Stockscom Report for Sunday Nov 11, 2001

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

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

 

 

 

Market Synopsis

 

All three majors rose this past week as investors continue to pour money into index components. This is happening despite the almost daily news describing further damage to the economy as investors choose to believe that recovery is not far off. We, on the other hand, believe that recovery will take place much further in the future than previously thought. Reduced consumer spending and rising unemployment are two indicators that are going to be hit hard in the coming months. The consumer spending numbers, especially on retail, will become plainly obvious this Christmas season as consumers make major expenditure cuts and the unemployment numbers, the latest which some analysts applauded for their strength, will hit home as announced cuts finally kick in between now and the new year. Equally significant in unemployment matters is that virtually all corporate hiring plans for the new year have been put on hold since the attack of September 11.

 

While the rally has been more powerful than anticipated, we see a potential exhaustion point shaping up though on the daily chart.

 

In the past, the Dow daily chart stochastics have followed a familiar pattern of three peaks in overbought territory followed by a significant drop in the index value. The Nasdaq and S&P have similar patterns but seem less pronounced. At the current point, we are reaching the third consecutive peak in stochastics and as such are looking for a sell signal. It is equally noteworthy that the indexes are all around the same 50% retracement levels, meaning that all indexes have risen approximately 50% of the distance from their May highs to their lows of September. This retracement alone serves as major resistance to further moves higher.

 

Our Stock Picks

 

Though gold and gold shares lost some ground this week, we continue to see this as a longer-term play on the re-emergence of gold in the world economy. Relegated to regular commodity status, gold certainly lost its luster in the last decade, but with currency crises happening more frequently (Argentina this week), with long term graphs depicting gold prices that have broken through resistance lines, and with the potential for deflation on the horizon, there is no shortage of reasons to buy.

 

In spite of the fact that we only have Petro-Canada as a recommendation, an argument could be made for loading up on oils at this point. A recent article that passed through our hands explained how a small terrorist act in Saudi Arabia could seriously hinder oil production for weeks and cause spot prices to escalate. While the article was not meant  to be alarmist, it outlined the serious consequences that might result from either a power struggle or a terrorist act in the Saudi kingdom.

 

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:

 

None.

 

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	8.89	B
02/01/01	Acm Government Opportunity Fund	AOF	7.99	8.90	B
10/29/01	Adaptec	ADPT	12.81	14.14	B
10/08/01	Agnico-Eagle Mine	AEM #	10.85	10.32	B
10/08/01	BCE	BCE #	22.80	22.58	B
10/22/01	Glamis Gold	GLG #	3.28	3.31	B
10/08/01	Gold Fields ADR	GOLD	4.97	4.48	B
10/08/01	GPU Inc	GPU	40.60	40.05	B
08/27/01	Health Care REIT	HCN	25.85	25.88	B
10/29/01	Immunex Corp	IMNX	25.50	24.85	H
12/18/00	Kinder Morgan *	KMP	25.00	38.90	B
10/22/01	Lihir Gold	LIHRY	10.94	11.50	B
10/08/01	Moore Corp	MCL #	8.45	7.36	B
10/08/01	Petro-Canada	PCZ #	26.00	25.22	B
02/01/01	Pioneer Interest Shares	MUO	11.95	11.75	B
10/08/01	The Southern Co.	SO	25.73	24.18	B
02/12/01	US Treasury 20 Year Bonds	USZ	103.01	109.10	SOLD

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

*   Split 2:1 – 09/04/01