Stockscom Report for Sunday Nov 9 2003

Publisher: Colin Alexander     Editor: Ken Wilson

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

 

• Indexes appear tired
• More good news on the economy

 

Market Synopsis

 

Stock market indexes continue to confound the analysts who like ourselves, consider the indexes to be ripe for pruning. This week was no exception especially when counting Friday's action where all three major indexes finished the session with closing price reversals. We've mentioned many times recently that the indexes appear to be tired and topping out near these levels and yet they have often finished the week slightly higher. To conclude each week with new weekly highs demands an extraordinary amount of investment money at this point of the rally.

 

Now stocks are heavily supported at this point with the economic fundamentals suggesting that we've only just begun to turn the corner on recovery with the latest numbers. Indications on consumer spending, factory orders, and unemployment show broad improvement in the past few months. The stock indexes however, have languished comparatively and one must keep in mind that when stocks refuse to go up amid good news, the mostly likely direction then is down. Friday's action was a textbook example: the unemployment report released at 8:30 ET spoke of 126K jobs created in October slightly better than the large, revised figure of 125K for the month of September. Once trading began, equities jumped as a result of the dissemination of good news, but quickly, they reversed course and slowly lost ground throughout the trading session. By the time the markets closed, all three majors had completed closing reversals.

 

If we were to assume that a retracement would occur, the underlying strength of the indexes suggests that support would be found first at 1875 and later at 1650 on the Nasdaq Composite; for the Dow, first level support is located at 9400 and secondary support at 9000; finally for the S&P, the support is located first at 1010 while secondary support is located at 920

 

Several companies and leaders including the likes of MSFT, AMZN and GE have already begun breaking down. The daily charts show prices swinging low and any of these could have been considered a short candidate in recent weeks. Generally, when leadership in stocks is being sold off, the stock indexes are aligned and moving also in that same, particular direction. Clearly another dynamic is at work here in this latest bull rally.

New Buy Recommendations:

 

BGO # – We sold our position in Bema this week but we do believe that the fears of Russian nationalization are quite overdone. After reflection, we feel strongly that the Russian government is not interested in reversing course and that development of a free-market economy is their prime concern. Certainly the stream of government officials emphasizing this point in the media this week demonstrates the efforts which they are making to ensure that Westerners perceive the case of Yukos as unique. Also, it certainly appears likely that they misjudged the reaction to this move and are attempting to reassure investors of their true intentions.

 

The US$ finished the week with a selloff against other major currencies and this occurred after a significant retracement. Likewise, the price of gold rebounded from its lows and we believe a new move higher is imminent. As such, we recommend purchases of both BGO and WHT.

 

ABB – This is another stock that we had and then dropped, however the charts have changed and it appears to be benefiting from the efforts in North America to prevent new hydro power outages and ensure a reliable electrical grid. Specifically, we would be looking to buy this on a move through $6.14 – a new high for the year, which we think is almost certainly about to happen.

 

BPT – Continuing with our energy theme, we want to add BP Prudhoe Bay to our list of recommended shares owing to its rapidly rising price curve. (Those with Canadian RSP's searching for companies qualifying under the Canadian rules could buy PCZ – Petro-Canada which enjoyed a break out move this week). This week the EIA upped their estimates of US demand for oil and its products and many of the integrated companies have seen their prices rise significantly. BPT is a REIT, which pays a high dividend but is subject to the ebb and flow of energy prices.

 

New Short Sales

None.

 

Stock Positions to Sell/Exit:

 

New stops have been added to the list while others have been modified. Those that have blanks, are being carried unstopped for now. Please see our complete list of stops in the table below.

 

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	Stop	Action Rating
09/29/03	AES	AES	7.50	9.04	unstopped	B+
10/06/03	Align Tech	ALGN	13.46	17.87	15.50	B
08/25/03	Bema Gold	BGO #	2.15	3.15	3.00 *	SOLD
09/29/03	China Unicom	CHU	8.18	9.54	7.60	H
10/06/03	Citrix	CTXS	24.31	26.08	23.17 *	H
05/12/03	Cott Corp	COT #	20.02	26.21	22.98	H
11/03/03	Ivanhoe Energy	IVAN #	4.99	5.65		H
09/08/03	Sapient	SAPE	3.72	5.82	4.75	H
04/28/03	TransCanada Pipe	TRP #	15.85	20.38	19.42	B+
11/03/03	Wheaton River	WHT #	2.36	2.15		B+

 

* Stop on a closing basis