----Original Message-----
From: Greg Simmons
Sent: Friday, August 06, 2004 9:38 AM
To: Greg Simmons
Subject: MARKET UPDATE

August 6, 2004 8:30am
SORRY NO UPDATE YESTERDAY I AM STILL WORKING OFF NOTEBOOK COMPUTER AND WONT HAVE REGULAR/NEW SYSTEMS UP TILL MID-NEXT WEEK...

I AM ALSO UNABLE TO SEND TO THE MAILING LISTS OFF THIS COMPUTER SO MEGHANN WILL BE FORWARDING THIS UPDATE.
THE SPX CLOSED YESTERDAY DOWN 17.93 @ 1180.70
THE VIX CLOSED YESTERDAY UP 2.11 @ 18.32
IF THE FACT THAT THE MARKET WENT AGAINST THE HIGHER PROBABILITY OF GOING UP TO AT LEAST TEST THE 50% RETRACMENT AT 1111 OR THE 61.8% RETRACMENT AT 1119 WASN'T BAD ENOUGH, TODAY'S ACTION IS JUST PLAIN SCARY!

WE HAVE TRADED THIS MORNING (BASICALLY ON A HORRIBLE JOBS NUMBER) DOWN THRU THE YEARLY LOWS TO 1068.98 BEFORE BOUNCING SLIGHTLY.

WE ARE NOW EXTREMELY OVERSOLD AND THE VIX IS TOWARDS IT'S HIGHS OF THE YEAR WHICH SHOULD PRODUCE SOME KIND OF A RALLY FROM A TECHNICAL PICTURE, BUT IF THE REAL PROBLEMS OF THIS MARKET WERE TO BE EXAMINED I THINK THAT WE WOULD SEE LOWS WELL BELOW THE LOWS OF 2002.

FOR THE "BEAR MARKET" THAT STARTED IN 1999 TO REALLY BE OVER (I HAVE NEVER BELIEVED IN THIS "NEW BULL MARKET" THEORY - - I FELT THAT THE "YEAR OF STUPIDITY" MAR '03 TO MAR'04 WAS SIMPLY A "BEAR MARKET" RALLY) WE NEED TO TRADE INTO THE MID 600s ON THE SPX FROM JUST A TECHNICAL BASIS AND MUCH LOWER FROM A FUNDAMENTAL BASIS.

RATHER THAN RETYPE THE LIST OF WORRY'S THAT I HAVE ABOUT THE MARKET BELOW IS THE "MARKET UPDATE" FROM MAY 11TH LISTING WHAT WAS BOTHERING ME THEN AND I FEEL THINGS HAVE GOTTEN MUCH MUCH WORSE SINCE.

MAY 11 2004
THE SPX CLOSED UP 8.33 @ 1095.45
THE VIX CLOSED DOWN 1.20 @ 18.57
AS I SUGGESTED YESTERDAY WE ARE QUITE OVERSOLD AND THE ODDS FAVOR A RALLY (IT WOULD HAVE BEEN MORE BULLISH SHORT TERM IF THE MARKET WERE TO HAVE

REGAINED ALL OF YESTERDAY'S 12 POINT DROP, BUT 8 OF 12 IS A START) BACK UP TO THE RETRACEMENT LEVELS IN THE CHART BELOW.

<<MAY 11 SPX RE RETRAC.jpg>>
THE CHART SHOWS A HIGH LIKELIHOOD, NOW THAT THE MARKET IS ACTING MORE "NORMAL", OF A TEST OF THE 50% RETRACEMENT OF THE RECENT DROP AT 1113.25 AND

POSSIBLY A TEST OF THE 61.8% RETRACEMENT AT 1121.16.
THAT BEING SAID, I DID GET A LOT OF RESPONSES FROM YESTERDAY'S "MARKET UPDATE" ASKING WHY I WOULD SAY SUCH BEARISH THINGS... THE REASON IS I STILL

BELIEVE THAT "BEAR MARKETS" END WHEN THE FOLLOWING CRITERIA IS MET:
1. WHEN STOCKS ARE AT GREAT VALUES i.e. <10 TIMES EARNINGS = WE ARE CURRENTLY TRADING AT 22.44 TIMES TRAILING 12 MONTHS EARNINGS WHICH WOULD BE

MORE REPRESENTATIVE HISTORICAL OF A "BULL MARKET" HIGHS THEN THE END OF A "BEAR MARKET".
2. WHEN THE DIVIDEND YIELD ON THE S&P 500 IS CLOSER 6% THAN TODAY'S 1.62%.
3. WHEN THE "BEARISH SENTIMENT" IS RAMPANT AND PEOPLE SAY THINGS LIKE "ILL NEVER OWN ANOTHER STOCK AGAIN" INSTEAD CURRENTLY WE HAVE THE HIGHEST

"BULLISH SENTIMENT" READINGS, I BELIEVE, IN HISTORY WITH IDIOTS ON TV LIKE THOSE "KUDLOW/CRAMER" PEOPLE SAYING JUST INSANE THINGS THAT PEOPLE ACTUALLY

BELIEVE.
THESE ARE JUST A FEW HISTORICAL MEASURES THAT GIVE YOU A CLUE WHEN THE "BEAR MARKET" IS REALLY OVER. THEY (THE TV COMMENTATORS, BROKERAGE FIRMS, MUTUAL

FUND SALES PEOPLE ETC) SAY "IT'S DIFFERENT THIS TIME" , BUT I STILL GOT TO GO WITH WHAT HAS HAPPENED EVERY OTHER TIME IN THE PAST - - I AM VERY WEARY

OF THAT COMMENT = IT DIDN'T WORK OUT WELL DURING THE 1999 - 2002 WINDOW WITH THE "NEW PARADIGM" PITCH THAT WAS MADE ALMOST DAILY OF TV BEFORE THE CRASH

AND I DOUBT IT WILL BE ANY DIFFERENT THIS TIME. I AM MORE OF A BELIEVER OF "THERE IS NOTHING NEW UNDER THE SUN".
JUST FOR FUN HERE ARE JUST A COUPLE OF OTHER THINGS THAT WOULD HAVE ME SCARED IF I WERE INVESTED IN EQUITIES AT THESE LEVELS:

1. THE WAR IN IRAQ DOESN'T SEEM TO GOING THAT SMOOTHLY.
2. THE THREAT OF TERRORISM IS STILL SORT OF LOOMING OUT THERE - - I DON'T THINK THE ANGRY MUSLIMS ARE ANY LESS ANGRY THAN BEFORE 911.

3. THE DOLLAR SWINGS LIKE, I THINK , NEVER BEFORE IN HISTORY?
4. THE INTEREST RATE PICTURE IS UNCERTAIN AT BEST AND ESPECIALLY AFTER BEING AT ALMOST 50 YEAR LOWS FOR A LONG PERIOD COULD CAUSE PROBLEMS I DON'T EVEN

UNDERSTAND?
5. RECORD BUDGET DEFICITS (WHICH ONCE AGAIN IM NOT SURE I REALLY UNDERSTAND) SCARES ME - - I READ THAT WE GO $1 BILLION DOLLARS A DAY FURTHER INTO DEBT

IN THE COUNTRY EVERYDAY - - ALL I KNOW IS IF I WERE TO GO FURTHER INTO DEBT EVERYDAY THAT WOULD BE A BAD THING...
6. THE UNEMPLOYMENT PICTURE IS KIND OF ODD. I GUESS IT IS GETTING BETTER ,BUT IT STILL SEEMS KIND OF SCARY.
7. MAYBE THE BIGGEST THREAT TO THE SYSTEM (I DON'T KNOW WHY ITS #7 ON MY LIST) IS THE HUGE "DEBT BUBBLE" CREATED BY THE RATES BEING SO LOW FOR SO

LONG? WHAT I HAVE READ ON THIS IS SO UNBELIEVABLE ITS ALMOST SURREAL.
I AM TIRED OF WORKING ON THIS LIST ALREADY = I HAVE TONS MORE i.e. CORPORATE FRAUD, THE WAY THE ACCOUNTING IS STILL BEING DONE i.e. STOCK OPTIONS , RECORD

LOW SAVINGS RATES, RECORD BANKRUPTCIES, EMERGING MARKET DEBT ETC ETC
THIS PROBABLY IS THE LONGEST "MARKET UPDATE" I HAVE WRITTEN TO DATE AND I PROMISE NOT TO DO THIS AGAIN FOR LONG TIME, BUT I HAD TO GIVE SOME OF MY

REASONS VIA THE RESPONSE I GOT FROM YESTERDAY.
-G
ALL OF THE ABOVE BEING SAID, THE ODDS FAVOR SOME MEANINGFUL RALLY AND I WOULDN'T BE SHORT AT THESE LEVELS, PLUS THE FED IS NEXT WEEK (TUESDAY) AND I DON'T THINK BUSH IS GOING TO THROW IN THE TOWEL ON THE ELECTION SO THE PICTURE THRU THE END OF THE YEAR AFTER HITTING NEW LOWS TODAY BECOMES EVEN MORE DIFFICULT TO CALL.

-G