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Stockscom Report for Sunday Mar 3, 2002

Publisher: Colin Alexander     Editor: Ken Wilson

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

 

Market Synopsis

 

While the beginning of the week started with a whimper, it certainly finished with a roar. On the back of new irrefutable data that a recovery is happening, the markets charged forth on Friday with the Nasdaq leading the parade on a percentage basis. Ironically, tech issues are probably the equities most likely to be laggards in this recovery as business investment still is reduced considerably and current prices imply skyrocketing profits. Already on Friday after the markets closed, Oracle provided us with a glimpse of the future in tech-land with the release of a profit warning for the current quarter. Expectations are for a penny less per share than the same quarter last year. This week Intel and Sun will have similar conferences to offer some guidance for the current quarter.

 

Traders were encouraged by indications on Friday that personal income and personal spending both increased more than expected due in large part to tax breaks that kicked in at the beginning of January. The second bit of good news was the numbers released by the ISM surveying purchasing managers. February numbers came in at 54.7%, which signifies an economic expansion – the first in 19 months. The orders component of this number was 62.8% and judging by the Nasdaq, traders seemed to take this as a signal that orders had increased in technology first. Undoubtedly, a strong move in the ISM numbers was expected as depleted inventories needed rebuilding, but the question remains whether the strength of this rebuild will carry through beyond the next quarter. Consumer demand has not been dampened by this recession so the recovery cannot count on a renewed consumer strength as it normally would.

 

It was notable as well that fourth quarter GDP figures were revised to 1.4% from 0.2%. Much of this gain was attributed to car sales even better than originally estimated. (The initial release of GDP figures relies heavily on estimates for the last month’s data of the particular quarter). GM is now predicting much better sales for 2002 than previously believed and are preparing to increase production to handle the increase. The on-going sales incentives programs at the Big Three are bringing buyers into the showrooms, but at what cost? Initial reports give GM slim profit margins on the increased sales while Ford and Chrysler struggle to breakeven.

 

Overall, we aren’t convinced that Friday’s movement was the real deal on the Nasdaq. The Nasdaq 100 index currently trades at 1435 or about 15 points below its 25-day moving average even with the move on Friday. This moving average is applying a heavy amount of resistance to any sustained upward movement on the ND. As for the S&P 500, it exhibits more strength but is finding resistance at the 40-day moving average. A sustained movement with daily closes above this level for a few sessions would do much to dispel some of the negativity surrounding this index. Finally, the Dow with its breakout pattern and new high set on Friday shows definite strength and is the most powerful chart of the three. 

 

 

Our Stock Picks

 

The stop losses of $7.80 on AOF and $11.20 on MUO are maintained.

 

Gold bullion prices appear to be consolidating ahead of the Bank of England gold auction on Tuesday. This third auction is the last one scheduled by the BOE but may encourage other Euro governments to follow suit.

 

New Buy Recommendations:

 

Moore Corp (MCL)# - We are reinitiating our recommendation of Moore shares as the dip we feared amounted only to a normal retracement. The net result being that shares are out of weaker hands and the price is now set to move higher. Charts provide evidence that some accumulation is occurring and with Friday’s move away from the 25-day moving average, we have reason to believe that in the short term, price will appreciate.

 

Quadramed (QMDC) – We have watched this issue for quite some time and with its recent retracement and stabilization at current levels plus the tendency of late to attempt breakouts means to us that the share price is readying itself for some new appreciation.

 

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 Opportunity Fund	AOF	7.99	8.65	H
10/08/01	Agnico-Eagle Mine	AEM #	10.85	12.11	B
10/22/01	Glamis Gold	GLG #	3.28	4.93	B+
10/08/01	Gold Fields ADR	GOLD	4.97	8.68	B+
08/27/01	Health Care REIT	HCN	25.85	27.66	B+
10/22/01	Lihir Gold	LIHRY	10.94	15.24	B+
02/01/01	Pioneer Interest Shares	MUO	11.95	11.89	H

 

Short sells

 

Date of Entry	Name	Symbol	Entry Price	Current Price	Action Rating
02/25/02	Ciena	CIEN	7.69	8.11	S
01/22/02	Microsoft	MSFT	66.61	61.37	S