Stockscom Report for Sunday Mar 26 2006

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

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

· New home sales down sharply

· Ben Bernanke’s the boss now

Market Synopsis

Friday’s new home sales report brought home the message loud and clear that indeed the housing market is perched on slowly eroding shoreline. The announcement that February’s new home sales fell 10.5%, the largest decrease in nearly nine years, was a strong signal that housing has indeed passed over the peak.

As the government statisticians are quick to point out, one cannot draw conclusions from one month’s data but preferably a series of data, approximately six months worth, should be employed at a minimum to discern patterns and trends. Not one to be alarmist, for we do not share the view that there will be a general collapse in housing prices, we do however believe that the likelihood of further weakness in prices has increased appreciably. As we saw in the report there will be pockets of extreme weakness, which in this case was characterized by the west where sales dropped almost 30%. Moreover, the inventory of unsold homes reached 6.3 months at current sales rates which is 1.5 months greater than the inventory in December’s report.

There is no doubt that this will be an important factor in the Federal Reserve’s meeting on Tuesday this week when the first meeting led by new Fed Chairman, Ben Bernanke, will culminate in a decision on interest rates. Already the market has priced in an increase of a quarter point to 4.75% , however eyes and ears will be trained on the Fed for some indication of future interest rates especially the decision to follow from the meeting in May.

A slowdown in housing could give the economy a chest cold. Those speculators arriving late to the party will be forced to sell at losses while others will attempt to declare bankruptcy. The higher interest rates have already become a deterrent to home ownership and propelled others into tough decisions on whether to sell, refinance or swallow a bitter pill in opting for a fixed rate mortgage as ARM’s become less attractive.

While those are indirect effects of a slowdown in housing and an increase in interest rates, there are direct effects on the labor that have been hired as the residential construction industry expanded these past few years. Many of these relatively new construction workers will need to find jobs as house construction slows down to meet the lower demand. As such in the meantime, we can expect to see an increase in unemployment, which added to the problems in Iraq could realistically lower consumer sentiment in the months ahead.

Technically Speaking

Equity indexes have changed little from a week ago as the broader indexes, the S&P and the Dow remain near their respective 52-week highs while the Nasdaq-dominated tech sector has divided into two principle streams. The Composite index represents all of the ND companies regardless of size and here the strength is noticeable though not equal to the broader indexes. However the Nasdaq-100, composed of the 100 largest companies in the Nasdaq index, is evidently the weakest link. It’s chart is imminently weaker than the others is in danger of falling back quite substantially.

It was noteworthy that as we moved into the end of the week, trading volume dropped considerably and therefore point rises in the indexes such as those occurring on Friday are much less effective in convincing technicians that there will be follow through thus adding to the general negativity.

Analysts are keenly waiting for the Fed’s decision on interest rates, more so than at anytime in recent history because of the change in command. Everyone wants to hear what Fed Chairman, Ben Bernanke has to say and get a sense of the direction that he will be taking as well as a sense of the communication style that will be his. We can expect a significant amount of volatility in equities to follow the rate decision as a result.

New Buy Recommendations (in order of preference):

Anadigics (ANAD) – The company is involved in the production of chips for wireless mobility instruments such as cell phones and modems. From December onward, the chart consists of a remarkable consolidation in price however Friday’s gain of almost 15% on heavy volume suggests that a new leg higher is about to begin.

Texas Industries (TXI) – First this is not Texas Instruments, the tech firm. Rather this company is the largest producer of cement in Texas and a large player in California to boot. Though there were some production problems as recently as last quarter, which they have addressed and, with the ability to raise prices substantially, there is abundant promise. Certainly it shows in the chart, which had peaked in September but passed through a retracement before finding favor once more with investors. Thursday’s new 52-week high indicates very strongly that the predominant direction is once more upward.

New Short Sales

None.

Stock Positions to Sell/Exit:

We were stopped out of MNG in mid-week on a strange price bar from Thursday when price actually was recorded falling to 2.56 for a brief moment in time. In spite of the price of gold bouncing back on Friday, we don’t wish to embark right away with this company again. Certainly at this point, we would prefer to see some follow through in the price of gold before believing that it is indeed a new leg that has begun.

We sent a missive on Wednesday evening to inform our subscribers that they should exit their positions in SIGM and we trust that they did.

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	89.86		B
11/14/05	Birch Mtn Resour.	BMD	6.65	6.55		H
02/21/06	Cdn Natural Res	CNQ	58.00	56.38		H
01/09/06	Englobal Corp	ENG	10.86	10.50		SOLD
03/20/06	LSI Logic	LSI	11.25	11.00		H
01/17/06	Miramar Mining	MNG	2.50	2.65	2.65	SOLD
01/30/06	Nasdaq Stock Mkt	NDAQ	45.98	40.56		H
01/09/06	Nuvelo Inc.	NUVO	12.95	15.89		B
01/09/06	Progenics Pharma	PGNX	29.70	27.50		H
12/12/05	Radiant Systems	RADS	13.78	13.74		SOLD
11/07/05	Redback Networks	RBAK	11.78	20.68	18.00	B
03/20/06	RTI Int’l Metals	RTI	47.70	51.64		B
01/09/06	Seabridge Gold	SA	9.49	8.02	6.69	H
01/09/06	Sierra Wireless	SWIR	13.60	11.06		H
11/21/05	Sigma Designs	SIGM	13.10	13.50		SOLD
02/27/06	Stereotaxis	STXS	13.57	13.79		B
11/14/05	Tom Online	TOMO	20.66	22.25		B
03/08/04	Transcanada Corp	TRP	21.34	29.61	27.50	B

New stops in BOLD

* Stop on a closing basis

** Buy if above entry price

*** Split-adjusted price