Stockscom Report for Sunday Feb 12 2006

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

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

• Veritable weakness in stocks

Market Synopsis

While the general consensus in the media seems to be that equities are weak or are on the brink of significant losses, of the large capitalization indexes, only the Nasdaq was beaten lower this week and this by a sliver of a margin (less than 1 point).

That being said, there are indications that money is being pulled out of stocks at this time and with an absence of buyers, there is usually only one direction for stocks to go – down. However in a system where money flows from one bubble to the next and with the power of large hedge funds, there is rarely a time that a bubble somewhere is not being inflated. Housing has been the magnet of large sums of capital in the past couple of years and crude oil has been the recipient of equally large sums over the past twelve months but both of these big picture investment ideas are souring as we write. Interest rate hikes are taking their toll quickly now on the housing market and with several large home developers forecasting a slowdown in their business, speculators are busy extracting themselves from any potential losses. Similarly, oil and natural gas inventories are more than sufficient especially as heating requirements drop significantly from this time of the year.

Commodities in general however, have generated much interest this year and have been on the receiving end of vast sums of money from hedge funds searching for a place to park. As a big picture investment idea, commodities will continue to attract capital this year as investors turn toward hard assets. With funds wielding such a heavy weight and the preponderance of long-only funds, there is bound to be price inflation in certain commodities this year.

So while money is flowing out of equities, we see that to be a temporary situation for investment capital is growing and there is always a preference for stock investments. Those companies that will benefit the most from the capital are those that whose profits are growing reasonably well. There is a possibility that emerging markets will see a significant portion of capital as well but nevertheless there is certain reluctance on the part of funds and investors to take substantial positions in companies not trading in North America.

Technically Speaking

On a technical basis, equities have managed to largely maintain their bullish trends in spite of recent weakness. The Nasdaq Composite index remains well above its January lows reached on the first day of trading in 2006 and well above the natural support level of 2200. The Nasdaq-100 comprised of the largest companies on Nasdaq is however materially weaker on a technical basis with Friday’s session coming very close to its January low. A failure here could be a catalyst for a greater tumble on other markets.

Moving away from the tech sector and into the broader sectors as represented by the Dow Jones or S&P 500, we find charts that are more range bound. A break on the Dow above 11,000 would signal a new move to a higher plain while conversely a move below 10,700 would be a technical sell signal.

In the S&P, the reversals of the past four days argue for a move higher and technicians will point to the 1250 area as having held proper support for the bullish trend. As long as price stays clear of 1250, we may continue to see this recent activity as a consolidation in a step-like move higher.

For all three of the large cap indexes, their respective weekly charts suggest that the predominant direction will be up. Both the Dow and the S&P are close to completing Lindahl buy signals on their weeklies and the Nasdaq Composite is not far from duplicating this feat. But the caveat for all of this action is that a sustained move higher must occur soon for the rule to stick.

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	65.50		H
11/14/05	Birch Mtn Resour.	BMD	6.65	7.50		B
01/09/06	Englobal Corp	ENG	10.86	9.14		H
01/17/06	Miramar Mining	MNG	2.50	2.25		H
01/30/06	Nasdaq Stock Mkt	NDAQ	45.98	40.21		H
01/09/06	Nuvelo Inc.	NUVO	12.95	17.06		B
01/09/06	Progenics Pharma	PGNX	29.70	25.51		H
12/12/05	Radiant Systems	RADS	13.78	14.38		B
11/07/05	Redback Networks	RBAK	11.78	18.44		B
01/09/06	Seabridge Gold	SA	9.49	7.70		H
01/09/06	Sierra Wireless	SWIR	13.60	12.88		H
11/21/05	Sigma Designs	SIGM	13.10	14.82		B
11/14/05	Tom Online	TOMO	20.66	20.30		H
03/08/04	Transcanada Corp	TRP	21.34	30.31	27.50	B

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price

*** Split-adjusted price