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Sell off continues but
halted (temporarily?) by rebound
Technically Speaking
The major equity markets received a boost coming into the long weekend with the last three sessions of the week marking the beginning of a rebound after the incessant fall of the past couple of weeks. Significant technical damage to the bull-run from the bottom in October 2005 was sustained and it will require a prolonged period of base-building before there’s any possibility of a return to a bullish trend.
While we don’t discount the possibility that a bear market has begun, it is worth noting that the Nasdaq has bounced off a trend line in command since the market bottom in 2004. Were support to fail here, the likelihood would be great that a much deeper decline would result. This support becomes even more important when taken in the context that the tech sector has more often than not been the leader for market rallies in the past 10 years. Conversely, the point is well taken that today’s markets have seen an explosive re-emergence of commodities and the ensuing rise in their respective equity prices has reinstated the importance of the Dow Jones and the S&P 500 in establishing an overall direction for stock markets.
Technically, the DJ and SP have more favorable charts than the tech sector’s ND but that statement alone doesn’t offer recognition of the critical damage sustained by the Dow’s short drop through the rising support line starting at the 2005 low. Certainly the overall chart is stronger and the bounce has brought the Dow’s average to a point just below the 40-day moving average, a not insignificant feat.
The S&P occupies the middle ground between the two other camps. The SP rebounded off the very notable 200-day moving average this week and being one of the broader market averages carries some important weight as a true indicator of the health of all equities in general.
With markets acting in such erratic fashion unwilling to reveal much of a trend, we prefer to remain largely on the sidelines until a clearer picture develops. Ironically, even commodities, which have risen steadily over the past several months have sustained large sell-offs and now appear indecisive on their charts.
New Buy Recommendations (in order of preference):
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 |
|
11/07/05 |
Redback Networks |
RBAK |
11.78 |
23.81 |
18.00 |
B
|
|
03/08/04 |
Transcanada Corp |
TRP |
21.34 |
28.00 |
28.00 |
SOLD |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price