AEGEANCAPITAL

CHARTREVIEW(daily) COMMENTARY SEPTEMBER 2001

9-27-01

Charts: Yesterday we said:

"Today's action seems to confirm our beliefs that a bottom is in the making, but it will come from lower levels. All indicators have formed a pattern that turn out to be "topping" patterns 3 out of 4 times. The one out of the four, that they are not, the market rallies furiously -like it did in April- We do not think that is the case. "

The charts today are confirming the same conclusion. The markets are "pausing" before they make the next move. Based upon historical patterns, that move should be expected to be on the downside. It does not "have to" happen that way! But investors should be cognizant of the odds.

(Also just as a reference, this is what we said on 8-6-01, when the markets formed the same patter -see archives for August 2001.

Charts: The market's action over the past two trading days (Friday-Monday) is perfectly normal. After any advance the market pulls back due to exhaustion of "fuel" then it attempts to gather strength (replenish fuel) and embark on another leg up. If it can't replenish the previously spent fuel, if it can't muster new strength, then the rally dies off and the market rolls over. So, these two days, we have been in the process during which the market pulls back and tries to find strength , will it find it, or won't it? Our indicators have turned mostly "neutral" meaning the chances are almost 50/50 that the market will either march higher, or, it will roll over.)

SPDRs/Sectors: Five of the eight worst performing sectors this week -just like every week- are NASDAQ related sectors. Which means, despite the 70% decline from its March 10, 2000 high, NASDAQ is still being liquidated. We find it astonishing!

9-26-01

Charts: Yesterday we said:

"Today's action gives us more evidence to believe, that indeed we are seeing the first, and early signs of a potential bottom. The charts clearly show, that it will take about 12-14 trading days for that bottom to be formed -if one is indeed formed- Meanwhile, we can expect to see lower prices, as part of the bottom building process."

Today' action seems to confirm our beliefs that a bottom is in the making, but it will come from lower levels. All indicators have formed a pattern that turn out to be "topping" patterns 3 out of 4 times. The one out of the four, that they are not, the market rallies furiously -like it did in April- We do not think that is the case.

SPDRs/Sectors: The continuous decline in oil says one thing: there is a global recession in the horizon, whether we like it or not. The continuous advance in gold says that the dollar is in trouble, and foreigners' confidence in the U.S . is waning.

9-25-01

Charts: Yesterday we said:

"...All the charts are unanimously saying one thing and one thing only: we are coming out of a tremendous oversold condition, but no "bottom" has been formed yet. Thus, it is way too early to proclaim the "end of the bear market" or even the "end" of the current decline. In all probability we are witnessing a counter trend rally that will be short-lived. So trade it for what it is, if it meets your risk/reward criteria, but do not get "suckered" into it taking it as the "real thing" The charts are telling you, that it is not..."

Today's action gives us more evidence to believe, that indeed we are seeing the first, and early signs of a potential bottom. The charts clearly show, that it will take about 12-14 trading days for that bottom to be formed -if one is indeed formed- Meanwhile, we can expect to see lower prices, as part of the bottom building process.

SPDRs/Sectors: The continuous decline in oil says one thing: there is a global recession in the horizon, whether we like it or not.

9-24-01

Charts: All the charts are unanimously saying one thing and one thing only: we are coming out of a tremendous oversold condition, but no "bottom" has been formed yet. Thus, it is way too early to proclaim the "end of the bear market" or even the "end" of the current decline. In all probability we are witnessing a counter trend rally that will be short-lived. So trade it for what it is, if it meets your risk/reward criteria, but do not get "suckered" into it taking it as the "real thing" The chart are telling you, that it is not.

SPDRs/Sectors: If you have any doubt that today's rally was due to short-covering pay attention which sector experienced the biggest advance of all: The Internet! (DOT) Do you think that serious investors, were looking in the most speculative of all areas to establish new long positions? No, they were buying back the garbage stocks they had sold short several weeks, or months ago.

9-20-01

Charts: The charts are telling us that we have reached one of the most oversold conditions of the past 80 years (listen to today's interview with Mr. Mogey) We genuinely believe that this "free fall" will come to an end within 1-3 trading days. However, investors should focus on the bigger picture. Foreign investors have been abandoning out markets in droves since Monday, why? In the late 1990's foreign investors found in the US the following compelling reasons to invest: 1) Appreciating Currency 2) Appreciating Equities 3) Political Stability 4) Earnings Predictability 5) Higher Productivity 6) Safety 7) Confidence in our institutions. All the above have been shattered. 1) Both the US Dollar and Equities are depreciating creating double losses for foreign holders of American financial assets. 2) There is a wide spread fear in Europe that America is getting into another Vietnam of much larger scale and commitment. Although there is agreement on and support of the notion that something needs to de done, Europeans are fearful that America will start a wide scale war that could easily be labeled by Muslims around the world as a war of Judeo-Christians against Islam. The Europeans do not want another "crusade" They are afraid that if this thing gets out of control, the current unity displayed across the American political spectrum will disappear leading to political instability. 3) There is no predictability -at the moment- with regards to earnings. Thousands of corporations have been affected, and in turn they are forced to lay off people. If the unemployment rate rose by another full percentage point, the economy could experience more than just a couple of negative quarters. 4) "War" causes money to be taken out of productive investments and be re-deployed into non-productive investments. 5) In the spirit of "unity and patriotism" Americans have neglected to ask some tough questions such as: How can it be possible for the CIA and the FBI - with their incredible resources- to not detect what was coming? Europeans have lost confidence in our country's ability to provide a safe environment. In conclusion, foreigners no longer see a rational reason for holding U.S. equities, thus they are selling now and asking questions later.

Today the President will deliver a very important speech, how foreigners respond tomorrow will be indicative of whether we are starting to gain back their confidence.

SPDRs/Sectors: Since Monday, 3 out of past 4 trading days, Gold has been among the best producing sectors. Investors buy Gold when they lose confidence in the Dollar. Investors lose confidence in the Dollar, when they lose confidence in America. As much as we may not like it as Americans, as rational investors we need to recognize what is going on, and we need to start asking some tough questions.

9-19-01

Charts: The charts are clearly telling us that the "rubber band" has been stretched too far, and thus a reflex rally is in the works, unless, we have another external event that turns everything upside down. However, this rally should not be mistaken as a sign that a bottom is in place. Our model turned "neutral" today (click here to see the probability scenarios and new market timing signal ) It has been our experience, that the model turns neutral -from bearish- when the market is about to embark on a reflex rally of some significance, and then it goes on a buy signal, when there is a re-test of the lows, non-confirmed by the indicators we follow.

SPDRs/Sectors: The steep decline in oil and oil related stocks, confirms in the mot loudest of ways that the economy will get weaker, before it gets stronger.

9-18-01

Charts: The charts are clearly telling us what government officials, the media, and brokerage companies are not: the markets are in trouble! We are at a level that we should see some attempt to stabilize, in the form of a short-term rally that will fill the gaps left open from Monday's decline. Once those gaps are filled, another decline will probably ensue. Nothing in the charts, indicates anything that even remotely suggests a "bottom" is in place. Instead, the charts are indicating that the market is in a state of free fall. We can understand CNBC promoting the "bullish case" One of our subscribers explained it very eloquently, this what he wrote to us:

>>First I want to thank you for putting together what is undoubtedly the
> > best resource for the trader and the investor that exists on the
> > internet.
> >
> > Secondly, you've frequently expressed your astonishment over the
> > "financial reporting" that is offered up by CNBC and others. Speaking
> > from a broadcast advertising background I'd like to point out that
> > CNBC's revenue is driven by advertising dollars. Advertising dollars
> > are keyed to viewership. Although I have no data to support this, I
> > would wager that as in many other areas of investing, the public's
> > interest in "financial news" is greater in Bull markets than it is in
> > Bear markets. It is in CNBC's financial interest to maintain the Bull
> > Market theme and accordingly keep the viewership numbers and the revenue
> > stream up. As such, Bearishness can be seen as detrimental to their
> > bottom line. In their situation, accuracy presents a conflict of
> > interest.
> >
> > Thanks for all your hard work.
> >
> > Glenn Suprenard Dir/DP
> > www.matineepictures,com

However, we find it equally astonishing that high ranking government officials such as the Secretary of the Treasury, and the Vice President, think, that it is appropriate for them to encourage the public to buy stocks. It's not the government's job to tell what to do with our hard earned money, and neither it is its job to tell us when to buy or sell equities. The government's job is to make sure it exercises its powers under the Constitution to ensure that our citizens can pursue liberty and happiness, without the fear of being blown away.

Please read: "Patriotism Proves a Poor Investment Guide" Posted on thestreet.com By Aaron L. Task, 09/18/2001 07:15 AM EDT

SPDRs/Sectors: Today's further steep declines in Semiconductor Equipment related stocks, as well as, the steep decline in energy related stocks, continues to confirm the market's message that it does not see a recovery in the near future.

9-17-01

Charts: Last night we sent an email in which we warned that in all likelihood, today we would see a sell-off due to selling pressure from overseas investors. We had the sell-off, and now everyone is wondering if it is over! The charts are indicating two things: a) the "rubber band" is stretched enough where a rebound is somewhat imminent b) the markets are in a free fall. Therefore, any rebound should not be confused with a "bottom" of the bear market that has been in effect for the past 18 months. It should be understood that the current situation holds plenty of uncertainty, which is precisely what the markets hate the most! We see no turn around in sight -for the market, until there is a turn around in the military and political front. Keep in mind that war is about destruction, disruption, erection of barriers and unproductive investment of capital. On the other hand, stock markets are about "business." Business is about building, about bringing down barriers, about un-interrupted flow of goods capital and people, and last but not least, business is about investing capital productively. Thus, "business" and "war" are two diametrically opposed situations. War is not good for business! It should be noted that we experienced the greatest economic expansion after the end of the Cold War. At the moment, not only we are in a state of war, but also we are involved in a war unlike any we have seen before. We fail to see how this situation can be beneficial to the stock market. Once we have a clear indication that this war is winnable -on our terms- then the market will respond positively, until the it will keep bleeding.

SPDRs/Sectors: Today's action in the SPDRs clearly confirms the point we made above. The issues hit the hardest were the economically sensitive ones. Obviously war is not good for the economy, if it was, economically sensitive issues would have rallied!

9-10-01

Charts: Today the markets tried to stabilize, disappointing both the Bulls who were expecting a rally from a deeply oversold condition, and the Bears who were expecting a "crash." Unless some really terrible news come out on the economic front, we expect the markets to attempt to re-group. We do not think we will get anything more than just a "dead cat" bounce, due to the extreme underlying weakness that is currently at work.

SPDRs/Sectors: Today's action in the SPDRs and sectors shows the instability of the markets at the present time. On one hand investors were buying one defensive issue (Consumer Staples) and on the other, they were selling another defensive issue (Hospitals) in favor of a Internet stocks (the most speculative of the bunch) and PC stocks (the area of technology that is the most saturated!) The message is simple: investors are confused, and so are the markets! In this kind of environment, risk averse investors are best served by staying in cash.

9-7-01

Charts: Today we had the first signs of real breakdown in all Indexes. At the same time, oversold/overbought indicators such as the McClellan Oscillator, and the Bullish Percent Indexes are near levels that even within bear markets we get a rally. So, the danger here, is for investors to mistake a reflex rally, with a "successful" re-test of the March-April lows. Given the current condition of the market, if they drop another 2%-3%, they will experience a "reflex" rally NO MATTER WHAT! Coincidentally, another 2% to 3% decline will bring the Indexes to the March-April lows, so just because they will rally from there, it won't mean that the rally is due to successful re-test of the Spring lows, the rally will be due to an extreme oversold condition. So, keep that in mind, go long if you want -we will-, but do not believe the morons on CNBC who will be telling you the market re-tested the lows successfully. Remember: the same morons have been telling you the same thing for a year now! We are open minded, we do not rule out that maybe the market will indeed put a real bottom. However, we will not jump to conclusions unless we see something more than just a one, or, two day wonder rally.

SPDRs/Sectors: Yesterday we said:

"Here are some $64,000 questions: If the economy is bottoming, as some recent reports suggested, why are investors buying defensive issues, like consumer staples (XLP) that do well even when the economy does not. Is the market telling us that these reports do not tell the whole picture? Why are investors buying drug and health care issues (defensive plays) if the economy is about to turn around? Are mutual funds liquidating their technology losers due to tax selling, and re-deploying the cash into defensive issues ? We strongly suggest you listen to today's interview with Mr. Fred Meissner."

9-6-01

SPDRs/Sectors: Yesterday we said:

Notice how today we got the same thing: XLY (cyclicals) and XLK (technology which is also cyclical) got creamed. Yet recent economic reports suggest (NAPM for example) the economy is bottoming. Why is the market -in its infinite wisdom- ignoring the good news?

9-5-01

Charts: The charts do not look very re-assuring, but no significant break-down either. We are getting to the point, where -even by bear market standards- rallies have taken place. People should pay attention to the intra-day action. If the markets go up during the day, and lose ground late in the afternoon -on a consistent basis- then there is more trouble to come.

SPDRs/Sectors: Here are some $64,000 questions: If the economy is bottoming, as some recent reports suggested, why are investors buying defensive issues, like consumer staples (XLP) that do well even when the economy does not. Is the market telling us that these reports do not tell the whole picture? Why are investors buying drug and health care issues (defensive plays) if the economy is about to turn around? Are mutual funds liquidating their technology losers due to tax selling, and re-deploying the cash into defensive issues ? We strongly suggest you listen to today's interview with Mr. Fred Meissner.

9-4-01

Charts: Something significant did happen today -assuming we see more of it- The market did surrender most of its early gains. Why is this significant? Because this is exactly the intra-day action we saw last September after Labor Day! That type of action continued unabated until March of 2001, in the mean time, NASDAQ went from 4250 to 1650! So, we need to pay very close attention to how the market acts in the coming days on an intra-day basis. Last year, small investors bought in the morning, and institutional investors sold "en masse" every afternoon. If we see similar action developing on a consistent basis, we would have to conclude that we have entered another heavy liquidation/distribution phase. If that is the case, do not try to "bottom fish" the bottom will be a long way from here.

SPDRs/Sectors: As we have pointed out countless times, you can count on a regular basis for one or both of the worst performing sectors of the day, to come from NASDAQ. Today -just like yesterday- was no exception1 The message: stay away from NASDAQ, at least for now, if you are a risk averse investor.