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Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
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Market Synopsis
Regardless of the good economic news of late, the aspect of seasonality has reared its ugly head to raise the nervousness level of bulls as we head into the fall season. August is rarely a good month for the stock market as it makes its near-annual trek toward a seasonal bottom in September or October. And this week’s action, exacerbated by higher prices for crude oil and a trade gap that seemingly widens in every passing month, has meant stocks were notably weak on both the large cap indexes as well as the S&P Midcaps and the Russell small caps.
Crude oil almost reached $67 per barrel on Friday and overnight is trading 50 cents lower but the fears of Iranian nuclear expansion and the threat of political instability in Saudi Arabia, the defacto price setter for oil, will not dissipate overnight and thus we consider the possibility of an even higher price for crude in the coming days is at least 50:50. Certainly, there has been rampant speculation in oil on world commodity markets in the past few months and the long side is terribly heavy, but this situation could continue for longer than expected. On Thursday, the IEA added fuel to the fire by noting that non-OPEC supplies would be lower for the entire 2005 year than previously forecasted.
The high price of crude oil was also partially responsible for the $58.8 billion trade gap in June. While not the largest trade deficit ever, that honor belonging to February’s $60.1 billion, it was not that far behind. Imported oil accounted for $14.6 billion or about 26% of the total and with prices rising in July and August, the likelihood of further increases in the monthly bill for oil is high.
Inflation figures are on tap this week first
with the CPI on Tuesday followed by the PPI on Wednesday. The Federal Reserve
with its mouthpiece, Alan Greenspan, has been paying close attention to the
level of inflation in this country. But what Fed-analysts have determined is
that they are more concerned with the effects of high oil prices on consumer
behavior rather than whether oil is getting too expensive, too quickly. On the
other hand, labor productivity is one of Alan Greenspan’s favorite topics and
thus the Fed is constantly evaluating the level of wage inflation in the
Technically Speaking
Though the week’s action did not negate the rally in progress since May, it has placed it in a precarious position seriously threatening the rally and we saw evidence of that in the many recommended positions whose protective stops and stop-losses were triggered. We continue to look at the 2100 area on Nasdaq as a strong support level and similarly 1220 on S&P but in the case of both indexes, there is ostensibly money being withdrawn from each that undermines these support levels.
Perhaps the healthiest market appears to be the S&P Midcaps followed by the Russell small caps however even in the case of the small caps, we would recommend taking a bearish view if support fails at the nearby 655 level.
New Buy Recommendations:
Nvidia Corp. (NVDA) – This stock reached a new high (on higher than normal volume) for the year on Friday and accomplished this with an impressive gap up based on its just announced quarterly results. Perhaps more importantly, NVDA is breaking out of a consolidation that has contained price for the two years. The monthly Lindahl buy signal combined with the breakout visible on the daily as well as the weekly charts is a strong indication of a stock about to mount a serious climb.
American Science and Engineering Inc (ASEI)
– This developer of x-ray inspection systems is not just benefiting from the
Homeland Security policies here in the
Websidestory Inc. (WSSI) – This stock is more of a speculative buy than the previous two, however from the point of view of technical analysis, it certainly passes muster. It has a short history having come to the market in October of 2004 so there is not months and months of history in its chart. Having said that, there are fundamental reasons to like the stock owing to its rising quarterly profits. Friday’s action saw it breakout from a two- month consolidation on rising volume and it gives every indication that further moves higher are in the offing.
New Short Sales
None.
Stock Positions to Sell/Exit:
Stocks exited this week are list below.
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
Canada will be accepted into law. From the budget date forward, there are no
longer restrictions on foreign stocks held in Canadian retirement accounts.
Furthermore we will no longer mark stocks with # to indicate such.
[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 |
7.90 |
7.90 |
SOLD |
|
|
Canadian Nat Res. |
CNQ *** |
28.47 |
48.50 |
42.00 |
B |
|
|
Captiva Software |
CPTV |
14.03 |
20.05 |
17.00 |
B |
|
|
|
GILD |
39.58 |
41.84 |
42.00 |
SOLD |
|
|
Humana |
HUM |
36.30 |
45.76 |
40.00 |
B |
|
|
MGI Pharma |
MOGN |
26.91 |
25.97 |
25.25 |
B |
|
|
Nexen |
NXY |
33.76 |
42.06 |
38.80 |
B |
|
|
Novatel |
NGPS |
28.09 |
29.80 |
29.80 |
SOLD |
|
|
Orckit Comm. |
ORCT |
27.09 |
22.80 |
22.80 |
SOLD |
|
|
Pacificare Health |
PHS |
62.60 |
75.85 |
73.00 |
B |
|
|
Precision Drilling |
PDS |
41.50 |
43.61 |
41.00 |
B |
|
|
Sun Hydraulics |
SNHY *** |
23.92 |
27.40 |
27.40 |
SOLD |
|
|
Transcanada Corp |
TRP |
21.34 |
27.39 |
25.10 |
B |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price