Stockscom Report for Sunday Jan 22 2006

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

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

• Iran and oil concerns
• Profit warnings

Market Synopsis

The overhanging threat of a new geopolitical powder keg was front and center this week as Iran faced off against the West in a war of words and chest-thumping theatrics. To quickly summarize: Iran removed UN seals on the Natanz nuclear enrichment plant in violation of the Nuclear Non-proliferation Treaty. While the Iranian hardliner President Ahmadinejad has said that their desire is to continue nuclear research begun many years ago in order to develop nuclear energy capabilities, the West is unconvinced and considering the 90 billion barrels of crude oil reserves contained in Iran, doubts surrounding their intentions are perfectly normal. Iran certainly is past its peak in oil production, which occurred in 1979 at the height of the Islamic Revolution when production was 4.0 million bpd. Now, Iran produces 2.5 million bpd at most as Western investment in the nine major oil-producing fields dried up in the 25 years that followed the Revolution. Nevertheless, several current development projects by Western producers including Royal Dutch Shell, Total SA, Eni and Norsk Hydro are seen adding to reserves in the next few years.

Part of the threat issued by Iran was to stop selling their 2+ million barrels of oil per day but observers are quick to note that 90% of Iranian exports are oil so this threat is unlikely to be taken seriously for such a draconian measure would have an immediate impact on the Iranian economy, perhaps a collapse. Western governments are studying trade sanctions however this would not be of any consequence for the US as a trade boycott has existed since April 1995.

If concerns about Iran weren’t enough, several earnings warnings were sufficient to send markets into a tailspin by the end of the week. Bellwether companies as large and diverse as GE, Citigroup and Intel all reported in-line or weakening corporate quarterly results leading to some large gaps lower in the daily charts. While these reports were important for their own stock prices, these announcements were also the catalysts for very widespread negative market activity on Friday.

Technically Speaking

Wednesday’s trading gave us a sneak preview of what was to come when news of Intel’s missed quarter sparked a day of heavy selling among the large capitalization companies. But Friday’s reaction to further corporate warnings and new threats emanating from Iran with the concomitant rise in crude oil prices set off alarm bells in the stock markets.

By the end of the day, stock charts were deep red with major losses contributing to a strong negative shift in market sentiment. The Dow Jones slipped below support at 10700 and closed below the Dec and Jan lows, evaporating the 2006 gain. Meanwhile ND and SP broke through their respective 25- and 40-day moving averages but remained above the Dec and Jan lows. Volumes were heavy on all three indexes adding to the negative cocktail but with a ratio of declining volume to advancing volume of 8.8:1, there is the strong possibility that this activity constituted a selling exhaustion. Certainly, no one can say at this point, but we would be cautious moving forward.

One noteworthy development was the relative strength seen in the Russell small caps market and the SP Midcap 400 both of which were far less negative than their large cap cousins. Here these two markets appeared to be negotiating a correction and not a major slide. A comparison of the ND Composite index to the ND-100 demonstrated a similar result. The ND-100 is composed of the 100 largest tech sector companies while the ND Composite contains all companies traded on the index, therefore including a large contingent of small and midcap-sized companies. While the ND-100 was losing 53.5 points or 3.09%, the ND Composite was losing 54.1 points or 2.35% signifying that the losses were indeed concentrated in the large cap firms.

New Buy Recommendations (in order of preference):

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
11/21/05	Amer Sci & Eng	ASEI	71.08	61.02		H
11/14/05	Birch Mtn Resour.	BMD	6.65	7.60		B
01/09/06	Englobal Corp	ENG	10.86	11.33		B
01/17/06	Miramar Mining	MNG	2.50	2.39		H
01/09/06	Nuvelo Inc.	NUVO	12.95	15.57		B
11/07/05	Plexus Corp	PLXS	20.15	23.40		SOLD
01/09/06	Progenics Pharma	PGNX	29.70	27.89		H
12/12/05	Radiant Systems	RADS	13.78	13.46		H
11/07/05	Redback Networks	RBAK	11.78	14.23		B
01/09/06	Seabridge Gold	SA	9.49	8.98		H
01/09/06	Sierra Wireless	SWIR	13.60	12.14		H
11/21/05	Sigma Designs	SIGM	13.10	15.95		B
11/14/05	Tom Online	TOMO	20.66	21.71		B
03/08/04	Transcanada Corp	TRP	21.34	30.33	27.50	B
12/05/05	USA Truck Inc	USAK	29.30	29.50		B

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price

*** Split-adjusted price