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

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Technically Speaking

Stock markets played a waiting game this past week with non-committal moves in both directions. The broader markets, namely the Dow Jones Industrials and the S&P 500 finished the week almost exactly as they began it. The DJ-30 lost a few points and the SP finished just slightly higher and all of this occurred on lighter volume than the previous week. Resistance at levels mentioned last week loomed large with SP stuck near 1300 and the DJ failing to seriously crack resistance near 11,750. Both indices have found support around their respective 200-week moving averages and both are approaching resistance near their 25-week MA’s. In a bear market such as this, the odds favor a continuation of the major trend when nearing significant resistance levels.

The tech sector is viewed as somewhat more immune to the various malaises in the equities markets especially those involving credit and as such, has performed relatively better in comparison to the broader market. Nonetheless, while both gained 1.5% this week, they both ended the week at the areas of resistance mentioned last week, that is, around 1950 on the ND-100 and 2450 on the Nasdaq Composite. Both thermometers of tech sector strength saw volume decline in the price rise, which in a bear market, is a sign of fatigue or weakness.

Stochastics for all four majors have reached very neutral levels on the weekly charts and in the case of the tech indices, have developed into very overbought situations, which naturally could provoke some selling after the weekend. It bears repeating that this is a bear market and investors should approach buying with abundant caution.

It is worth mentioning that the action of the past few weeks is anticipated every year in an annual rite that analysts like to call the summer rally. With August quickly slipping away, it is a prudent time to remember that August is rarely a good month for stocks in general and leads in to another annual rite known as the autumn low. Financial sector stocks saw some substantial losses last week and they might just be the catalyst for more widespread selling in the days ahead.

New Buy Recommendations (in order of preference):

Cypress Semiconductor (CY) – This stock gapped higher on Friday on heavy volume breaking to a seven month high as well as a move above its 200-day moving average. Since dropping early in the year CY has managed to develop a double-bottom in the first quarter of 2008 and lately made a successful test of that bottom in July. Starting from that bounce in July, CY had recently progressed into a pennant with resistance at the 27.50 level however that too was broken on Friday. The monthly chart also shows support with the development of a Lindahl buy signal.

New Short Sales

None.

Stock Positions to Sell/Exit:

We covered Nissan Motors at the stop.

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