Stockscom Report for Sunday Feb 2 2003

Publisher: Colin Alexander     Editor: Ken Wilson

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

 

Market Synopsis

 

An unrelenting bear market in equities, potential war with Iraq, and an oil strike in Venezuela that has reduced oil exports from that OPEC nation by well over half even according to the most pro-government spokesperson. In baseball, three strikes and you’re out – here it’s a different story.

 

Now that January has managed to suck in more investors with the promise of a rebounding market, let the truth be known, this rally only served to line the pockets of professional traders who were nimble enough to profit from the rise and fall that mirrored the false rally in January 2001. And if we are to believe the January indicator for equity markets, the rest of the year won’t be a happy occasion. All three major indexes ended the month down once more and appear poised to test the October lows, which isn’t an especially cheery prospect if one is long equities. Ominously, a test of the October lows on the S&P 500 takes on a more significant meaning as a test here would complete a triple bottom, which in technical analysis, is noteworthy as a point where demand failed the third time around - and with it, support.

 

We are coming to the end of the fourth quarter reporting period and while many corporations met or exceeded lowered expectations from Wall St, the vast majority used this occasion to lower future expectations for full-year 2003. With lower returns expected, expect to see announcements of cutbacks in capital expenditures as a natural conclusion to the lower returns.

 

The economic data releases should begin to reflect the degradation in the recovery with tomorrow’s release of the ISM figures representing purchasing managers’ current experiences and future expectations. This is the old NAPM figure and a number above 50% is considered to represent an economic expansion while a figure below that mark is considered to be an economic contraction. Many analysts are already expecting a lower figure than December’s given the size of that jump from November. Nonetheless a figure in the neighborhood of 53% is expected and this signifies a continuation of the weak economic expansion. Plus next Friday, all eyes will turn to the US employment data situation for January due for release before markets open.

 

Measurements on the economy will continue to worsen as the current oil shock persists. Little has been made in the media of the skyrocketing cost of energy in the past two months but with unleaded gas pushing closer to $1 per gallon in the futures markets, make no mistake – this shock to the economy will begin showing up in various statistical measures in the months ahead. The combination of very cold weather in the north-east with above average fuel prices will have meant that consumers shifted their spending from non-essential goods to fuel to heat their homes and run their cars.

 

Technically, there is little change from last week with all three majors exhibiting signs of rallying prices, but this is merely a market reaction to the vastly oversold condition of the past several sessions. The markets are still in the grip of the bear with no obvious end in sight. And the rally could very well end by Wednesday when the US administration will present evidence of Iraqi weapons of mass destruction to the UN effectively putting the war-watch back on the front burner.

 

To our benefit, gold should react favorably to the unfolding events and we would not be surprised to witness a breakout in price beyond the current $370/ounce level of consolidation.

 

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	51.55	SOLD
01/13/03	BCE	BCE #	19.22	18.84	SOLD
01/13/03	Echostar Comm.	DISH	27.05	23.46	SOLD
12/16/02	Glamis Gold	GLG #	10.40	12.15	H
12/16/02	Gold Fields	GFI	14.68	13.13	H
12/16/02	Goldcorp	GG #	12.75	12.20	H
12/16/02	Harmony Gold	HMY	16.98	15.57	H
10/21/02	CP Ships	TEU #	12.20	13.50	SOLD