AEGEANCAPITAL.COM INC.
STOCK MARKET REPORT

 Report#12,   Aug. 13th, 2000 Pg.1   

 In our last newsletter, dated 7-14-00 we pointed out, that  every indicator we employ to measure internal market strength had failed to  confirm NASDAQ's move upwards during the first part of July. In addition, we also pointed out the remarkable similarities in the way the markets  behaved from 6-29-00 to 7-14-00, and the way they behaved from 2-22-00 to 3-10-00. We noted, that although history did not have to repeat itself, the very same behavior (from 2-22 to 3-10)led (between 3-10 and 3-24)to a 10% decline in NASDAQ, a failed attempt to rally, a revival of the Dow, and the SP500, and finally the completion of a double top in NASDAQ (on 3-24-00) which then set the stage for the 32% decline in NASDAQ between 3-27 and 4-14, and in the end, it also brought down the Dow and the SP500. From 7-14-00, until now, the NASDAQ has again fallen 15%, the Dow has re-asserted itself, and the SP500 could easily make a run to a new high. To put it altogether, the markets from 6-29-00 until now, have pretty much acted identically to the way they acted between 2-22-00 and 3-24-00, and they also portray the same technical characteristics, as they did prior to the crash in April. If you look at the indicator charts which measure internal strength) on page 3, you can't miss  the remarkable similarities between now and late March. Does that mean the markets are headed for another horrific decline over the next three to four weeks? Not necessarily. There is no such thing as "certainty" when it comes to the stock market. The market has a tendency to surprise even the most astute and experienced observers. Even However, given the circumstances, it is logical to assume, that, at the very least, there is a probability the markets may end up reacting in a similar fashion. Our probability model gives a 56.58% probability for a 20% decline in NASDAQ over the next 3-4 weeks.  This is not a very high percentage, but it is high enough to put us on alert status.. This time around, maybe the final outcome will be different, instead of the SP500 and the Dow being dragged down by NASDAQ, (as it happened in April) they will lift NASDAQ right up with them!  Anything can happen, but the evidence points more to a bearish scenario than a happy ending. For example, a) the VIX index is near the bottom of its range -rallies usually do not start with the VIX around 20-  b)The put/call ratio, indicates unabashed optimism, with investors totally ignoring that stocks have been  reacting negatively to good news and catastrophically to bad news -ex. LLY, CEPH, HON etc-  c) According to the AAII index(as of 8-11-00)  the percentage of bearish investors was just 11.5%,  d) Insider selling so far this year, has exceeded the entire last year's dollar volume. e) Valuations have yet to take into account a slower economy and a slower rate of growth in corporate earnings. We do know that bull markets climb a "wall of worry" therefore, the market might be able to continue higher regardless of all these lingering issues. However, a bit of cautiousness and healthy skepticism won't hurt! 

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