Dow Jones 11715.18 +212.67 1:06 pm PDT, August 28, 2008 NASDAQ 2411.64 +29.18 For info, visit access.smallcapnetwork.com S & P 500 1300.66 +19.00 Change your subscription status here Russell 2000 746.25 +13.30 VOLUME 08 : ISSUE 76 In This Edition... I know a lot of us are already gearing up for a long weekend, but we've got one more day left to go this week. So, I'm not hanging it up just yet. We've got two items I want to look at today...  You're Not Crazy - Small & Micro Caps Are On Hold  Our Next Small Cap Idea is Brewing  Also, be sure to take a look at the sidebar to the right. I had to rant a little (ok, a lot) about today's ridiculous revision to Q2's GDP growth rate.    Micro Caps March to Their Own Drumbeat If it seems like micro caps have been stagnant lately, it's because they have. That's not a bad thing or a good thing; it's just the way it is. As with pretty much everything else related to stocks though, that's likely to be temporary. Back to that in a second.  A quick glance at some data today really drove the point home with me.  Take a look at the nearby table, which compares the advance/decline data of all the major indices. Not in a stand-up-comedy kind of way, but I have to laugh. Bulletin board stocks just haven't gotten any real traction recently ... this table has been the norm quite often over the last few months.  There's a lesson to be learned in all of this, and an even bigger message to be delivered.  The lesson to be learned is simply not to try and squeeze blood out of a turnip. If small caps don't have it (any bullishness) right now, then they just don't have it. It's like trying to push a string from behind ... it doesn't work.  That's specifically why we added the Cogent (NASDAQ: COGT) trade to our mix in early August. It's still technically a small cap, but not of the bulletin board variety. Hence, it's been a little easier for it to get traction. In fact, Cogent is up about 12% since we picked it. Not bad for less than a month's worth of work.  So when might small caps get up off the couch and start moving again? That's the bigger message - if history repeats itself, we're on the verge of seeing it happen.  Using the Russell 2000 Small Cap Index as our test subject, we've found the best time of year for small caps is Q4. That's generally true for all stocks, but particularly true for small caps.  On average, the Russell 2000 returns 3.43% in the first nine months of the year. For the last three months of the year, on average, it returns 5.48%. And just so you know, the Russell 2000 Index is actually down a little for 2008-to-date. So, between the averages and this year's lag to-date, I expect the winds to be at our backs soon as far as small caps are concerned.  That being said, the time to capitalize on the potential rally is before it happens - not during. That means September could be an optimal time to step in (for all stocks, really) before things are apt to take off. Though it's not the entire reason we wanted to hold off on our next small cap idea, it never hurts to have all the planets lining up the right way.  Speaking of...    Alterative Energy Is No Fad I didn't want to let the cat out of the bag too soon, but as the time approaches for our next small cap trading idea I think it's time to start setting the stage.  I'm a perma-skeptic. That doesn't mean I'm a non-believer no matter what...it just means I base decisions more on facts than hope. That's why I've not been necessarily euphoric over every alternative energy name that comes down the pike.  If you were around in 2007 to any degree, you'll remember alternative energy stocks had a great year, with solar power stocks doing particularly well. Too much hype for your health? That's what I thought too, especially when the entire industry's stocks got blasted in just the first three weeks of this year.  The thing is, most of these stocks have recovered since then. The fact that they didn't go away tells me they're not a fad. So, when I dug deeper to find out what was really going on, I found what I suspected - many of these stocks are also profitable.  Just for fun let's use the Market Vectors Global Alternative Energy ETF (NYSE: GEX) as a proxy for the industry, since it holds a variety of stocks in the niche. It's cut its January loss in half, and is up 30% since its May 2007 inception. The rest of the market is down about 15% since then. Not a bad differential.  That's not to say a little bit of strength now is a reason to expect the same in the future. However, those stocks are moving higher for a reason.  Maybe the ETF is moving higher because the average stock in the Market Vectors Global Alternative Energy ETF is profitable. The average P/E is 25, and the average P/S is 2.2. That's hardly an 'introductory' performance.  None of this is a pitch for GEX. We're just making the point that the alternative energy is viable, has been for a while, and is more so every day. Pretty soon, we'll be giving you a specific ticker we like.      We Value Your Feedback   Got comments, questions or suggestions? Send 'em on over: Email the Editor If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 4653 Carmel Mtn Rd Suite 308 #402 San Diego, CA 92130 GDP's Upward Revision Only 59 Days Late By now you've certainly heard the good news - the second quarter's growth in GDP (gross domestic product) was actually 3.3% rather than 1.9%. Fantastic. However, in all fairness to Joe Investor, does it really matter at this point? This is why I'm interested in very little economic data any more....at least not the economic barometers. Woe to anybody who still puts their faith in it.  There's a short list of problems I have with the whole mess...  1) First of all, Q2 ended 59 days ago. We're only 34 days away from the end of Q3. Does Q2's data really matter any more?  2) Let me get this right....the government's first guess was only 1.9%, which was well under the initial expected growth rate of 2.7%. Then they come back later and so "Nope, sorry - it was actually much better than anybody even came close to imagining."? I know there are a lot of inputs, but that makes the initial calculation not only pointless, but dangerous.  3) Is this really data that investors can worry about? The reason I ask....if it is data we need to respond to, we could drive ourselves crazy. Take a look at the chart below, comparing the S&P 500 to the GDP growth rate over the last several years.  It seems to me there's not enough consistency in the GDP's change to actually make any real sense of it...at least not in terms of spotting a trend. Take a look at the chart by clicking here. If anything, the only discernible pattern I've seen is that market bottoms are made at incredibly low GDP growth readings, and market tops are typically made when GDP growth is through the roof. Kinda make the whole thing pointless, doesn't it?  Ah, but the media would never let reality and history stand in the way of the easy and quick story. If they're putting the 'GDP Revised Upward' story on the front page of all the finance portals, then it must be important for investors....NOT!  Lesson learned - there's always more to the story, and if you're looking for a journalist to provide you with context or a valid cause-effect relationship, don't hold your breath.  (On the other hand, I hear the guy over at the Small Cap Network is pretty good about looking at economic data and the real impact - if any - it has on your portfolio.)  Subscribe Information is power and timely information is profitable. Become informed and profit from Small Cap Network Profiles and Trading Alerts by becoming a Preferred Member today. There is no cost associated with your email subscription. Add your email address below and make sure to check your email inbox and confirm your opt-in request to start receiving the Small Cap Network Email Newsletter on a regular basis. 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