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Undoubtedly the big shocker this week was the dramatic increase in job losses in the month of February. The Bureau of Labor Statistics announced a decline of 63K jobs in the month and revised the previous two months lower by another 46K adding further woes to the numbers. The unemployment rate actually fell 0.1% to 4.8% despite the numbers due to the fact that there were fewer people looking for work and the participation rate declined. And there was little surprise to the sectors found to be the weakest in this month’s summary of job losses – manufacturing and construction. Job losses in manufacturing reached a new high at 52K and with the marked slowdown in the housing industry there was little surprise in another decline in construction jobs.

This news sent futures on interest rates higher and consequently odds have reached 96% that there will be a cut in the overnight interest rate of 0.75% now when the FOMC meets March 18. Some analysts are predicting that the Fed will actually move before this meeting in a bold attempt to apply electroshock therapy to the market but the fact is that the Fed’s room to maneuver is diminishing rapidly. They would prefer to lower interest rates and boost the economy however inflation is rearing its ugly head and the dollar is falling. In any case, any potential change in interest rate policy has a lag time of its effects in terms of months not days or weeks so improvement would only show up gradually, several months from now.

Earlier in the week, the ISM manufacturing index came in slightly above expectations at 48.3% but it is worth remembering that any figure below the key 50% level represents a contraction of economic activity and this figure was the lowest level it has been at since April 2003. Market bulls preferred to concentrate on the ISM services index released later in the week, which showed an increase from 44.6% in January to 49.3% last month.

Friday was momentous not only for the significant job losses being announced but also for the news that the Federal Reserve would inject an additional $140 billion to aid dysfunctional credit markets. There would be $40 billion added to emergency auctions and $100 billion would be made available to dealers in US treasury debt. These moves were viewed as necessary steps to keep a minimum level of liquidity in mortgage-backed securities where pressure is mounting as the downward trend in housing continues unabated.

One particular victim of the latest economic news has been the dollar as it continues to plumb new lows against other currencies. Commodities as an asset class has benefited from this currency movement since many traded commodities are priced in US dollars. One only needs to look at the widely available prices of gold and oil to get a hint of this action but there are other notable price increases of late in natural gas and the grains group dominated by wheat, corn and soybean.

While lower interest rates will further weaken support for the dollar and exports will maintain their current expansion due to the lower value of the dollar, there will certainly come a time when other central banks will need to make decisions. Either these central banks allow their currencies to increase in value versus the dollar thus rendering their products more expensive to American consumers or they succumb to the pressure of their higher values and initiate monetary policies to lower their own interest rates thus reducing their currencies’ attraction and contributing to a decline in their values vis-à-vis the dollar but with the additional risk of incurring inflation.

Technically Speaking

The broader market indexes tripped their respective wires this week and followed the tech sector into uncharted territory by closing at their lowest levels since 2006. All indexes declined on heavier volume this week and their respective closes represent a clear determination for each to start a new downward leg on the charts.

For the Dow Jones Industrials, the key support level is now 11,750, which was the previous all-time high reached early in 2000. At the current 11,894, there isn’t much room separating it from this level. Similarly the S&P 500 finds itself closing in on the lows from 2006 some 70 points lower.

In the case of the tech sector, bulls will be unable to find refuge here either. Though their decline this week was markedly lighter, the technical indicators are no less convincing that another downward leg has begun in earnest. A test of the 2006 lows is not out of the question at this stage though it must be said that the ND-100 is situated well above this level.

Stochastics for all of these indexes are oversold but could sustain further declines for a few days before renewed buying or short covering occurs. There is also a distinct change of character for these charts that is worth noting. These indexes have fallen away from downward trending channels that had contained their respective prices since the highs reached in October. The Nasdaq brothers had toyed with the bottom boundary of the channel for the past few weeks before signaling this week that it no longer captures their trends and now the broader indexes, the DJ and the S&P, have joined them as they drop away from their channels.

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