Back on September 10th, the Micro Cap Press took an in-depth look at the impact of certain economic data on the market. One of the data sets we studied was the Michigan Sentiment Index…a general survey of consumer optimism. Though our bottom-line stance was the survey was more dangerous than useful as in investment tool, it still wasn’t worthless - you just needed to know its flaws.

In any case, we observed more often than not how a sharp plunge in the Michigan Sentiment readings coincided with a market bottom. That’s not to say the market hit a bottom on the same day the reading was announced, though it was usually the same month.

One qualifier….the overall mood of the market seemed to play a role. If the bigger trend was still bullish when we saw a low reading, it was almost always a great dip to buy into. The same is true even in a bear market - strong dips that coincided with low sentiment readings were still short-term buying opportunities.

If instead the plunge in the survey score occurred but the market wasn’t making a short-term correction, then the survey actually forecasted a market lull (most of the time).

In the current scenario, what we have is a market dip along with a low Michigan Sentiment Index reading, which is actually a bullish event. It may take a month or two to fully realize the potential, but the odds still favor it.

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It’s not necessarily amazing how a micro cap company with huge potential can start out as an unknown to the market. It is amazing, however, how and unknown micro cap stock can start out as an unknown – realize all of its potential (and more) – and still remain basically an unknown. Hurco Companies (HURC) has done that very thing…shares are up $2262% over the last five years, yet most investors still haven’t heard of the company.

We came across Hurco in a routine scan of small and micro cap stocks, searching for unknown names with good fundamentals that could make for great trades. The company certainly made the cut.

Hurco makes the software and tools used in metal cutting and forming. And apparently, business has been good since 2002. The company did just under $100 million in sales in 2004, $125 million in 2005, $149 million in 2006, and they’re on track to do somewhere around $184 million in 2007. Better still, they’re profitable. (What a novel idea!)

The ratios look good too, with a P/E of 12.8 and a forward-looking P/E of 10.2. Net margins are 11.2%, and quarterly earnings have been growing at 35.8%. A price/sales ratio of 1.5 rounds out the undervalued scorecard.

That being said, consistently reliable fundamentals aren’t a bullet-proof shield…HURC has taken some lumps of late - like most stocks have. The difference with HURC has been the rebounds…investors have usually been rewarded for stepping into a Hurco position when the stock dipped.

On the other hand, the most recent dip has been especially harsh, raising the question of whether or not this pullback would lead to a revival this time around. In a case such as this, most traders would say (and we wouldn’t disagree) to wait for the chart to make a convincing improvement before migrating back into this strangely undervalued company. If they can keep delivering what they’ve been delivering, we anticipate a rebound soon.

Side note: We suspect this weakness may have been prompted by worries of a recession. A company like Hurco may be the first to suffer if the economic reigns do get tightened. We’ll just say this…far more recessions have been predicted than have actually come to pass. If the market is collectively wrong again about an economic contraction, Hurco could recover in a hurry. So, you may want to keep it on an oft-seen watchlist.

Micro cap company Spicy Pickle (SPKL) continues to grow at a rapid pace, opening their 31st store last week, and signing leases for two more. The newly-opened one is the second one in Indianapolis, Indiana. A total of ten are on tap for the area. The two new leases were signed for pending stores in San Diego, California, and Austin, Texas. It’s the first store in San Diego, though twelve are on the way. It’s the third store in the Austin area.

As we’ve mentioned before, each store established in a new market is like a seed…the first one softens the ground, which means the following ones are well received. And in all cases so far, their popularity among consumers has had a positive ripple effect. We suspect this is the primary reason for such a brisk pace of growth right now.

Moreover, this early-stage company is why we feel SPKL is an early-stage investment opportunity. As more saturation occurs, the risk/reward dynamic of being a shareholder changes.

Speaking of shares, the pullback seems to have stabilized after a full 61.8% retracement of a historic run-up. Many traders would consider this a relatively safe ’second chance’ entry point, or perhaps a first chance for anyone waiting for all the early volatility to subside.

Additionally, the company reported quarterly earnings on Wednesday. No surprises really…the cost of ‘going public’ was built into the bottom line, making the loss seem substantial to anyone not reading the income statement closely. Those are one-time fees, and shouldn’t be a factor at all going forward.

Also, note that the company doesn’t book franchise fees until that store is open. Considering a significant number of stores were open after their reported quarter was completed, the ‘then’ doesn’t exactly reflect the ‘now’. More than that, the number of stores being opened right now is accelerating. We believe next quarter will be significantly stronger than this past quarter, and encourage you to focus on the future rather than the past for this micro cap stock.

Here’s the full press release on the store openings, while the quarterly fiscal information can be found right here.

Congratulations to all the former micro cap bulletin board stocks that recently graduated to a major exchange. Though they all clearly managed to grow enough to achieve the minimum listing requirement, we believe the following couple of companies have particularly interesting stories (i.e. they may merit a closer look).

Advanced Battery Technologies (GBT) moved from the bulletin board to the AMEX on October 9th. The build-up to the event was great for this micro cap stock, driving shares from the high $2’s to a high of $9.66 by the 8th of October. The event itself, however, was terrible for the stock. GBT peaked at $9.45 on the 9th, and has since fallen back to the low $6’s.

In our opinion, this chart was driven by hype and hope prior to October 9th. Unable to justify a too-lofty valuation once it hit the AMEX, it was reeled in. Now - with all the volatility flushed out - we suspect GBT will begin trading more consistently…and possibly higher

By the way, if you want big margins and huge top line growth, Advanced Battery Technologies may fit the bill. They swung to a profit last year, and have sustained that pace.

Uranium Energy Corp. (UEC) made a more palatable transition from being a bulletin board equity to an AMEX-listed stock. It went through the upgrade on September 28th with a little bit of a bullish push. Like Advanced Battery, it also pulled back afterwards. Unlike Advanced Battery, it’s managed to renew its uptrend and is now above levels hit just before it landed on the AMEX.

Owning UEC right now is pure speculation, as the number look anywhere from poor to just plain awful. We suspect it’s gotten a lot of attention based on Uranium predictions rather than on the company’s specific merits. But still, this industry’s stocks are an all-or-nothing proposition. If Uranium Energy Corp. can just win a proverbial lottery, UEC may well jump as a result.

Ever heard of a micro cap company called Broadcast International (BCST)? If not, you might - sooner than you realize, and the hard way. As part of our ongoing goal of spotting looming trends before they become obvious, the research staff at the Micro Cap Press has uncovered a potential problem with the U.S. government’s requirement that all television broadcasting soon be done in ‘HD’ format.

High-definition, digital video is indeed an improvement relative to current and previous formats. However, as the FCC-mandated standard changes to an ‘all HD’ mode, the country may be surprised that a bandwidth bottleneck is going to be created. In other words, the infrastructure (wires) needed for the United States to be an all-digital-broadcast system is not adequate.

The straight-forward solution is to install more capacity. It would work, but will take lots of time and lots of dollars. The alternative is better compression of digital broadcasts, which could utilize (but not burden) the current infrastructure.

Better compression isn’t a new idea. However, it too has inherent problems. Specifically, most of the digital sending and receiving hardware is designed to compress and decompress one video format - MPEG2. The problem is, MPEG2 may not be compliant with the FCC’s ever-changing ‘H.264′ high-definition standard in the future. If the H.264 standard changes to something besides MPEG2 (and it’s assumed it will), much of the current hardware may become obsolete. Moreover, the currently-preferred MPEG2 format still may not be compressed enough to use the current infrastructure’s bandwidth capacity.

The solution? Hardware that can adapt by upgrading the compression/decompression software in perpetuity. That includes the ability to make a complete switch of digital formats.

Enter Broadcast International (BCST). They’re working on that very technology. Click here to see the website and see for yourself exactly what it is they’re doing….and plan on doing in the future.

From an investment perspective, it looks as if at least some traders like BCST’s place in the race. The stock has moved from below $1.00 to $3.00 over the last three months. The volume behind the rally was significant too. Though the fundamentals don’t look great right now, it looks like the market is looking well into the future in trying to find the ‘right’ price for these shares.

Whether or not Broadcast International is the industry leader or has cutting-edge R&D, the misunderstood (and underestimated) problem of inadequate bandwidth could mean some company in this space is poised for explosive growth.

We’ll add details to the dilemma as we can. In the meantime, if you have thoughts, opinions, or other investment ideas related to the looming video compression challenge, leave us a note below.

Though gold mining stocks are in a league of their own relative to the rest of the market, investors may still do well to at least recognize a bullish chart when one could be forming. Granted, though nearly all of the recent strength in this group could be attributed to the recent rally in the price of gold itself, the prospect (no pun intended) is still a compelling one. One of these more compelling prospects we dug up is micro cap stock Minera Andes (MNEAF) - a gold mining equity with digs in Argentina.

Minera got our attention based strictly on the chart’s recent rise. It kept our attention when we noticed the distinctive up-and-down pattern over the last several months. If past history predicts the future, there may be a lot more upside in store for this bullish leg. The recent revisit - and subsequent cross above - the 200 day moving average line (black) also provides some perspective on how much more room there is for MNEAF shares to climb.

Speculative? Completely. Worth risking? Who knows? It’s not going to be an official trade or stock pick from the research department, though we still believe this stock - or other gold stocks like it - may be offering up a nice near-term reward…even if not for the best of reasons.

And speaking of the reason, this long-term chart of gold prices may clarify what all the chatter is about. Gold hit new multi-year highs this week. It has not hit all-time highs (around $850) though…and not even on an inflation-adjusted basis (around $2000, in early 1980)

Our take on gold? In the short run, it’s overbought. We may be seeing a dip in the very near future, which could take a toll on gold stocks (perhaps even a big one). In the longer-term, we think gold is going to rebound, and continue on its rampage. That rebound may not start for weeks though.

In the even-bigger-picture, we’re looking for this ‘two steps forward, one step back’ pattern to persist for months - or years. Each ebb and flow could be a good entry or exit opportunity. Why a longer-term uptrend? The ‘R’ word….recession. It’s back on the table as a possibility. Note that we’re not saying it’s going to happen; we’re saying the mere worry about it (and the effect it might have on stocks) could keep money flowing into recession-proof places like gold stocks. As you can see, there’s plenty of room to go before the psychological ceiling of all-time inflation-adjusted highs are reached.

Though the research staff of the Micro Cap Press generally feels that solid fundamentals are the foundation for a ‘good’ micro cap stock pick, we’re also more than willing to acknowledge how - sometimes - evidence of a stock’s strength can first materialize on the stock’s chart. One of the key bullish technical signals worth watching for is volume. Specifically, when the amount of volume increases while the stock is rising, it’s frequently worth a closer look at the underlying story.

With that in mind, we became curious about micro cap equity China Transinfo Tech (CTFO) over the weekend when we saw the volume behind Friday’s rally was nearly twice as strong as the stock’s previous record-volume day.

Moreover, we’ve seen a steady increase in volume over the last month, as the stock has started to move higher following a pretty poor Q3. Since October 1, we’ve watched CTFO move from $3.20 to $3.84. The technical name for the bullish volume trend is ‘accumulation’. Regardless of what it’s called though, it’s the kind of things shareholders usually like to see, as it hints of an accelerating uptrend.

What’s most interesting in this instance is how the volume has grown at a greater pace than the stock’s trading level….so far. After Friday’s volume data is processed though, we suspect there will be a great number of new interested parties. This has the potential to really rev the engines here, so China Transinfo Tech may be worth putting on your watchlist - if you’re looking for a speculative idea.

By the way, there were legitimate drivers for the stock’s renewed strength. China Transinfo Tech was awarded some major contracts by Oracle and the Chinese Transportation Information Ministry. It’s still unclear what kind of impact this will have on the company, but it wouldn’t be hard for this company to make a significant improvement of its recent fiscal results.