Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)

Subscriptions and Administration: Pierre Fichaud (toll-free: 866-487-9711)

Friday’s employment report was a major surprise to investors as the shock of 4,000 jobs lost in August was only exceeded by the negative revisions to both June and July’s numbers. Revisions totaling 81K further job losses for the previous two months meant that the three-month average of job growth was now reduced to 44K with the likelihood that the final number will be even lower. Perhaps the greater problem lies with the amounts revised since the first six months of the year have seen revisions averaging 32K per month from the initial estimate to the final count. The average estimated job growth for that period amounted to 127.5K, which meant that the average revision amounted to a woeful 25%. The investing public should be questioning what benefit it is if the estimates are so blatantly inadequate.

Analyzing the data, we had expected some impact in the construction industry from previous reports but were surprised by the ability of that sector to retain jobs (or the inability of the government to properly count them). This month saw a significant change however with construction jobs declining in August by 22K. Manufacturing jobs were also hit hard with job losses amounting to 46K but the report showed that employment was steady in financial activities, which is likely to be revised downward over the next two months given the turmoil of the last several weeks. Certainly with the number of mortgage lending companies that closed their doors in August, we would expect that there were indeed substantial job losses in this sector.

For many economists, this report was the final nail in the coffin of the rate cut discussion. Indications in the media would suggest that the majority of these economists believe now that the Federal Open Market Committee will use the opportunity presented by this material weakening in the economy to ease the overnight rate by a quarter point with some believing that a half point cut remains in the cards. This interest rate decision will conclude their meeting in a little over a week and though the Philadelphia Federal Reserve bank president indicated on Saturday that there might not be a need for a rate cut, most observers believe otherwise. It is worth noting that the aforementioned president is a non-voting member of the FOMC, the body that sets the influential overnight interest rate.

The financial situation of some of the top investment banks will also be a little clearer next week when earnings reports from the likes of Goldman Sachs, Lehman Brothers, Bear Stearns, and Morgan Stanley are released. This will be the first glimpse at the radically changed situation with regards to asset valuations as the market for many of these toxic mortgage products has literally dried up overnight.

Technically Speaking

All of the major indexes finished the holiday-shortened week significantly lower due to the steep losses incurred on Friday, when near-term negative sentiment was exacerbated by the release of the surprising employment report. Losses on the four major indexes varied in a range of 1.2 - 1.8% but volume strayed little on all four days including Friday despite those heavy losses.

Of all the indexes, the tech-heavy Nasdaq twins managed to beat their respective August highs on Tuesday and therefore altered their negative propensity moving forward. The broader markets of the DJ-30 and the S&P 500 failed in their own attempts but considering that the Nasdaq is often a leader for the markets, we are inclined to patiently wait as this situation unfolds. While we see that fundamentally there are severe debt and derivatives problems that need to be dealt with in the economy, the technicals remain supportive of a potential low at this point and have yet to clearly indicate their intentions. Nevertheless, the situation is as they say, "fluid".

Of all sectors this week, none performed as strongly as the precious metals and especially gold. Renewed interest in the yellow metal resulted from the both the recent selling in gold as well as ideas that central banks will inflate to extricate themselves from the precarious situation that the drying up of global liquidity has caused all owing to the problems stemming from the US housing industry. With gold topping the previous resistance at $700 an ounce, it is now poised to break out of the pennant formation that has contained gold for the past 16 months.

New Buy Recommendations (in order of preference):

Seabridge Gold (SA) – This is one of the two choices for gold however we are concerned that the run-up has been quite strong and perhaps unsustainable. Evidently, it would be better to trade long at a lower price such as $28 but this might not be possible.

Miramar Mining (MNG) – Our second choice for investing in gold shares is MNG as this also has tremendous upside potential, especially given the approximately one year timeframe that has kept prices in a relatively tight range. A break out above $5.40 could ignite significant buying pressure.

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.

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price

*** Split-adjusted price