Stockscom Report for Sunday Sep 30, 2001

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

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

 

 

 

Market Synopsis

 

While the rally this past week was not entirely unexpected, the chances of a repeat performance are less likely. Taking the weekend to digest the latest economic news, we believe only the more aggressive traders will be willing to risk capital on this situation. Major notes were the GDP which actually survived the final revision and still remained positive at 0.3%, consumer confidence as measured by the University of Michigan which managed a smaller drop than expected given the events of the last 3 weeks and Chicago’s Purchasing Manager’s index which had signs of strength in production and new orders. This week’s National Purchasing Manager’s index should provide confirmation of Chicago’s index.

 

In general, we see the Dow and the Nasdaq charts as being a bit sloppy anchored by last week’s rally – the rally is somewhat clear on the Dow while the Nasdaq displays continued bearishness despite its performance last week. On the S&P, a textbook rally has begun with price reaching upward, but likely limited to 1130, that being the price level of the upper channel-line. Our expectation is that October could provide us with a more interesting base upon which a strong rally could be built.

 

With thoughts of a rally in mind – both last week’s and any potential for another – we consider whether we want to retain our short positions. As a normal first step to participate as buyers in any rally, we would likely cover all short positions, but after analyzing the charts, we have come to the conclusion that both Amazon and Calpine appear much too weak to sustain any chance for a rebound. And as for Macdonald’s and Coca-Cola, they appear to be range-bound for the moment.

 

On Monday and Tuesday the Fed meets to decide what action to take on interest rates. Current opinion is that the interest rate will drop by another 0.50% taking the interest rate to 2.5%, which is actually lower than the latest inflation figures of 2.7%. While the lower interest rates have most certainly cushioned the blow of a drop in business investment and a painful, drawn-out consumption of superfluous inventory, we are left with the impression that the Fed action is akin to pushing on a string.

 

 

Our Stock Picks

 

We stay with our picks and choose not to buy or sell further.

 

New Buy Recommendations:

None

 

New Short Sales

None.

                                                                                  

Stock Positions to Sell/Exit:

 

None. We exited Boeing and American Express at Tuesday morning’s open.

 

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.

Stocks marked # are eligible for Canadian RSP funds. Otherwise there is a
30 percent restriction on foreign stocks held in these accounts.

Date of Entry	Name	Symbol	Entry Price	Current Price	Action Rating
02/01/01	Acm Government Income Fund	ACG	8.07	8.59	B
02/01/01	Acm Government Opportunity Fund	AOF	7.99	8.72	B
08/27/01	Health Care REIT	HCN	25.85	25.20	B
12/18/00	Kinder Morgan *	KMP	25.00	34.61	B
02/01/01	Pioneer Interest Shares	MUO	11.95	11.30	B
12/18/00	Trans Canada Pipelines	TRP #	11.19	12.84	B
02/12/01	US Treasury 20 Year Bonds	USZ	103.01	105.50	B

·       Rolled from the March contract and price adjusted

*   Split 2:1 – 09/04/01

Short Sales

Date of entry	Name	Symbol	Entry Price	Current Price	Action Rating
03/21/01	Amazon.com	AMZN	10.38	5.97	S
08/20/01	American Express	AXP	37.42	28.00	Covered
07/09/01	Boeing	BA	53.85	33.25	Covered
08/20/01	Calpine	CPN	29.27	22.81	S
12/18/00	Coca-Cola	KO	54.00	46.85	S
03/21/01	McDonalds	MCD	25.60	27.14	S