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Stockscom Report for Sunday Nov 21 2004
Publisher: Colin Alexander Editor: Ken Wilson
Subscriptions and Administration: Pierre Fichaud (toll-free: 866-487-9711)
Market Synopsis
Certainly we had wondered whatever would be the catalyst for some significant retracement of the stock indexes as they had resisted being deflated over the past month’s rally. Essentially, stocks had risen in a straight line over the past four weeks until Friday’s action reversed the overall direction. Perhaps it was an ironic coincidence or perhaps it was a more tactical maneuver that Federal Reserve Chairman Greenspan chose to wait until after the presidential election to transmit a wake-up call to Congress that current account deficits could not continue ad infinitum. In fact, the CA deficit now approaching 6% along with the $500 billion budget deficit cannot grow unrestricted.
The top central banker in the US has now officially condemned the government’s mismanagement of credit. True, he employed very academic terms to describe the situation, which lent it an air of intellectual argument thus cushioning the blow, but there’s no escaping the fact that this was a severe indictment of the Bush Administration and a call to begin corrective measures.
His words did not go unnoticed either. Treasury Secretary, John Snow commented, at the G-20 conference, that the budget deficit would be reduced through spending caps and pro-growth policies, the latter term being Administration-speak for new tax cuts. The Bush Administration has made it clear that more tax reform was being planned for the second term and that part of this strategy included ensuring that tax cuts initiated in the first term would be made permanent. Inasmuch as no new revelations were discussed, traders considered this to be dollar-bearish as even President Bush was quoted as stating that the Administration continued to favor a strong dollar policy. The dollar sell off that began on Friday with Greenspan’s not so subtle warning was maintained this evening as trading began on Globex electronic markets. Traders have decided that the lack of a constructive response at the G-20 meeting in Berlin should be construed as support for the status quo and since the Chinese government continues to oppose further movement toward a flexible currency rate, the is little likelihood of a change in the condition of the dollar.
Technically Speaking
The market sell off from Friday was as much a reaction to the overbought nature of markets in general as it was a reaction to Greenspan’s comments. Much has been written and discussed about the unsustainability of Administration policies with respect to the twin deficits so the words were hardly surprising. However it was the author of those words that caught everyone’s attention. Therefore it was a combination of the precondition and the person speaking the words that the effect was so powerful.
As declines go, this one would not be classified as a major turn in direction. The markets needed to let off some steam having risen so far in one month that a retracement is long overdue. We would expect further moves lower in the coming days, however there is a certain optimism in the air not the least because of a Thanksgiving holiday this week and a holiday season that is just beginning, that will likely limit the downside.
New Buy Recommendations:
Essex Corp (KEYW) – Though we hesitate to recommend a new buy when the markets are believed to be dropping, we make an exception for this company. Essex is in the business of signal and image processing and much of their work is done under contract with either defense or intelligence departments and it is often classified. What isn’t classified is their financial results and their price chart reflects those excellent results of late. Specifically, the gap left at $14 reached its peak at $20 before retracing 50% to $17 and closing up on Friday. Consequently, there is a good window of opportunity to start a position on Monday.
New Short Sales
None.
Stock Positions to Sell/Exit:
None.
Portfolio Comments:
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 |
12.23 |
9.50 |
B |
|
09/20/04 |
Air T Inc |
AIRT |
15.48 |
26.60 |
26.60 |
SOLD |
|
10/04/04 |
Amedisys |
AMED |
32.00 |
31.70 |
|
SOLD |
|
11/08/04 |
Cryptologic |
CRYP # |
18.58 |
20.24 |
|
H |
|
11/08/04 |
F5 Networks |
FFIV |
42.38 |
40.59 |
|
H |
|
11/08/04 |
Ipsco |
IPS # |
31.69 |
34.78 |
|
B |
|
11/08/04 |
MFRI Inc |
MFRI |
7.41 |
6.86 |
|
B |
|
08/09/04 |
Pan Amer Silver |
PAAS # |
13.40 |
18.32 |
|
B+ |
|
09/27/04 |
Petro-Canada |
PCZ # |
50.90 |
55.42 |
|
B |
|
11/05/04 |
Placer Dome |
PDG # |
22.12 |
22.25 |
|
B+ |
|
11/08/04 |
Potash Corp |
POT # |
73.85 |
74.94 |
|
B |
|
08/16/04 |
Suncor |
SU # |
28.50 |
33.42 |
|
B |
|
03/08/04 |
Transcanada Corp |
TRP # |
21.34 |
24.06 |
19.00 |
B |
|
09/20/04 |
Ulticom |
ULCM |
13.24 |
16.21 |
14.95 |
H |
|
09/20/04 |
Vintage Petroleum |
VPI |
18.44 |
21.55 |
|
B+ |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price