Stockscom Report for Monday Jan 20 2003

Publisher: Colin Alexander     Editor: Ken Wilson

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

 

Market Synopsis

 

Last week we suggested that on one hand certain stocks such as Dell and GE looked as if they were topping out but on the other hand indications such as OBV gave us pause to reflect on the possibility that this was a period of consolidation before further movements higher. Obviously our first inclination was the correct one and now we are left to consider the potential downside risk after a week in which the indexes fell or perhaps more accurately, had a severe breakdown.

 

Much like Icarus flying too close to the sun, equities have flown too close to the December highs and have now begun a seemingly ugly descent away. The rising volume on Friday’s breakout downward move bodes ill for the indexes for the next few sessions, at a minimum. And associated to that move, we see the Nasdaq drop once more below its 200-day moving average indicating for now that the small move above that demarcation was meant to be a distraction or a temptation for those who still haven’t had enough of the tech sector.

 

Nevertheless, despite the dour warnings from the charts, we do believe that a test of the October lows would be successful and that equities are in the long process of building a base upon which one day, a new bull market will take form. We do not believe it will mirror the previous bull market nor do we believe that it will occur this year, but we believe that the base building has begun. Accordingly, we would not be looking to sell stocks short in this environment. We sell stocks short when the general indexes are failing and the major long-term trend as seen on the monthly charts, is inexorably downward. At these times we search for the weakest of the weak and sell them short. But in today’s market, we assume the risks between a rising market and a falling market to be roughly equal so consequently, we make no new moves in either direction while waiting for the market to show its hand.

 

The beginning of the fourth quarter reporting period began in earnest last week and while several tech stocks were more than a little happy to divulge that their results exceeded (already lowered) expectations, they were understandably loathe to admit that 2003 was not shaping up to be the year of the strong rebound. Much like the Goldman Sachs’ survey revealed in December, tech spending is under immense pressure and the likelihood of an increase in spending for 2003 is getting smaller and smaller. Budgets are usually completed by December for the coming year and this survey’s timing is therefore impeccable thus giving additional credence to the findings.

 

Our recommended stocks took several hits but we’re prepared to wait out the current malaise with these holdings especially given that gold is consolidating at the current levels, a normal reaction given the steep climb in the price of gold over the past month. Our bet on gold is as much for security reasons as it is a wager on the inflationary monetary policies that seem inevitable now.

 

New Buy Recommendations:

 

None.

 

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
07/29/02	Amgen	AMGN	43.80	51.32	H
01/13/03	BCE	BCE #	19.22	19.58	H
01/13/03	Echostar Comm.	DISH	27.05	25.77	H
12/16/02	Glamis Gold	GLG #	10.40	12.02	H
12/16/02	Gold Fields	GFI	14.68	13.55	H
12/16/02	Goldcorp	GG #	12.75	12.57	H
12/16/02	Harmony Gold	HMY	16.98	15.89	H
12/16/02	Hecla Mining	HL	4.74	4.78	H
10/21/02	Petsmart	PETM	19.95	16.16	H
10/21/02	CP Ships	TEU #	12.20	14.84	H