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

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

The June employment report was released early due of course to the holiday-shortened week but it added little cheer to the approaching holiday weekend. The report signaled that another 62K jobs were lost in the month of June pushing the six-month total number of jobs lost to 438K. Though the unemployment rate remained at 5.5% there are few analysts willing to posit that the rate is going anywhere but up. Being Thursday, the report’s early publication coincided with the release of weekly first-time unemployment claims, which while varying by several thousand from week to week, touched a milestone this week with initial claims topping the 400K level.

Adding further pressure to the beleaguered Administration, the previous two months’ employment reports were also revised down by an additional 52K jobs and showed that May’s job losses matched June’s. As has been the usual case for several months, the sectors losing the greatest number of jobs continue to be construction and manufacturing.

Though the latest economic data may not represent a solid case for recession, the decrease in economic activity is palpable and the increase in consumer costs, namely the very visible rise in the price of gas, is taking its toll on the American consumer. The Bush Administration may be content to point to government statistics showing still growing GDP nevertheless the decline is real and we continue to expect that GDP will move into recessionary territory in 2008.

Before we see the second quarter GDP however, we’ll be inundated by quarterly earnings reports and it’s these reports that will reveal much of the direction that the economy is taking. Our expectation is that though exports may be expanding, they aren’t strong enough to counter the slowdown and a recent rise in inventories will need to be worked through putting further downward pressure on production.

Technically Speaking

The S&P 500 joined the Dow Jones Industrials this week as the second major index to break down through its March low and it would appear to be only time before the tech sector defined by the Nasdaq twins also succumbs to a similar performance. With regards to the Nasdaq, the Composite index remains significantly weaker than the ND-100 but in keeping with the principle that good stocks get tossed out with bad stocks, it’s only a matter of time before the stronger of the two fails as well.

On the weekly charts we are concerned that the broader markets are becoming quite oversold and could develop into a bounce at this point. This possibility is especially true now that the S&P has dipped below its March low triggering an apparent sell signal and would be open to a contrarian move. To keep matters in perspective however, we would not expect any rebound at this point to seriously alter any progression in the on-going bearish decline. What we might witness is a small rebound in financial shares given their inexorable decline but stops have been tightened to cover positions if required.

The overall direction of share prices will be largely dictated by the revelations in quarterly reports over the next three or four weeks. In general, we deem it unlikely that financial corporations (our dominant short exposure) will be foretelling of a bottom at this point in the year.

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