· Markets remains in mildly bullish mode
 

Technically Speaking

While the broader large cap stock indexes, the Dow Jones Industrials and the S&P 500, continue to rise albeit at a slower pace now with a decidedly gentler upward slope, investors’ collective interest has turned to both the tech sector of Nasdaq and the small cap and mid-cap stocks. This rotation away from the large cap sectors is both healthy and expected and though some retracement could knock a few points off of the mid-caps and small caps, there is ample room for both to run now that both have regained all that was lost from the retracement experienced since May of 2006.

For the smaller capitalization stock indexes, this break away from their former resistance levels has provided bulls with proof that the swing upward is trustworthy and now those same resistance levels have become their respective support levels.

The tech sector as represented by the Nasdaq twins has been on a hot streak as well of late. In the past three weeks, both of the Nasdaq measures have displayed strong bullish intentions closing near their respective highs for these periods. Importantly, since November, Nasdaq has been virtually at a standstill trading in a relatively tight trading range but these last few weeks suggest that an imminent break is upon us. The key levels to break through are the 1850-1860 area on the Nasdaq-100 and the 2530-2550 area of the Nasdaq Composite.

Gold made a sharp move higher in midweek after having sold off suddenly when markets opened on Tuesday. This dramatic and immediate rebound indicates both a flushing out of weak longs and a strong bullish conviction of the rally. A move such as this has underlying power not to be ignored and we fully expect the price of gold to stretch higher in the near term. Probable targets in this short-term timeframe include the previous high touched in May and the $800 an ounce level given that it is about to break through the $700 level in the coming days. It is with that thought in mind that we emphasize adding to positions in GRS.

New Buy Recommendations (in order of preference):

Vasco Data Security Int’l (VDSI)  The company is one of the leaders in IT security authentication products and is benefiting from recent US guidelines to securitize high risk money transactions as well as preventing online fraud schemes. The jump this past week in the share price has effectively put the chart into a bullish position that could see some backing and filling but will ultimately reward investors. The weekly chart displays a nearly two year trading range which has been only recently broken to the upside and offers tremendous support moving forward.

Vital Images Inc. (VTAL)  This provider of visualization and analysis software is used primarily by medical specialists in the diagnosis of diseases and conditions. The daily chart had a remarkable outside day on Tuesday upon the release of its quarterly results, which only confirmed the profitability of this enterprise. On the weekly chart, price is breaking out of trading range that has contained prices for more than a year suggesting that a new leg higher has begun.

Avici Systems (AVCI)  The daily chart of AVCI is marked by a large gap that occurred last week when quarterly results were released. The gap plus its persistence in moving higher on strong volumes indicates a very strong buying presence. The gap also serves to leave behind an island created by the gap in October and a subsequent double-bottom. While the weekly chart is situated in an area of congestion, there are indications through volume and OBV that this consolidation is temporary at best.

Dynamic Materials Corp. (BOOM)  With reference to the weekly chart, BOOM’s price has been remarkably contained within a trading range since late in 2005 but the rise this week caused by the solid quarterly results suggests that a break out is coming and a new leg higher will begin. Though the daily chart suggests that a retracement could be in order after rising for eight consecutive sessions, the unusually high volumes of the last two days indicate a significant buying presence that should not be ignored.

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.