The market continues its bull ran as the DOW ran to new recent highs Monday to close at 10,090. As the market continues to rally more and more bullish stock chart setups are popping up on my scanners. Here are 3 stocks that haven't yet broken out from their chart patterns but all have great potential if these trigger prices are hit to spark the breakout momentum.

Small Cap Stock Pick GSI:

Q1’09 represented a terrible time for Chinese steel companies with heavy losses reported. And the start of Q2 saw steel prices trending still lower before commencing a recovery in May that has since gained momentum without pause. As a consequence of firming prices China Iron & Steel Association (CISA) reported in June that its 72 largest members recorded combined profits in May of 1.262 billion yuan, $185 million, after a 7-month losing streak. After better prices in June, CISA members posted combined profits for the month of 3.55 billion yuan, $520 million - almost triple the May profits.

The GDP report stated that steel, cement and retail companies are seeing positive benefits from the stimulus plan. For this reason, the GeoTeam has perused through its database of U.S. listed China stocks to compile a list of small and microcap stocks involved with these industries. We also included stocks involved with the construction, real estate, housing and auto sectors.

Notwithstanding that the Chinese economy already contains inherent strengths and is highly competitive, it is gaining further traction from a $586 billion stimulus package announced by the government at the beginning of 2009. Of the $586 billion, $259 billion is allocated towards infrastructure, earthquake and housing with a further $219 billion allocated to transport and power infrastructure.

At the end of each trading week, our market direction radar scans the Hillbent 3000 universe (minimun average daily volume of 100k and largest 3000 market capitalization stocks) for the top 3 and bottom 3 sectors based upon aggregate performance and analyzes their winners and losers.

Using this weekly sector report on a regular basis allows Hillbent.com’s readers to efficiently monitor sector rotations and investor sentiment biases.

Market Analysis Commentary:  Relative Price Volume Momentum Tracks scans the Russell 3000 components for stocks that are moving up or down on relatively strong surging volume. Such stocks may signal institutional buying or selling and have a tendency to continue further in their current market direction. From a contrarian perspective, buying and selling on extreme volume also has a tendency to produce short term reversals of a stock’s market direction on the following day of trading.

Moving Up on Surging Volume

Bullish calls:

Wal-Mart (WMT): "I only like Costco…I like Wal-Mart … I like TJX and I like Urban Outfitters."
Costco (COST), TJX Companies (TJX), Urban Outfitters (URBN)
Qualcomm (QCOM): "…buy, buy, buy. It's going higher... congratulations, you go it, and I missed it."
General Steel (GSI): "I like the steel business in general."
United States Steel (X), Reliance Steel (RS)
Gran Tierra Energy (GTE): "I don't want you to run for the exits... Buy some more if it goes under $7."

• MGM mulls Manhattan. MGM Mirage (MGM) and Dubai World may join to buy Harry Macklowe's Drake Hotel site. The partners would assume $580M in defaulted debt and interest, and probably pay another $200M for the East 56th and Park Ave. site. "A Park Avenue address is prestigious and well regarded from a global perspective, and a globally recognized brand would be a good combination," hotel investment broker Mark Gordon says.
• Can Icahn seize Yahoo? Carl Icahn unveiled his Yahoo (YHOO) proxy slate (including Dallas Mavericks owner Mark Cuban), while Yahoo defended its board and its handling of the Microsoft (MSFT) bid. Paulson & Co. hedge fund said it bought 50M shares of Yahoo during Q1, and plans to back Icahn's dissident slate. Some think the group may already control as much as 30% of the proxy vote.
• Yahoo pressing Google alliance. Yahoo (YHOO) is in a big rush to seal a search-advertising pact with Google (GOOG), in part due to the pressure of Carl Icahn's play for its board. The companies say their planned "open platform" will allow others to serve up ads tied to keyword searches (this in order to overcome regulatory issues). But some analysts think the deal's structure creates a false sense of a level playing field that will in fact be dominated by Google.
• Weak data won't go away. Thursday's economic data kept recessionary concerns on the front burner. Industrial production fell 0.7% amid a 8.2% drop in motor vehicle output. Capacity utilization at manufacturers fell to 79.7% from 80.4% a month ago. The Empire State Manufacturing Survey fell to -3.23 from +0.63, while the Philly Fed's general business-conditions index improved to -15.6 from -24.9, although it remains in contractionary territory. Initial claims fell 1,000 to 365,750. Homebuilder confidence fell to 19 from 20 the past three months.
• More scrutiny at American Airlines. The FAA wants to know why American Airlines (AMR) mechanics were told to skimp on safety checks for damage due to lightening. American seems confident the move was permissible; if it's wrong, it could face stiff fines.
• Macy's banks on child's play. Macy's will announce plans to open FAO Schwarz toy boutiques in each of the 685 stores that carry kids clothing. Macy's says the deal will drive traffic. The big question is can FAO retain its exclusive image amid such huge expansion?
• Carmakers settle with CAW. GM (GM) and Chrysler (DIA) settled with the Canadian Auto Workers union in a deal very similar to the one hammered out by Ford (F) two weeks ago -- even though the two initially said Ford got the short shrift. CAW president Buzz Hargrove says he moved quickly, because things are only going to get worse from here on.
• Libor in focus. Fed officials and London traders who play a role in setting the Libor are in contact amid concerns the ubiquitous rate is lowballing the true rate banks are borrowing at.
• Lockheed locks up $1.5B gov't deal. As had been speculated, Lockheed Martin (LMT) won a $1.4B U.S. Air Force contract to build the next-generation Global Positioning System Space System program, known as GPS III. ITT (ITT) and General Dynamics (GD) are also participating in the project.
• Bernanke urges banks to borrow. Fed Chairman Bernanke is happy banks are having an easier time of raising funds, and wants them to keep doing so to repair their balance sheets and support new economic expansion. The most recent Treasurys offered by the Fed's new program drew just $7.24B in bids on an offer of $25B.
• Rio Tinto faces China censure. Chinese steelmakers may boycott Rio Tinto (RTP) amid accusations Rio is limiting contract-supplied iron ore in order to force them to buy at higher spot-market prices. A boycott could open up the door for smaller firms to break the virtual China iron-ore monopoly of Rio, BHP Billiton (BHP) and Vale (RIO).

Earnings: Thursday After Close

• Advance Auto Parts (AAP): Q1 EPS of $0.86 beats consensus of $0.78. Revenue of $1.53B in-line. Announces $250M share repurchase program to replace a $500M program which had $105M remaining. Shares: +8.75%.
• Autodesk (ADSK): Q1 EPS of $0.50 beats consensus of $0.48. Revenue of $599M vs. consensus of $589M. Sees Q2 EPS of $0.52-0.54 vs. consensus of $0.52. Shares: -0.4%.
• Beazer Homes (BZH): Q1 EPS of -$3.59 misses consensus of -$2.05. Revenue of $503M vs. consensus of $528M. Sees Q2 EPS of -$5.93, short of consensus of -$1.01, and revenue of $405M vs. consensus of $483M. Shares: -5.2%.
• BMC Software (BMC): FQ4 EPS of $0.63 beats consensus of $0.51. Revenue of $467M vs. consensus of $460M. Sees full-year 2009 EPS of $2.10-2.20, better than consensus of $2.09. Shares: +4.3%.
• Compuware (CPWR): FQ4 EPS of $0.23 beats consensus of $0.21. Revenue of $339M vs. consensus of $332M. Shares: -2.7%.
• General Steel (GSI): Q1 EPS of $0.06 misses consensus of $0.13. Revenue of $292M vs. consensus of $282M. Shares: -21.8%.
• Giant Interactive (GA): Q1 EPS of $0.20 beats consensus of $0.16. Revenue of $67.3M vs. consensus of $63.1M. Shares: -3.9%.
• Kohl's (KSS): Q1 EPS of $0.49 beats consensus of $0.44. Revenue of $3.6B in-line. Sees Q2 EPS of $0.70-0.74, in-line, and full-year EPS of $2.95-3.15, short of consensus of $3.11. Shares: -1%.
• Nordstrom (JWN): Q1 EPS of $0.54 beats consensus of $0.49. Revenue of $1.88B in-line. Sees full-year EPS of $2.65-2.80, short of consensus of $2.76 and down from a previous $2.75-2.90. Shares: +1.2%
• Quantum (QTM): FQ4 EPS of -$0.08 misses consensus of $0.04. Revenue of $229M vs. consensus of $241M. Shares: -10.1%.
• UTStarcom (UTSI): Q1 EPS of $0.21 beats consensus of -$0.10. Revenue of $586M vs. consensus of $550M. Shares: +4.6%.

Earnings: Friday Before Open

• Abercrombie & Fitch (ANF): Q1 EPS of $0.69 beats consensus of $0.65. Revenue of $800M vs. consensus of $808M. Same-store sales were down 3% from a year ago.
• Fairpoint (FRP): Q1 EPS of $0.19 beats consensus of $0.00. Revenue of $282M vs. consensus $143M.

Today's Markets

• In Asia Friday: Nikkei -0.23% to 14,219. Hang Seng +0.41% to 25,619. Shanghai -0.36% to 3,624. BSE Sensex +0.47% to 17,435.
• European markets are broadly higher at midday. FTSE +1.43% to 6,341. CAC +0.74% to 5,095. DAX +1.79% to 7,202.
• U.S. futures are up slightly from Thursday's close. Dow +0.11% to 13,009. S&P +0.18% to 1,427. Nasdaq +0.14% to 2,038.50.
• Gold is 0.98% higher to $888.40. Oil is up 1.78% to $126.35.

I have been investing for more than 25 years. And with quite a bit of success, I might say. I have a MBA from a name US school, and a degree in economics from Oxford across the pond. I have traveled widely, and know the world. I have taken a company public myself, and understand the stock game both from the perspective of the insider and the outsider.

Above all, I am not easily impressed. I tend to be skeptical by nature, especially when it comes to investing. However, the opportunity I see right now in Chinese micro-caps is the single most attractive play I have ever encountered in my many years of following the market.

Considering how the emerging markets were treated in November, it's not a surprise that I received several emails asking if I still regarded General Steel Holdings (GSI) as a long term investment since my support of it on November 6, 2007. My response is a resounding yes. When our globally interconnected markets swoon, it is important to consider your equities as a function of the new paradigm – this is an external view. It is also important to review if those equities still represent the spirit of why you originally chose them – study anew the internals.

The US might be entering a recession. Europe's economy might be slowing. No one knows for certain, although an opinion and a few bucks will certainly get you the average Joe's opinion. And while I believe in international diversification to hedge against regional bouts of underperformance, in many cases it is illogical to interpret low R^2 plays – viewed from within any regional market – as being nearly completely decoupled from the global environment. Something that studying international relations taught me is that the more interconnected we become as a collection of nations, the more likely it is that sympathetic propagations of similar sentiment will pervade financial networks. While an ailing US or Europe might not give the world the flu, those other billions of investing compatriots are likely to need some chicken soup.

With Monday's market swoon, I saw an opportunity to add to our holdings of General Steel Holdings (AMEX: GSI). Essentially a portfolio of steel companies, GSI holds controlling interest in Shaanxi Longmen Steel, Tianjian Daqiuzhuang Metal Sheet Co., and Baotou Steel, as well as serves as an acquisition vehicle for in-process and future steel-related acquisitions.

GSI's unique business plan revolves around acquiring government owned steel companies operating in niche segments of the steel industry – or companies enjoying near monopolies in certain geographic areas – and increasing their profitability and efficiency with "the infusion of applied western management practices, advanced production technologies, and capital resources." The cowboy factor is that GSI intends to acquire its assets by "leveraging [its] relationship with certain key people and local governments."

Traditionally the Chinese steel industry has been highly fragmented with over 1,100 separate players, most of which are still state owned enterprises [SOE]. Historically, many of these had low quality output and were uncompetitive compared to large global steel producers. The Chinese Government has declared that the country needs a strong indigenous steel industry capable of competing on a world stage. As such it has afforded Chinese steel companies certain advantages over foreign companies. The Government introduced plans to have the existing industry privatized and consolidated into a handful of efficient companies and also decided that antiquated plants must close. The closing of antiquated plants also ties into China’s plans to cut energy consumption and greenhouse gases by eliminating 55 million tons of inefficient steel making capacity by 2010. To further assist the local Chinese companies in their consolidation efforts the Government prohibited foreign companies from having controlling interests in steel SOEs. In essence, a highly attractive playing field has now been created for a select number of Chinese steel companies.

A Fresh Eye on China Stocks -- and Strip Clubs by Andrew Bary