I have been publishing monthly on Stockhouse for some time now but will be moving to weekly reports starting tonight; with a special interest group (and Bullboard) focused on smallcap and microcap stocks.

Stockhouse is a unique community with a diverse skill set and our goal is to build a social network around this talented pool of professional and private investors. Websites like Facebook are hugely popular for sharing personal information and LinkedIn is popular for creating business networks. But neither works well for sharing information and insight on stocks.

Message boards are nothing new to Stockhouse as its network of company specific message boards (the Bullboards) is one of the largest in the world. The boards though, while boasting huge advantages and freedom of speech, also get abused. Our intent is to moderate a board that keeps everyone focused on the task at hand and provides a venue from which to share insight and ideas, but at the same time prevents abuse and eliminates pointless banter.

My plan is to build a network of dedicated investors who are interested in sharing their own research, tips, and rumours, and/or would like to read the insights of other group members. To accomplish this, I will write a report that reviews posts from the group along with insight from emails I receive. We will call this the StreetSignal Report and it will be hosted on the Stockhouse home page Monday evenings.

In essence we will try to build a large social network around investors interested in North American smallcaps and microcaps. We will target companies with a maximum market cap of $400 million (unless it’s a high profile story). Over time I should also be able to identify those contributors with solid track records and credibility - and highlight their input.

We invite you to join the group if interested in posting at some point, and otherwise bookmark group.

Stockhouse is working on a solution that will make these groups easier to locate without depending upon the long URL.

The StreetSignal report

Starting next Monday February 1st I will have more company-specific information to discuss. This week you will see a few posts on the message board to get us started.

We had a very strong rally heading into the new year but that was short lived as the microcaps and smallcaps started the correction that began  in January. After witnessing last week’s 5% correction on the big boards, its evident (in hindsight) an aversion to risk was building significant traction and some type of correction was enroute.

It is evident that risk aversion is weighing on this market. The bids on smaller stocks have thinned out considerably and trading would indicate a lot of shareholders are “lightening up" after President Obama dealt a slap this market upside the head when he proposed legislation that would limit the size and trading activities of financial institutions. It’s unknown how long this could last but investors will tread very carefully for the remainder of this week.

That being said, speculators are more than happy to jump on short term trading opportunities. This was evident on Friday with First Gold Exploration (TSX: V.EFG, Stock Forum). In the midst of Friday's heavy market selling, EFG jumped 200% and within the past couple days has generated over $15 million worth of buying. Friday's jump appeared overblown as initially the company only released grab samples. Today (Monday) it released some drill results and expects to post more in coming weeks. Today's numbers generated another flurry of buying as the grades of rubidium (a rare earth element) were off the chart, but the drill intersection was fairly narrow.

This lithium/rare earth element project of EFG's  is very early stage, and while the traders and speculators appeared over anxious, it was great to see how much activity these plays can generate in the midst of a frail market. That is also what makes microcaps and smallcaps exciting -- when you can stomach the risk.

If anyone has more insight into this specific area of EFG's discovery (including potential stock plays), feel free to drop me a note at microcap(at)telus(dot)net,  and I can summarize the information and post it to our StreetSignal board this week.

Market & economic insight:  From a list compiled over the past decade, I track over 60 of the world's best money managers, market strategists, and economists. Weekly we will summarize some of the most relevant insight.

Current rating: 48% cautious / 27% bearish / 25% bullish

a) Evy Hambro, who is one of the world's most successful resource fund managers, remains bullish on gold and platinum as Chinese demand continues to experience powerful growth across all commodities. "If you're looking for a W-shaped correction from the lows that we came to last year, I don't think we'll see the scale of that. If it does happen, I think it will be very short-lived.

b) Bob Janjuah, Royal Bank of Scotland’s Chief Global Strategist, in late December felt global stock and credit markets were on the verge of a steep market sell-off. He felt the S&P 500 index would shed more than 300 points by September. However, he really likes commodities - and anything Bernanke cannot print. He expects to see oil at $100 and gold near $1500 in 2010. "I would be extremely surprised if we did not see at least 1 decent multi-month counter trend rally, but I also think we see lower highs. So think S&P going from 950/1000 back up to 1080/1120 in Q2. The driver for this counter trend rally will be the market’s belief that the growth story can survive even with tighter policy"

c) Professor Nouriel Roubini - "The global rally in stocks may end in the second half of the year amid a muted recovery in the world’s largest economies and as deflationary pressures limit gains in earnings"

d) David Rosenberg of Gluskin Sheff - "Sometimes good just isn't good enough. Equities have a lot of good news already priced in - probably too much. This is in stark contrast to a year ago when it only took “less negative” sequential data and earnings performances to take the market higher. Those days are gone. Right now the charts are telling us that we could easily go down another five per cent from here."

e) Robert Shiller, professor of Economics at Yale University - believes we need to see Contingent Capital for financial institutions - also called regulatory hybrid securities. "The idea is simple: banks should be pressured to issue a new kind of debt that automatically converts into equity if the regulators determine that there is a systemic national financial crisis, and if the bank is simultaneously in violation of capital-adequacy covenants in the hybrid-security contract."

General Conclusion: If this was the correction many were calling for, another 5% loss in the Dow could not be ruled out (we already saw 5% in 3 days last week). Whether that occurs this week is anyone's guess. This weakness is being fuelled by Obama's plan to place tough restrictions on major banks, China's efforts to control economic growth, and growing concern over national government debt from countries like Greece.

Disclosure: Danny Deadlock does not own shares in any of the stocks mentioned in this report

To send an email (tips, rumours, research) for consideration in the StreetSignal report, please contact Danny at microcap(at)telus(dot)net or post directly to our moderated message board.

Danny Deadlock has specialized in microcap and smallcap companies for over 25 years and has been a registered member of the Stockhouse community since 1997. You can find his website at www.MicroCap.com - a service which has specialized in TSX and TSX Venture penny stocks since 1998.