It's not Saudi Arabia the market is worried about. Saudi Arabia is quite wealthy. And while you can't say that the people of Saudi Arabiahave American-like freedom, at least the ruling family spends money on education, infrastructure and technology.

No, the fear is that protests will spread to Iraq, Iran and Kuwait. Those countries represent close to 10 million barrels of daily oil production. They are not politically stable. Disruptions to oil production in these countries would have a huge effect on oil prices.

The week is not getting off to a good start for European stocks. Portuguese bonds ticked above the “bailout threshold” of 7%. Readers may recall that both Greece and Ireland requested aid once their bonds breached 7%. For its part, Portugal says it doesn’t need to tap into the EU’s emergency fund. But it’s not always about need. Sometimes it’s about appearance. That was the motivation behind the Treasury’s force-feeding of TARP funds to U.S. banks. And if Portugal can get its rates down, and ease fears that its problems will spread to Spain by taking some loans, it will do so.

The market hit new highs as the buyers kept the gravy train running smoothly. Volume was good today and financials and energy both rebounded after dismal showings on Tuesday afternoon. Investors

Positive results for second quarter earnings have pushed the S&P 500 to the support/resistance point at 1,115 yesterday. And it looks as though that level will fall easily today.

FedEx (NYSE:FDX) doesn't report until September 16, but the company was kind enough to raise its earnings guidance yesterday, and that helped encourage investors that the global economy is improving.

Shipping stocks are always a good measure of economic activity. When business is growing, more packages are sent and shippers do well. And so, along with recent positive results from UPS (NYSE:UPS), FedEx's preannouncement is great news.

The latest round of earnings reports are taking stock prices lower. 2Q earnings started off good with a glowing report from Intel (Nasdaq:INTC), but have taken a turn for the worst.

The issue is revenues. IBM (NYSE:IBM), Texas Instruments (NYSE:TXI) and Goldman Sachs (NYSE:GS) all came in a little light on revenues. Companies are meeting or exceeding earnings estimates, overall S&P 500 earnings have been 17% above expectations, according to Bloomberg.

But revenues have beaten expectations by only 3.5% so far, and some big names like IBM have come in below revenue estimates.

Intel's blowout earnings report last night is certainly making it look as though earnings estimates were revised too low for corporations. And so the overwhelmingly pessimism that drove stocks lower since early May seems to be shifting to optimism that maybe things aren't that bad after all.

Intel's second quarter EPS were $0.51 on revenue of $10.8 billion. Those numbers crushed the analyst expectations. Analysts wanted $0.43 with $10.3 billion in sales. Guidance was also way above expectations. Intel's management expects third quarter revenue of $11.6 billion from $11 billion.

CEO Paul Otellini made sure to let analyst know during the conference call that this quarter was the best quarter in the company's 42 year corporate history.

Last week's rally ahead of earnings was a good indication that the stock market had priced in lower 2Q earnings estimates. And in fact, stock prices fell to the point where some upside was possible as earnings come in. It sounds simplistic, but sometimes, stock prices must sell-off before they can rally.

Alcoa's (NYSE:AA) earnings last night were excellent. It would have been predictable for Alcoa to miss on revenues and still come in with the right earnings-per-share number. But Alcoa beat on revenues and boosted aluminum demand for the year.

Perhaps even more importantly, railroad company CSX (NYSE:CSX) reported that auto shipments were up big.

Green. After 10 out of the past 11 sessions ended in red, green was certainly a welcome color for the stock market yesterday. And more importantly, it wasn't just a little green, either. It was a lot.

The S&P 500 bounced off of support at 1,018 on Tuesday and vaulted all the way through resistance at 1,050 to close at 1,062 yesterday.

More importantly, yesterday's explosive rally came on no significant news and with no pre-market futures ramp. In other words, we may have just seen an important shift in sentiment based on stock valuations.

I hope everyone had a relaxing holiday. Holidays can definitely help all of us recharge our batteries. And sometimes, a break can even give investors a more positive perspective on stock prices.

It looks like we may have a good rally at hand, at least for today. And with the S&P 500 now trading at around 10x next year's earnings, we could even say that any rally would be based on valuations.

But we also know that investors have been pricing in slower earnings growth and slower economic growth in general.

Well, Friday's Daily Profit was certainly timely. In case you missed the piece titled Is China an Afterthought?, I said "I won’t be surprised to see China do both – raise rates and incrementally revalue the yuan."

Just two days later, China announced that it will completely remove the yuan from its dollar peg. That news sparked a global rally for stocks last night, and Chinese stocks in the U.S. are moving higher as well.

Even though China has dropped its U.S. dollar peg, which meant that one dollar was worth 6.83 yuan, China will now peg the yuan to a basket of currencies that includes the dollar.

Yesterday’s huge move took the S&P 500 above 1,105 to close right at 1,115. TradeMaster Daily Stock Alerts’ Jason Cimpl told his readers he’s bullish going into next week. And yesterday’s close at 1,115 will keep him from selling his latest round of upside trades.

That’s good news for TradeMaster readers, because one stock they bought on Friday made a 50% move in just two days. Jason’s bullish stance suggests there are more gains ahead for this little beauty.

Jason is looking for a move above the next resistance of 1,120 sometime in the next few days.

For the most part, the big banks have now reported earnings. And there's a lot to digest. But when we're done with today's discussion, I believe we'll have a strong handle on a big opportunity for small cap investors.

So bear with me as we set the stage...

This morning Morgan Stanley (NYSE:MS) reported that it returned to profitability after three consecutive quarterly losses. While the bank reported strong results from its investment banking and growing brokerage businesses, it said real estate investments are still a drag.

Wells Fargo (NYSE:WFC) sang a similar tune. The third-largest U.S. bank by market cap recorded $3.2 billion in Q3 net income, but expects loan losses to rise further, and to peak next year. Their acquisition of Wachovia is not helping matters. Those loan losses rose over 70%.   

We're hearing the same story from nearly all the big American banks, whether they made money or not. "Profits are positive, or at least less negative, but we're still loosing money on bad real estate and consumer loans." This was the news from Bank of America (NYSE:BAC), US Bancorp (NYSE:USB), Citigroup (NYSE:C), and JPMorgan Chase (NYSE:JPM).

No doubt we're all growing weary of the stream of bearish news on the housing front. The Commerce Department said Tuesday that September New Home Construction and New Building Permit applications were lower then expected. Foreclosure filings hit a record high. Another report stated that national median home prices will drop more than 10% by June 2010.

These factors are clearly showing in the poor bank earnings...

I've been discussing how investors can use the "Most Price % Change" list published on Yahoo! Finance to find worthy stocks that will start making money for you in the near-term, and hopefully in the future as well.

Of course, not every stock that shows up on the "Most Price % Change" list is investment worthy. It's too harsh to say the majority of stocks that show up on this list are "pump and dumps", but if you watch the list for a while, you'll notice that one day's top gainer is the next day's top lower. In other words, many of the stocks that make the "Most Price % Change" are reacting to news that will only affect the price temporarily.

I lump all biotechs into this category. Of course, that means I miss a few biotechs. But I am not a doctor. I can't speak to how important a particular drug might be. And besides, news from biotechs about the results of a drug trial is never a surprise. Investors are always holding the stock in anticipation of that news. I do not want to be buying while they are selling.

The key to using the "Most Price % Change" list is to be able to discern the relatively few stocks that are moving on fundamentally important news from the majority that are moving on temporarily important news. Trust me, this skill is not instinctual. It can be learned...

Readers are probably used to the fact that small caps outperform on both the upside and the downside. But how does an investor take advantage of that?

Of course, you could subscribe to my SmallCapInvestor PRO advisory service, where we've averaged 36% per recommendation this year. But that's probably not the answer you seek (at least not yet)...

Another way to quickly find small cap names for potential investments is to follow the "new highs of the day." On Yahoo! Finance, they're called the "Price % Gainers". This is the list of the stocks that make the biggest moves in a single day, and it's nearly always dominated by small cap stocks.

Now, the small cap stocks you find on the Top Gainers list have just made a big jump in price. It should be understood that the majority of these stocks are moving on news and will give the gains they've just recorded. But, for the discerning eye, the Top Gainers list can be a goldmine for small cap stocks that are breaking out to new highs...

Once again, small caps were the place to be. While the Dow Industrials managed a 0.59% gain, the Nasdaq 0.52% and the S&P 500 0.39%, the Russell 2000 finished up 0.79%.

Of today's top small cap movers, I am intrigued by Maguire Properties (NYSE:MPG). It's a REIT (real estate investment trust) which owns mostly office buildings and parking lots in California. In early August, Maguire defaulted on debt payments for 7 properties and had to turn them over to the bank.

The company claims better than $4 billion in assets and has a market cap of just $65 million. There has been recent moves by private equity to start buying distressed real estate. And if the Fed and Treasury are serious about supporting the commercial real estate market with loans and guarantees, beaten down REITs like Maguire Properties could be very attractive. The fact that Maguire was up 29% on nearly 8 times normal volume suggests that somebody out there thinks it's attractive...

Small-cap stocks extended the morning decline into midday trading, with retailer stocks leading the way down. Additional pressure came from sinking energy stocks, a weak tone in some commodity names, tumbling automakers and modest declines in financial shares as well. Some of today’s small-cap gainers are MAP Pharmaceuticals (Nasdaq:MAPP), Palm (Nasdaq:PALM) and Colony Bankcorp (Nasdaq:CBAN).

Other Market Watch highlights today included:

• Restaurants were a hot item on Friday, but were a little cool this morning, perhaps tied to profit-taking and also from the ongoing worries about the economy.  
• Credit Suisse analysts lowered its rating on GM to “underperform” and cut their price target to $1.  
• Automakers were finding out that the glow from Friday’s $13.4 billion dollar White House bailout had a short shelf-life among investors. 
• Crude oil was off more than 3%, slipping back below $41 a barrel as Chinese imports tumbled to the lowest level of the year in November. 

Small Cap Gainers:

• MAP Pharmaceuticals up 30% after announcing a worldwide collaboration with AstraZeneca to develop and commercialize a new drug. See (Nasdaq:MAPP).
• Palm gets $100 million investement, shares rally 20%. See (Nasdaq:PALM).  
• Colony Bankcorp up 28% after declaring a fourth quarter dividend on Friday. See (Nasdaq:CBAN).  
• Benihana awarded Xanadu liquor permit by state; shares pop 12%. See (Nasdaq:BNHNA).  

Small Gainers:

• Maguire Properties down 22% after suspending dividend on Friday. See (NYSE:MPG).
• Among small-cap movers, eatery chain Lubys Inc. is down 17%. See (NYSE:LUB).
• Browne & Co. Inc. is down 15% as the marketing communications firm gave back a huge chunk of Friday’s rally. See (NYSE:BNE).  
• Oxford Industries Inc. is down 14% as the apparel maker turned south along with other apparel and retail names after a strong performance last week. See (NYSE:OXM).  

The Russell was bleeding red during midday trading, down over 4% following the worst decline in October retail sales on record. Today's small-cap gainers are...

Virtual Radiologic Corp. (Nasdaq:VRAD), BankAtlantic Bancorp Inc. (Nasdaq:BBX) and FirstFed Financial Corp. (Nasdaq:FED) are among the biggest percentage losers in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Cal-Maine Foods Inc. (Nasdaq:CALM), A Power Energy Generation Systems Ltd. (Nasdaq:APWR), James River Coal Co. (Nasdaq:JRCC), Canadian Solar Inc (Nasdaq:CSIQ), Maguire Properties REIT (Nasdaq:MPG) and WuXi PharmaTech Cayman Inc. (Nasdaq:WX).

Here are the biggest percentage losers among small caps:

GFI Group Inc. (Nasdaq:GFIG), Federal Agricultural Mortgage Corp. (Nasdaq:AGM) and Media General Inc.(Nasdaq:MEG) are among the new 52-week lows in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Alto Palermo S.A. (Nasdaq:APSA), Flaherty & Crumrine Preferred Inc. Oppty Fund Inc (Nasdaq:PFO), Metalico Inc. (Nasdaq:MEA), GigaMedia Ltd. (Nasdaq:GIGM), Patni Computer Systems ADR (Nasdaq:PTI) and Maguire Properties Inc. (Nasdaq:MPG).

Here are the new 52-week lows among small caps:

Maguire Properties Inc (Nasdaq:MPG), First Horizon National Corp (Nasdaq:FHN) and United Security Bancshares (AL) (Nasdaq:USBI) are among the new 52-week lows in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Superior Bancorp (Nasdaq:SUPR), Anaren Inc (Nasdaq:ANEN), AMERICAN RIVER Bankshares (Nasdaq:AMRB), ATMI Inc (Nasdaq:ATMI), Sunstone Hotel Investors Inc (Nasdaq:SHO) and CoBiz Financial Inc (Nasdaq:COBZ).

Here are the new 52-week lows among small caps:

Small-cap stocks endured another sizable decline Monday, pulled down by tension over the health of the financial arena at a time when the economy is already struggling with rising unemployment, slumping housing markets and soaring energy costs. The Russell 2000 (NYSE:IWM) shed 10.45, or 1.55%, to 664.50, the third lowest daily close since mid-March.

The closing slide in small caps was a stark difference from this morning as the market appeared poised to begin the week with a relief rally. Stock index futures jumped some 1.6% during overnight action as investors embraced a plan by government authorities to shore up the balance sheet — and market confidence — in government-sponsored mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). However, that overnight rally failed to gain traction relatively quickly once the market opened today, and a wave of selling swept through banking stocks, especially within the regional banking sector and smaller banks, which took a toll on small-cap index products. Despite opening up amid 20%-plus gains this morning, FNM and FRE eventually closed down 4.2% and 5.8%, respectively.

Elsewhere on the banking front, National City Corp. (NYSE:NCC) plunged 17% after trading was halted briefly on concerns about unusual trading activity. NCC was downgraded by analysts, and the stock dropped anchor, as the unsettling tide of selling coursed through financials a day after IndyMac Bancorp Inc. (NYSE:IMB) failed, becoming the third-largest U.S. bank failure on record.

There was some sense that investors are beginning to fret about all the special bail-out programs needed to avert systemic risk on the financial landscape. After all, there are only so many rabbits that magicians at the Federal Reserve and Treasury Department can pull out of their hats. What’s more, there are some concerns that these recovery efforts could flood the debt market with so much paper that supply issues could hamper funding, or even that the world could balk at “being the buyer of last resort for U.S. government debt,” as noted in a research report . . .

First Horizon National Corp (Nasdaq:FHN), ATMI Inc (Nasdaq:ATMI) and Endwave Corp (Nasdaq:ENWV) are among the biggest percentage losers in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: American Independence Corp (Nasdaq:AMIC), Maguire Properties Inc (Nasdaq:MPG), FCStone Group, Inc. (Nasdaq:FCSX), Anaren Inc (Nasdaq:ANEN), Pyramid Oil Co (Nasdaq:PDO) and DineEquity Inc (Nasdaq:DIN).

Here are the biggest percentage losers among small caps:

Internet Gold-Golden Lines Ltd (Nasdaq:IGLD), Community Valley Bancorp (CA) (Nasdaq:CVLL) and Maguire Properties Inc (Nasdaq:MPG) are among the biggest percentage gainers in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: ARYx Therapeutics Inc (Nasdaq:ARYX), Spectrum Control Inc (Nasdaq:SPEC), Park View Federal Savings Bank (Nasdaq:PVFC), Cash America International Inc (Nasdaq:CSH), Marten Transport Ltd (Nasdaq:MRTN) and Waccamaw Bankshares Inc (Nasdaq:WBNK).

Here are the biggest percentage gainers among small caps: