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Stockscom Report for Sunday July 18 2004
Publisher: Colin Alexander Editor: Ken Wilson
Subscriptions and Administration: Pierre Fichaud (toll-free: 866-487-9711)
Market Synopsis
Little changed in the week just completed. Markets continue to march lower despite the vastly oversold stochastics with Nasdaq in particular, impervious to the logical propensity for a rebound, marking five consecutive daily losses and the Dow Jones finishing with losses on the final three sessions of the week on rising trading volume. Little change is expected in the general trend for the coming week.
Earnings are the biggest attention drawer and this week highlights the auto sector with both Ford and GM announcing their quarterly results. Inasmuch as we already know their monthly production and can estimate that sales figures will be less than stellar, investors will be on the lookout for signs of a renewed war with incentives. Currently every new automobile sold by Ford or GM comes equipped with over $4,000 in financial incentives in a last ditch attempt to move sales forward. In both of these cases, net income is expected to rise amidst a sharp slowdown in revenues. Various parts suppliers from Visteon to Goodyear Tire are also expected to report.
Inflation or the lack of it in the month of June was a major driver of the markets in the past week. CPI had been expected to equal previous month’s values but the core rate was measured as an increase of only 0.1%, the lowest value of the year. This unexpected sign of a reduced threat of inflation drove bond prices higher. Although announced with less emphasis, a separate report released at the same time described wage inflation as non-existent with average weekly earnings adjusted for inflation decreasing 0.8%. Naturally this figure is viewed in a negative light with consumer spending likely to show considerable tightening in the months ahead if this trend continues. As we’ve mentioned many times in the past, the monetary stimulus of tax rebates and low long-term interest rates is largely a thing of the past. Now the heavy lifting of consumer spending begins and with a domestic job market characterized by a healthy amount of slack and willing job market competitors located in other countries paid derisory wages, the spending factor will take on even greater importance as the year winds down and election fever grows.
New Buy Recommendations:
None.
New Short Sales
None.
Stock Positions to Sell/Exit:
None.
Portfolio Comments:
Consol Energy (CNX) – We modify the rating to H given the significant rise of the past couple of weeks and the likelihood of some measure of retracement.
Transcanada (TRP) – This is another energy firm that we are paying close attention to given its weakness.
Gold stocks – Our gold plays – GSS and WHT – have spent more time in the courtroom than in the field recently. IAG adopted a poison pill this week in order to permit other offers to come forward and GSS has asked the courts for a ruling on this move. Also GSS extended the date of their offer to July 30. The US dollar has begun another leg down and as the price of gold has been moving inversely to the US$, expectations are for a new leg higher in the price of the yellow metal. Similarly, silver prices should benefit and we saw evidence of that this week in the price of PAAS.
Citigroup (C) – Citigroup was sold off on the day it announced its quarterly earnings and finished the week much lower. We would consider adding to this trade however we consider it appropriate to wait for a retracement of this drop before acting.
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 |
|
06/28/04 |
Accenture |
ACN |
27.41 |
25.67 |
|
H |
|
06/01/04 |
AES |
AES |
9.24 |
10.18 |
|
B |
|
06/28/04 |
ATI Technologies |
ATYT # |
18.79 |
16.71 |
|
H |
|
06/01/04 |
Capital Env’t Res |
CERI # |
4.98 |
4.75 |
|
H |
|
03/01/04 |
Consol Energy |
CNX |
27.50 |
38.00 |
33.50 |
H |
|
06/28/04 |
Cyberoptics |
CYBE |
27.43 |
22.27 |
|
H |
|
04/08/04 |
Golden Star Res. |
GSS # |
6.88 |
4.65 |
|
H |
|
05/24/04 |
Inco |
N # |
31.03 |
35.00 |
|
B |
|
05/24/04 |
Jetblue Airways |
JBLU |
28.66 |
25.00 |
25.00 |
SOLD |
|
06/28/04 |
Microsoft |
MSFT |
28.60 |
27.48 |
|
H |
|
05/24/04 |
Pan Amer Silver |
PAAS |
12.78 |
15.37 |
|
B+ |
|
03/08/04 |
Transcanada Corp |
TRP # |
21.34 |
19.62 |
19.00 |
H |
|
11/03/03 |
Wheaton River |
WHT # |
2.36 |
2.90 |
|
H |
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
05/17/04 |
Citigroup |
C |
45.02 |
43.62 |
|
H |
|
05/17/04 |
General Motors |
GM |
43.55 |
43.60 |
48.50 |
H |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price