Stockscom Report for Sunday Apr 3 2005

Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)

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

• Early signals of global weakness
• March unemployment data misses expectations

Market Synopsis

Besides the US, the two economic poles that are relied on as engines for global growth are Germany and Japan. While the Far East (ex. Japan) is perceived as an area rapidly developing, these countries still constitute a group that depends largely on foreign demand for its well-being. Domestic demand inside these countries is improving quickly however the concept remains largely a work-in-progress. Probably in twenty years, the engines for global growth will include countries such as China and India, but for now this growth must be found elsewhere.

The global recovery over the past couple of years has only succeeded because of the participation of Germany and Japan. In particular, Japan has been attempting a recovery for more than ten years since the loud thud of a falling Nikkei combined with the significant drop in real estate values to drive the Japanese economy into recession after recession. Over roughly the same period, Germany has had to deal with the difficulties and challenges of combining its economy with that of the formerly communist East Germany. But there are problems showing up now in these two countries putting into doubt their ability to sustain their contribution.

In Japan, the release of the Tankan survey, a survey of business conditions taken among business leaders, this past week surprised many observers who hadn’t expected the elevated degree of deterioration in the survey. It followed similar readings from industrial production, consumer spending and exports that all signified a weakening in the economy. Clearly, the rebound that has brought Japan this far is now winding down.

Germany and Europe in general appear also to be failing in their bid to keep the recovery moving. The Ifo survey in Germany, which is similar to the Tankan in many respects and the ISM purchasing managers survey here in the US, is equally troublesome in that there are indications of a dramatic slowing in the German economy, an effect of which is sure to be felt in the rest of Europe. At the same time, unemployment in Germany has just reached a post-WWII high of 12% for the month of March pushing the seasonally-adjusted number of unemployed to almost five million people.

Relying on the US to do the heavy lifting for a continuation of the global recovery is risky at best and the likelihood decreases each day that the price of oil remains high. The ISM numbers for both manufacturing and services were released on Friday and while they were mostly steady, the one worrisome aspect was the spike in prices paid on the manufacturing survey.

But the biggest surprise was naturally the employment numbers with March job growth amounting to 110K instead of the expected 200K or more. This disappointing figure only serves to prove that job creation will be slow to expand and that analysts will need to ratchet down their expectations for further growth in the future.

Technically Speaking

With Friday’s disappointing news on job growth coupled with ISM numbers that suggested higher inflation is coming down the pipe, the indexes, which had initially made gains on the basis of lower inflation expectations inasmuch as fewer jobs were created, completely reversed. By the end of the day, charts were marked with the red lines of a large outside day, evidence of some violent whipsawing action and indication of further weakness to come.

New Buy Recommendations:

None.

New Short Sales

Short sales should always be pooled owing to the concept of spreading risk, which takes on added importance when shorting. Equity indexes look invariably weak and any strength deserves to be sold not bought so accordingly there is safety at this time in shorting a pool of stocks.

Amgen (AMGN)

Cisco Systems (CSCO)

Ebay (EBAY)

General Motors (GM)

This diverse group of companies all share the characteristic of weak charts over an extended period of time and that show no sign that impending recovery is just over the horizon. Speculators might even want to include Websense (WBSN) in this list though we prefer to withhold any recommendation to short this stock at this time.

Stock Positions to Sell/Exit:

Checkfree (CKFR). With abundant weakness in the market and a stock that has gone largely nowhere for the entire time we’ve held it, we feel it’s prudent to exit this stock since the risk element is probably working against us if we persist in holding onto it.

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.

Please take note that the following clause is being removed under the assumption that the aforementioned federal budget in Canada will be accepted into law. From the budget date forward, there are no longer restrictions on foreign stocks held in Canadian retirement accounts. Furthermore we will no longer mark stocks with # to indicate such.
[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	16.61		H
02/08/05	Applix	APLX	7.01	6.07		H
01/24/05	Checkfree Corp	CKFR	38.43	40.00		SELL
01/24/05	Cleveland-Cliffs	CLF	60.41	70.00	70.00	SOLD
01/24/05	Cryptologic	CRYP	23.67	29.50	29.50	SOLD
01/10/05	Immucor	BLUD	26.59	29.81	28.00	B
03/28/05	Intellisync	SYNC	3.37	3.62		B
02/14/05	Ipsco	IPS	51.33	50.24	51.41	SOLD
03/28/05	Paincare Holdings	PRZ	4.69	4.81		B
03/08/04	Transcanada Corp	TRP	21.34	24.44	23.25	B
02/14/05	Western Silver Crp	WTZ	10.50	8.65	8.65	SOLD

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price