Stockscom
Report for
Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
Subscriptions and Administration:
Market Synopsis
On Tuesday, the Federal Reserve meets one last time in 2005 and makes a decision on interest rate policy. All observers are in agreement that another quarter point hike in overnight interest rates is in the cards but the question on everyone’s mind is what will be the wording of the communiqué. Will the Fed rely on similar language expressing the sentiment that “longer term inflation expectations remained contained” and that “policy accommodation could be removed at a pace that would likely be measured…”? This has been part of the standard briefing at the end of each meeting for some time. Or are they prepared to change their statement to reflect the reality that inflation is more than tame?
Inflation had been reported to be rising sharply in the third quarter, but the latest figures on the third quarter refute that argument showing instead that productivity increased by a revised 4.7% while unit labor costs eased 1%. Unit labor costs have now been measured at 1.8% for the year after a revision for the second quarter was in sharp contrast to the original report; the original showed unit labor costs were rising 1.8% while the revised report argued for a decline of 1.2% - a total shift of 3%!
The Fed will find it difficult to keep the same message to express their view of inflation risks since the broad category of unit labor costs shows an increase for the year of 1.8% or less than half of the rate of inflation. Notably, this unit labor costs category is one of the primary statistics long depended on by Fed Chairman, Alan Greenspan, in developing his view of inflation. Therefore, the Fed could potentially word the communiqué differently to accommodate a subtle shift in monetary policy that might represent an end to these quarter point rate hikes.
Technically Speaking
The more powerful of the larger capitalization indexes, the S&P 500 and the Nasdaq Composite, have found critical support at their respective lows from Nov 30, which were tested successfully on Dec 8 this week. Friday’s trading was a return to the bullishness that we saw during the first leg of this rally beginning in October and although the trading volume was less than normal, there was some indication that a return to rally mode was imminent. Breadth was uniformly bullish and the S&P midcaps and Russell small caps are close to attaining new 2005 highs once more. Clearly, the technology sector is leading the parade in North American equities, but it isn’t necessarily led by those stocks that were leaders in the past.
New Buy Recommendations (in order of preference):
Radiant Systems (RADS) – Radiant Systems has spent the past eight months consolidating its position between $9 and $13, but with the large gap left in mid-November and the sharp step higher triggered on Friday, this stock is letting everyone know that it’s prepared to move higher and break out from this consolidation for good. On the daily chart, the price bars left the gap open and price found strong support with the 25-day moving average. On the weekly, there is essentially an outside up week reinforcing the original break out move from three weeks ago.
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 |
|
|
Amer Sci & Eng |
ASEI |
71.08 |
66.20 |
|
H
|
|
|
Birch Mtn Resour. |
BMD |
6.65 |
7.83 |
|
B
|
|
|
Broadcom |
BRCM |
48.41 |
48.49 |
|
B+
|
|
|
Omnivisions Tech |
OVTI |
16.39 |
20.70 |
|
B
|
|
|
Plexus Corp |
PLXS |
20.15 |
22.64 |
|
B
|
|
|
Qualcomm |
QCOM |
44.83 |
44.45 |
|
B
|
|
|
Redback Networks |
RBAK |
11.78 |
13.99 |
|
B+
|
|
|
Sigma Designs |
SIGM |
13.10 |
13.92 |
|
B
|
|
|
Tom Online |
TOMO |
20.66 |
20.69 |
|
B
|
|
|
Transcanada Corp |
TRP |
21.34 |
31.58 |
27.50 |
B |
|
|
USA Truck Inc |
USAK |
29.30 |
28.91 |
|
H |
|
|
Viasat Inc |
VSAT |
27.43 |
26.94 |
23.00 |
H
|
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price