Stockscom Report for Sunday Nov 4, 2001

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

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

 

 

 

Market Synopsis

 

From our vantage point it remains difficult to see any reason to whole-heartedly recommend large purchases of equities given the extraordinary values placed on them in the past few days, and this, especially in light of the alarming economic news that was released this week. To summarize, we had GDP firmly planted in recession territory, unemployment reports showing an additional 400+K unemployed this past month, consumer spending taking a nosedive in October (and consumer confidence with it), and the purchasing managers report (NAPM) revealing a plunge in current and planned activities.

 

For starters, all this grim news doesn’t bode well for the coming Christmas season for retailers. With the number of unemployed people rising, those who still have jobs begin to lose confidence in the security of their job and consequently cut down their spending in order to save. Worse still is that not all of the announced layoffs have come to fruition yet and many are still in the planning stage meaning that job loss numbers will continue to show weakness in the coming months. An economy relying heavily on consumer spending to pull itself up such as this one, will recover slowly and the probability increases that the predicted recovery in the second half of 2002 will miss the mark.

 

As for the actual markets, some argue that stock prices have already factored this information in, that the recovery is in place due to the heavier than normal cuts in the Fed lending rate and the massive injection of liquidity since the year began. We continue to take a more pessimistic stance while waiting for a new downturn in the market. As a further plus, a new dip could lead to stronger prices for gold shares.

 

And there is ample reason to believe that we will see a drop in market price levels shortly. Besides last week’s news, which may take some time to be absorbed by the brains of Wall Street, we see on the daily charts a textbook head and shoulders pattern forming on the Dow. The Nasdaq and S&P have similar patterns developing though not as clearly defined as on the Dow.

 

Additionally, on both the S&P and the Dow, there is resistance provided now by the 40-day MA, which has been tested, but remains firm (especially true with the S&P). Also, we have yet to see any serious test of the September lows and all of this points to a downturn sometime soon.

 

 

 

Our Stock Picks

 

We’re concerned with Moore but hesitate to recommend selling at this point. We decide to remain patient and watch market action in this one, this week.

 

Gold shares rebounded nicely from last week’s aggravation and we feel more confident about their prospects.

 

Adaptec looks to be solidifying gains at this new recent high and could make a run for the yearly high in a short time.

 

New Buy Recommendations:

None.

 

New Short Sales

None.

                                                                                  

Stock Positions to Sell/Exit:

 

USZ – We are recommending selling the bond at this price due to its remarkable reaction this week to the announcement of the end of 30-year bonds. At this price level, it would be unlikely to appreciate much higher.

 

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 as Canadian content in 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	8.74	B
02/01/01	Acm Government Opportunity Fund	AOF	7.99	9.05	B
10/29/01	Adaptec	ADPT	12.81	12.86	B
10/08/01	Agnico-Eagle Mine	AEM #	10.85	10.45	B
10/08/01	BCE	BCE #	22.80	22.17	B
10/22/01	Glamis Gold	GLG #	3.28	3.54	B
10/08/01	Gold Fields ADR	GOLD	4.97	4.70	B
10/08/01	GPU Inc	GPU	40.60	40.05	B
08/27/01	Health Care REIT	HCN	25.85	25.65	B
10/29/01	Immunex Corp	IMNX	25.50	23.35	H
12/18/00	Kinder Morgan *	KMP	25.00	38.05	B
10/22/01	Lihir Gold	LIHRY	10.94	12.00	B
10/08/01	Moore Corp	MCL #	8.45	7.17	B
10/08/01	Petro-Canada	PCZ #	26.00	25.59	B
02/01/01	Pioneer Interest Shares	MUO	11.95	11.75	B
10/08/01	The Southern Co.	SO	25.73	23.50	B
12/18/00	Trans Canada Pipelines	TRP #	11.19	12.40	SOLD
02/12/01	US Treasury 20 Year Bonds	USZ	103.01	109.10	S

·       Rolled from the March contract and price adjusted (in 32nds)

*   Split 2:1 – 09/04/01