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Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
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Market Synopsis
There were new indications of renewed health in the American economy this week with details of second quarter GDP providing hope of resurgence in the second half of the year. While GDP increased adequately at a real rate of 3.4%, (down from 3.8% in the first quarter) the simple number masked some interesting highlights, namely the significant drawdown in business inventories of 2.4%. Added back to GDP, the real rate of growth becomes 5.8% and while one might argue that it is wrong to simply add those two numbers together, the very low level of current inventories permits us to make the assumption that these reduced inventories must absolutely be replaced in the very near future. Thus, we can assume that the necessary rebuild in inventories will occur in either this third quarter and/or carry over into the fourth quarter of the year.
Apparently though, the manufacturing sector is feverishly replacing those inventories in the current quarter for this would explain the very good durable goods orders for the month of June released on Wednesday of this week. The increase of 1.4% follows on the heels of a lopsided gain of 6.4% in May whose totals were skewed by the presence of large orders for aircraft and aircraft parts. The June orders were strong across all sectors, especially the critical core capital goods equipment group, and most certainly represents production in both June and months further out.
The good news translated into a Chicago PMI figure of 63.5%, an unexpectedly sharp increase from June’s 53.6% and set the stage for a similar performance from the national figure due to be released tomorrow. Moreover, the employment report for July, released this coming Friday, is likely to show a healthy increase in manufacturing jobs thus reducing its heretofore reliance on construction. A reinvigorated manufacturing sector would alleviate any losses due to a slowdown in the housing construction sector, a sector that is overdue for some measure of reduced activity.
Technically Speaking
Stock markets appear to be in a bit of a
quandary. Despite Friday’s news on GDP and the Chicago PMI, equity indexes
languished, reversing their performance and gains made just one day before.
Being the last day of the month doesn’t
We must nevertheless keep this all in perspective for most of the charts of the equities we’ve recommended still demonstrate very bullish behavior and certainly the weekly charts for the indexes had price bars that were positive on the week. But the characteristic that stands out the most if one looks at the index charts, is the lack of power to the upside that one normally associates with a break out from consolidation and a new yearly high. Because of this missing characteristic we will continue to be vigilant in recommending either purchases of new stocks or divesture of held issues.
New Buy Recommendations:
None.
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 |
|
|
Arena Pharma |
ARNA |
8.25 |
8.67 |
|
B |
|
|
Canadian Nat Res. |
CNQ *** |
28.47 |
41.58 |
|
B |
|
|
Captiva Software |
CPTV |
14.03 |
16.16 |
14.00 |
B |
|
|
|
GILD |
39.58 |
44.81 |
42.00 |
B |
|
|
Humana |
HUM |
36.30 |
39.85 |
36.75 |
B |
|
|
MGI Pharma |
MOGN |
26.91 |
27.30 |
|
B |
|
|
Nexen |
NXY |
33.76 |
37.20 |
|
B |
|
|
Novatel |
NGPS |
28.09 |
32.50 |
|
B |
|
|
Orckit Comm. |
ORCT |
27.09 |
24.25 |
|
B |
|
|
Pacificare Health |
PHS |
62.60 |
76.20 |
|
B |
|
|
Precision Drilling |
PDS |
41.50 |
42.06 |
|
B |
|
|
Sun Hydraulics |
SNHY *** |
23.92 |
30.37 |
|
B |
|
|
Transcanada Corp |
TRP |
21.34 |
27.35 |
23.25 |
B |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price