Another shaky day for the market today, which we largely attribute to President Obama’s somewhat-alarmist Congressional address Tuesday evening.It’s an unfortunate response, in that his recovery plans - though costly and ambitious - could be effective. And, consumers as well asperception is at least as important as substance. We didn’t get any plan specifics, nor did he inspire hope. It would have been great had he done both; we would have been happy with one or the other. He did neither though. So, we’re pleased to see even a partial rebound later in the day. enterprises should be able to survive the new plan. However, his speech didn’t recognize that

That said, don’t dwell on the response too much. Any pessimism taken on today will be wiped away by the next mood-changing news. It could be good or bad, but either way it will replace the current mood pretty quickly. (Hopefully, it will shift the market into an optimistic mindset.)

In the meantime, there are some groups and stocks moving higher despite Wednesday’s pullback. Many of these trends have been in place for a while, and they look like they could persist for a while longer. In other words, they may be trade-worthy.

Here are this month’s biggest winners so far that (1) don’t look overbought, and (2) look like they could keep moving higher for a while.

Large Cap Metals & Mining

Up 14.8% MTD, and up 4.4% on Wednesday. The group has been ebbing and flowing since December, but the lows have been getting higher. Freeport-McMoRan (FCX) and Rio Tinto (RTP) look like your best bets here. Like the industry index itself, both stocks are contending with a near-term ceiling/resistance line. If they break down, the group could explode to the upside.

Large Cap Entertainment Software

These names are up 8.5% so far for February, and flat for the last couple of weeks. However, some of the largest large cap game software stocks really look enticing. Activision-Blizzard (ATVI) has turned higher after a terrible end to 2008. Electronic Arts (ERTS) look like it’s trying to. Konami (KNM) was destroyed starting at the very beginning of the year, but may be poised to bounce. KNM would still be fairly speculative though.

Large Cap Automobile Manufacturers

Don’t ask us…. we don’t get it either. Auto makers are up a hair for the month, but are up 30% week-to-date. Of course, when your stock has been reduced to the single-dollar level (if not sub-$1.00), then it doesn’t take much to generate a big percentage gain. This is the least likely trend of all the ones we’re looking at today, and should not be entered without a great deal of caution.

Mid Cap Healthcare Facilities

This group is up 5.7% month-to-date, which isn’t really a lot. However, what these stocks lack in high-octane power they make up for with reliable consistency. The Mid Cap Healthcare Industry Index is up 16.8% since the end of November. That’s still not tops among all the mid cap industries, but it’s a really good looking chart…. it leaves the group with somewhere to go. Universal Health Services (UHS) and Community Health Services (CYH) are leading this slow-but-steady rally.

Mid Cap Specialty Stores

It’s 6.2% gain MTD isn’t huge, and is even less impressive knowing that 2.2% of it came today. However, this chart looks a lot like the Large Cap Metals and Mining chart… oh-so-close to a breakout. The highs are flat, while the lows are getting higher. Something’s got to give sometime. Try PetSmart (PETM) if you’re looking for a leader.

Small Cap Tobacco

We already mentioned this trend a couple of times in recent blogs, so we’re not going to go into a lot of detail now. We’ll just point out that the Small Cap Tobacco Index is up 36.6% so far this month. Alliance One International (AOI) is the reason.

Small Cap Homefurnishing Retail

We also mentioned this trend recently, citing Kirkland’s (KIRK) as the leader of the pack. Williams-Sonoma (WSM) has been coming on strong lately though. The group is up 13.6% month-to-date.

Small Cap Household Products

How about an 11.2% gain so far for February? Not bad. It’s not great, but not bad. We like the reliability of the trend. There are dozens of stocks in this group in almost as many segments. Just think “consumer staple”.

Here’s a quick glance at all of these charts. As you can see, they’ve all got existing or emerging technical strength….which right now is at least as important as strong fundamentals.

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Odds are you heard a lot about Secretary of State Hillary Clinton’s recent trip to China. However, you may not have heard about a side trip she took while she was there…. a visit to one of China’s energy-efficient power plants. Though there never seems to be enough publicity when it comes to a theme you’ve invested in (i.e. China Energy Recovery and waste heat), this exposure was a relative victory - the waste heat opportunity was at least exposed to a few new investors who are hungry for anything that’s profitable right now.

It was the perfect set up for a recent article penned by China Energy Board Member Roger Ballentine … Clinton’s visit highlighted the benefit of waste heat recovery, and Ballentine’s article at www.renewableenergeworld.com pin-pointed exactly how investors could tap into the trend. In fact, we attribute most of Monday’s and today’s rally from CGYV shares to the article, as that’s when it first appeared at the website.

If you’re interested, you can check out his article “China Offers Tips on Using Energy More Efficiently” at the Renewable Energy World site. It probably won’t reveal any new ideas to those already familiar with the company, but in reading it, it’s easy to understand how newcomers could be excited enough to buy into the company, hence the recent rebound. It was a much-needed rebound too.

Despite the nice move, the stock has still been stagnant over the last four months. There have been plenty of ups and downs, but on a net basis, has gone nowhere since early November. In that light, CGYV still has some hurdles to work past before any investors need to get excessively excited. Some traders are watching the $2.00 mark as a line in the sand, while others say $2.20 needs to be cleared before the stock has broken out of its rut. A move above $2.20 would mean new multi-month highs are being hit.

Either way, Roger Ballentine’s article stopped last week’s bleeding. From here the bulls can at least attempt to recoup some of the recent pullback.

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Since it’s been a pet project of ours for a while, we wanted to refresh our discussion of wind energy; a lot of things happened - in a good way - for the wind energy industry in 2008. This lays an interesting foundation for investment opportunities in 2009 and beyond.

We won’t be able to talk about everything in one blog entry. In fact, it will take a series of commentaries to really jump-start the kind of detailed discussion we need to in order to become competitive wind energy investors. It’s worth the effort though.

Just to get the ball rolling, here are some recent stats regarding the U.S. wind energy industry:

• For the total amount of energy-generation capacity added in 2008 to the U.S. total capacity, 42% of it came from the addition of wind power. An industry association indicates there were 8,358 megawatts (MW) of new generating capacity added, which was a 50% improvement over 2007’s total wind-power capacity addition. (Just for perspective, the world’s total wind energy capacity sky-rocketed from 9700 MegaWatts in 1998 to 121,000 MegaWatts in 2008.)
• Despite the huge increase, wind energy generating capacity in the U.S. is just over 25 GW…. less than 2% of the total energy capacity (all sources) for the nation. That leaves a lot of room for penetration, but it  may also indicate a lack of receptiveness.
• Though 2008’s growth was surprisingly impressive, wind energy isn’t expected to have the same kind of growth success in 2009. The financial crisis has finally taken hold in the arena, even though these companies staved off the worst of 2008’s fiscal mess. No specific projections have been made for 2009; experts just expect a slowdown in installations.
• Last year, the wind industry growth in the United States generated $17 billion in revenue (though not all of it necessarily flowed to U.S. manufacturers).
• The stimulus bill extended a wind energy production tax credit for three years, though it’s not condition-free credit. Wind energy - and alternative energy in general - is still a priority under President Obama’s Presidency though. So, the industry is apt to benefit from the current government regime as long as they’re in office.
• The Department of Energy has established a goal of “20% by 2030“. Simply put, this means the DOE wants 20% of the United States’ energy need in 2030 to be met by wind energy resources. It is physically possible, but it will require an enormous amount of infrastructure investment. (That’s the opportunity though.)

The point is this…the industry is still alive and viable. However, the growth pace is slowing - at least it is for 2009. This could literally be the year that “separates the men from the boys” within the wind turbine manufacturer world. That’s actually a good thing for investors though, just as long as you’re not holding one of the ‘boys’ that doesn’t survive.

Bigger picture, this is still a massive long-term opportunity. While we may not see another $17 billion poured into the industry in 2009 like we did in 2008, we could start to see those kinds of dollars flowing again in 2010. The key is comfort - can governments justify their fiscal support of it, and can investors afford to risk investing in the companies that build wind energy hardware? By 2010 we think the answer will be yes. This year, however, is the right time to start the search for the right stocks.

There are many other facets we didn’t discuss in this commentary. We’ll get to those in time. Just to keep you interested though, here’s a teaser for three of them…

1. The U.S. trends (above) may or may not be similar to trends evident in other countries.
2. Now that the concept has been proven, the mechanics of the technology are coming into focus. As of right now, wind energy is only about 50% efficient….which is actually pretty good, but could be a whole lot better. A company that can build a better proverbial ‘mouse trap’ may be a better investment.
3. The two key technology improvements being addressed right now are the gearboxes and fan blades used in the actual wind-mill mechanism.

We’ll look at those three aspects, and mention a few specific companies, in upcoming articles. Be sure to stay tuned.

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Want to see a surprisingly strong chart that’s on the verge of getting a whole lot stronger? After digging up a big winner with Alliance One International (AOI) a couple of weeks ago by keeping tabs on the small cap tobacco industry charts, we’re more than a little interested in the recent rise from the S&P Small Cap Homefurnishing Retail Index. It’s up 14% month-to-date, it gained about 6% last week, and is up nearly 4% today. Considering the S&P 500 is down 8.3% month-to-date, there’s obviously something special being held in the niche index. First things first though…

The S&P Small Cap Homefurnishing Retail Index chart didn’t exactly make a bullish beeline after hitting bottom back in October. In fact, it’s been pretty volatile in both directions. The net result of that volatility was the formation of a wedge shape (which is plotted on the chart below). Of course, as with all wedges, this one will eventually come to a point and force the index past one side or the other. And, that time is coming soon. Based on what we see right now we’re assuming it will be a bullish break, but we’ll burn that bridge when we come to it.

The two key drivers behind this recent industry strength, however, are Williams-Sonoma (WMS) and Kirkland’s (KIRK).

Ironically, neither of those stocks is technically part of the S&P 600 index. Both are small caps though, and seem to be a constituent of the S&P Small Cap Homefurnishing Retail Index all the same. More importantly, both charts look attractive… particularly Kirklands, which is up 290% over the last twelve months (yet still seems to be going strong). Williams-Sonoma is more of a question mark, but also holds a lot of rebound potential.

Take a look at the chart, but be sure to keep reading for our final thoughts.

This isn’t an endorsement of Kirklands, or the industry chart. On the other hand, the results and performance speak for themselves - these charts are going higher, which is more than can be said for most stocks right now. If the industry chart ends up breaking out of the wedge in a bullish fashion, Kirkland’s and the group could really heat up.

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I’ll warn you now the two charts you’re about to see may cause frustration. They may also offer hope, since they’re both now at the point where the proverbial nail could be getting pounded into the coffin (maybe). Either way though, just be ready to shake your head and/or roll your eyes. Do NOT, however, get sidetracked by an emotional response. Those emotions - positive or negative - are what cause you to miss out on opportunities (or miss entries and exits). The market isn’t personal… it’s your job to stay objective.

Anyway, the Dow Jones Industrial Average is close to falling under the low of 7197 made in October of 2002. It’s currently at 7280, and falling like a rock (i.e. it may revisit 7197 by the end of the day).

Is that a worry, or relief? From a momentum perspective it’s a worry. There’s nothing but gloom and doom for the economy… no silver linings behind any clouds. With that not likely to change anytime soon, what’s to halt the market’s tumble? Traders would further argue that a move below 7197 would trigger a whole ‘nother wave of selling, as many ’stops’ are set to sell when the index falls under that floor.

Other investors would say a move to or under 7197 would be a welcome event, yet for bullish reasons. Their argument is that it’s going to happen anyway, driven by psychology more than values. Better to go ahead and get it overwith now rather than delay it.

Our stance is somewhere in between. We have more of a ‘prove it first’ mindset, but we also acknowledge there’s no perfect hint of a breakdown or breakout. If new lows are eclipsed and the market starts to perk up, we’ll see things bullishly. If 7197 is broken and the index keeps falling, that will be bearish. It’s really not a complicated approach.

And what about the S&P 500 chart? It’s a similar story.

The SPX already fell under the October of 2002 lows by reaching 741 in November. It was a ‘barely’ clip, but it did get there. On a weekly basis though, the lowest close we’ve seen from the S&P 500 since the mid-90’s may well come today. The current price of 760 - if that’s about where we stay - would be the lowest weekly close since the middle of 1997. (Yes, 12 wasted years.)

Our interpretation is the same though. We’re not jumping to conclusions - we’re just taking things as they come, one day at a time. If we don’t see a rebound soon, we’ll assume the bearish trend is still in place. That’s not a foregone conclusion though.

We know entertaining the idea of a rebound from here puts us in the minority. We’ll just add these thoughts on that matter….

We’re not betting the farm on a recovery; we’re just being open-minded about the possibility of it.

We’ll refer you back to October of 2002 and the way the charts took shape then. It took three very sharp bottoms to really lay the foundation for that recovery. At the low point for each of those three dips though, “the market” was screaming about how much worse it would get. Those same nay-sayers were still screaming “bearish” for months after the new bull market began. Point being, don’t think the market can’t stop and turn on a dime even if the economy looks like it’s in shambles. That’s exactly what it did in the fall of 2002.

In fact, a revisit to those prior lows may have alleviated the self-fulfilling assumption that stocks were ’supposed to’ touch those lows again.

Either way, don’t get bogged down by the blame-game, and don’t waste time griping about how unfair the government has been acting. In other words, don’t get emotional despite the fact that you have every right or reason to be. Just take the information at face value, and respond accordingly.

For right now (heading into a weekend after a terrible week) the information suggests just staying on the sidelines. Once the market recollects its thoughts this weekend, we’ll see some more rationale movement next week. That’s what we want to trade.

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You can thank us later…maybe. Back on February 6th (eight trading sessions ago) we were touting the strength of the S&P Small Cap Tobacco Index. The group was up in a major way for the week, as well as over the the two week period at the time. Since then, it’s remained at the top of the two-week leader board, gaining 8.6% since February 6th.

That strength was the whole point of the exercise… to find groups and individual stocks that are so strong that they could overcome general market weakness if need be. That emerging relative strength is often long-lived, so there’s a good shot at finding great trading ideas. And, the exercise worked successfully this time; the market slipped, but the tobacco index continued to make gains.

Though some of the stocks we mentioned at the time were indeed the reason for the rally since then, not all of them were. Likewise, we didn’t mention the one small cap tobacco stock that’s been one of the most impressive performers of late… Alliance One International, Inc. (AOI). We definitely should have discussed it though.

AOI shares are up by pretty much the same amount as the small cap tobacco index itself, which leads us to think the index has a healthy dose of Alliance One International as a constituent. We can’t say for sure, as Standard & Poor’s isn’t overly-forthcoming about how they construct many of their specialty indices. However, both the AOI and the S&P Small Cap Tobacco Index charts and results are amazingly similar. If not completely, they may essentially be the same thing.

Those are academic details at this point though. The intent was to drill-down into sectors, industries, and market caps to fish out the best of the best. Alliance One International is that stock in this group.

What’s really interesting about Alliance One is not so much the chart and the opportunity, but how it can be so far off the radar despite being an official ‘S&P 600′ holding. It’s not the smallest company in the ‘tobacco’ industry, yet it doesn’t show up on most of the web’s online search-and-screen tools. In fact, many bulletin board companies (and even a few pink sheet stocks) showed up as tobacco stocks in places where AOI didn’t. Analyst coverage is nil too.

The lesson learned is simply to not assume all stocks are being served up or followed by the reputable market information sources. We could have easily overlooked Alliance One International had we not been persistent, and continued to watch those emerging industry trends we discussed on the 6th.

As it turns out, the persistence paid off… AOI is literally one of the top performers - for any group or market cap - over the last four weeks, having gained 30.71% during that period.

Regarding the potential longevity, all we can say is this… we’ve now seen AOI make higher highs and higher lows made while the market was making lower highs and lower lows. The stock has also broken above a fairly important resistance line at $3.12. Plus, we’re seeing a bullish upside-down head-and-shoulders pattern take shape on the chart. All are bullish hints.

Factor in that the stock is trading at about half the value it was in June of last year, and that the P/E is 8.0, and what you have a very under-followed stock that looks very interesting. It’s not an official ‘trade’ for us yet, but it could be soon.

If you want to be informed about other undiscovered values like Alliance One International, Inc. (NYSE:AOI), the free newsletter can do that for you. Delivered one to two times per week, the newsletter keeps you in touch with great stocks most of the media will never even discuss until well after the big gains are made. Don’t stay behind the eight ball any longer. Sign up today.