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

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

Finally the government bean counters have admitted what many others have believed for a very long time; that the economy is struggling to grow within an archly recessionary period. The first estimate of second quarter GDP was released this week and revealed that growth in this period was a meager 1.9% but it was the contents of the annual revision that previous quarters were far more negative than first thought that caught many analysts by surprise. In fact, during the fourth quarter of 2007 the revision showed that not only did they miss the final number by a wide margin; they even failed to get the direction correct. Now the new fourth quarter reading is –0.2% (instead of +0.6%) and expectations are high that the National Bureau of Economic Research (NBER) will soon declare that a recession had begun in the fourth quarter of 2007.

As for the second quarter GDP, this number was given a giant boost by the $80 billion in tax rebates mailed out by Washington in a futile attempt at stimulating the economy. Without those checks, there would have been a strong likelihood of contraction for the quarter instead of the slight growth seen. Gross domestic purchases, a key figure in calculating GDP, measured –0.5%, a clear sign of trouble in the hinterland and given the boost provided by the federal government, an equally clear indication that the next quarter’s GDP is more likely to fall into negative territory.

To end the week, the July employment report combined with Thursday’s initial unemployment claims to paint a picture of further strains on the job market. The monthly report totaled job losses of 51K and the unemployment rate jumped to 5.7% - a four year high. Meanwhile the initial claims report showed a sharp jump of 44K to reach 448K inching ever closer to the 500K level.

Fortunately despite the obvious gloom in the statistics, the President’s chief cheerleader, Treasury Secretary Henry Paulson announced on Thursday that the American economy will grow slowly but should avoid an outright recession in the months ahead. He added that the stimulus would continue to support the economy in the second half of the year as businesses use the new tax incentives. This comment has a broad parallel in the famous quote from Federal Reserve Chairman, Ben Bernanke made last year when he said, "Troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system,"

Indeed it has come to this point where Bernanke and Paulson spend as much time as possible attempting to transmit the message with the proper sound bites, expressing confidence in the financial system while loosening the Federal Reserve’s rules to prevent a total collapse. Liquidity is being shoved down the throat of a frozen system – a practice that could only have grave repercussions and lead to a lower dollar with higher inflation.

Technically Speaking

All markets remained close to the unchanged line by the end of the week but that statistic camouflaged the volatility present as the four major stock markets experienced wide swings in price levels over the course of the past five sessions.

In general, the broader markets were the most affected by the shifts in momentum and their charts have developed much clearer patterns showing both double tops in July as well as the potential development of pennants, which in the case of a bear market would usually resolve themselves in a continuation of the bearish direction. Trading volume was lighter this week allowing weekly stochastics to ease their way out of oversold territory and in a bear market, this reduces upside pressure.

The tech sector tended to move in tighter trading ranges than the aforementioned broader markets and interestingly, the ND-100 has recently weakened in comparison to the Nasdaq Composite though its overall chart remains stronger due to its ability to float well above its own March low.

As the first full week of August begins, the question is whether this rally is quickly fading or simply waiting for a second wind.

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