Stockscom Report for Sunday Nov 24 2002

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

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

Market Synopsis

The bulls are in the midst of enjoying a rare break from the two-year long slaughter of stock prices. HP and the Conference Board teamed up to bring us another "up" week in equities. HP did their part with a stellar profit exceeding all expectations and the Conference Board followed it up with their Leading Economic Indicators index that didn’t fall. After four straight months of constant decline, a stable month was seen as a bright ray of hope. Both stories lent credence to the theory that the worst is behind us, but it’s outrageous that the leader in this brief episode to re-inflate stock indexes, has clearly been the Nasdaq market.

The Nasdaq’s strength is as unusual as it is unlikely given the immense losses suffered by ordinary small investors. With an estimated $7 trillion in wealth destroyed since the height of stock market madness in 2000 and most of that the result of bubble-headedness on the part of tech investors, it has always seemed unlikely to us that tech investors would pile into stocks that have rendered their lives a little more worrisome. In all likelihood, the buoyant real estate market with its associated refinanced mortgages has helped tremendously to relieve the psychological burden of equity market losses during the past 24 months.

Technically the argument for investing in the Nasdaq remains strong. Both the Nasdaq 100 and the Nasdaq Composite have now poked their heads through downward trend lines that extend back to the summits of equity prices in early 2000. It is noteworthy that the Dow and the S&P 500 have not been able to duplicate this strength and while not avoiding them entirely, we shall concentrate on the Nasdaq for it is in playing the stronger of two markets that one succeeds in timing the markets. This is entirely analogous to the concept of choosing the stronger of two stocks during a bull run or shorting the weaker of two stocks during a bear run.

The one caveat to putting new funds to work in the Nasdaq or any equity market at this time is the daily stochastics which are extremely overbought and have a propensity at this point to retrace part of the gains produced of late. To reiterate, we have now witnessed seven straight weeks of gains on the Dow and six of seven weeks of gains on both the Nasdaq (Composite as well as 100) and the S&P 500. Weekly stochastics have not reached these heights since the rally to end last year. But this is Thanksgiving Week and with only three real days of trading, there is significantly lower downside risk.

As for our own shares, we’re watching carefully the action in AMGN and MME while retaining the stop-losses of $43.00 and $31.40 respectively. Certainly in the case of AMGN, the downside risk is substantially less at this point. We also want to add a stop-loss for STCO of $10.00 after a sharp selloff this past week that we didn’t particularly enjoy nor expect.

The buy recommendations from last week performed well during their first week and we wish to draw special attention to COGN, which we’d prefer to label as a strong buy however, given the overbought nature of the Nasdaq market, we refrain from doing so at this time. On certain charts, especially with the OBV indicator, we detect some significant buying occurring. After a suitable retracement occurs in the Nasdaq market, we’d be inclined to purchase more shares in COGN increasing our position sizably. CTXS is also marked with a B for Buy, but this stock, while also very strong, is second to COGN and as mentioned before, when choosing between two stocks, choose the stronger of the two even when it has already moved substantially.

We sell shares and exit our position in BMET for the chart has turned down once more and not after making any serious attempt at a new high. This action probably signals some shorting that’s occurring and much like a train, we have no desire to stand in front of it.

Of the remaining shares, we apply Holds as the indexes do appear to be severely overbought and no new money should be invested at this point. Even though overbought, it would not be terribly surprising to see market indexes finish the week with a gain given that this is Thanksgiving week. And notably soon after, there will be the initial retail sales figures for that weekend, which could provide some early indication of holiday season sales.

New Buy Recommendations:

None.

New Short Sales

None.

Stock Positions to Sell/Exit:

BMET.

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.