Stockscom Report for Monday Sep 1 2003

Publisher: Colin Alexander     Editor: Ken Wilson

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

 

Market Synopsis

 

Tomorrow is the first workday in September and is considered rightfully, as the first day back from summer holidays for in this part of the world, summer vacation ends on Labor Day. For investors and traders alike, September represents the return of big money in the form of institutional traders and with these players back in the game, we get a chance to observe whether the recent moves upward have any sustainability. Case in point: the three major indexes all finished with positive moves on the final three days in August except for the Dow Jones on one single occasion. The problem from a technical point of view is that trading volumes were abysmal and trying to deduce information from these chart patterns is much riskier than normal.

 

Thus the big question on everyone's mind is whether the big boys will return in a buying mood, afraid of missing the latest rally and wishing to appear wise when end of quarter reports must be compiled in less than thirty days. Or will they look at the fundamentals and decide that the upside potential is unfavorable and that shares are truly priced to perfection leading to a lightening of the load. In fact these two broad concepts are what rule the markets today. On one hand we have technical chart characteristics depicting a moderately bullish rally in progress with little sign of slowing down while the fundamental side offers few reasons to buy many companies since their stock prices have already risen substantially and now the companies sport P/E ratios often located just above absurd.

 

As we mentioned in previous weeks, the S&P 500 has yet to join this rally though a new high could be on its way this week. On three separate occasions, attempts were made to clear the 1015 level and set a new high for 2003, but each time has failed and the latest failure occurs at the same time as rallies have pushed the Dow Jones and Nasdaq to new heights. The reason for this poor performance is the weak financial services sector, which comprises 21% of the S&P 500 index. There are two important points to remember about this situation: the first is that without the financial services sector, the rally is unlikely to continue very far and the second is that one more failure at this point would signal an effective sell signal in the S&P.

 

Traders will watch closely the ISM numbers to be released Tuesday morning for further indications of growth in the economy after having learned of the glowing Midwest report on Friday. Also this coming Friday will see the release of unemployment data for the month of August and this too is viewed as an important signal of employment trends.

 

New Buy Recommendations:

 

None.

 

New Short Sales

None.

 

Stock Positions to Sell/Exit:

 

TRP – We managed to stay in this trade but only by the thinnest of margins. At this point, the retracement appears to have completed its move and the share price is now recovering. We will keep the stop however at $17.40.

 

If the share price moves above 18.60, we would be inclined to add to our position.

 

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
08/25/03	ABB	ABB	5.43	5.72	B
08/25/03	Bema Gold	BGO #	2.15	2.24	B
08/25/03	China Unicom	CHU	7.63	7.17	H
05/12/03	Cott Corp	COT #	20.02	23.24	H
08/11/03	Crystallex	KRY #	2.28	2.60	B+
08/25/03	PFSweb Inc	PFSW	1.64	1.42	H
08/11/03	Steelcloud	SCLD	3.55	5.30	B
04/28/03	TransCanada Pipe	TRP #	15.85	18.02	H