Dow Jones 10625.18 -68.89 10:30 am PST, February 13, 2004  NASDAQ 2054.26 -19.35 For info, visit access.smallcapnetwork.com S & P 500 1145.22 -6.89 To be removed, please click here Russell 2000 586.71 -6.04 VOLUME 04: ISSUE 11  Feature: NASDAQ tightens, Imclone brightens and Homeland heightens. Since today is Friday the 13th, tomorrow, Valentine's Day--also known as male atonement day--and Monday, the President's Day holiday, I thought we'd drive-by a few topics and visit a selection of stocks that we cover. And, being a full service newsletter, a Valentine gift suggestion follows.... NASDAQ: A Rubber Band? Don't need a chart for this one. The NAS is stuck between a range of 2000 and 2100. Our view is that a break above 2100 would further validate the bulls. A break below 2050 would see some bearish weakness, albeit short-lived in our view.  Given that in the last reporting period, 67 percent of the S&P 500 companies beat earnings expectations, while 20 percent met them, the 13 percent that missed the cut should only marginally concern investors. The horizon, while bumpy, still looks to have a continued upward bias.  Imclone: The Intel of Biotech? Thursday night, the FDA approved Imclone's (NASDAQ IMCL) application for its cancer drug, Erbitux. Although the stock is not yet near Martha's contentious sale price of $60, the shares did shoot up, pre-opening Friday, by almost $11 to $45 and change.  The big news is not just the acceptance of a blockbuster drug that may help thousands of patients, but that the FDA approval will put both large and small biotech companies firmly back on investors' radar screens. Over and above the past travails of Imclone, the bottom line is that it takes years for a drug to come to market. In our little corner of the world we have seen how the process can play out with the volatility in the shares of unique cancer therapy concern Cel-Sci (AMEX: CVM).  Since late 2003, Cel-Sci has been stuck in a trading range of between $1.05 and $1.40. We believe that the shares are in a consolidation phase while investors await more news. As an aside, CVM has, over the last year, been a better performer than Imclone. Ten years ago, IMCL traded at roughly what CVM does now. Not that we think it will take ten years more for CVM to prosper--let us be clear--but it makes an interesting comparison. We have often said that investors are welcome--even encouraged-- to trade CVM shares. We have also said that investors should always maintain at least a small, core position in the company. One day, Cel-Sci will likely announce timing for a Phase III trial, perhaps a deal with a big pharma company, or some other snappy corporate development. As CEO Geert Kersten pointed out in his recent Letter to Shareholders, the company has met and defeated past challenges and, while there will likely be more in the future, he is confident those too will be identified and dispatched.  Cel-Sci is at a watershed. We feel that the next few months should be exciting for this company, which has dedicated almost twenty years to the development of unique drugs and therapies that could revolutionize cancer treatment.   Homeland Security Forever I tend to get lots of pointed email when I delve into political discussions in the SmallCap Digest. All I can say is: Get over it. When political machinations cease to define economic developments, I'll stop.  The rest of the year looks to be shaping up as one of the most vicious political battles of a generation. John Kerry will likely square off against George Bush in November. As I said in my 2004 predictions piece, the election will be very close. And likely very, very nasty.  The one thing that will transcend all the jockeying will be the progress of the Homeland Security sector. The protection of the USA has not only become a way of life, but is emerging as one of the largest economic sectors, again, within a generation--regardless of which party occupies the White House It matters not who wins in November. Homeland Security, as a social and economic force is, unfortunately, here to stay. Over the last couple of years, the budget for Homeland Security has doubled. The Department is looking for more than $40 billion for 2004-2005 to keep the nation safe.  We believe that we are well represented to participate in this sector with our coverage of Spectrum Sciences (OTCBB: SPSC) and Xtreme Companies (OTCBB: XTME). The former is not only profitable, but continues to add contracts, reduce debt and exhibit the moxie needed to take it from a smallcap to what we believe will be a major defense/Homeland Security supplier. The latter, Xtreme, while at an earlier stage of development that Spectrum, has both nifty products and marketing plans that we feel will grab a decent marketshare of the business portion of keeping the nation safe.  Each company has already seen decent gains since we initiated coverage. We strongly believe that there is much more to come for both. Ensure that you have at least a small initial position and use any weakness to accumulate shares for the long term.  Our focus on the Homeland Security sector will grow as these companies prosper over the next 6-12 months. As well, we are actively looking for more to add to the stable.  As promised: Everyone gets flowers for Valentines. Be creative. Flowers die. Properly maintained, a Lexus is forever.     We Value Your Feedback Got comments, questions or suggestions? 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