Stockscom Report for Monday Jan 16 2006

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

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

• Stocks get a big boost to start the year

Market Synopsis

Over the next few weeks, expectations are that equities will be buffeted by earning results both positive and negative. Inasmuch as corporations have been relatively quiet, the lack of warnings bodes well for earnings, which in turn would manifest itself in another round of buying similar to the first few days of the year. Despite the current retracement, which has resulted in some substantial drawbacks in stock prices, the predominant direction is for now, upward.

Some analysts have noted that the buying exuberance to begin the year was, to say the least, overdone, and that the cause was funds that had sold near the end of the year to reduce or remove exposure to certain equities, considered that risks of purchasing at this time were acceptably low. Therefore these funds, many of which are no doubt vehicles for pensions, sought to assemble positions in a variety of equities as the year began. Ergo say these analysts, the initial drive higher in stocks is not believable and hence one should prepare themselves for the inevitable fall as the investment money suddenly dries up.

This is not likely to happen. Technically, the charts are displaying some very bullish tones that will only disappear after some significantly heavy selling, something which we have yet to see in this nascent retracement. Furthermore, if we assume that fourth quarter results due to be released over the next two to three weeks, are considerably better than expected, there are thus fewer excuses to sell or exit positions.

And indications are that we should expect good results because corporate profitability is strong and has been strong for the past couple of years. One important reason for the improvement in corporate balance sheets could be directly related to the weakness often pointed to as the Achilles heal of the current economic recovery from the short lived recession in 2001 – the lack of wage inflation or perhaps more accurately, the drop in real wages.

Essentially, US consumers have made up the difference in lost wages with money extracted from inflated assets, namely real estate and the refinancing of mortgages. This has sustained the consumers’ lifestyles and hence their ability to purchase. The Federal Reserve has aided and abetted this process by ensuring that the cost to borrow is low and although, overnight rates have risen more than 300 basis points, long term rates have moved comparatively little.

So the question remains, should we be concerned that massive selling is about to hit the markets? Not likely. Any resolution to this unbalanced world is likely to be unwound over an extended period of time and judging by the stock markets’ charts, investors aren’t set to through in the towel just yet.

Technically Speaking

A retracement began and using the Nasdaq Composite and S&P 500 markets as proxies, we believe that a move to test support at 2270 on ND and 1275 on the SP is the most probable tendency. These levels correspond to respective tops that occurred in Nov and Dec and constituted at the time, resistance. Having broken decisively through this resistance in the first few days of the year, these levels now become the support areas leading to higher reaches.

We intentionally leave out the Dow Jones for now since this index is being whipsawed by extraordinary moves of individual members of which there are only 30. While the attainment of 11,000 is important, a more meaningful move would be succeeding in reaching a new all-time high above 11,750.

New Buy Recommendations (in order of preference):

Miramar Mining Corp (MNG) – Though we don’t consider ourselves gold bugs, we do recognize the historic rise that has occurred in gold recently and recommend adding another small gold company to the stable of stock picks. MNG recently accepted a large investment from Newmont, the largest gold company in the world, to finance the on-going drilling and examination of the largest undeveloped gold project in Canada. This project, Hope Bay, in the far north is to be developed using a phased approach in order to avoid stock dilution as well as to step carefully through the regulatory and environmental framework incumbent in such an undertaking.

Technically, the outside bar higher on Friday completes a double Lindahl buy signal on the daily and emphasizes that this stock is certain to move higher in the short term at the very least. On the weekly chart, price is closing in on the high from early 2004. A break above this level would point to a possible doubling of its current price.

New Short Sales

None.

Stock Positions to Sell/Exit:

Plexus Corp. (PLXS) – We recommend selling this position as a downgrade at Deutsche Bank has damaged the chart and it is our belief that any further move higher will be painstakingly slow, if at all. The downside risk has now become rather important and thus there is no reason to continue to hold this stock.

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
11/21/05	Amer Sci & Eng	ASEI	71.08	63.42		H
11/14/05	Birch Mtn Resour.	BMD	6.65	7.44		B
01/09/06	Englobal Corp	ENG	10.86	11.15		B+
01/09/06	Nuvelo Inc.	NUVO	12.95	15.42		B+
11/07/05	Plexus Corp	PLXS	20.15	23.63		SELL
01/09/06	Progenics Pharma	PGNX	29.70	29.40		H
12/12/05	Radiant Systems	RADS	13.78	11.71		H
11/07/05	Redback Networks	RBAK	11.78	14.47		B
01/09/06	Seabridge Gold	SA	9.49	9.84		B
01/09/06	Sierra Wireless	SWIR	13.60	12.63		H
11/21/05	Sigma Designs	SIGM	13.10	16.29		B
11/14/05	Tom Online	TOMO	20.66	22.50		B+
03/08/04	Transcanada Corp	TRP	21.34	30.85	27.50	B
12/05/05	USA Truck Inc	USAK	29.30	29.15		H

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price

*** Split-adjusted price