Click here to go to the Stockscom website

Stockscom Report for Monday Jan 17 2005

Publisher: Colin Alexander Editor: Ken Wilson

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

• Equities under further risk of sliding

Market Synopsis

We have steadfastly believed that a consumer suffering under the pressure of high fuel prices, unable to lower taxes further or benefit from new tax breaks, and potentially paying higher interest charges on unpaid balances would lose momentum in the battle to consume. And now there is some evidence to demonstrate that indeed the consumer has retreated. The National Retail Federation is expecting first quarter consumer spending to have increased only 3.7%, which while seemingly adequate on the surface, pales in comparison to last year’s 9.9% for the same time period. Their members are telling them that customers are tapped out and that there are fewer dollars chasing goods. While this may be the start of a well-deserved break in consumption, and the beginning of a period of fixing up household balance sheets, a US economy heavily dependant on consumer spending must prepare itself for some significant slowing down in the months ahead.

Perhaps this past week’s release of trade figures for November showing a large increase in the trade gap to $60 bil might be marking the final blow-out. But even that is doubtful since the record-sized gap was less related to ballooning imports as it was to sharply reduced exports. Oil and its products were of course, a big factor in the imports side of the equation but it was the low exports, despite benefiting from a weaker dollar, which surprised many analysts.

Ultimately, what is important with respect to a tapped out American consumer is that a global shift will result. An American consumer withdrawing from the marketplace will cause a long-awaited increase in US personal savings, lower the trade deficit with China even to the point of slowing down the growth rate in China’s economy and incite Europe and Japan to reduce their high savings rates through increased consumption. The global economy, dependent for too long on US consumers, must be weaned off and other countries in Asia and Europe must take up the slack if the world economy is to expand further this year.

Technically Speaking

Stocks have reached the middle of the month in a state of limbo not knowing or at least, not signaling their next direction. We consider the S&P 500 to be a reasonable barometer for the broad market but we cannot ascertain with any certainty the predominant direction for the market early in 2005 until we see whether support in the area of 1160-1170 is reliable enough. Just this week, the S&P managed to reach lows in the area of 1175, a key support area owing to a series of lows in that area that had been touched in the latter half of November and early in December. Bulls are using the successful test of this point as indication of the index’s strength.

The tech market as represented by Nasdaq is a different animal with some indications that the latest high will not be taken out for quite some time. Though the previous high near 2055 could be expected to support, a more likely scenario would be the key 2000 level. A failure at either level would indicate that losses on ND would be far more substantial.

New Buy Recommendations:

Some of the stocks that were disposed of during the first week of January are showing new signs of life. However given the inherent weakness of the indexes, we prefer to demonstrate a certain amount of restraint in cases where the ambiguity is far too great. Some examples of these include: ERTS, FFIV, VPI, IPS, and CRYP.

For now we are not recommending new positions – we wish only to draw our subscribers’ collective attention to them.

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
11/08/04	Cryptologic	CRYP #	18.58	22.00	22.00	SOLD
01/10/05	Immucor	BLUD	26.59	28.07		H
01/03/05	Immunogen	IMGN	8.96	8.05	7.70	H
01/10/05	Keryx Biopharm	KERX	15.09	15.00		H
03/08/04	Transcanada Corp	TRP #	21.34	24.75	23.25	H

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price