Stockscom Report for Sunday Dec 16, 2001

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

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

With the end of the year practically around the next corner, we find ourselves in True Confession territory. This past week, we had news from Ciena, Lucent Technologies, and Aetna among others. Lucent and Ciena reported that sales projections for 2002 would be much lower than previously thought – somewhere in the neighborhood of 30-40% less as carriers re-evaluate capital spending programs for next year. Qwest, one such carrier, released a revised forecast of spending, which now stands at around $4.2 billion, down from $5.5 billion estimated in September, which itself was reduced from the original estimate of $7.5 billion.

In the case of Aetna, the health insurer continues to suffer losses as the strategy of price cuts to gain market share, has wreaked havoc on the company for much of this year. Now the company has announced that 6,000 jobs will be cut in order to reduce their costs and return them to profitability.

Besides the omnipresent early warnings that occur, we will also be getting earnings reports from some of the retailers and financial services companies beginning on Tuesday. Stock traders will be taking their cues not so much from the results published, but from the indications for future business in 2002. Retailers in particular will be listened to carefully for hints of their projections for 2002.

Similar to last week, we expect more easing in the market indexes this week as all three have managed significant comebacks from the September lows especially Nasdaq, which has risen 37%. This puts the Nasdaq in an especially vulnerable position to any pullback in prices. And with new warnings every week, the evidence mounts that prices earnings multiples far exceed the growth potential of these companies.

Looking at the charts, one strong sell signal on the Nasdaq 100 was given when the gap up from 1634 was completely filled in as support waned. Further weakening will occur as support around 1580 falls apart. We certainly expect that some significant retracing of the Nasdaq will occur over the next several weeks as uncertainty builds over the pace of recovery in 2002.

Our Stock Picks

SO continues to stabilize as does BCE and we continue to watch these stocks carefully. Gold stocks took on an added shine this week due in part to the weakening US dollar, which caused gold prices to jump and gold shares to jump even higher in percentage terms.

New Buy Recommendations:

MPS – this is an outsourcing firm which had some problems in the past but is much more focused and executing on their business strategy. Chart action strongly suggests that there is an accumulation occurring in this stock and it hit a new high for the year this past week. Downside risk is minimal at the current stock price.

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.

*    FE purchased GPU – prices reflect share exchange of 1.2318 shares of F