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The shocking number of 240K job losses announced on Friday was made only worse by the revisions for the previous two months. While the attention of many analysts and certainly investors is cemented on the current figure, the revisions often give a more accurate description of the situation, albeit a lagging description. For the month of August, the original estimate announced in September was –84K but the final revision released as part of Friday’s announcement was –127K. For the month of September, the original estimate was –159K and the second estimate released Friday was –284K. Clearly, the initial estimates have been far too conservative where job losses are concerned and we are now led to expect a much greater estimate when the December announcement provides the first revision of October’s figures.

The number of jobs lost was horrid but it only serves to confirm other economic data released in recent days. Perhaps the most important was the ISM Purchasing Managers report for October released Monday that fell from 43.5% in September to 38.9%. A figure below 50 represents an economic contraction and below 45 represents a recession. Nobody had ever bothered to define what below 40 meant. It is simply terrible and will require an extended period of time before improving.

Executives at GM have no need to read the ISM report to understand their predicament. Their quarterly results announced Friday showed a loss of $2.5 billion due to a sharp fall in sales both in Europe as well as North America. Total revenue for the quarter dropped from $43.7 billion to $37.9 billion y-o-y, which represents a drop of more than 13%. Even worse news was the deepening credit crisis caused them to have a negative cash flow of $6.9 billion and their cash burn was very significant as reserves fell from $21 billion to $16.2 billion leaving many analysts to wonder how long before they declare bankruptcy.

Ford is in similar dire straits with quarterly revenue nose-diving from $41.1 billion in the third quarter 2007 to $32.1 billion in the third quarter of this year. Their cash burn took them from $26.6 billion in reserves to $18.9 billion.

Executives from both companies have met with government leaders in the hope of eliciting a bailout package similar to the one granted to banks and other financial institutions and this weekend there appeared to be some favorable reaction from the office of President-elect Obama.

Technically Speaking

All of the major indices declined during the past week with broader markets performing marginally better than the tech sector as measured by Nasdaq. All of these markets closed with weekly reversals to the downside but on diminishing volume. Stochastics on the weekly charts remain near oversold levels, which present certain resistance to prices falling further. Nevertheless, stochastics on the daily charts show significant swings lower meaning that a further easing in prices is possible in the very short term.

Taking a step back and looking at a larger time frame starting from early October, we see the development of a small pennant, something that may grow in importance as stocks swing between support and resistance levels. For all these markets, support continues to be the lows forged in October and resistance is found at levels mentioned last week, that is, 1050 on the S&P 500, 9800 for the Dow Jones Industrials, 1470 for the Nasdaq-100 and 1900 for the larger Nasdaq Composite index.

New Buy Recommendations (in order of preference):

Luminex Corp. (LMNX) – Their quarterly results on Thursday drove the stock higher on Friday to end the week and extend the current bounce from its 200-week moving average. The large gap on the daily chart easily crossed through the 200-day MA on the daily chart and although volume was much higher than normal, this was actually the fifth spike in volume on the daily chart since May and declines have been made on noticeably lower volumes. The month of October saw a large sell-off in LMNX but volumes were not especially strong. The monthly chart reflects this continuing improvement and also shows significant support at the 25-month MA.

Fuel Systems Solutions (FSYS) – This provider of alternative fuels (natgas, propane and biogas) also released its earnings report on Thursday evening and saw its stock price jump 45%. On the daily chart, this move completes the comeback from a double-bottom in October and puts price above its close from September 29 when it dropped on heavy volume thus negating that move as well. On the recent fall, support was strong at $25 seen best on the weekly chart and with stochastics rebounding on the weekly from oversold levels, price should continue to carry higher. Most importantly, the gap higher from mid-May held firm and remained open.

New Short Sales

None.

Stock Positions to Sell/Exit:

We were exited from both Wal-Mart and Procter & Gamble at their respective stops.

Portfolio Comments:

New stops have been added in bold 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