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·
April jobs +138K – slower
job growth than expected
·
Better than expected
quarterly earnings
Market Synopsis
Of all the statistics released last week none had as big an impact as the April employment report on Friday morning. While expectations had been considerably higher with estimates averaging nearly 200K new jobs, the actual figure (prone to revision in later months) was measured as 138K. Furthermore, the previous two months were revised lower to 200K each, representing a net overstatement of 36K jobs. Given that we perceive everything to move in trends, we would not be the least surprised if next month’s data reveals that the job growth for the month of April was a tad less than the reported figure. Nonetheless, breaking down the report, there were a number of positives and the numero uno among these was the increase in manufacturing employment by 19K. While there have been some rare occasions in the recent past with where we’ve witnessed increases in this sector, this month’s number is arguably the most impressive. Also the construction sector continued to produce strong numbers in this report. With an increase of 10K jobs, the steady monthly gains are especially notable given the decline in residential house construction.
The employment report noted that the average number of hours worked gained 0.5%, the largest increase since July while the average hourly earnings rose 0.5% as well boosting the year-over-year gain to 3.8%. These two statistics caused differing opinions among analysts with some concerned that the strong wage gains threatened the consistently low inflation environment while others pointed to the increase in hours worked, an indication that the need for additional employment was being met by current employees willing to work extra time.
The first quarter’s earnings season is coming quickly to a close and with 85% of the S&P 500 having reported, it is becoming clear that the current average of earnings growth of 14% will succeed in topping the analysts’ expectations of 10.4%. Though earnings growth has been strong in the energy sector as expected, other normally mundane sectors such as basic materials have also been in the spotlight due naturally to the increase in demand and the subsequent increase in commodity pricing. Undoubtedly, the effect of the rise in Asian consumption is being felt here at home.
Technically Speaking
Friday’s strong jump on both the S&P 500 and the Dow Jones has designated the near term direction as unequivocally upward. The DJ has been a steady performer of late and with Friday’s move, it now lies less than 180 points away from its all-time highest level last reached in 2000. Over the past two months, the DJ continued to plod alone in a slow upward crawl but in a departure from the norm, the S&P joined on Friday breaking through its previous resistance located just below the 1320 level. This was an important move on the S&P for the resistance had prevented it from matching the DJ’s performance over this time. Now the former resistance area becomes a solid area of support for the S&P.
The tech sector and Nasdaq in particular extended their rangebound price action. The ND-100, the largest 100 companies on ND, has been relegated to a lateral trend since touching a new high on Jan 11. The Composite index comprising all shares has fared much better with a 2006 high occurring on Apr 20 and while this index has mapped out a similar rangebound chart, there is a slight upward tilt to the index demonstrating a marked preference of the market bulls for smaller tech outfits.
New Buy Recommendations (in order of preference):
Sunopta Inc (STKL) – This company has three main units: a food group concentrating on production and processing of natural food products, a minerals group that produces and distributes industrial materials and a bioprocess group that represents a wild card of sorts. It is the latter business group that is developing a novel process to turn biomass into ethanol. The firm is profitable owing to the fact that the former two units generate large growing profits but it is probably speculation in the ethanol connection, which is driving the rise in the stock price. The stock’s chart in all three timeframes: daily, weekly and monthly supports the buying thesis however with entry positions so important, it is worth noting that the daily chart completed a Lindahl buy signal on Friday.
New Short Sales
None.
Stock Positions to Sell/Exit:
Stereotaxis (STXS) – We closed this position upon touching our stop-loss.
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 |
79.50 |
74.00 |
B
|
|
|
Anadigics |
ANAD |
6.85 |
9.19 |
|
B
|
|
11/14/05 |
Birch Mtn Resour. |
BMD |
6.65 |
7.85 |
|
B
|
|
02/21/06 |
Cdn Natural Res |
CNQ |
58.00 |
58.05 |
|
B
|
|
03/20/06 |
LSI Logic |
LSI |
11.25 |
10.92 |
|
H
|
|
01/30/06 |
Nasdaq Stock Mkt |
NDAQ |
45.98 |
37.53 |
|
SOLD |
|
01/09/06 |
Nuvelo Inc. |
NUVO |
12.95 |
17.39 |
|
B
|
|
11/07/05 |
Redback Networks |
RBAK |
11.78 |
22.19 |
18.00 |
B
|
|
03/20/06 |
RTI Int’l Metals |
RTI |
47.70 |
60.90 |
|
B
|
|
01/09/06 |
Seabridge Gold |
SA |
9.49 |
11.35 |
8.00 |
B+
|
|
01/09/06 |
Sierra Wireless |
SWIR |
13.60 |
18.96 |
|
B
|
|
04/10/06 |
Silver Wheaton |
SLW |
11.06 |
10.71 |
|
H
|
|
02/27/06 |
Stereotaxis |
STXS |
13.57 |
11.00 |
11.00 |
SOLD |
|
01/05/06 |
TGC Industries |
TGE |
14.50 |
15.13 |
|
B
|
|
11/14/05 |
Tom Online |
TOMO |
20.66 |
27.54 |
23.90 |
B
|
|
03/08/04 |
Transcanada Corp |
TRP |
21.34 |
29.67 |
28.00 |
B |
|
01/05/06 |
US Global Invest |
GROW |
21.18 |
22.50 |
|
B |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price