Click here to go to the Stockscom website

Stockscom Report for Sunday Feb 13 2005

Publisher: Colin Alexander Editor: Ken Wilson

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

• Greenspan testimony before Congress this week

Market Synopsis

Though the forthcoming week will be a bit short on economic data (housing data and industrial production being less exciting than say, monthly unemployment data), there will be another form of entertainment available to market watchers. On Wednesday and Thursday of this week, the semiannual congressional testimony on the economy will take place starring Fed Chairman, Alan Greenspan. Now attaining the age of 79 on March 6, a few weeks hence, and reaching mandatory retirement age, means that this year will be Mr. Greenspan’s last as the Federal Reserve Chairman.

The testimony itself will be largely fixed as he outlines in broad terms the state of the economy from his perspective and considering the paucity of changes in FOMC statements over the past six months, we feel certain that given the chance, we could probably succeed in predicting his comments. There will be the usual commentary that the economy is slowly lifting, that job growth is appearing albeit slowly, that inflation is contained and that the Federal Reserve will continue to normalize short term interest rates.

Fortunately, there is a question period. This part of the testimony is by far the most entertaining as various congress(wo)men attempt to spar intellectually with the gifted baffler, Greenspan. His comments though never mocking are as enigmatic as the man himself and are interpreted differently by each individual who dares to try. The members of congress will question him on topics ranging from the lack of strength at this point of the economic cycle to his opinion of President Bush’s proposed budget and the fiscal policies of the current administration.

Perhaps Greenspan will be as illuminating as he was in London just before the G-7 conference a week ago. He suggested that the falling savings rate in the US was supplanted by rising asset prices, namely housing and he explained how money extracted from real estate was finding its way into consumption. What he failed to mention was that the first 37 months of the recovery has seen a meager 4% rise in private wage and salary increases, which stands in stark contrast to the average of 14% for the past five recoveries. This is a key factor in explaining the lack of a vibrant recovery normally seen at this point. Instead, in order to meet payments and maintain current levels of consumption, Americans have chosen to take equity out of their principle residence and renegotiate better terms for repayment. But with rising short-term interest rates and a belief that longer-term rates will head higher notwithstanding the latest drop in yields, the opportunities to keep the spigots open will be reduced.

Technically Speaking

We have a continuation of this bifurcation in markets with the tech sector dropping over the week while the broader markets find new buyers enough to support higher stock prices. On Nasdaq, the leaders such as Dell, Microsoft and Cisco flounder and in particular, Cisco has been a stock to short for many months having peaked at the beginning of 2004.

So while the Dow Jones and the S&P 500 appear to be setting up new runs for twelve-month highs, the Nasdaq-100 is being pressured from the 40-month moving average on long term charts and remains unable to burst through this resistance level.

New Buy Recommendations:

Ipsco (IPS #) – This steel producer was a recommendation just weeks ago and with the move on Friday, we reinstate a buy recommendation. Like many stocks, we were concerned with its fall in value at the beginning of the year but in the past couple of weeks, the weakness has cleared away and the gap higher in trading on Friday leaves it with a virtual island on the daily chart. The dividend was increased on Friday and tomorrow brings their quarterly results, which given the broad outlook for steel remains quite bright with demand creating supply shortages in some steel products.

Meridian Gold. (MDG #) – Gold and precious metals have once again bounced off long-term support lines and Meridian, in particular, has benefited from some buying pressure especially during the leg extending from mid-September until December. But now the past three days there was renewed buying in MDG culminating in a new high for 2005 and it appears set to reach a new all-time high in price.

Western Silver Corp. (WTZ #) – Similar to the MDG story, this silver producer has recently found support at its 200-day moving average and with the gaps higher on Thursday and Friday this past week, it’s signaling that further climbs are in the works all the way to new highs.

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
01/31/05	Air T Inc	AIRT	17.63	20.77		B
02/08/05	Applix	APLX	7.01	7.99		B
02/08/05	Ascential Software	ASCL	16.00	16.01		H
01/24/05	Checkfree Corp	CKFR	38.43	38.27		B
01/24/05	Cleveland-Cliffs	CLF	60.41	68.12		B+
01/24/05	Cryptologic	CRYP #	23.67	23.82		B
01/24/05	Encana	ECA #	57.40	61.44		B
01/10/05	Immucor	BLUD	26.59	31.01		B
01/10/05	Keryx Biopharm	KERX	15.09	14.32		H
01/31/05	Massey Energy	MEE	37.00	39.65		B
03/08/04	Transcanada Corp	TRP #	21.34	24.35	23.25	H
01/24/05	Trident Microsys.	TRID	18.05	18.13		B

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price