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Market Synopsis
What is the matter with Alan Greenspan?
With the release of the revised GDP for the
third quarter of 4.3% and the stellar employment figures released on Friday
showing another 215K new jobs for the month of November (as well as higher
revisions for the previous two months), there is every reason for the likes of
still-Federal Reserve Chairman, Alan Greenspan, to rejoice in the economy but
instead he chose the weekend’s G-7 meeting in London to complain loudly that
Uncle Sam is in danger of missing a step. More specifically, he pointed to the
federal budget deficit and warned that ignorance of this “little” $318.5
billion matter posed an extraordinary risk to the American economy. What he
emphasized was the demographic challenge of a fast-growing population of
retirees that required some tough choices on how to address their implicit
social costs and by consequence, of the nation’s future economic performance.
Since the
Meanwhile, it was only a few weeks ago that Mr. Greenspan began to speak out about housing and the possibility that there was indeed a housing bubble. As many analysts have warned about, the pricking of this bubble could create much greater havoc with the economy than the historical slide in tech stocks did after the year 2000. So the question that is on everyone’s mind is, why has the soon-to-be-retired Federal Reserve Chairman waited this long to wade in forcefully on these very important issues?
On Tuesday of this coming week, the Labor Department will release the third quarter revision of productivity and most analysts expect that the figure will be revised higher from 4.1% to 4.5%, the highest productivity gain in more than a year. More importantly, the unit labor costs are expected to be revised downward to –1% for the quarter and those in the second quarter to be revised lower from +1.8% to –1.3%, which will mean that the Fed’s view that inflation is expected to be contained may in fact be exaggerated, however we must wait for the December 13th meeting for an update.
Technically Speaking
As we wrote after the Thanksgiving holiday weekend, there was indeed a retracement of substantial proportion but on Thursday of this past week, buyers roared back into the market in a big way pushing up prices on higher than normal volume. Essentially, this puts the original thesis back on the front burner: that this is the time to buy and given a choice, the stocks to buy are more likely to be in the tech sector for the Nasdaq is the strongest index. The Nasdaq Composite found the support it needed at around the 2225 level corresponding to a point just above the August and previous 2005 yearly highs.
While the broader indexes gain altitude, it is the Nasdaq which is reaching new yearly highs and probably looking to close out the year 2005 on a high note. Not to be neglected though is the good chance for a close on the Dow Jones above the significant 11,000 level and a finish above 1,300 on the S&P. The mid-week turn near support at 1,250 on the S&P was a very noteworthy event demonstrating that the broader general market was also strong.
New Buy Recommendations (in order of preference):
New Short Sales
None.
Stock Positions to Sell/Exit:
We were exited from Capstone Turbines (CPST).
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 |
|
|
Amer Sci & Eng |
ASEI |
71.08 |
68.80 |
|
B
|
|
|
Birch Mtn Resour. |
BMD |
6.65 |
7.58 |
|
B+
|
|
|
Broadcom |
BRCM |
48.41 |
48.77 |
|
B+
|
|
|
Capstone Turbine |
CPST |
3.16 |
3.50 |
3.50 |
SOLD |
|
|
Omnivisions Tech |
OVTI |
16.39 |
21.56 |
|
B
|
|
11/07/05 |
Plexus Corp |
PLXS |
20.15 |
22.26 |
|
B
|
|
11/07/05 |
Qualcomm |
QCOM |
44.83 |
45.20 |
|
B+
|
|
11/07/05 |
Redback Networks |
RBAK |
11.78 |
14.22 |
|
B
|
|
11/21/05 |
Sigma Designs |
SIGM |
13.10 |
13.90 |
|
B
|
|
11/14/05 |
Tom Online |
TOMO |
20.66 |
21.33 |
|
B
|
|
03/08/04 |
Transcanada Corp |
TRP |
21.34 |
31.57 |
27.50 |
B |
|
10/10/05 |
Viasat Inc |
VSAT |
27.43 |
27.78 |
23.00 |
B+
|
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price