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To: Les H who wrote (226)	5/30/2001 1:50:08 PM
From: Les H	Read Replies (1) \| Respond to of 29603

MARKET EARNINGS Since the earnings season has wound down, and the pre-announcement season will not heat up until three or four weeks from now, the pace of downward revisions in earnings estimates has temporarily slowed. Don’t get lulled into a false sense that things are getting better. Keep in mind that the quarter-to-date pace of downward revisions continues to accelerate. Compared to the equivalent time in 1Q01, negative pre-announcements are running 15% ahead of those for the record setting 1Q01. Bulls point to the 39% higher pace in positive pre-announcements over the 1Q01 rate as a positive, but that is misleading since the positives are coming off such a low base. The percentage of negatives relative to all 2Q01 pre-announcements is running 64%, compared to 66% at the equivalent point in 1Q01. This is an extremely high percentage for this early in the quarter. In 2Q00, the percentage negative at this point was only 47%. Also worrisome is that negative pre-announcements from S&P500 companies is up 42% from 1Q01 levels. That means a greater proportion of large companies are warning. Most of these are repeaters from 1Q01. It may be an oversimplification, but we believe a useful one, that the economy these days is really driven by a tug of war between consumer spending holding up and pulling the economy out of the doldrums vs. weakness in capital spending pulling us into a recession. As a proxy for this contest, we continue to monitor the patterns in warnings and downward earnings estimate revisions in the consumer cyclical sector and in the technology sector. Warnings and downward earnings estimate revisions in the consumer cyclical sector had been in free fall from mid-August thru late February, but since the beginning of March had reverted back to more normal patterns. The decline in estimates were moderate in April, but have picked up in late May. From 1 April to 1 May to now, the respective earnings expectations for the consumer cyclical sector have dropped for 2Q01 from -15% to -18% to -22%, for 3Q01 from 8% to 7% to 4%, and for 4Q01 from 22% to 21% to 18%. The greater declines in May (even with three working days left) are worrisome, with most of the slippage over the last week or so. This may only be an anomaly, but it does wave a caution flag on whether the sector could slip back into the free fall patterns that prevailed from August to February. The tech sector continues in the free fall patterns prevalent since October. The respective estimate revisions from 1 April to 1 May to now have dropped for 2Q01 from –35% to –51% to –54%, for 3Q01 from –23% to –38% to –41%, and for 4Q01 from +1% to –12% to –16%. The downward revisions have moderated some during the quiet period in May, but likely will heat up again in late June and early July as the 2Q01 pre-announcements move into the peak weeks. The bottom line is that there is still no visibility on 4Q01 expectations. Clearly, 2Q01 earnings will be worse than 1Q01. With 98% of the S&P500 having reported (8 are left), the results are likely going to be a decline of 6.2%. The outlook for 2Q01 is at 12.2%. The analysts will trim that further by the July reporting season, but the final results will likely be a few percentage points above the estimates at report time. Therefore, the final results will likely be about at the current 12.2% estimate. Any deviation is more likely to be an even deeper decline. Visibility is somewhat limited on 3Q01. With the estimate currently at a decline of 3.4%, there is no doubt that 3Q01 will be the third quarter in a row of down earnings. This will be the first earnings recession since 1991, when the economy was in a recession. It seems likely that the final results will be similar to those of 2Q01. There is almost no visibility on 4Q01. Current expectations are for a gain of 8.3%. That could slip to a decline, but even if it does, it still could represent a recovery over 3Q01. We continue to believe the key places to look for clues are the warnings and downward estimate revision patterns in consumer cyclicals and in tech. Given the recent perturbation in consumer cyclical patterns, that is the area that commands the most watching. The key industries to watch are autos, home building, home furnishing, and retailing. By the start of the 2Q01 reporting season in July, we should have enough visibility on 4Q01 to determine if the earnings recovery is likely to occur then or whether it gets pushed back to 1Q01. The First Call valuation model (comparing the forward four quarter P/E ratio to the inverse of the interest rate on the 10-year Treasury) indicates the market was about fairly valued on 30 March. However, the April and May surge in stock prices, particularly in the technology sector, along with the continued slippage in earnings forecasts, again particularly in the tech sector, pushed the P/E ratio to 24.1, compared to the implied fair market P/E of 18.2. That means the market is 32% overvalued, up 7 percentage points from last week www1.firstcall.com

To: Les H who wrote (226)	5/30/2001 10:46:38 PM
From: Les H	Read Replies (2) \| Respond to of 29603

Market/Sector Breadth Journal: May 30, 2001 (3399 stocks) percent stocks over MA highs/lows highs/lows highs/lows highs/lows market 10 d 21 d 50 d 200d 5-days 10-days 20-days 1-year ----------------- ---- ---- ---- ---- ---------- ---------- ---------- ---------- May 30 30 47 71 54 283 - 1800 209 - 989 171 - 599 68 - 35 May 29 45 60 78 57 450 - 1365 381 - 567 307 - 341 98 - 19 May 25 59 68 82 58 546 - 802 474 - 316 387 - 164 108 - 13 May 24 66 72 82 58 733 - 682 646 - 250 524 - 125 137 - 11 May 23 68 73 82 58 554 - 741 487 - 308 381 - 166 92 - 9 May 22 80 80 84 60 1362 - 304 1147 - 176 940 - 85 216 - 12 May 21 80 80 84 59 1808 - 228 1468 - 157 1203 - 76 301 - 10 May 18 72 74 81 56 1206 - 324 940 - 228 776 - 101 224 - 21 May 17 72 75 80 56 1602 - 265 1220 - 164 968 - 90 272 - 23 May 16 65 71 77 54 1487 - 389 1089 - 285 870 - 134 264 - 30 May 15 51 63 73 51 899 - 694 614 - 502 492 - 186 173 - 41 May 14 45 62 71 50 696 - 1035 481 - 682 404 - 214 138 - 37 May 11 46 65 71 50 552 - 1009 420 - 561 368 - 193 119 - 28 May 10 54 71 71 51 788 - 738 566 - 393 493 - 148 143 - 24 May 9 55 73 73 51 694 - 847 507 - 361 434 - 152 120 - 23 May 8 61 76 73 50 765 - 669 624 - 280 524 - 116 126 - 20 May 7 65 77 72 50 692 - 630 589 - 245 504 - 93 112 - 14 May 4 72 80 74 51 962 - 390 857 - 148 719 - 60 147 - 20 May 3 66 78 69 48 527 - 700 430 - 316 378 - 101 69 - 16 May 2 75 82 73 50 1334 - 432 1059 - 201 980 - 55 120 - 10 May 1 77 84 72 51 1524 - 255 1131 - 125 1001 - 57 166 - 18 Apr 30 75 82 68 49 1475 - 278 1093 - 156 913 - 74 149 - 14 Apr 27 75 82 65 48 1485 - 283 1144 - 136 941 - 57 203 - 21 Apr 26 69 78 60 46 1160 - 464 952 - 183 774 - 74 185 - 20 Apr 25 68 75 56 44 980 - 424 806 - 167 644 - 80 151 - 26 Apr 24 58 68 48 42 570 - 646 503 - 307 381 - 165 95 - 37 Apr 23 63 69 48 42 461 - 628 401 - 298 294 - 144 73 - 29 Apr 20 73 73 51 43 801 - 491 698 - 272 518 - 118 61 - 21 Apr 19 78 77 54 44 1613 - 300 1424 - 135 1052 - 78 111 - 18 Apr 18 80 75 49 43 1857 - 295 1665 - 143 1141 - 95 127 - 32 Market Index Breadth S & P 500 percent stocks over MA highs/lows highs/lows highs/lows highs/lows market 10 d 21 d 50 d 200d 5-days 10-days 20-days 1-year ----------------- ---- ---- ---- ---- ---------- ---------- ---------- ---------- May 30 1248 23 44 71 67 46 - 285 30 - 162 22 - 87 7 - 3 May 29 1267 36 58 77 69 64 - 212 46 - 93 40 - 54 11 - 3 May 25 1277 45 63 82 71 28 - 180 26 - 62 20 - 26 4 - 2 May 24 1293 59 72 85 72 70 - 145 64 - 42 50 - 22 13 - 2 May 23 1289 68 77 85 72 54 - 149 50 - 44 36 - 31 9 - 2 May 22 1309 82 85 88 75 171 - 44 157 - 25 130 - 13 33 - 1 May 21 1312 86 86 86 74 269 - 32 245 - 26 207 - 13 57 - 1 May 18 1291 82 79 85 70 189 - 37 159 - 30 126 - 18 40 - 2 May 17 1288 83 78 83 70 264 - 30 224 - 19 187 - 13 53 - 1 May 16 1284 82 79 82 69 356 - 21 293 - 16 228 - 9 72 - 0 May 15 1249 58 62 75 64 167 - 82 108 - 61 79 - 24 27 - 1 May 14 1248 51 61 74 62 126 - 117 83 - 80 67 - 24 19 - 1 May 11 1245 46 59 73 61 80 - 152 54 - 98 43 - 31 13 - 2 May 10 1255 55 69 76 64 142 - 99 94 - 48 74 - 15 19 - 1 May 9 1255 52 69 73 64 116 - 128 68 - 59 52 - 21 12 - 1 May 8 1261 54 70 73 62 93 - 114 71 - 47 51 - 17 13 - 2 May 7 1263 63 74 74 63 96 - 82 76 - 31 60 - 9 10 - 0 May 4 1266 67 75 76 63 130 - 49 114 - 16 91 - 7 14 - 1 May 3 1248 56 71 68 61 39 - 152 28 - 64 20 - 19 4 - 1 May 2 1267 69 79 75 63 158 - 81 103 - 35 98 - 9 8 - 0 May 1 1266 73 84 77 65 208 - 40 144 - 19 132 - 8 20 - 1 Apr 30 1249 72 81 74 63 177 - 37 123 - 16 112 - 10 19 - 0 Apr 27 1253 79 84 74 63 257 - 22 183 - 10 161 - 5 37 - 0 Apr 26 1234 69 78 66 59 174 - 73 132 - 27 113 - 11 34 - 1 Apr 25 1228 67 75 59 56 112 - 79 95 - 20 81 - 8 25 - 1 Apr 24 1209 58 70 54 56 51 - 111 49 - 57 39 - 36 17 - 3 Apr 23 1224 68 75 56 57 45 - 83 42 - 48 39 - 28 17 - 2 Apr 20 1242 75 78 60 59 55 - 81 50 - 48 45 - 18 5 - 0 Apr 19 1253 80 82 65 61 202 - 51 190 - 24 157 - 11 15 - 1 Apr 18 1238 87 86 64 61 328 - 25 308 - 14 239 - 12 29 - 1 Nasdaq 100 percent stocks over MA highs/lows highs/lows highs/lows highs/lows market 10 d 21 d 50 d 200d 5-days 10-days 20-days 1-year ----------------- ---- ---- ---- ---- ---------- ---------- ---------- ---------- May 30 1779 6 19 53 25 2 - 82 1 - 47 1 - 41 1 - 1 May 29 1873 18 36 67 27 3 - 76 3 - 23 2 - 19 1 - 0 May 25 1960 61 63 84 33 7 - 27 7 - 8 5 - 6 1 - 0 May 24 2003 78 73 89 33 13 - 11 13 - 2 8 - 1 1 - 0 May 23 1957 76 69 84 28 5 - 21 5 - 6 2 - 4 0 - 0 May 22 2042 93 87 94 34 30 - 2 23 - 1 15 - 0 1 - 0 May 21 2052 89 84 93 35 83 - 4 67 - 4 52 - 2 3 - 0 May 18 1927 70 64 83 30 37 - 6 26 - 6 17 - 3 1 - 1 May 17 1925 75 67 88 29 61 - 3 40 - 2 25 - 0 3 - 0 May 16 1899 69 66 78 26 58 - 4 22 - 4 11 - 2 2 - 1 May 15 1796 15 32 63 22 11 - 38 4 - 31 3 - 8 1 - 1 May 14 1795 11 34 62 22 6 - 62 3 - 48 1 - 9 0 - 1 May 11 1821 15 46 65 21 3 - 51 2 - 30 1 - 6 1 - 0 May 10 1838 20 54 70 22 4 - 55 1 - 20 0 - 9 0 - 0 May 9 1876 38 64 73 25 5 - 43 2 - 16 1 - 4 0 - 0 May 8 1929 62 84 79 26 17 - 16 15 - 3 7 - 2 0 - 0 May 7 1895 59 82 74 25 6 - 23 6 - 9 3 - 2 0 - 0 May 4 1923 75 87 79 25 19 - 11 19 - 2 18 - 2 1 - 1 May 3 1877 57 84 69 23 3 - 16 3 - 11 3 - 2 0 - 0 May 2 1962 87 96 82 25 61 - 6 40 - 2 37 - 1 0 - 0 May 1 1919 86 95 75 26 76 - 2 46 - 2 45 - 1 4 - 0 Apr 30 1855 78 92 66 23 58 - 3 24 - 2 22 - 0 2 - 0 Apr 27 1810 68 86 57 21 26 - 8 11 - 3 11 - 1 1 - 0 Apr 26 1763 48 81 48 20 5 - 33 3 - 9 3 - 0 0 - 0 Apr 25 1814 68 84 55 20 9 - 10 9 - 3 7 - 1 0 - 1 Apr 24 1762 53 76 46 17 1 - 27 1 - 9 0 - 2 0 - 0 Apr 23 1811 76 83 47 17 1 - 12 1 - 2 0 - 0 0 - 0 Apr 20 1933 92 92 62 22 25 - 3 25 - 0 18 - 0 0 - 0 Apr 19 1953 98 91 65 24 68 - 1 66 - 1 52 - 1 1 - 0 Apr 18 1830 98 92 46 20 79 - 2 77 - 0 51 - 0 2 - 0 S & P 100 percent stocks over MA highs/lows highs/lows highs/lows highs/lows market 10 d 21 d 50 d 200d 5-days 10-days 20-days 1-year ----------------- ---- ---- ---- ---- ---------- ---------- ---------- ---------- May 30 642 20 41 72 60 6 - 60 4 - 33 3 - 14 0 - 0 May 29 652 33 55 77 61 11 - 37 8 - 18 7 - 8 0 - 0 May 25 658 37 55 82 61 2 - 44 2 - 16 1 - 7 0 - 0 May 24 668 56 68 85 65 20 - 32 19 - 10 16 - 5 1 - 0 May 23 665 65 76 84 64 14 - 34 10 - 9 7 - 6 2 - 0 May 22 676 82 80 86 64 29 - 9 23 - 9 19 - 3 4 - 0 May 21 678 83 83 84 64 51 - 6 43 - 5 39 - 1 9 - 0 May 18 668 75 74 83 59 39 - 6 31 - 4 27 - 3 10 - 0 May 17 665 81 76 80 57 48 - 8 43 - 6 37 - 3 11 - 1 May 16 664 76 76 78 61 69 - 5 57 - 3 49 - 2 15 - 0 May 15 646 53 58 72 55 28 - 21 20 - 13 16 - 7 5 - 1 May 14 647 54 63 74 54 23 - 21 13 - 12 11 - 7 2 - 1 May 11 645 46 61 72 53 21 - 34 14 - 21 2 - 6 1 - 1 May 10 651 58 71 74 54 31 - 13 18 - 7 17 - 3 4 - 1 May 9 652 51 68 70 54 24 - 28 19 - 14 18 - 5 1 - 1 May 8 656 55 70 72 52 23 - 26 21 - 11 17 - 4 2 - 1 May 7 657 69 78 72 53 24 - 11 19 - 7 16 - 2 1 - 0 May 4 658 71 78 77 54 30 - 9 27 - 4 24 - 1 1 - 0 May 3 647 62 74 66 52 9 - 23 7 - 8 4 - 2 0 - 0 May 2 657 76 83 76 52 29 - 14 19 - 5 19 - 3 2 - 0 May 1 653 72 86 73 53 38 - 5 30 - 3 26 - 1 2 - 0 Apr 30 645 69 83 72 51 35 - 6 24 - 0 22 - 0 3 - 0 Apr 27 649 81 88 75 52 53 - 4 37 - 1 31 - 0 4 - 0 Apr 26 640 72 81 65 47 35 - 13 25 - 4 21 - 1 4 - 0 Apr 25 635 60 71 56 44 20 - 16 16 - 5 14 - 1 4 - 0 Apr 24 625 54 67 48 41 10 - 25 10 - 16 8 - 9 4 - 0 Apr 23 633 72 74 53 45 8 - 16 7 - 8 6 - 2 3 - 6 Apr 20 643 77 81 60 46 14 - 14 12 - 8 10 - 3 1 - 0 Apr 19 649 78 81 64 47 44 - 9 42 - 4 33 - 1 2 - 0 Apr 18 639 83 83 65 50 68 - 4 63 - 3 50 - 2 4 - 0 AIQ market log (buy - sell ratios of signals for stocks >= 7 and ADV >= 75,000) Unconfirmed Signals (US) market DJIA SPX OTC Universe SPX OEX NDX ----------------- ------ ----- ----- -------- -------- -------- -------- May 30 10,872 1248 2084 79 - 21 76 - 24 71 - 29 100 - 0 May 29 11,039 1267 2175 57 - 43 58 - 42 43 - 57 83 - 17 May 25 11,005 1277 2251 43 - 57 51 - 49 37 - 63 50 - 50 May 24 11,122 1293 2282 34 - 66 35 - 65 25 - 75 25 - 75 May 23 11,105 1289 2243 30 - 70 31 - 69 27 - 73 40 - 60 May 22 11,257 1309 2313 18 - 82 14 - 86 22 - 78 0 -100 May 21 11,337 1312 2305 19 - 81 13 - 87 25 - 75 0 -100 May 18 11,301 1291 2198 26 - 74 18 - 82 33 - 67 0 -100 May 17 11,248 1288 2193 28 - 72 26 - 74 33 - 67 0 -100 May 16 11,215 1284 2166 40 - 60 20 - 80 25 - 75 50 - 50 May 15 10,873 1249 2085 51 - 49 53 - 47 50 - 50 100 - 0 May 14 10,877 1247 2081 46 - 54 47 - 53 50 - 50 80 - 20 May 11 10,821 1245 2107 40 - 60 55 - 45 43 - 57 86 - 14 May 10 10,910 1255 2128 32 - 68 45 - 55 33 - 67 50 - 50 May 9 10,867 1255 2156 28 - 72 44 - 56 43 - 57 30 - 70 May 8 10,883 1261 2198 20 - 80 36 - 64 22 - 78 20 - 80 May 7 10,935 1263 2173 15 - 85 34 - 66 0 -100 20 - 80 May 4 10,951 1266 2191 12 - 88 31 - 69 0 -100 8 - 92 May 3 10,796 1248 2146 12 - 88 29 - 71 0 -100 0 -100 May 2 10,876 1267 2220 8 - 92 15 - 85 0 -100 0 -100 May 1 10,898 1266 2168 8 - 92 11 - 89 0 -100 0 -100 Apr 30 10,735 1249 2116 9 - 91 14 - 86 7 - 93 0 -100 Apr 27 10,810 1253 2075 10 - 90 13 - 87 5 - 95 0 -100 Apr 26 10,692 1234 2034 11 - 89 17 - 83 5 - 95 0 -100 Apr 25 10,625 1228 2059 13 - 87 16 - 84 5 - 95 0 -100 Apr 24 10,454 1209 2016 16 - 84 20 - 80 15 - 85 0 -100 Apr 23 10,532 1224 2059 13 - 87 15 - 85 5 - 95 0 -100 Apr 20 10,579 1242 2163 9 - 91 10 - 90 5 - 95 0 -100 Apr 19 10,693 1253 2182 8 - 92 8 - 92 4 - 96 0 -100 Apr 18 10,615 1238 2079 9 - 91 9 - 91 5 - 95 0 -100 May 30 Weighted Unconfirmed Action List Daily Signals Universe 9 - 91 79 - 21 S&P 500 (SPX) 8 - 92 76 - 24 S&P 100 (OEX) 7 - 93 71 - 29 Nasdaq 100 (NDX) 3 - 97 100 - 0 Nine Month Cycle - April 4 Anchor Apr 4 start start start 1103 none Apr 27 green green green 1253 +150 1253 +150 1103 + 10 May 21 yellow green green 1312 + 59 1312 + 59 1240 - 13 Jun 13 red yellow green 1248 - 64 1315 + 3 1245 - 67 Jul 6 green yellow green Jul 30 yellow red yellow Aug 22 red red yellow Sep 14 green green yellow Oct 8 yellow green yellow Oct 31 red yellow red Nov 23 green yellow red Dec 17 yellow red red Jan 9 red red red June 20th is 21-day fibonacci date basis the previous 13-day fibonacci date on May 21st.