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Economic data released this week continued to reflect a steady deterioration in the overall situation. The big shocker for analysts was Friday’s release of the January employment report that counted a decline of 17K jobs where there had been anticipation of job gains numbering 85K. Moreover in their annual revision of estimated employment level changes, the Bureau of Labour Statistics, revised the entire year’s job growth to an average gain of 95K per month down from the original 110K per month. Though the year ended with a gain on an annual basis, the more important figure remained the jobs lost in the month of January, which has led many analysts to acknowledge the strong probability that the US is now in a recession. Certainly the initial estimate of fourth quarter GDP of 0.6% released on Wednesday paints a dreary picture of a slowing economy and supports the recession-thesis.

However, in contrast to these statistics, durable goods orders for December were markedly higher. Breaking down the numbers, we find that a good portion of the positives was provided by transportation and military orders, which are often volatile and tend to be discounted by analysts. Still the orders were the highest since July but may represent simply a rebound from the losses of the previous two months (and a restocking of inventory). Since goods orders are horribly backward looking, it is often difficult to gauge the level of importance to attach to them and these, especially so given the lowly GDP estimate for the quarter.

Evidently, the Federal Reserve is concerned with the rapidity of the decline in economic conditions across the country aided and abetted by a sharp fall in the housing market. The rise of foreclosures coupled with declining sales and falling prices has put the Fed on alert to the critical threat of a retrenchment in consumer spending. Ironically, while the Fed chose to cut the overnight interest rate by another 0.5% this week loosening monetary policy to encourage more spending, it is abundantly clear that the greater need is for an expunging of the excess, to let some companies fail, to persuade consumers to lower their debt levels and wipe the plate clean, but this solution is far too unpalatable for the government especially one that is preparing for an election in the coming months.

Technically Speaking

All markets ended stronger this week though this rebound only served to alleviate the losses for the entire month of January. Now with resistance levels being met and stochastics climbing into overbought territory, the stock indexes face the pressure of a return to another selling phase.

Looking at the entire week, we see that volumes on the rise early in the week were lower than recent averages but volumes increased over the second half of the week to more normal levels. The largest difference here was that the broader markets saw volumes fall while prices rose to end the week contrasting with the tech sector whose trading volumes continued to rise throughout the week.

Nevertheless overbought stochastics are going to have an effect at this point given that we are in a major downward trend and significant resistance points are being met. On the Dow Jones Industrials, the close of Friday at 12743 matches its November low and on the S&P 500, the week’s close of 1395 remains just below its respective low close from November of 1407.

In the case of the tech sector’s Nasdaq brothers, the Composite index closed at 2413 – not far below its August low of 2451 and the ND-100 finished the week at 1855, which is a bit above its August low of 1846.

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.

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price

*** Split-adjusted price