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Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
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Market Synopsis
Economic data is on the calendar for this week as numbers for factory orders, productivity and spending both, consumer and construction, could set the pace for investors in stocks. Moreover, the Federal Reserve will be releasing their decision on interest rates on Tuesday afternoon and, in this particular case, all analysts are in agreement that the Fed will hike rates once more by a quarter point to an even 4%. The release of all this data though is not likely to heavily influence markets unless the numbers are substantially different from the expectations. The reason being that these numbers represent the past and typically stock prices represent future value.
To that end, the ISM numbers on both goods as well as services often influence the perception that investors have about the general health in the economy. These numbers, also to be released in the coming days, will describe the present economic conditions and offer ideas on the broad scenarios most likely to be witnessed in the months ahead.
On Friday of this past week, the first estimate of third quarter GDP was announced as 3.8%, 0.2% more than had been expected. The news was greeted with enthusiasm by investors who used the production numbers as an excuse to buy shares. Still, despite the overwhelmingly positive breadth in the markets that day, volume was not truly indicative of a shift in investor psychology. For the past few months, the overall trend for stock markets has been stepping lower and we view this trend as continuing. It is worth noting that some well-respected analysts consider the potential for recession in the first half of 2006 to be quite high.
Technically Speaking
The Nasdaq index remains in bearish mode in spite of the strong upward movement in prices witnessed on Friday. The broader large cap indexes, the Dow Jones and the S&P 500, ended the week on the positive side. The technology sector has been facing lower share prices since the beginning of August therefore its performance this past week was not surprising in the least. Paradoxically, the Nasdaq Composite index actually finished in positive territory for the week while the Nasdaq 100 finished with a loss demonstrating that Nasdaq’s largest members are performing disproportionately weaker.
We believe that given the generally weak performance by stocks, there is further potential for downward movement in prices though the tech-sector is especially weak and poses a stronger, singular threat of future weakness. Though the low in October was set on Oct 13 for all three large cap indexes, we would caution that we don’t believe that this represents the ultimate low for shares this year.
Overall, we consider new long positions too risky at this juncture given the performances of the various indexes and stock sectors though Oil and Gas Services appear interesting and worth watching. And on the short side, we still consider that the most promising opportunities lie with mortgage financing firms such as the Fannie Mae and Freddie Mac’s of the world but their recent rises have only served as a warning not to jump too soon. Patience and cash remain our biggest friends.
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 |
|
|
Akamai Tech |
AKAM |
15.96 |
16.84 |
15.00 |
B
|
|
|
Transcanada Corp |
TRP |
21.34 |
29.69 |
27.50 |
B |
|
|
Viasat Inc |
VSAT |
27.43 |
23.99 |
23.00 |
B
|
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price