Stockscom
Report for
Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
Subscriptions and Administration:
Market Synopsis
Undoubtedly the release Friday of the employment report stole the lion’s share of the economic spotlight away from the Federal Reserve’s quarter point hike to 3.0% that came earlier this week. For Friday’s job report was bigger than anyone had imagined and certainly prior disappointments had paved the way to low expectations when it came to the monthly report on jobs. But do the 274K new positions indicate a return to economic boom times? Given the recent history of job reports, we would say the jury is still deliberating.
In order to fully analyze the report, it’s necessary to break it down to its components. One key element in the jobs report was the manufacturing job sector, which for the ninth time in the past twelve months lost jobs – in this report, the losses numbered 6K. Overall, the extremely important goods-producing industry sector gained 45K jobs but this was dominated in no small measure by the construction industry where job growth amounted to 47K. Meanwhile fully 20% of the increase in jobs came in the leisure and hospitality industries, a sector not known for paying high salaries equivalent to earnings in manufacturing. Other large portions of the increase in jobs include 9% in low-paying retail and approximately 13% in health and education, which are public services and not barometers of a booming economy.
In the end, the spurt in job creation only served to raise fears among investors of a speedier series of interest rate hikes as the Fed becomes more vigilant in the face of rising inflation. Perhaps more worrisome is the potential for higher inflation and concomitant interest rate hikes just as the economy begins a cooling off period, which if one were to believe the trend in ISM purchasing manager’s surveys, is an accurate assessment. Accordingly, the Fed is left handling a precarious situation with both rising interest rates and falling economic activity.
Similar fears of a slowdown in the
economies of both
Technically Speaking
The charts on Friday signified fear more than elation over increased jobs. As the markets were moving into the close, the S&P and DJ were especially noteworthy for the velocity of the downward movement in price and this reflected the investors’ fear of rapidly rising interest rates, which might only serve to start a recession.
Technically, the indexes had reached resistance points, bumping up against the lows from the previous step down and corresponding in two cases, DJ and ND, to the 200-day moving average. With stochastics on all three indexes reaching well into overbought territory, there is every reason to believe that another leg down is beginning for the indexes. In order to counter that view, we would need to see a bounce well above the April highs. Light volumes traded on Friday only serve to reinforce the view that this is the top of a retracement in a powerful bearish cycle.
New Buy Recommendations:
Canadian Natural Resources (CNQ) – We wish to be long once more in energy and more specifically, the Canadian oil sands. While Suncor, which we held previously was a solid performer, charts suggest that the upside potential for CNQ is far better than for SU. The gap left on February 9 is the key at this moment with the recent retracement finding support at the gap and the past three sessions saw strong upward moves leaving gaps between all three. On the weekly chart, the retracement followed closely the 25-week moving average without violating the line adding support for long term investors such as us.
New Short Sales
None.
Stock Positions to Sell/Exit:
None.
Portfolio Comments:
New stops have been added to the list while others have been modified. Those that have blanks, are being carried unstopped for now. Please see our complete list of stops in the table below.
List of Current Stock Recommendations:
Action Ratings. The following is the legend for designating immediate action
for our stock recommendations. The first is B, meaning the stock is timely
to buy but the case for doing so right here is not overwhelming. Either the
stock may have gotten ahead of itself and may be vulnerable to a retracement or
else the stock has been performing disappointingly but may simply be
regrouping. B+ and B++ indicate stocks for which there is a technical case
to buy now, with plusses adding weight according to how many there are, up
to a maximum of two. Stocks rated H are ones to hold, awaiting confirmation
to buy more or to sell. SELL, of course, means what it says. It seldom pays
to override this designation. In the case of stocks held short, the rating is S
where positions should be retained. S+ and S++ indicate stocks for which there
is a technical case to add to the positions with plusses adding weight similar
to long positions. The maximum number of plus signs is 2.
Please take note that the following clause
is being removed under the assumption that the aforementioned federal budget in
[Stocks marked # are eligible as Canadian content in Canadian RSP funds.
Otherwise there is a 30 percent restriction on foreign stocks held in these
accounts.]
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
|
Air T Inc |
AIRT |
17.63 |
15.10 |
13.64 |
H |
|
|
|
GILD |
39.58 |
38.72 |
34.50 |
H |
|
|
|
HTCH |
37.00 |
38.37 |
32.00 |
H |
|
|
Transcanada Corp |
TRP |
21.34 |
24.14 |
23.25 |
H |
|
|
Verisign Inc |
VRSN |
29.24 |
28.35 |
24.60 |
H |
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
|
Cisco |
CSCO |
17.66 |
18.02 |
18.70 |
S |
|
|
3M |
MMM |
77.67 |
77.33 |
78.40 |
S
|
|
|
General Motors |
GM |
29.95 |
30.52 |
|
Covered |
|
|
Wal-Mart |
WMT |
47.05 |
48.96 |
50.00 |
S
|
|
|
Yellow Roadway |
YELL |
50.62 |
52.86 |
55.00 |
S
|
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price