Stockscom Report for Sunday Feb 5 2006

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

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

• Unemployment down to 4.7% - a 5-yr low
• Orders up – markets down

Market Synopsis

On Tuesday of this past week, President Bush used his State of the Union address to discuss one of the central themes of his administration this year – the energy problem in the US. He stated, “America is addicted to oil, which is often imported from unstable parts of the world.” and revealed that his goal was, “… to replace more than 75% of our oil imports from the Middle East by 2025.” Ironically, this is about the time that many scientists believe the Middle East will have depleted much of their energy resources if no significant new discoveries are made so it isn’t quite a stretch to believe that the US will succeed in this endeavor. Bush’s main focus was on developing alternative energies and the development of technologies that utilize these new forms of energy. He emphasized ethanol as one alternative, pointing out that the production of ethanol is made possible through the use of corn, sugar or other crops. Strangely, there was no mention of an expanded relationship with the number one source of imported oil into the US, Canada.

In the State of the Union address, little time was spent discussing the economy except on very broad terms and outlining the general prosperity that the US enjoys. Protectionism and immigration were two areas that President Bush concentrated on, ostensibly sending a message to Congress that the former was not desired while the latter was. Perhaps if he had chosen to wait a few more days he would have had the luxury of extolling the job creation made possible through his stewardship of the economy. For on Friday, the January employment report was released revealing that unemployment hit a five year low last month at 4.7% and though the number of jobs created was a little on the low side, upward revisions to November’s and December’s employment reports more than made up the difference. Further, the Commerce Department released the December report on factory orders and this too would have given Bush some ammunition to use against his detractors. Durable goods order were higher by 1.8% and core capital goods increased by 4.1% sending the overall orders number higher by 1.1%. Goods orders figures are often terribly volatile and one month is not a long enough period to base one’s judgment upon, however a series of months does develop a pattern and with November’s orders revised higher from 2.5% to 3.3% and with October’s orders data also showing an increase, a sequence of three consecutive months of healthy increases is a significant occurrence.

Despite the good economic news, the message from the stock market was clear and to the point: there’s something potentially wrong with the economy. The last two days of the week saw a noticeable shift in large capitalization shares as a normal retracement developed into a larger sign of weakness that threatens the bullish rally begun in October of 2005. If this were NASCAR instead of Nasdaq, the yellow caution flag would be out. And this applies equally to the Dow Jones and the S&P 500.

Technically Speaking

The prowling bear bit all large cap indexes last week. The tech sector as represented by the Nasdaq-100 was arguably the hardest hit with its mid-January low falling to the wayside with only Jan 3 left standing as a lower price range than Friday’s action. The DJ and S&P settled with losses albeit above their respective January lows. Nonetheless all these indexes sport head and shoulders formations on their charts and have the potential to slide the equivalent of the top of the head to the neckline in points.

Interestingly, the small cap Russell 3000 and the S&P Midcap 400 both have charts that still appear bullish though the past two days certainly put sticks in the spokes of those particular wheels.

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	67.99		H
11/14/05	Birch Mtn Resour.	BMD	6.65	7.00		B
01/09/06	Englobal Corp	ENG	10.86	11.52		B
01/17/06	Miramar Mining	MNG	2.50	2.57		B
01/30/06	Nasdaq Stock Mkt	NDAQ	45.98	40.02		H
01/09/06	Nuvelo Inc.	NUVO	12.95	16.55		B
01/09/06	Progenics Pharma	PGNX	29.70	27.49		H
12/12/05	Radiant Systems	RADS	13.78	13.40		B
11/07/05	Redback Networks	RBAK	11.78	17.67		B
01/09/06	Seabridge Gold	SA	9.49	8.67		H
01/09/06	Sierra Wireless	SWIR	13.60	12.74		H
11/21/05	Sigma Designs	SIGM	13.10	16.14		B
11/14/05	Tom Online	TOMO	20.66	22.15		B
03/08/04	Transcanada Corp	TRP	21.34	30.70	27.50	B
12/05/05	USA Truck Inc	USAK	29.30	26.53		SOLD

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price

*** Split-adjusted price