KVB, SEH, and ROYL Lead Small Cap Gainers

Stocks extended their gains today with all of the major indices closing up from this morning's open. The Dow Jones Industrial average closed at 8,770.92, up 0.37%; the Nasdaq added 9.29 points to close at 1,862.37; and the S&P 500 closed up 5.74 points at 944.89 for a 0.61% gain.

The small-cap stock bellwether index, the Russell 2000, was up 1.05% to close at 529.23.

Leading small-cap leading gainers today was KV Pharma (NYSE:KVB) which closed up 49.39% to $3.95 on news that it had settled its OxyContin dispute with Purdue Pharma. Other small-cap gainers include Spartech Corp. (NYSE:SEH), up 37.15%; Royale Energy (Nasdaq:ROYL) up 30.36% to close at $3.65; and a leader from yesterday, Corel Corp. (Nasdaq:CREL) up 22.5%.

Small-cap decliners were lead by Shanghai-based Linktone (Nasdaq:LTON) down 17.36% on unaudited Q1 results showing revenues at $14.8 million compared to $19.4 million for Q4, net income from continuing operations of $0.1 million compared to $1.1 million from Q4, net income of $0.3 million versus $0.6 in Q4.

Setting a new 52-week high today was American Dairy (NYSE:ADY), closing at $43.38. American Dairy produces and distributes milk powder, soybean milk powder, and related dairy products in China. American Dairy had been trading between $10 and $18 for much of 2009 until May 15 when it surged to $28.48 and continued on to $35.08 by May 19, pulling back, then steadily moving up again. After the closing bell on May 14 American Dairy announced Q1 2009 versus Q1 2008 sales increase of 191%, income from continuing operations increase of 523%, and net income up 282%.

*****The International Energy Agency (IEA) reported that demand for oil is picking up. Instead of the 3% drop in demand, the IEA says that it now expects demand to be off a whopping - drumroll please - 2.9%. Sheesh.

When you're talking about 83.5 million barrels a day, a one-tenth of a percent revision should not be headline news. Somebody owes me an apology.

But seriously, I think it's pretty much understood that any statistic thrown out there by some agency or department is subject to revision. In fact, I get suspicious when numbers don't get revised…

*****Economics is the study of a human system of production and consumption of goods. And because it's a human system, there must always be some margin for error.

Especially at this stage of the recession/recovery, numbers are going to swing wildly. Retail sales, foreclosures, payrolls, it doesn't matter - the headline number will get revised.

Of course, this is what makes investing interesting. The data can only take you so far. And if one relies solely on economic data for buy and sell signals, poor results are inevitable.

*****As you know, I was quick to jump on oil stocks at the start of the current rally. Oil was trading around $40 a barrel when I recommended three  small oil stocks in my SmallCapInvestor PRO advisory service and also recommended Graham Corp (AMEX:GHM) here to Daily Profit readers.

Obviously, investor sentiment toward oil has changed dramatically since I first started pushing oil stocks. That's what happens when an asset doubles in price in just a few months.

In fact, the bullish sentiment behind oil and oil stocks is so extreme that I've told SmallCapInvestor PRO to sell one oil stock and take the 142% gains we had off the table. Oil prices are due for a big correction, and there's no way I'm going to lose such a nice gain.

I'll be buying back oil stocks sometime this summer. And if you missed the big gains in oil this time around, don't worry, you'll get another chance. I'll cover oil consistently here in Daily Profit. And you can also get my stock recommendations on the next sector to run up, China, for SmallCapInvestor PRO HERE. So far this year, SmallCapInvestor PRO members are averaging 43% gains per recommendation.

*****I have one more announcement today. Jason Cimpl, the technical analyst for TradeMaster Daily Stock Alerts has graciously offered to start sharing his weekly forecasts with Daily Profit readers on Fridays. So tomorrow, you should get your first video chart analysis from Jason.

He's done a great job of keeping his readers in profitable trades during this rally. And his insights into what's driving stock prices and where they are likely to head next should prove a worthy addition to this letter.

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