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Stockscom Report for Sunday June 2 2002

Publisher: Colin Alexander     Editor: Ken Wilson

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

 

Market Synopsis

 

If May is any indication of what to expect in the coming months, then markets are heading for a long irritable summer season. Despite the good news provided by Friday’s release of several items in the economic agenda including Chicago’s PMI numbers, the US factory orders for April, and Univ. of Michigan’s consumer confidence, markets were generally not impressed after the initial elation. To be certain, political events happening half a world away dominated the stage as India and Pakistan moved several steps closer to outright war.

 

Symptomatic of a bear market, worry and fear are found lurking everywhere, but the reality is quite telling, for in fact, this current period has much more to be fearful of. Besides the potential for war in South Asia, there is also the on-going conflict between the Israelis and the Palestinians, and the possibility of another terrorist attack on US soil.

 

So while world events threaten to topple a short-lived global recovery, the markets’ winningest sector is really no surprise – precious metals.

 

Gold and silver dominated funds are outperforming all others after the first five months of the year and though events have occurred around the globe triggering an interest in precious metals, the chartists studying the technicals would state that it was a foregone conclusion. To be sure, precious metals have had tremendous help in the form of weakening confidence in the US$, budget deficits, and a ballooning current account deficit.

 

Technically most markets this week looked prepared to swing downward once more to start the week, which in the case of the S&P 500 could mean another test of the weekly close around 1007 and of the monthly close of 1040, both of which were last reached in September. On the monthly charts we see two successful tests back in 1998 and a more recent test of the same level in September. Having found support on this many occasions strengthens our belief that a rally could occur off these levels. With the S&P index settling around 1067 on Friday, a weekly close in the area of 1007 becomes a strong possibility. Stochastics are firmly in oversold territory and consequently, a strong rebound could begin here.

 

The Dow has been finding support in the area of 9800 on several occasions of late and therefore we hesitate to liquidate any of our recommended stocks at these levels. Thursday’s action saw once more a test of the 9800-level and again, it passed, but the lack of follow-through on Friday puts the rally into question.

 

Similarly the Nasdaq daily chart will be looking for support at the 1573-level on the daily chart and failing that, a weekly close above 1464, which is the low weekly close in September. On the monthly chart, there’s reliable support at the 1380-level and this is unlikely to give us problems. Stochastics are similar for both the Dow and the Nasdaq whereas both markets are extremely oversold and liable to rebound at this point.

 

 

Our Stock Picks

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

 

 

New Buy Recommendations:

 

None. We continue to recommend gold equities and with the latest global conflict, it would appear reasonably safe to add to these positions or begin new ones with little possibility of retracement occurring.

 

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
22/04/02	Acclaim Entertain.	AKLM	5.79	5.25	H
02/01/01	Acm Government Opportunity Fund	AOF	7.99	8.98	B
10/08/01	Agnico-Eagle Mine	AEM #	10.85	16.75	B
22/04/02	Aspect Comms.		4.92	4.63	H
03/11/02	Caterpillar	CAT	59.08	52.27	H
22/04/02	Cobalt	CBZ	15.15	20.55	B
03/18/02	Dupont	DD	48.70	46.00	H
10/22/01	Glamis Gold	GLG #	3.28	9.30	B
10/08/01	Gold Fields ADR*	GFI	4.97	13.93	B
03/18/02	Johnson & Johnson	JNJ	64.70	61.35	H
03/11/02	Modis Prof. Srvcs	MPS	7.75	8.26	B
03/04/02	Moore Corp	MCL #	11.50	14.25	B
02/01/01	Pioneer Interest Shares	MUO	11.95	11.70	H
03/11/02	United Tech	UTX	75.32	68.87	H

 

*Gold Fields changed their symbol to GFI from GOLD