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Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
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Market Synopsis
Inflation was cooking in the month of September with the CPI up 1.2%, an increase not seen in 25 years. This pop in consumer inflation was caused in no small part by the jump in energy prices, which were up by 12% for the month. Stripping out the energy and food prices to calculate the core rate, the rate of inflation was a more meager 0.1%. Expectations were for a core rate of 0.2% and an overall rate of 0.9% thus the effect of the errors was largely neutral given the balance of both. On Monday, the PPI is due to be released but the effect on markets is slowly being nullified by the greater importance that’s accorded to the CPI each year.
In other reports, capacity utilization
dropped by more than 1% to 78.6% during the month and industrial production was
hit by hurricanes Katrina and Rita, resulting in a decrease of 1.3%. The mining
sector was hardest hit with a cut of 9.1% in output mainly due to the lost
production in oil and gas located in the
Our interest in selling mortgage companies remains strong even after a week where clearly they outperformed the market as a whole. Companies such as GDW, CFC, FNM and FRE have enjoyed the benefit of a technical rebound while at the same time, most shares have generally been pressured by substantial selling and this, in all sectors. All of these stocks had been heading lower for several weeks though CFC had only begun, in the past couple of months, a downward slope on its price chart.
Technically Speaking
The drop in equities that was initiated last week continued to strengthen this week and in the process signaled that the slide was part of a significant bearish move designed to carry the indexes to lower points. The extension of losses this week occurred with heavier than normal volume adding emphasis to the move and by the time a meaningful rebound occurred, the volume accompanying the bounce was notably lower. Friday’s bounce still might be only the first step of a larger rebound but given the ferocity of the drop, there is a greater likelihood of a still lower low yet to be made. At this point, all indexes continue to suggest further weakness ahead in a search for an autumn bottom.
Many of our recommendations have been stopped out these past two weeks and we consider this to be a safe approach to handling long trades when risk becomes far too elevated. At this point, we cannot recommend shorts due to the bounce that has only just begun and therefore we choose to be patient.
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.
N.B. There are no longer restrictions on foreign stocks held in Canadian retirement savings accounts.
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
10/03/05 |
Akamai Tech |
AKAM |
15.96 |
16.10 |
15.00 |
B
|
|
10/03/05 |
Cardiome Pharma |
CRME |
8.97 |
8.00 |
8.00 |
SOLD |
|
08/15/05 |
Nvidia |
NVDA |
30.05 |
31.00 |
31.00 |
SOLD |
|
05/10/05 |
Pacificare Health |
PHS |
62.60 |
79.00 |
79.00 |
SOLD |
|
03/08/04 |
Transcanada Corp |
TRP |
21.34 |
29.46 |
27.50 |
B |
|
10/10/05 |
Viasat Inc |
VSAT |
27.43 |
25.35 |
|
B
|
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price