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Stockscom Report for Sunday Aug 15 2004
Publisher: Colin Alexander Editor: Ken Wilson
Subscriptions and Administration: Pierre Fichaud (toll-free: 866-487-9711)
Market Synopsis
Oil remains very much in the spotlight with the threat of supply disruptions in Iraq and Russia vying with the most recent, Venezuela. On Sunday, the recall election took place in Venezuela, reinforced with independent observers to ensure an honest, open process was kept. The latest unofficial results suggest strongly that the populist incumbent, President Chavez, was the victor and considering that his wide support includes the all-important military, there is unlikely to be widespread violence. However, inasmuch as oil production is and has been relatively steady with Chavez since the end of the riots of 2002, the lack of well-trained personnel offers no promise of a hike in production to ease the current supply squeeze.
With the current price of oil nearing the $47 per barrel mark, the fear factor and the consequent hoarding by speculators and governments alike should keep upward pressure on oil prices until we see data demonstrating lower global demand for energy and/or resolution to the conflicts. Regardless of the announcements from OPEC, their promises to increase production are pure fantasy and while Saudi Arabia was reported to have announced an increase of 1.5 million b/d production this past week, it is well known that their entire spare capacity is approximately 1.5 million b/d and can be accessed only sparingly.
Global security concerns are also dominant issues owing to the Athens Olympics, which began on Friday. As a result, some of the biggest winners or biggest losers might actually be the insurance companies participating in the estimated $1 billion of coverage underwritten, where even the IOC (International Olympic Committee) sought to protect themselves financially in the event of a terrorist attack.
Lost amongst the stories of more oil supply shocks and the terrorist threats at the Olympics is Friday’s announcement of Japan’s unexpectedly low second quarter GDP, which came in at an annual rate of 1.7%, a large drop from the previous quarter’s 6.6% rate. A return to slow or negative growth in the world’s second largest economy bears watching as this could be a signal to a faltering global recovery story.
A misstep in the global expansion/recovery theory may actually be what the stock indexes are attempting to say. With new lows set for 2004, the North American markets continue to test the downside further. Despite slight gains in the broader markets – the S&P 500 and the Dow Jones – the weekly charts finished the week with closes at the bottoms of the price bars. Nasdaq ended the week with a loss. For the S&P we are still considering the 970 mark as a potential landing area while on Nasdaq, there is strong potential for support around 1640. The Nasdaq has become decidedly weaker since last week’s employment report and having dropped out of the downward channel, there is now fierce resistance built up at the 1810 level.
New Buy Recommendations:
Suncor (SU #). We were exited from this in an earlier period of weakness in oil stocks, however the chart has turned around (much like many of the oil stocks) gapping higher on July 27 and successfully testing the gap on Friday. Now SU appears prepared to move solidly away from the range in which it has been bound for several months. Oil stocks in general do not reflect the current high oil price environment and appear to be pricing in oil at substantially less. Sustained prices near current levels will ensure that the equities play catch up in the months ahead.
New Short Sales
None.
Stock Positions to Sell/Exit:
None.
Portfolio Comments:
Transcanada (TRP) – This energy firm is appearing much stronger and we would consider this as a possible add-to and this in spite of a current price below the original price of purchase. A move closing the gap left on Apr 13 at $21.18 would be a conclusive sign to add to this position.
Gold stocks – IAG announced a merger with the international assets of Gold Fields (GFI) and this has finally put to rest the uncertainty of GSS (and to some extent WHT). Gold is still trending higher and the US$ is under immense pressure after the unexpectedly larger trade deficit of $55 billion. This data coupled with the weak inflation data and the employment report is likely to contain the US$.
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 |
23.71 |
|
H |
|
06/28/04 |
ATI Technologies |
ATYT # |
18.79 |
13.99 |
13.99 |
SOLD |
|
06/01/04 |
Capital Env’t Res (1) |
CERI # (WSII) |
4.98 |
4.19 |
|
SOLD |
|
04/08/04 |
Golden Star Res. |
GSS # |
6.88 |
3.98 |
|
H |
|
06/28/04 |
Microsoft |
MSFT |
28.60 |
27.02 |
|
H |
|
08/09/04 |
Pan Amer Silver |
PAAS # |
13.40 |
13.57 |
|
B |
|
08/09/04 |
Southern Co. |
SO |
29.83 |
29.83 |
|
H |
|
03/08/04 |
Transcanada Corp |
TRP # |
21.34 |
20.88 |
19.00 |
H |
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
08/09/04 |
Alcoa |
AA |
29.95 |
29.63 |
|
H |
|
05/17/04 |
Citigroup |
C |
45.02 |
44.01 |
|
S |
|
05/17/04 |
General Motors |
GM |
43.55 |
40.69 |
45.00 |
S |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
(1) Was renamed Waste Services Inc and now uses the symbol WSII