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Stockscom Report for Sunday Jan 30 2005

Publisher: Colin Alexander Editor: Ken Wilson

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

• Elections in Iraq perceived as successful

Market Synopsis

Democratic elections were held in Iraq today and despite the threat of violence and the actual incidents that occurred, there is a general perception that with the level of voter turnout seen, this was a successful transition. Perhaps more significantly, a fact not lost on the Bush Administration, this election will have installed a democratically elected government in the heart of the Muslim part of the Middle East.

Certainly the recent election in Afghanistan was also a momentous occasion however Afghanistan is not as strategic as Iraq given the proximity of both oil production and a potential for closer surveillance of the volatile situation with Arab sheiks. Undoubtedly, some members of Bush’s inner circle view the prospect of a violent overthrow of the Saudi Arabian government as a distinct possibility and the closer that they can be, geographically, to respond to such a situation, the better.

As investors, we have more of an interest in the ultimate response to this event by the stock market. And overnight trading in electronic markets here and in bourses open elsewhere in the world is indicating that they view this election as a positive development in global economic affairs.

Technically Speaking

Stock markets were strongly affected by the earnings season this past week as companies reporting unexpectedly good results were amply rewarded while those whose results were less than outstanding or were surprisingly lower than expected, were disposed of in large volumes.

In general we are seeing more cases of beaten down shares in the large cap indexes both in tech and in the broader market. The more bullish stocks appear to be small or medium capitalization stocks underlining their importance to the ongoing recovery. Many shares in the larger cap range that experienced greatly inflated P/E ratios in the rally from August are having their bubbles popped now and these include companies such as Ebay, Research In Motion, and Qualcomm.

Notwithstanding this current deflation of bubbles, the Iraqi election is likely to provide a climatic turning point in the current bear rally. The Nasdaq Composite has found support at 2000 and the S&P 500 has tested support in the 1150-1160 level. An important global event of this nature is strong enough to change investor momentum and we have evidence of that this evening. As mentioned above, overnight trading has both the ND and SP higher and we expect this to carry into the daytime trade.

How far can this rally take us is the most important question and given the various global imbalances and potential for an economic slowdown, we would assume – not terribly far. We doubt that the highs seen both in mid-December and early January would be succeeded by a new rally beginning here. More likely there would be a short-lived rally generating a healthy retracement before further losses drove the indexes lower once again.

New Buy Recommendations:

Air T Inc. (AIRT) – This stock was added to our portfolio in the autumn of 2004 and we held it for several weeks earning quite an interesting gain. On Friday afternoon, AIRT released its quarterly results and saw a large increase in trading volumes moments before the release and a significant rise in the stock price. The chart has once again signaled that the moment to buy is now.

Massey Energy Co. (MEE) – This coal producer witnessed a significant jump both in volume and stock price upon the release of its quarterly data this week. With Fri’s move, the development of a pennant was abruptly concluded as price jumped to a new high and signaled that there would be a continuation of the upward movement. This stock has seen steadily rising price movement over several months, however there is nothing to indicate that this positive action is about to end.

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
01/24/05	Checkfree Corp	CKFR	38.43	38.08		H
01/24/05	Cleveland-Cliffs	CLF	60.41	63.30		B
01/24/05	Cryptologic	CRYP #	23.67	24.18		B
01/24/05	Encana	ECA #	57.40	59.03		B
01/10/05	Immucor	BLUD	26.59	29.75		B+
01/10/05	Keryx Biopharm	KERX	15.09	14.12		H
03/08/04	Transcanada Corp	TRP #	21.34	24.03	23.25	H
01/24/05	Trident Microsys.	TRID	18.05	17.45		H

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price