Analyst Upgrades

• Dynegy (DYN) was upgraded to buy from neutral at Pritchard.
• Itron (ITRI) was upgraded to neutral from underperform at Macquarie.
• Goldman upgraded Ameren (AEE) to sell from conviction sell.
• Signet Jewelers (SIG) was upgraded to buy from hold at Societe Generale.
• JPMorgan upgraded Synopsys (SNPS) to overweight from neutral.

Even though Friday's and Monday's selling moderated some of the overbought internal indicators, those indicators -- chiefly the Moving Average Convergence/Divergence (MACD) and Stochastic -- are still very overbought, and momentum has fallen to the point where it will take some hefty volume to make a meaningful turn up again.

And speaking of volume: Just when the bulls need a big chunk of buying to penetrate into the massive overhead beginning at S&P 500 820, volume contracted yesterday to just 1.5 billion shares traded on the NYSE.

The evidence is growing that a major rally is about to get underway and the possibility that a major bottom has been made is increasing.

The bases for the Dow at 7,900 to 8,000 and S&P 500 at 800 to 820 have not only held fast, but new buy signals from a variety of indicators are virtually telegraphing that the market is better situated for a rally than at any time since November.

And there are some interesting similarities to the bear market bottom of 2002-2003: The sideways pattern that began in early October is now more than four months old. And an argument could be made that the consolidation that marked the bottom of the last bear market was extended to seven months only by the Sept. 11 catastrophe, which hit smack in the middle of the consolidation.

Rival home improvement chains Home Depot Inc. (NYSE: HD) and Lowe's Companies Inc. (NYSE: LOW) are scheduled to report quarterly results this week. Not surprisingly, given the ongoing housing slump, analysts surveyed by Thomson Financial on average expect both companies to post earnings lower than in the same period a year ago. For Home Depot, that's 61 cents per share, down 20.8%, and for Lowe's, 56 cents per share, down 16.4%. Meanwhile, cabinet maker American Woodmark Corp. (NASDAQ: AMWD), for whom Home Depot and Lowe's are major distributors, is also expected to report lower earnings: 11 cents per share, down 67.6%.

The presidential campaigns have prompted much discussion of energy policy and alternative energy sources. Some solar-energy-related concerns are scheduled to report this week, and expectations seem to be high. Trina Solar Ltd. (NYSE: TSL) is expected to report 81 cents per share earnings, up 67.9%; ReneSola Ltd. (NYSE: SOL) is expected to post earnings of 32 cents per share, up 62.5%; and Suntech Power Holdings Co. (NYSE: STP) is expected to have earnings of 32 cents per share, up 21.9%. Even China Sunergy Co. Ltd. (NASDAQ: CSUN) is expected to have swung to a profit of 3 cents per share, from a per-share loss of 14 cents a year ago.

Here are a few highlights of this past week's earnings coverage from BloggingStocks:

• Analogic Corp. (NASDAQ: ALOG) easily beat expectations, sending shares higher.
• Ciena Corp. (NASDAQ: CIEN) posted a loss and forecast sales for 2008 below estimates.
• Coca-Cola Enterprises Inc.'s (NYSE: CCE) earnings outlook led shares to a 52-week high.
• Cooper Cos. (NYSE: COO) swung to a loss on acquistion costs and litigation.
• Copart Inc. (NASDAQ: CPRT) beat expectations, sending shares to a new high.
• Costco Wholesale Corp. (NASDAQ: COST) posted a solid quarter, in line with expectations.
• Cost Plus Inc. (NASDAQ: CPWM) posted a smaller-than-expected net loss.
• Fleetwood Enterprises Inc. (NYSE: FLE) narrowed its loss through improved efficiency.
• General Electric Co. (NYSE: GE) reaffirmed its 4Q forecast, but the forward outlook disappointed investors.
• H&R Block Inc. (NYSE: HRB) warned of a deep loss due to the mortgage meltdown.
• Korn/Ferry International (NYSE: KFY) beat estimates and revised its guidance.
• Leap Wireless International Inc. (NASDAQ: LEAP) posted a loss, but share prices rose anyway.
• Lehman Brothers Holdings Inc. (NYSE: LEH) earnings fell for the third quarter in a row.
• Methode Electronics Inc. (NYSE: MEI) beat estimates, spurred by international sales.
• Novell Inc. (NASDAQ: NOVL) swung to a loss, surprising Wall Street.
• Synopsys Inc. (NASDAQ: SNPS) beat expectations and offered guidance.
• Texas Instruments Inc. (NYSE: TXN) raised its guidance for the fourth quarter.

The first steps in creating a new integrated circuit involve theoretical design, simulation and testing. A leader in the development of software that powers those efforts is headquartered in Mountain View, California.

Synopsys (NASDAQ: SNPS) is a leading provider of electronic design automation software for semiconductors. The company delivers system design and verification platforms, IC manufacturing and yield optimization solutions, semiconductor intellectual property, and design services to customers in the chip, electronics and aerospace industries. Synopsys products address such complex issues as power management, accelerated time to yield, and system-to-silicon verification. The firm has strategic alliances with Honeywell (NYSE: HON), IBM (NYSE: IBM) and Texas Instruments (NYSE: TXN).

Investors were pleased last week, when the company reported fiscal Q4 EPS of 40 cents and revenues of $315.2 million. Analysts had been expecting 36 cents and $308.2 million. Management also guided Q1 EPS to 37-39 cents (37 cent consensus), Q1 revenues to $308-316 million ($314.70M consensus), FY08 EPS to $1.54-1.60 ($1.58 consensus) and FY08 revenues to $1.30-1.32 billion ($1.30B consensus).

Synopsys Inc. (NASDAQ: SNPS) is a leading provider of electronic design automation software for semiconductors. The company delivers system design and verification platforms, IC manufacturing and yield optimization solutions, semiconductor intellectual property, and design services to customers in the chip, electronics and aerospace industries. Synopsys products address such complex issues as power management, accelerated time to yield, and system-to-silicon verification. The firm has strategic alliances with Honeywell (NYSE: HON), IBM (NYSE: IBM) and Texas Instruments (NYSE: TXN).

Investors were pleased last week, when the company reported fiscal Q3 EPS of 32 cents and revenues of $304.1 million. Analysts had been expecting 30 cents and $300.6 million. Management also guided Q4 EPS to 34-37 cents (35 cent consensus) and Q4 revenues to $300-$310 million ($308.61M consensus). Shares popped above 50-day, 200-day and 90-day moving average resistance on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with two "strong buys," two "buys" and seven "holds." Analysts see a 19% growth rate, through the next year. The SNPS Price to Book ratio (2.98), Price to Free Cash Flow ratio (15.48) and EPS Growth rate (190.91%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 87% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $18.32 and $28.67. A stop-loss of $23.40 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.