The power of the consumer is amazing. Before today’s opening bell, equity futures looked bleak.

Nuclear testing in North Korea spooked global markets. Housing data showed yet another double-digit decline in home prices. And we are down to the last few days before General Motors’ (NYSE:GM) big June 1 deadline.

But all it took was good news from consumers to get the markets surging by more than 2%. Even though the economic data does not show many signs of a long-term improvement, evangelical announcements of “green shoots” appear more than enough to convince Americans the worst is behind us.

With American sentiment on the rise, it is no wonder one of New York’s biggest movers is smack dab in the thick of the discretionary spending sector.

Take a look at Tween Brands (NYSE:TWB) and its 20% surge today. Shares of the company have nearly doubled in value over the last week after management pulled the curtain on the specialty retailer’s latest quarterly figures, surprising investors with better-than-anticipated results.

Since the March lows, shares of the company have soared by over 400%. A re-branding effort has helped the company’s financial results, but surely a rash of consumer exuberance has helped.

Sell the hype

It is safe to say the same kind of “trend” investors that are boosting up shares of Under Armour (NYSE:UA), Sirius XM Radio (NASDAQ:SIRI) and Crocs (NASDAQ:CROX) are creating a top-heavy valuation for Tween.

Certainly, management has done good things with its recent attempts to “re-value” its Justice brand, but after the recent run, any negative turn in consumer spending could send this volatile small cap into a tailspin.

With a share price of over $5 per share, Tween is ripe for a short position. Investors have an opportunity at double-digit profits by riding shares down to a more appropriate short-term valuation of $4 per share.

Even though today’s report from the Conference Board shows Americans are more upbeat than a month ago does not mean the macro-economic factors tugging at this market have suddenly vanished.

Unemployment is still high. Houses are still shedding value. And Americans are still scared out of their collective minds.

As the green shoots slowly turn into tumbleweed during the summer months, Americans are surely going to realize this is no time to be celebrating.

Shorts may be sweating after the recent surge, but they will have their shot in the spotlight once again real soon.

The equities market can only go so far on expectations of a turnaround. Pretty soon investors are going to demand to see real results. So far, there is no turnaround in sight.

Source: Consumers: What Do They Know?

But while many analysts suggest this company may be a one trick pony – akin to Crocs, (Nasdaq: CROX). They couldn’t be more wrong. The reason its share price was penalized was that analysts were expecting $1.09 instead of the .79 reported.

This is a classic case of overreaction from a negative earnings report.

The fact of the matter is that this brand has developed a premium niche within the sportswear market, and it’s expanding that brand recognition to other areas.

Yes, there are numerous knock-offs of their breathable fabrics. And several competitors for the highly coveted retail space they occupy. But you have to hand it to UA. It was able to outmaneuver entrenched companies like Adidas AG (OTC: ADDYY) and Nike (NYSE: NKE). That wasn’t easy.

Under Armour’s integration into professional and college sports, has put its product into the hands of millions of athletes. From younger athletes see their sports idols wearing UA, to the armchair quarterbacks who want to do the same, its specialty sportswear has mass appeal. That brand dominance will allow it to keep its spot for the long haul.

It’s no surprise, really, that it’s being affected by the current economic downturn – like most other companies. But a few missed analyst estimates does not make a company un-investable – or unprofitable.

Source: Under Armour (UA) Gets Penalized by Analysts

Herein lies our quest with penny stocks. Our goal is to identify the perfect time to buy shares over the course of a company’s development. Get in too early and you could end up holding shares longer than you originally planned. Get in too late, and you might miss the ride…

***********Time’s Running Out ***********

One of the Most Valuable Piles of Ice and Rock Ever Discovered

From a plane window, it looks like a map made of elephant skin. Nothing but frozen rivers and gnarled earth, stretched out as far as you can see.

But underneath, you’ll find as much as $50 billion worth of mineral wealth. Discovered in 1993, it’s already making fortunes. Not on gold or silver, but on some of the world’s richest deposits of copper, cobalt and — mostly — nickel.

Click here to get your share…

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The idea is to get in before a company begins to experience what I call super-traction. Super-traction is when the dam bursts and huge orders come rushing in — the point where a trend becomes viral. It’s also when your average investor hops on the bandwagon. And if you’re already holding shares, you can come out on top.

Look at the point where Super-traction begins with trendy sandal maker Crocs, Inc. (CROX: NASDAQ):

Right around the time of this small company’s IPO, the company’s revenue and earnings doubled on heavy sales of the company’s trademark lightweight, rubbery shoes. There was no turning back at this point. In the last 12 months, shares of Crocs are up more than 290%:

But getting in before Super-traction catapults the share price is the tricky part. It’s all about realizing when sales are becoming strong, and a (often hidden) catalyst is on the horizon…

We recently found another company with explosive growth potential and is still hidden from many investors. You see, its business is unique. It found a way into the ordinarily secretive Chinese pharmaceutical industry. So far we are up about 33%, but it has far to go. This gem is really cruising under Wall Street’s radar.

Here are the numbers: The industry is growing at 20% per year, and will continue to do so for years to come. If that’s not enough, the company itself is growing at 50% per year, and gaining ground even faster now. We could easily see this one double and even triple by year’s end.

To get in on this opportunity before Wall Street figures it out, you need to check this out…

Best,
Gunner

P.S.: If you really want to see the power of Super-traction, you need to get into Bulletin Board stocks. That’s where the real growth happens — before Wall Street can even invest. To get the absolute best coverage of these underground companies, check this out…

Source: Super-Traction: Getting in on a Hot New Stock First

CASH: Don’t sound too surprised now. Yep, IPO activity is at a good level. But we’re starting to see the quality deteriorate just a bit. Nothing too serious — but it’s something to keep an eye on.

JL: Can you explain the “quality” issue a little more? Does that mean we’re seeing more duds come to market?

CASH: Right, that’s part of it. When companies see that optimism is up and liquidity is flowing, it makes sense for them to try and raise capital while that window is open. Keep in mind that few people really expect this firm market to continue. So folks are trying to grab what they can, while they can.

JL: Makes sense. Anything else?

CASH: In addition to lower-quality companies, you’re also starting to see smaller companies tagging along. An example of this is Real Goods Solar (RSOL), a company that’s supposed to price its IPO this week. Because RSOL is so small — less than $20 million in revenues — they’re unable to attract the all-star underwriters. They have to use second-tier partners instead.

JL: So what effect will that have on the stock? If they’re small and putting fewer shares out there, it seems that might benefit the price, right? Keeping supply low to help the ‘ole S-and-D curve?

CASH: Don’t forget the other input for that curve…

JL: Never. Supply and demand is about the only useful thing I got out of college economics. So what do you see on the demand side?

CASH: Nothing.

JL: Nothing?

CASH: Nada. Zip. Zilch. Goose egg. Bagel. The big donut…

JL: I got it, I got it. But what does that mean exactly?

CASH: It’s means there’s just no demand — period. These underwriters (think names you’ve never heard of, like Equity, Canaccord Adams, & Broadpoint) don’t have anywhere near the footprint or the clout that, say, a Goldman Sachs, a Merrill Lynch, or a Morgan Stanley would bring. And so, while this might be a reasonably strong company with limited supply of stock, the underwriting machine is weak. They won’t be able to gin up enough interest for a good price pop.

JL: So do you short a name like this right out of the box?

CASH: Quite possibly. Although I’m a little uncomfortable being short a thin name in a hopeful market, even if the hope is fleeting. But it’s a possibility, and that brings us around to our topic for the day.

JL: Which is?

CASH: Shorting! Last week I said I’d bring a little balance to our banter. Today I wanted to give a little clearer picture as to how Cash McDash makes money on the “dark side.”

JL: Sweet, the dark side! Insert Darth Vader joke here. Can we talk about Jedi mind tricks, too?

CASH: Let’s not and say we did.

JL: Fair enough. Where should we begin?

CASH: Well, there are basically two different categories of short trades that I use. We can skim over the first and dig a little deeper into the second.

JL: Hold on! We’re just getting into the good stuff and you’re already skimming? Why don’t we take ‘em one at a time and get some more detail.

CASH: Because the first category of shorting doesn’t quite fit for this type of conversation. The trades are too specialized… Oftentimes they have to be executed very quickly, with very little notice, in order to lock in solid profits. I can tell you “how” that’s done, but if I tried throwing out picks in that area to a broad audience, it would be more trouble than it’s worth. I’m more interested in sharing that type of info with a small, select group of readers who are dead serious about their trading gains.

JL: Fair enough. So give us the Cliffs Notes then.

CASH: Well, the first way I make money on the short side is by selling underwriting dogs right from the beginning — “out of the box,” as you say. Because I’m so plugged in to that whole hidden process of taking companies public, I see what most others don’t. I know whether or not the demand is there, and I can get a very clear read on whether or not the underwriters have buyers for the stock.

JL: Hey, so you’re kind of like that guy Simon Cowell on American Idol or something. Except you, uh, judge new issues instead of wannabe pop stars.

CASH: Ugh. I’d rather be Darth Vader. But, yes, from time to time there are deals that are just destined to fail. And even although the public can sometimes get excited over these deals, my behind-the-scenes view makes it exceedingly clear that money is to be made on the short side.

JL: How about an example folks might recognize.

• U.S. producer prices rose almost twice as much as forecast, the Labor Department reported yesterday (Tuesday). Wholesale prices surged 1.1% in March, led by rising energy and food prices, which jumped 2.9% and 1.2% respectively.

• U.S. Bancorp (USB) announced yesterday (Tuesday) that first-quarter earnings fell 4% as a result of losses connected to the mortgage crunch but said its credit problems will continue to be manageable. The Minneapolis-based bank said it earned $1.09 billion, or 62 cents per share, down from $1.13 billion, or 63 cents per share, during the same period last year. Revenues were $3.87 billion, up 14% from $3.39 billion in the first quarter of 2007, the Associated Press reported.

• Johnson & Johnson (JNJ) reported a 40% jump in first-quarter profit, mainly due to the weak dollar boosting foreign revenues and a charge that depressed results a year ago, the Associated Press reported. The company reported net income of $3.6 billion, for the first three months of the year, up from $2.57 billion a year ago. Though, the year-ago quarter included a charge of $807 million for research and development related to the acquisition of Conor Medsystems Inc.

• China’s $200 billion sovereign wealth fund, China Investment Corp. (CIC), purchased a 1% stake in BP PLC (BP), worth about $1.97 billion, Bloomberg reported. Last year, CIC spent upwards of $8 billion on stakes in The Blackstone Group (BX) and Morgan Stanley (MS).

• February retail sales in Brazil rose 12.2% from the prior year, marking the fastest pace since 2004. The statistics boost expectations that its central bank will raise interest rates in the red-hot economy from 11.25% to 11.50%, Bloomberg reported.

• Shares of Crocs Inc. (CROX) dropped 43% yesterday (Tuesday) with a $7.68 decline to close at $10.11 after the Niwot, Colorado-based colorful shoemaker lowered its profit guidance and announced it would eliminate 600 jobs at a Canada plant.

• After the close of trading yesterday (Tuesday), Intel Corp. (INTC) reported first quarter profit dropped 12% due in part to spin-off costs. First-quarter net income declined to $1.44 billion, or 25 cents per share, from $1.64 billion, or 28 cents, the year prior, the Santa Clara, California-based chipmaker announced in a statement.

• Washington Mutual Inc. (WM) reported a $1.14 billion loss yesterday (Tuesday) due to a growing number of customers that have fallen behind in their mortgage payments, Reuters reported. WaMu, as the Seattle-based lender is called, said the quarterly loss equaled $1.40 per share, and compared with profit of $784 million, or 86 cents, in the first quarter last year.