This week’s top performing sectors on a relative basis were Technology and Industrials with a gain of 1.45% and 1.33% respectively. The poor sector performers were Financials with a loss of 2.50% and Health Care with a decline of 1.06%. Additionally, mid cap and small cap value stocks lost 0.25% and 0.65% against growth stocks.

The week’s top performing sectors on a relative basis were last weeks best performing sectors Energy and Materials with a gain of 2.12% and 1.88% respectively. The poor sector performers were Consumer Cyclicals with a loss of 1.50% and Financials with a decline of 1.21%. Additionally, large cap stocks gained 0.20% and 0.39% against mid cap and small cap stocks.

Management also released its estimate of resource potential for selected areas outside the Axe Lake Discovery area (areas B and C in figure below) and for the adjacent permits in Alberta (area D in figure below) which is 3.0 billion barrels and 4.5 billion barrels respectively.

To summarize last week's action from a technical perspective: the triple bottom formation in the S&P 500 Index remained intact and the yield on 10-Year U.S. Treasury Note broke its downtrend it had formed over the past couple of weeks (see charts below). The main item on this week’s agenda is the start of second quarter earnings season. While the majority of reports really don’t kick in until next week, two big Dow stocks are scheduled to report in the next five trading days. Alcoa (AA) reports after the close on Monday, and General Electric (GE) reports before the open on Friday.

During the last week the Nasdaq climbed 2.4%, followed by the Russell 2000 with 2.2. The S&P 500 added 1.8% and he Dow 1.5%.

However, normally investors discard the first choice as they would have to care about warehousing and other costs of carry. Therefore, most investors invest through commodity futures contracts or through exchange traded funds which in turn also normaly hold commodity futures contracts. The return from a collateralized portfolio of commodity futures contracts comes from three main sources:

Total Return = Spot Return + Roll Yield + Collateral Yield

Despite a roller coaster at the stock market last week, in which the FED decided to hold interest rates steady, the Nasdaq finished the week with a small gain of 0.6% followed by the the Dow with 0.4%, and the S&P 500 with 0.03%. The Russell 2000 posted even a small loss of -0.2%. However, the wild ups and downs in the VIX last week indicate that the market participants are still nervous.

This week’s top performing sectors on a relative basis were last weeks poorest performing sector Utilities and Health Care with a gain of 1.56% and 1.37% respectively. The poor sector performers were Materials with a loss of 1.45% and Energy with a decline of 1.32%.

This week’s top performing sectors on a relative basis were Technology and Industrials with a gain of 0.87% and 0.62% respectively. The poor sector performers were Utilities with a loss of 1.72% and Health Care with a decline of 0.85%. Additionally, mid cap and small cap value stocks lost 0.70% and 0.74% against growth stocks.

• A sustained and strong world economy with China and India as its engines,
• Chinas and Indias unsatisfying appetite for natural resources and its result of rising dry freight rates,
• inflation fears which recently caused a bond sell-off around the world,
• and last but not least, huge capital inflows in passiv commoditiy investments.

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Inside the agricultural commodities group, Cotton looks the most promising commodity as it may be at the beginning of a sizable upward move as in the last 6 months Corn already exploded by 100% and Soybeans and Wheat each by 50%. Recently Art Samberg in Barron's Midyear Roundtable (2007) (subscription required) pointed out that:

At the same time, more managers view the market as undervalued than at any time since the survey began, although that number still trails those who see it as fairly valued. Those who believe the market to be overvalued has risen slightly, from 8% to 10%.

* "We believe a 25% increase in tanker equity values since early June versus essentially no change in the Standard & Poor's 500 index reflects shipping strength to date, but has not fully priced in further upside over the next six months."

* "We believe the forward six-month outlook could exceed consensus by 40% and support further equity value increases from 10% to 20%."

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Most importantly, there has been no significant increase in rents, which would be expected if the run-up in house prices were explained by the fundamentals of the housing market. Rents and home sale prices have always moved closely together, since families can freely switch between renting and owning depending on the relative prices, and landlords can sell off rental property if home sale prices rise substantially relative to rents. Rents had increased somewhat more rapidly than the overall rate of inflation from 1998 to 2002, and are currently rising again. However, these small increases in rents compared to the large increases in home prices, could indicate that the run-up in house prices is not being driven by fundamental factors in the housing market.

Although the company has incurred a net loss over the past seven years, now it seems to be the right time to invest in this company. In the last 6 months, CECO Environmental experienced an extraordinary demand of its products and services. Year over year, it´s revenues increased in Q1 by 62% and in by Q2 59%. The strong demand and improvements in it´s operating margin pushed the company into profitability, as it reported a net income of 0.12 cents a share in Q2.

Management holds more than 50% of the outstanding common stock of 12,8 Million shares and various hedge funds hold over 70% of the free float of 4.8 Million shares.

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Russia´s biggest company, OAO Gazprom (not listed in the U.S.), ranks as the world's third-largest company at $276.9 billion in Marketcap, behind Exxon Mobil (XOM). and General Electric (GE) and ahead of Microsoft (MSFT) and Citigroup (C). Shares of Moscow-based Gazprom, the world's largest natural-gas producer, have jumped 60 percent this year. The country's biggest companies outside the oil and gas industry include OAO Sberbank, Russia's biggest lender; OAO Unified Energy System, the national power utility; OAO GMK Norilsk Nickel, the world's largest nickel miner; OAO Cherkizovo Group, Russia's largest meat producer; and OAO Mobile TeleSystems, eastern Europe's No. 1 mobile-phone operator.

As the chart below shows, the latest up-move in the S&P 500 Index, which started on August the 10th and could be a bull trap, was led by Technology, Industrial and Consumer Discretionary sectors. This sector performance suggests, that investors anticipated a soft landing at that time.

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On August the 15th, analyst Jason Willey of Standard & Poor's Equity Research lowered his investment recommendation (sub. req.) on shares of CBOT to "strong sell" from "sell" and put a price target on the stock of $105. Currently 8 analysts have a "Hold", 2 a "Sell" and 1 analyst has a "Strong Sell" recommendation on the stock (Source: Thomson/First Call). However, despite the analysts´ reservation about the growth prospects of CBOT in comparison to it´s biggest rival the Chicago Mercantile Exchange (CME), the stock has outperformed CME with an year-to-date return of 26.8 percent.

On a trailing earnings basis BOT trades currently at an PE of 52 where CME trades at a PE of 45. Regarding this year´s earnings both trade at a PE of 39. On a forward looking basis, BOT trades at a slightly higher PE of 32 in comparison to CME which trades at a forward PE of 31 for 2007 earnings. To justify these high PE ratios, well above the price-earnings ratio of less than 20 on the average S&P 500 stock, both companies should exhibit the same growth prespectives.

Eddy Elfenbein noticed that stock prices still lag behind earnings growth. Therefore, he can´t think of a real bull market as price/earnings ratios decline. And J.D. Steinhilber highlights the fact that the S&P 500’s earnings yield is higher than the 10-year Treasury yield.

A deeper look into the market reveals that the recent break out of the S&P 500 could be a bull trap and the S&P 500 could soon resume its downtrend.

The warrants, which are cash-settled, trade at the AMEX under the symbol AAB (AAB) and were priced at their "IPO" for $6.23 each. The initial reference currency rates were as follows:

CNY: 7.9740
TWD: 32.8300
JPY: 115.0400
SGD: 1.5739

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The Baltic Dirty Tanker Index [BDTI] and the Baltic Clean Tanker Index [BCTI] which measure the dayrates for tankers have been rising since June 2006. The BDTI index, which measures the costs of hiring ships able to transport crude, rose 10.2 per cent last week, and is 42.8 per cent higher than last year. The index is up by an even sharper 51 per cent from April lows. The BCTI has been rising since April and is currently 45 per cent higher than last year and 68 per cent above March lows.

The S&P 500 (SPY) currently has a P/E ratio of 16.9 whereas the Russell 2000´s (IWM) P/E ratio is currently at 33, almost twice that of the S&P 500. Bloomberg estimates that the earnings of the S&P 500 companies will grow in the next 12 months at 14.8 percent whereas the Russell 2000 companies' earnings should increase by 42.9 percent, almost three times that of the S&P 500.

SPY-IWM 1-yr comparison chart:

John Hussmann pointed out in his weekly newsletter on July 31th:

Investors are tenuously sticking to the first story line – moderating growth with no risk of recession, moderating inflation, beliefs that stocks are reasonably valued, and hopes for an end to the tightening cycle. Yet the data are actually consistent with a second story line – emerging (though not imminent) recession risks, persistent “structural” inflation, rich valuations, probable contraction of profit margins, and an incoherent Fed policy that is likely to become even more incoherent in attempting to battle weaker economic growth and persistent inflation simultaneously (not that I believe Fed actions will be effective in any event).