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Stockscom Report for Sunday Oct 24 2004
Publisher: Colin Alexander Editor: Ken Wilson
Subscriptions and Administration: Pierre Fichaud (toll-free: 866-487-9711)
Market Synopsis
The near term direction in markets is being dictated by the three E’s currently. They are election, earnings, and energy. Markets detest uncertainty and as the election draws near, the potential conflict to decide a victor similar to the court battles seen in 2000, is generating much nervousness. As for energy, the rapid rise in the cost of energy has a disproportionately greater impact on lower income earners and with the winter season and its associated costs of heating upon us, the amount of their disposable income must surely fall.
Reiterating our comments from last week, this lack of disposable income will invariably cause two things: the first being greater consumer debt brought on by the use of credit cards to pay for household expenses such as heating and the second being the strong probability of substantially lower retail sales especially important during the fast approaching holiday season.
The failure of the American consumer will have repercussions in the manufacturing centers of Asia especially China as China has been the manufacturer and the US has been the consumer for far too long and the slowdown there would be severe enough to induce a global recession. This evening we are witness to another effect of this slowdown and that is the lack of support for the US dollar, which has been propped up by Asian central bank demand for many months. The large budget and trade deficits have required massive injections of capital in order to fund but foreigners including foreign central banks are slowing down their purchases of US assets and the US dollar is visible evidence of this trend.
All three major indexes have returned to their previous pattern of cycling lower as they have done for the better part of 2004. The only difference being that each index is located at a different point on its consistent waveform. All indexes were extremely weak on Friday and are continuing that weakness into overnight trading this evening leading us to believe that markets are heading still lower.
The DJ is unusually low within its oscillating wave pattern and threatening to break lower, which would of course, be a bearish signal, however the broader market as characterized by the SP, has descended only about halfway in its march lower. Meanwhile the tech-heavy ND has only begun a break lower after having rallied for most of the past month. The resistance caused by the 200-day moving average stymied the ND in its most recent attempt to lift-off.
Initial support for the DJ is located around 9650 while on the SP, it is located near 1040 and on the ND, support is to be found near 1775. These assumptions are based on projecting the very consistent multi-month waves forward.
New Buy Recommendations:
None.
New Short Sales
None.
Stock Positions to Sell/Exit:
Microsoft (MSFT). We recommend exiting MSFT based on its gap down Friday followed by a weak finish. Its earnings report showed a drop in licensing revenue moving forward and had investors suitably nervous. Price action on Friday came very close to closing the gap up left on Sept 30 and we would assume that this will occur Monday thus leaving a multi-day island
Portfolio Comments:
GSS – Gold stocks should benefit from a renewed look at shorting the US dollar as encouraged by the Fed President Yellen. As the price of gold rises, small cap producers with low current profit margins such as cash-rich GSS benefit as profit potential grows exponentially.
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 |
|
08/23/04 |
AES |
AES |
10.23 |
11.04 |
9.50 |
H |
|
09/20/04 |
Air T Inc |
AIRT |
15.48 |
28.43 |
25.50 |
H |
|
10/04/04 |
Amedisys |
AMED |
32.00 |
30.69 |
|
H |
|
04/08/04 |
Golden Star Res. |
GSS # |
6.88 |
5.03 |
|
H |
|
10/04/04 |
Hurco Companies |
HURC |
15.23 |
14.84 |
|
H |
|
06/28/04 |
Microsoft |
MSFT |
28.60 |
27.74 |
|
SELL |
|
10/04/04 |
Palomar Medical |
PMTI |
25.88 |
22.57 |
|
H |
|
08/09/04 |
Pan Amer Silver |
PAAS # |
13.40 |
16.95 |
|
B |
|
09/27/04 |
Petro-Canada |
PCZ # |
50.90 |
55.24 |
|
B |
|
08/16/04 |
Suncor |
SU # |
28.50 |
35.23 |
|
B |
|
03/08/04 |
Transcanada Corp |
TRP # |
21.34 |
22.24 |
19.00 |
B |
|
09/20/04 |
Ulticom |
ULCM |
13.24 |
16.37 |
|
B |
|
09/20/04 |
Vintage Petroleum |
VPI |
18.44 |
21.00 |
|
B |
|
09/20/04 |
Witness Systems |
WITS |
16.42 |
16.04 |
|
H |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price