitude that separates the ‘good’ from the ‘great’ (and Clearly is the latter).

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

In Tom Peters’ book The Circle of Innovation, he wisely warns a company can’t shrink its way to greatness. We generally agree with the idea…there is rarely a reward for the timid. But, in some cases, you have to know when to take a step back to take a step forward. In that light, we applaud Ford’s (NYSE: F) decision to scale back their…well, just about everything. Yesterday we saw detailed initiatives of salary cuts, plant closures, and job reduction. Today we learned fourth quarter (2006) unit production would be pared by more than 20 percent…in line with yesterday’s news. 

We know, we know…less production = less cars = less potential revenue. The formula by itself makes Ford shares more than a little worrisome right now. But, perspective (as always) is everything. If you can’t sell every care you make at a profit - if you can sell it all - then you’re losing mre money by even making it. Until they can make a great car they can sell a lot of, Fors is indeed making the right move here. By the way…the market agrees. Ford shares are up 26.7% over the last four weeks. You know what else? We think it’s just the beginning - not just for Ford, but for all the auto manufacturers.

We finally saw the capitulation move for all these companies about a month ago, when they all - especially the big three American manufacturers - decided the old way of doing things clearly didn’t work. Oil is too expensive to focus solely on gasoline-based cars, and American cars just didn’t excite American consumers the way foreign cars have for years now. So, it’s back to the drawing boards. These companies really have nowhere to go but up…and the same goes for their stocks.

So once again, we’ll pound the table on auto-manufacturers. The Dow Jones Automobile Index chart is worth a thousand words, so we won’t bother repeating ourselves here.

How do you go from being the worst sector in the world, and within a month, to being the hottest sector? It seems unbelievable, but telecom did it. The six-month loss of 20.4% (the worst of all sectors during that time) has been muted by the one-month gain of 8.7% (the best of all sectors during that span). And keep in mind, the six-month return figure actually includes the heroic gains in the last few weeks. Had it not been for the 8.7% rebound, the six-month results for telecom would even be worse than what’s cited here.

Are there justifiable - or at least quantifiable - reasons for the big reversal? Sure, there always are. But it’s also more than possible to over-analyze things in search of justification. Often, the reason for such a recovery move isn’t perfectly clear until after the fact. A sector rotation strategy isn’t rooted so much in the ‘why’, but more in the ‘what’. Although telecom companies may feel a little shaky on the surface, it doesn’t change the fact that their stocks are moving higher now - in a pretty big way.

That said…

Telecom stocks are not immune to overall market weakness. And, as you’ll read in today’s full newsletter, the market is likely headed into a storm…or at least a squall. This will generally push all stocks lower, including telecommunication stocks. However, it still doesn’t change the fact that the sector has been revealed as a potential breakout candidate…one definitely worth the risk. When the market looks like it’s finally landed, we’d be fishing for telecom stocks first. And, there’s even a chance some of the high-powered names in this group could overcome a bearish environment - and move higher in spite of it.

Names worth considering are the usual suspects….Verizon (NYSE: VZ) and AT&T (NYSE: T) and BellSouth (NYSE: BLS) for sure. Or, if you’re felling a little adventurous, maybe a smaller company like Qwest (NYSE: Q) or the relatively unknown Embarq (NYSE: EQ) would be of interest. But to reiterate, if you’re buying in right now, you’re probably buying in at a short-term top. You can be a little picky with your entry point.

To say oil futures have been whipped around lately would be an understatement. An armed clash in Lebanon put the OPEC supply in question, pushing the futures higher, only to be followed be an oil selloff on the news of a cease-fire. Sandwiched in between those two events was a thwarted terrorist plot, which sent oil prices tumbling, followed by a quick rebound for oil when it became clear air travel wasn’t going to come to a screeching halt. All that pushing and pulling is enough to make a trader tired, even though it provided some great trading volatility.

With all the external pressures put in the past (or at least put on the table), what does it mean for oil now? As always, the best way to find an answer is in starting with chart. A weekly chart of light crude oil futures appears below, and tells us pretty much all we need to know. (By the way, the full-sized futures we’ve charted are ten times the actual amount of a barrel of oil. So, don’t get confused by what appears to be an astronomical price.)

It’s really quite simple…oil prices have been sinking since mid-July. It all started with a long-tailed bearish reversal spaced out between July 7th and 21st. Despite a brief surge last week, the downtrend is still intact. In the meantime, we have a stochastics chart as well as a set of MACD lines telling the same bearish story.

To what extent could the downtrend send light crude oil prices lower? The long-term support line plotted below is currently at 6550 (or $65.50 per barrel). That’s well under the current price of $72.45, but it wouldn’t be any different than some of the corrections we’ve seen since late 2004. By the time the futures get that low, though, the price may be somewhere around $66.

Tis the season…earnings season, that is. We’ve highlighted the earnings results of Execute Sports (OTCBB: EXCS), Biocurex (BOCX.PK), CEL-SCI (AMEX: CVM), and Network Installation (OTCBB: NWKI). However, there are a few more of our companies with recently-submitted results to review. They’re all listed below, with a quick summary, as well as a link to the full quarterly report.

Novelos Therapeutics (OTCBB: NVLT) reported a loss of 4 cents per share for their 2nd quarter of 2006, versus a 5 cent loss for the same quarter a year ago. For a six-month period - the first half of their fiscal year - a per-share loss of 8 cents is a penny better than the 9 cent loss for the equivalent period last year. For the full 10Q, click here.

Sense Holdings (OTCBB: SEHO) posted a loss of 1 cent per share for their most recently-completed quarter - the same loss they saw in Q2 of 2005. On a six-month basis, the 4 cent loss is 2 cents greater than the loss incurred for their first half of last year. For the full 10Q, click here.

Xtreme Companies (OTCBB: XTME) filed a 30 cent quarterly loss, compared to a 3 cent loss for the second quarter of last year. On a six-month basis, the company incurred a per-share loss of 85 cents, versus a 10 cent loss in the first half of 2005. For the full 10Q, click here.

In all cases, don’t assume the current numbers tell the whole story. Read the fine print, and read the news. Case in point - Network Installation. A year ago, the company had no earnings, but was incurring a lot of debt. The books didn’t indicate a major acquisition was being made, however, so the stock spent the better part of the last twelve months moving lower. Had you read the non-numerical information, you would have known about the acquisition…and you would have been paid well for it. NWKI shares are up 72% in the last two days, on earnings news. Very few people saw it coming. Needless to say, we’re glad we were watching it closely, and told you about the opportunity earlier this year.

The idea is particularly applicable to Xtreme, which posted dreadful numbers. The thing is, those figures also include some key accounting adjustments. You should also be aware the company has undergone a major overhaul in recent weeks, and is now operating under a strategic plan quite different than the one that yielded its six-month results.  

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

After the S&P 500 put up a 1.37% gain during Tuesday’s trading, a lot of pundits - and investors - were chomping at the bit, thinking finally, this was the ‘big one’. Well, nothing would please us more, but we’d be doing everyone a disservice if we didn’t at least provide the counter-voice of reason. Not that we’re infallible, but we see a problem with Tuesday’s strength, and any potential follow-through.

Take note of the CBOE Volatility Index (or VIX). We haven’t talked much about it here at the ‘Digest’ recently, but only because there hasn’t been much to talk about. However, as of Tuesday, the VIX got a heck of a lot more interesting - and not in a bullish way. In simplest terms, the VIX indicates, much like it has for weeks, an inordinate amount of confidence and complacency. If you’re thinking ‘So what?’, here’s why it matters…any decent rally starts when investors are more fearful than confident. The recent VIX chart, as you can see below, has verified this several times this year already.

Without getting into the mechanics of it, just understand that a high VIX (relatively) indicates fear/worry/concern, while a low VIX indicates complacency and confidence. With that in mind, take a look at the chart below…the S&P 500 is on top, and the VIX is on the bottom.

See anything odd? All four of the short-term rallies (April 18th, May 24th, June 14th, July 18th) in the last six months were started when fear was peaking. For the VIX, a reversal bar back under the upper Bollinger band could be considered a technical peak. You don’t have to look too hard to see how the VIX peaks coincide with the S&P 500’s bottoms.

Clearly, this is not the same scenario we have behind Tuesday’s rally. Where’s the fear? The mini-capitulation? Since the buyers never rushed out, there really aren’t any out there to rush back in, like we saw in the prior four instances. If anything, we’ve got the opposite scenario, where the VIX is indicating an enormous amount of confidence (e.g. ‘too much’). Truth be told, the current chart has more bearish implications than bullish ones.

As we said, we’re not immune to being wrong. However, if we’re wrong about this, it will certainly be against almost all the odds.   

Biocurex (BOCX.PK) submitted quarterly results yesterday, reporting the same per-share loss of 1 cent they reported for the same quarter a year ago. On a six-month basis, the loss was narrowed considerably. For the two quarters ended in June of 2006, Biocurex posted an operating loss of $942K (or 3 cents per share). For the same six-month period a year earlier, the loss was $1.5 million (or 5 cents per share).

Take a look for yourself.

Considering there’s no revenue to work with, the numbers are actually pretty impressive…it’s never easy to cut costs, with or without revenue. Of course, that brings up another important point about the opportunity - shares of Biocurex should be owned not for current results, but for potential future results. As a reminder, Biocurex is the sole creator and licensor of the RECAF prostate cancer test, which has been proven to work so much more effectively than current PSA tests. As we’ve said before, it’s a true medical breakthrough…and a reason to patiently own shares.

And speaking of the stock, no, it hasn’t exactly been easy to own lately. But then again, this isn’t an easy game. There is some comfort in the fact that the current price of 55 cents is also - mostly - an established support level. On the weekly chart below, you’ll see we’ve not edged under that line despite a few attempts recently. And, you can also see it was a significant bounce point in mid as well as late 2004. So, it may not be a bad time to start testing the waters, so to speak.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top left corner…and don’t forget to respond to the confirmation e-mail.

Over the course of the last several weeks, we’ve touched on several of Execute Sports’ (OTCBB: EXCS) initiatives designed to get top line growth going, so the bottom line earnings line would get out of the red. Today, the quarterly results release tells the story…Execute made some huge progress. The company’s 2nd quarter loss narrowed from $2.5 million in 2005 to only $1.0 million in 2006. On a per share basis, an 18 cent loss from a year ago is now only about a 5 cent loss. The six-month results are about as equally dramatic.

While the sales and marketing enhancements are a key part of the turnaround plan, Execute did just as well (maybe better) at cutting out the expenses from the middle portion of the income statement. The trend bodes well for the company, and for shareholders. As aggressively as the company is promoting itself, opening new lines of business, and fostering new distribution networks, we don’t think it’s going to be long until the scales are tipped towards profitability. Of course, to reap the full benefit of that, you’ll want to own shares before then.

To get the whole scoop, click here.

After the market closed Monday, CEL-SCI (AMEX: CVM) reported its fiscal Q3 earnings. The per-share loss was around the expected 2 cents, versus a 1 cent loss for the same quarter a year ago. As for dollar amounts, the most recent quarter’s loss was $1.3 million versus a $650K loss for Q3 of 2005. The year-to-date loss (through fiscal Q3) is $3.6 million versus $3.0 million for the same nine-month period a year ago.

For some perspective, the moderate difference between then and now is not so much the result of something the company did or didn’t do, but rather, income from derivative investments in 2005. Besides, the money counted as ‘revenue’ for CEL-SCI is almost entirely grant money, which can be a little inconsistent at times (more on this below). In other words, the actual ‘operating’ revenue and expenses wasn’t all that different…it’s just that the ‘last year vs. this year’ standard is a little unfair.

As for what to make of it, don’t panic here - this isn’t a surprise, nor is it unusual. It’s the nature of the beast when a company has a new drug still in the midst of the approval process. If Multikine lives up to its potential - as testing suggests that it could - the company’s past results and the company’s future results will be like night and day.

Plus, don’t forget how CEL-SCI scored a major financing deal in the last couple of weeks…after the end of the Q3 results being discussed here. Over $8 million was added to the operating fund. It wasn’t grant money per se, but funding is funding when it comes to paying for drug testing. The company’s balance sheet looks a lot better now than it did at the end of last quarter. And perhaps more importantly, the re-loaded cash supply will help accelerate Multikine through its current Phase III testing, and get CEL-SCI into the black soon.

Just a couple of quick observations, and a ‘lesson learned’ from it…..

Last week, after the terrorist airline bombing plans were thwarted, airline stocks got crushed. The rationale was (and a fairly logical one) that renewed fears of such threats would keep any would-be passengers away from the airports for a while. Simultaneously, the price of oil fell sharply, rationalized by the media’s notion that weaker demand for air travel would translate into much less demand for oil (i.e. jet fuel). The implication was the two should move hand-in-hand. Well, oil is hitting seven-week lows today, while the airline stocks are up an average of 1.0%. What happened to the media’s fear-driven exodus from the airports, or airline stocks? For that matter, what happened to the commonality between oil and airlines?

In an even earlier headline last week, gold’s demise was blamed on the renewed strength in the U.S. dollar. While it’s true one was rising while the other was falling, to say one caused the other is not entirely true. Otherwise, how does the media explain the simultaneous rise in gold prices as well as the U.S. dollar index between 09/05/05 through 11/16/05, and between 7/7/06 and 7/17/06? Or, how can they both fall b

etween 5/19/06 and 6/2/06? How does the decline of one sometimes push the other one higher, while other times they move in tandem? 

We’re not surprised about the media getting it (ultimately) wrong - we see it all the time, and we assume anybody reading this knows the same. What we’re a bit surprised about is how they still attribute a cause to an effect. Superficially, it’s always a logical explanation, but clearly, it’s also a dangerous game to play. Rarely is the media held accountable, despite the fact that they can be misleading.

The lesson learned is this…assume nothing. Just because a reporter says it is so does not make it true, or useful. As we saw in just these two examples, there’s a much bigger cause at work than the easiest cause/effect explanation usually offered by the media. More often than you may want to believe, the cause/effect is more coincidental, and dependent on an entirely different factor.

Execute Sports (OTCBB: EXCS) announced today the addition of Craig Warner to its vest and wetsuit team, as well as the Kampus Footwear team. Warner, a tough personal watercraft competitor, is on the leaderboard of the American Power Boat Association season standings. More than that, he’s within striking distance of the title, with only one race to go before the world championships.

Associating with a winner is important for any company, if only for sheer publicity reasons. But, bringing Craig Warner into the fold actually opens up a few new doors for Execute. Prior to signing Craig, most of the company’s publicity focus was within the world of wakeskating and wakeboards; there was no personal watercraft icon for Execute to tout. Now, there is. While it may still be a niche market, brand loyalty and name-association are powerful forces in the action sports arena. In other words, this is a big deal.

Although it’s not the only reason, this is yet one more reason to purchase EXCS shares. The current price of 13 cents is a bargain, and we’re seeing some support here after July’s tumble - the dip may be over. Plus, the stock is very oversold, and ripe for a bounce.

On Friday, Network Installation (OTCBB: NWKI) released news of a major re-structuring of its debt - for the better. All we knew then was the convertible debentures and 5.7 million warrants owned by Dutchess were being cancelled, and replaced with a straight-forward, low interest rate loan. Of course, it was good news for shareholders even without any more details.

Today, however, the company released those details…and the new deal looks even sweeter for NWKI owners. While we’d love to be able to tell the story ourselves, this part of the press release sums it up about as nicely as anything could…

According to Hultman (Network’s CEO), highlights of the restructuring plan include:

• Removes potential for up to 50% shareholder dilution.
• $9.1 million in debt converted into $7.5 million.
• 5.7 million warrants retired.
• $900,000 payment due in September 2006 has been reduced to $780,000 at
  7% interest termed out over two years beginning in January 2007.
• All debt reduction was achieved without use of any cash.

Could you ask for anything better? A large piece of the debt was literally just wiped away, and the potential for a major share dilution was cancelled. And the cash cost for all this? Zilch. We had to read it twice to make sure we didn’t miss anything…and we didn’t. It’s just a great deal.

Click here to read the full press release.

As for the stock, the news is being well received. Shares are up 18% today (so far) on very strong volume, which has the potential to lay the groundwork for a longer-term breakout. Obviously now would be a good time to add - or add more - shares of Network Installation to your portfolio.

By the way, be sure to closely read the linked press release above. Jeff Hultman makes a subtle mention of strong 2nd quarter results, and a record-breaking first half of the year. The official Q2 results are not yet out, but the recent revenue and earnings trend for NWKI has been very positive. 

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top right corner…and don’t forget to respond to the confirmation e-mail.

Although we tend to be logical and systematic here at the SmallCap Digest, there comes a time when you have to get a little touchy-feely to make much sense of the market. Last week was one of those times. Stocks had plenty of reasons to rally, but just didn’t. As a review….

• The Fed didn’t raise rates, the trade deficit was down, retail sales were up, and a cease-fire in Lebanon was announced: The reaction each of those days? It should have been bullish, but stocks sold off.
• A terrorist threat became public news. The reaction? Stocks actually rallied on the news. Yes, since the plot was thwarted, investors celebrated, but it doesn’t look like many of them realize how close we actually came to another disaster. The reaction, although bullish, was a bit backwards.

With the exception of the disrupted terrorist plans, investors ’sold on the news’. Is there a clue there? You bet. As we’ve discussed before, news events are the justification investors need to take the action they’re going to take anyway. So, the reaction to news is much more important than the news itself. Why? The same news can lead to different responses, depending on investor mood at the time the news is released. In that sense, there’s little to no predictive value in trying to guess how the market will respond to any event…as we saw above.

The real value of using the news is in monitoring the response to it, since it’s likely to tell you where investors are trying to take the market in the near future.

We’re up today (as of 10:30 am EST), but last week’s weakness is rather telling…of more weakness ahead. Stocks will have to do a lot better than they are right now to unwind all this selling pressure.

This morning, Sense Holdings Inc. (OTCBB: SEHO) announced the completion of phase one testing for a biometric and explosive detection device. The goal of phase one testing was simply to verify the hand-held detection device worked, and to demonstrate its ease of use by airport and law-enforcement personnel. The passage on to phase two does indeed mean phase one testing results were positive. During phase two, the device’s sensitivity and signature analysis will be enhanced by the Department of Energy’s Oak Ridge national Laboratory (or ORNL).

Having not looked at Sense Holdings in a while, there are a couple of key points which you may want to be reminded about - all of them positive. First and foremost, Sense is the developer and sole commercializing partner of the MEMS-based (Micro Electro Mechanical System) technology used in the detection device, meaning nobody but them has manufacturing rights. Second, the potential market for these devices is huge. If the device works well - and it apparently already has - every government agency, police department, and branch of the military will have a need for them, not to mention the FAA.

This is one of those times when there’s a light at the end of the tunnel, proverbially speaking. We knew Sense’s success largely depended on successful phase one testing, but we also knew the company had the right technology and people to accomplish what they set out to do. Today, it came to at least partial fruition.

Shares are trading higher on the news, but the timing of the phase one completion couldn’t have been any more appropriate, even if for a somewhat frightening reason. With a terrorist bomb scare that threatened to blow up several planes en route between the United States and Britain. With renewed worry and increased sensitivity to terrorist bombings, companies like Sense are coming back into focus. We don’t want to call this a breakout or recovery move just yet, but we will point out this is what breakouts usually look like when they start…a high volume surge in sharp contrast the prior trend.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top right corner…and don’t forget to respond to the confirmation e-mail.