· Bullish jobs report released to a quiet Friday
 

Market Synopsis

Friday’s job report released in untypical fashion on a holiday threw a curveball to those analysts predicting a severe downturn in the economy. The BLS reported a rise of 180K new jobs in March easily exceeding the expectations for an increase of 168K and the report went further by revising upward the numbers from January and February by another 32K jobs. Broken down, the report was mixed with losses in manufacturing offset by large gains in both service industries and construction, which was a particular surprise given the state of residential housing and the losses seen in construction in February. Thus the report presents a paradox of sorts with analysts questioning how the economy could possibly be so sluggish as depicted by the quarterly GDP and the latest numbers of durable orders yet so energetic with hiring.

The Federal Reserve will most certainly cast a glance at the average wage earnings, which increased in this latest report by 0.3% and have totaled +4.0% for the past twelve months. Upward pressure on wages is a large factor in determining the strength of inflationary forces in the economy and with wages increasing at a rate of 4%, there is little likelihood of the Fed relaxing on interest rates even to soothe the pain of sub-prime lending-induced foreclosures.

Perhaps analysts should take the numbers as they are and accept them as proof of an economy that is simply chugging along. Absorption of those workers displaced by the steady decline in residential construction and the housing service industry would provide a large boost to solving the potential housing crisis especially if the major effects of the fall in housing stay relegated to the sub-prime domain.

Technically Speaking

This holiday-shortened week was significant nonetheless for Thursday’s action, which completed the string of price moves that took the major index charts above their respective March highs and increased the probability of further upward probes in prices toward their 2007 highs. As is normal for lead ups to holidays, volume was characteristically light and this remains a caveat for predictions of a further climb in stock prices. Nevertheless, bulls will most certainly point to the alignment of Lindahl buy signals on the weekly charts of the four major indexes, which is a strong indicator of further buying as the new week begins. Moreover, the fact that support held near key levels upon hitting their lows (Nasdaq-100 at 1700, DJ at 12,000 and S&P at 1375) is a strong factor for trusting the current bullish tone.

Clearly the release of the hostages from Iran was a factor in the optimism evident in trading to end the week and there is no reason to believe that the effect of this geopolitical event will dissipate that quickly. Naturally though, an escalation of military activities involving Iran will throw cold water on this situation and engender an opposite reaction.


New Buy Recommendations (in order of preference):

Matrix Service Co. (MTRX)  This construction firm specializes in petroleum and pipeline industries and benefits from the increased activity in this sphere. While its stock price has consistently risen of late, the remarkable movement on Friday upon the release of its earnings, indicates that the move may be a harbinger of an increase in slope. The significant gap higher on heavier than normal volume coupled with the fast rebound from the sell-off in late-Feb and early Mar tells us this stock has strong upside potential.

Cameco Corp. (CCJ)  There should be no surprise that the largest uranium producer in the world has become a recommended stock, however it was the technical picture this week that provoked this recommendation. Beginning with Monday’s outside day and continuing all week with strong upward moves on heavy volume gives a strong indication of heavy buying occurring. On the weekly chart, this sharp move takes price out of the congestion area that has contained price throughout 2006 as well as the first quarter of 2007. The monthly chart also supports this recommendation with the completion of a Lindahl buy signal for the month just ended.


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.