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Stockscom Report for Sunday June 30 2002

Publisher: Colin Alexander     Editor: Ken Wilson

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

 

Market Synopsis

 

Another week of market turmoil but a change is detected in the nature of the beast. This change hit home on Wednesday with the announcement of WorldCom’s fraudulent behavior that has left investors holding an empty bag. Despite the fear running rampant through the market of another anticipated nosedive for the Nasdaq, the market managed to piece together a rally in the face of this auspicious event. Momentarily, the markets had exhausted their latest selling spree and as we’ve noted before, were tremendously oversold. The volatility indicator, VIX, has been rising forcefully the past few weeks and has lead many to believe that the bottom is imminent. This particular bottom corresponds closely to the September lows, so indeed we have come full circle back to the starting gate.

 

Whether this bottom was the solid footing that investors are waiting for is still being decided, however, we would be quick to point out that the rebound occurred as institutions and their funds were spending considerable time window-dressing their holdings for the end of quarter reporting obligations.

 

It could take several weeks and a few more tests at this level to properly establish a support level upon which the indexes could build. On the S&P 500 chart, we have reached down to support levels initiated in October 1998. Conversely, resistance at the 1080 level has limited the upward potential in the Nasdaq-100.

 

Gold

Over the past several months, we’ve been able to count on the price of gold to rise as this constant stream of bad news shocked and frightened investors into investing some of their hard earned capital in precious metals and especially gold. We latched onto the gold bull market back in the autumn and it has served us extremely well. While there were periods where markets rallied and the retracement in the price of gold was sometimes unfavorable, chart indications reassured us that it would be best to wait out the retracement. Unfortunately like anything else, this bull-run has definitely run its course. Friday’s trading in the gold commodity saw a major price swing down in a matter of minutes, pushing through support levels and we see this as the final nail in the coffin. As a consequence, we are advising that all gold shares be liquidated at this point.

 

 

 

Our Stock Picks

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

 

 

New Buy Recommendations:

 

SSFT – Scansoft is making a breakout move at these levels as indicated by Friday’s large volume surge. The chart has been a steady climber since October 2001 and appears to have completed the latest retracement. With the speed that it moved up from the autumn, it appears quite certain to double over the next few months.

 

WXS – Westpoint Stevens is in a very similar position to SSFT in that the chart is giving indications of an impending breakout after a retracement lasting more than four weeks. Starting from such a low point, this could quickly double in price. OBV for both recommended stocks shows increasing buy-interest levels and these often precede large moves in price.

 

New Short Sales

None.

 

Stock Positions to Sell/Exit:

 

All gold shares – AEM, GLG, GFI.

 

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	8.88	B
10/08/01	Agnico-Eagle Mine	AEM #	10.85	14.57	SELL
06/17/02	Friedman Billings Ramsey	FBR	10.75	12.73	B+
10/22/01	Glamis Gold	GLG #	3.28	8.79	SELL
10/08/01	Gold Fields ADR*	GFI	4.97	11.22	SELL
06/17/02	Lannett Co Inc	LCI	11.00	9.90	SOLD
02/01/01	Pioneer Interest Shares	MUO	11.95	11.85	H

 

*Gold Fields changed their symbol to GFI from GOLD