Whew! It's a good thing we went ahead and decided to add JC Penney (JCP) to the portfolio in yesterday's newsletter, for purchase this morning. Although the stock gapped a little higher at the open, it rallied even more after that. Waiting another day would have really put us behind the eight-ball. Either way, the big catalytic event we were hoping to see from JCP materialized today, and odds are good the floodgates are going to open wide from here. The key ceiling - the brim-line of a cup and handle pattern - was $10.23, and though it wasn't an easy or clean fight, JC Penney shares closed above that level on Tuesday after peaking at $10.45. All it took was this last nudge. To be clear, it's unlikely JCP will perfectly rocket higher here without looking back. In fact, I've got a feeling the bears are going to push back as early as tomorrow. The bulls have tipped their hand though. That's all we needed to see. Hydrocarb Energy Gets Energized Speaking of stocks we like, though it's not officially in the SCN portfolio, maybe Hydrocarb Energy (HECC) should be. Heck, maybe it will be in the near future. To give credit where it's due, it was James Brumley who first made the point in his commentary about Hydrocarb today. We think he's 100% right too, about HECC getting a second wind and renewing the bullishness we saw so much of back on August 1st when we first told you about it. It's not too often we see a micro cap name remain this persistent. The ones that do tend to be the real deal, from a short-term trading as well as from a long-term investing perspective. The make-or-break line is still the $5.00 level, but I've got a funny feeling if HECC shares get back to another close above $5.00, the stock could be catapulted. Rather than chase it, we suggest you consider sneaking in now. As always, make sure you understand all the risks involved and never invest more than you can afford to lose. [Editor's note: HECC closed above $5.00 today, so.... we'll see.] As for the prompt for today's burst from Hydrocarb Energy, in simplest terms, it got some key funding. You may recall the crux of the near-term story when we explained it back on the 1st was, HECC is reopening some wells Exxon-Mobil abandoned in Galveston Bay, Texas, several years ago. Exxon didn't want them at the time because oil was too cheap to make the extraction of the remaining oil from these wells profitable. Better technology and much better oil prices in the meantime have changed the situation. Now it makes good fiscal sense to extract the rest of the oil at the sites. Prior to August, Hydrocarb Energy had only reopened about 30 of the 140 wells it had acquired. All of those well bores are opportunity, though, so it's mostly just a matter of going to get the oil still waiting there. Today's funding will allow the company to reopen several more of those so-far-untapped wells. If I recall correctly, the company is currently producing about 400 barrels of oil per day with its 30 reworked wells, and it plans to be pumping out as much 600 barrels per day by the end of the year. The debt financing announced today is what's going to make it happen. Hydrocarb Energy continues to impress us as a good mix of near-term recurring revenue potential (Galveston Bay) and a long-term big-hit prospect (Namibia, Africa). I don't recall the last time I saw an oil junior this well diversified with credible properties. Here's the initial look at the company, in case you missed it. Construction Activity Getting Back on Track We don't want (or need) to talk too much about it, but we do want to share a couple pieces of important economic data unveiled today. First up is July's consumer inflation rate. You may recall last week's report that the producer price inflation rate was an annualized pace of 1.7%, down from June's rate of 1.9%. The consumer inflation rate now stands at 1.99%, down from June's reading of 2.07%. At this point we can say with plenty of confidence that inflation isn't a concern. Not that the Federal Reserve had voiced this concern lately, but with the inflation beast being fully tamed, the Fed has plenty of wiggle room to keep on stimulating. One almost has to wonder if deflation is going to become an impasse, although we're still months away from needing to have that tough discussion. The other key economic numbers released on Tuesday were last month's housing starts and building permits. Both were up, and both were better than expected. Building permits jumped from June's pace of 973K to 1.052 million, while new starts grew from 945K to a pace of 1.093 million in July. This was a much-needed revival of deteriorating uptrends. There's one more major piece of real estate data in the pipeline for this week. We'll hear about July's existing home sales on Thursday. This trend has been fairly strong for a while, and while the pros believe we'll see a slight dip in the pace of existing home sales, it shouldn't be a trend-changer. Mr. Market Stays the Course We don't really have a lot to talk about today as far as the broad market is concerned. We figured Monday's breakout moves would see some follow-through, and they did. Although the NASDAQ is dancing with resistance in the form of its upper Bollinger band, we knew this was happening yesterday. Like we told you then, no big deal - the composite has proven it's more than capable of pushing its upper Bollinger band higher for days on end. We really think there's room for a little more upside on this front. The S&P 500 also ripped higher on Tuesday. Unlike the NASDAQ Composite, however, the S&P 500 isn't even close to bumping into any major resistance levels just yet. We've got our eye on the upper Bollinger band at 2000, and we're also keeping an eye on the prior high at 1991 as a potential resistance level. With a close of 1981.60 today, however, there's room to run here as well. Our outlook hasn't changed any since yesterday. On the heels of Monday's breakouts, the bulls bought themselves a few days worth of strength. The market's not in a position to stage any long-lived or far-reaching rallies though. Aside from the fact that all the indices are still in an overbought condition thanks to big gains this year, we're also entering a time of year that's unusually bearish... even more than in May, when the whole "sell in May" thing kicks in. I'll be the first to tell you the market's tendencies and averages shouldn't be traded blindly. On the other hand, the average returns from one month to the next are different for a reason. More important to us right now, the average returns for the months of August and September are too big to pretend like they don't exist. How so? The average September for the NASDAQ is the only loser among the twelve, and with the average loss being a fairly hefty -0.62%v for the month, it's not a tendency to overlook. The S&P 500 generally has its toughest time of the year in September too, with a typical decline of -0.64%. August isn't exactly a winner either; the large cap index loses an average of -0.24% in August. While we may be a little too "up" for the current month to end it in the red this time around, the averages don't bode well for the general time of year. We could still start to see some weakness in late August to get the September drubbing started. The market is particularly vulnerable to a pullback here and now, being so overbought. The good news is (and this is worth repeating from yesterday's newsletter), any August/September dip will be a great buying opportunity.