AEGEANCAPITAL

MARKET COMMENTARY JANUARY 2001

Wed. 1-31-01[Before the opening]

We strongly believe, any rate cut by the FED will turn out to be anti-climactic for the market. Our upside target of 3050 (+/- 75 points) remains intact.

Tuesday 1-30-01[Before the opening]

The market has pretty much priced in the 50 basis points rate cut, we do not see NASDAQ going over 3050 over the next 2-3 days. We suspect once the rate cut is announced, the market will sell off mildly.

Friday 1-26-01[Before the opening]

Yesterday, GLW dropped some 13.5 points, after reporting "low visibility" with regards to future earnings. If you recall, in our weekly update for week ending 10-27-00 (see weekly market updates for Q4-00) we said "...DO NOT BELIEVE THE EXECS OF THESE COMPANIES TELLING YOU THAT BUSINESS WILL NOT SLOW DOWN IN THE FIRST QUARTER. Companies such GLW that insist growth will continue at present levels, will have to eat their words in January and the price of the stock will suffer even more..." In addition, we have often warned about the still lofty valuation levels of fiber-optic stocks... PLEASE VISIT AGAIN SATURDAY AFTER 6:00pm PST FOR THIS WEEK'S DETAILED ANALYSIS AND UPDATE

Thur. 1-25-01[Before the opening]

Yesterday, the market seemed to be "on hold" until today's testimony before the Senate by Mr. Greenspan. Even if he confirms that he will lower rates by 50 basis points, we do not expect NASDAQ to move -at this point- above 3050, and the SP500 above 1390. The momentum indicators, as well as the McClellan oscillator have been moving lower the past 3 days while the indexes have been moving higher. That is a sign that the indexes are ripe for a pull back shortly.

Wed. 1-24-01[Before the opening]

We do not want to sound like a broken record, but the move upwards seems destined to reach 3000. However, we view the area between 2850 and 3050 offering plenty of downside risk and not enough upward reward for the time being. Many of the stocks that have led the move, have become short-term overbought. Consider -for example- that BRCD has been up 10 consecutive days!

Tuesday 1-23-01[Before the opening]

Investors have convinced themselves that the worst is over, and they display their newfound optimism by continuing to find frivolous reasons to buy stocks that continue to issue profit warnings! So, we maintain our belief that NASDAQ will reach 3000 in the very near future. At the moment, investors have also convinced themselves that the FED will lower interest rates by another 50 basis points next week, so, even if the market experiences a pull back over the next few days, it should not be that severe. Our entry point for NASDAQ is between 2550-2650.

Friday 1-19-01[Before the opening]

Most of our indicators are signaling that NASDAQ has finally turned the corner. However, the proof would be, if it made it to the 3000 level, came back to close the gap in the 2625-2650 area, and then it turned back up again. We would consider any pull-back to the 2625-2650 area (from 3000) as a low risk entry point, assuming the FED reduces interest rates by another 50 basis points. We are reluctant to chase the market here, because a)overbought readings in several indicators (RSI, McClellan, etc) and b)if the rally turns out to be a fake-out (25% probability) it will turn down between 2750 to 3000. Day traders may want to pick up a point or two, but position traders -in our opinion- will be better off if they waited for a pullback. VISIT AGAIN SAT. 1-20-01 AFTER 6:00PM PST, FOR OUR DETAILED WEEKLY MARKET UPDATE

Thur. 1-18-01[Before the opening]

Yesterday the a/d McClellan oscillator reading for NASDAQ reached 325. It has been our observation over the years, that a reading in excess of 250, 3 out of 4 times indicates a major change in trend both on a short and intermediate term. One out of four times it has turned out to be just a fake rally! So, within a very short time we would expect a rather dramatic change, either a blast-off that will take NASDAQ to 2980-3010 (as we mentioned several times in previous updates) or a violent retreat to the downside. If the later was to happen, we do expect the 2300 level to hold. In all the years we have been observing the markets the McClellan oscillator has been very reliable in pointing out an " upside thrust" that results in change of trend, so, we would not get too bearish at this point. At the present time, the best action is to sit tight and wait for the market to show its true colors, you won't have to wait for too long!

Wed. 1-17-01[Before the opening]

As we mentioned in our most recent newsletter, investors are willing to believe that everything is going to return back to normal in the second half of the year. That belief was demostrated in after hours trading when many offenders -such as INTC- posted strong gains. NASDAQ -in regular hours trading- stopped two points below the downtrend line that has been resistance since September. If it breaks above it today -and more importantly- it makes it above 2700 with conviction, the next stop will be 3000. The SP500 must make it above 1340 for our model to rate the index a trading buy again. The odds today favor a further rally, but we would not chase the market if it gapped up sharply at the opening

Friday 1-12-01[Before the opening]

Yesterday NASDAQ came within 36 points from our target of 2700. In the process two positive events have emerged a)the a/d line continued to confirm the advance and b)money flows for the first time (although it may be temporary) since late August, have been in favor of NASDAQ and at the expense of defensive issues (health care, utilities) These are signs of a potential change in trend from declining to advancing. However, there are two events that still need to take place a)NASDAQ must decisively break above 2700 and b) the charts of leading stocks must confirm the break-out. At the moment the charts of many NASDAQ leading stocks appear ambiguous at best. In addition, the DOW and the SP500 (bur especially the DOW )do not look very healthy Any advance in NASDAQ at the expense of the DOW will be a negative, because it would simply confirm the continuation of lack of liquidity in the market. We need to see a broad advance in all the popular averages at the same time!(VISIT AGAIN SUNDAY 1-13-01 AFTER 6:00 PM PST FOR THIS MONTH'S NEWSLETTER.

Thur. 1-11-01[Before the opening]

Yesterday, NASDAQ put a very respectable perfomance. Not only it was able to put aside Cisco's admission that it is not immune to the economic downturn -despite assurances from its executives to the contrary, as recently as 45 days ago- but also second tier issues such ITWO, CIEN, NTAP, VRTS, VTSS, PMCS were able to rally. If it can hold on to the gains, and break above its 20 day EMA, the next stop should be at around 2700. After the close YHOO dropped the bomb, but we do not think, YHOO is much of a factor these days... (that's a real fall from grace, and in our opinion very deservingly so, in fact we continue to believe YHOO is a $17-$20 stock!)On the other hand MOT reported earnings in line with the lowered expectations. Investors, could easily choose to concentrate on MOT, and forget about YHOO, and in the process drive the index higher.

Wed. 1-10-01[Before the opening]

Our daily indicators are neutral. The market can go either way today. It is encouraging that NASDAQ -for two consecutive days- has been able to recover from selling pressure, however, if the March futures contract was to break thru 2230, the market will test 2000 in a hurry. As long as the futures hold above 2230, the cash NDX can move higher, and the Composite should revisit 2600 easily.

Today can be a very interesting and volatile day. A market that is characterized by manic depression, can go from euphoria due to lower interest rates, to catatonia due to lower corporate profits! A very weak employment report can be viewed by the Street as either a reason to celebrate lower interest rates (which will drive the market sharply higher),or, as a reason to fall into despair, due to lower corporate profits for the near future (and drive the market sharply lower, erasing most of the gains achieved just two days ago)Investors who went long yesterday, should place some "stops" to protect gains. In case the later takes place, the important thing to keep in mind, is that for now the prospect of lower interest rates has put a floor for NASDAQ at about 2050-2250. So, even if the Street decides to get "catatonic" about the employment report, we still believe 2-4 weeks from now stock prices will be higher.On the other hand, if a celebration is in store, then NASDAQ will test the 2790 level no later than Monday. VISIT AGAIN SAT. 1-6-01 AFTER 5:00pm PST FOR OUR DETAILED WEEKLY REPORT

Thur. 1-4-01[Before the opening]

Over the years that we have been students of the market, we have learned a few very important lessons. We regard as the most important of all the following: "DO NOT FIGHT THE FED!" Given the dramatic advance we experienced yesterday, some backing anf filling may well be in order, but in the short-term one would not want to be short the market

Wed. 1-3-01[Before the opening]

Yesterday's action may signal that the final "third leg down" that we mentioned in our recent previous updates, may be well underway. In that case expect, the high fliers -that are still left standing- to pay the price. Consider this: BRCD still has a P/E of 134 and an estimated 5yr growth rate of 50%, EMC has a P/E of 84.8, and a 5yr estimated growth rate of 30%(source: First Call) Investors holding stocks of this category, may experience some unwanted pain if that "third wave" plays out completely. However, we strongly believe, the market is much closer to an intermediate bottom, than it is to an intermediate top. If NASDAQ falls to around 2000-2100 level we will begin to open long positions in our managed accounts (which are still 100% in cash)