Stockscom Report for Sunday Sep 18 2005

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

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

• Oil revisited

Market Synopsis

What recently cost about 87 cents in Indonesia, $1.59 in Beijing and $2.42 in Bangkok? If you answered a gallon of gas, give yourself a pat on the back for indeed these are recent prices in certain parts of the world. While people in Europe marvel at how low the price of gas is in the US, another part of the world is managing to purchase gas for their automobiles at below cost. How is that possible? Quite simply the governments of these countries and many more subsidize the price of fuel in order to grant the poor regular folks the privilege of driving and/or working in spite of sky high gas prices.

When the world prices peaked recently, these subsidies became quite onerous on the various governments and consequently some administrations reluctantly chose to modify their policies regarding this cheap gas. In India for example, the government increased the price by 7% two weeks ago in an attempt to lessen the $12 million lost each day by the state-owned oil company. Meanwhile the Brazilian oil company, Petrobras, another state-owned oil company, made waves in recent days by raising the price of fuel for the very first time this year by 10%.

As commodity traders understand, nothing solves high prices like high(er) prices. As prices rise, there comes a point where demand starts to falter and the resultant fall-off in demand triggers a drop in price. We are now witnessing this process on a worldwide scale as energy demand is falling dramatically and slowly bringing prices back toward pre-Katrina levels.

The American Petroleum Institute noted this past week that US oil demand had fallen 1.1% in August after dropping 3% in July year over year. And unleaded gas demand for all of 2005 is virtually flat whereas forecasts had predicted a 1.5% increase over the entire year.

This is not just an American phenomenon as the International Energy Agency based in Paris released figures the week before that largely mirrors the American situation. Since March, the IEA has been lowering their estimates of world demand for oil as countries such as India and China, whose heretofore large marginal increases in demand prompted competition for product and markedly higher prices, have severely curtailed their purchases of crude and its derivatives.

With lower demand and falling prices, there is a greater chance now that we are seeing the peaks in oil stocks for 2005. Still we wouldn’t expect that prices fall precipitously on account of the uncertainty in various parts of the oil-exporting world. Nigeria and Venezuela have had their own internal problems over the past several months and Iraq is a going concern as an exporter.

Technically Speaking

Friday’s moves on the indexes served to allay fears of an imminent breakdown in price. While the days leading up to Friday were marked by weakening market positions, the week-ending trading session characterized by heavy volumes and a distinctly bullish breadth, was clearly a positive move that indicated the strong likelihood of further upward moves in the days ahead.

While we recognize that the most recent highs did not exceed the August highs on daily charts, the abrupt turnaround during the current retracement meant that the most recent low is now well above the previous lows and consequently, a broad “W” has been traced on the chart. Therefore the latest move culminating in Friday’s significant gain should be viewed as a return to a firmly bullish stance.

New Buy Recommendations:

None.

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.

N.B. There are no longer restrictions on foreign stocks held in Canadian retirement savings accounts.

Date of Entry	Name	Symbol	Entry Price	Current Price	Stop	Action Rating
08/15/05	Am Sci & Eng Inc	ASEI	49.25	61.42		B
08/22/05	Autodesk Inc.	ADSK	40.22	42.38		B
05/23/05	Captiva Software	CPTV	14.03	19.63	18.00	B
09/06/05	Commercial Metal	CMC	32.70	33.90		B
05/10/05	Humana	HUM	36.30	49.12	40.00	B
08/15/05	Nvidia	NVDA	30.05	33.25		B
05/10/05	Pacificare Health	PHS	62.60	77.94	73.00	B
07/25/05	Precision Drilling	PDS	41.50	50.90	41.00	B
09/12/05	Qualcomm	QCOM	42.48	43.32		B
03/08/04	Transcanada Corp	TRP	21.34	30.06	25.10	B
08/15/05	Websidestory	WSSI	16.74	17.62		B

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price

*** Split-adjusted price