Yesterday the S&P 500 index price change was -1.44% and 57.4% of stocks out-performed the index.

As of last nights close, there were 1094 stocks trading below their standard range of share price volatility. Of these unusually depressed names, 114 stocks have sufficiently good evidence of improving fundamentals and sufficient liquidity to justify a trading long position. Our current list of trading long ideas is unchanged from 114 the previous day. New long ideas yesterday numbered 2 stocks. Open long positions that can be added to at the current price number 50 stocks. Yesterday, 2 stocks that are in our portfolio list moved back into their standard range of share price volatility, prompting a flat position. Our average profit on those positions was 2.4%. The average holding period was 35 days.

As of last nights close, there were 1155 stocks trading above their standard range of share price volatility. Of these unusually extended names, 198 have sufficiently good evidence of deteriorating fundamentals and sufficient liquidity to justify a trading short position. Our current list of trading short ideas is down from 200 the previous day. New short ideas yesterday numbered 1 stocks. Open short positions that can be added to at the current price number 107 stocks. Yesterday, 3 stocks that were in our trading short portfolio moved back into their standard range of share price volatility, prompting a covered position. Our average profit on those positions was 12.0%. The average holding period was 18 days.

GEARS produces a series of long/short portfolio simulations based on our long-term pattern recognition work in the corporate accounting data and our short-term volatility calculator. These simulations are designed to extract returns from unusual share price volatility.

Our more aggressive long/short strategy chooses the 100 most deeply depressed stocks with improving fundamentals for the long fund and the 100 most extended stocks with deteriorating fundamentals for the short fund. Positions are equally weighted. Last week the GEARS aggressive hedge returned 0.57%. The long portfolio was down 2.29%. The short portfolio was up 2.86%.

We have now collected summary income statements from companies accounting for 80% of the capital value of the S&P Index. The average sales growth rate continues to improve and the population of companies achieving an improvement in sales growth is up again for the third consecutive quarter.

The traditional industrial sectors remain mired in recession with sales growth down on average and more frequently. The consumer cyclicals(mostly autos, housing and retailers) are mounting a recovery in average sales growth and frequency of improvement. A sales acceleration from the autos and housing sectors has often been associated with higher interest rates. That implies that our biggest market risk now is higher interest rates and lower valuation associated with that, not growth and earnings disappointments.

Our short portfolio is leveraged toward high valuations and falling growth. The long portfolio is more large cap and defensive. The long/short structure remains more leveraged to a market decline.

Research reports describing recent fundamentals developments by sector industry, investing style and index category are available at http://www.the-gears.com/newstyle_menu.htm..

The compound average return to the GEARS aggressive hedge over the past 13 weeks was -5.28%. Over the past year, the average return was -6.55%. Over the 252 week simulation period, the average annual return was 17.08%. Weekly standard deviation of returns was 2.05%.

The attached file contains lists of new long and new short ideas as of yesterday, as well as long and short ideas that were covered as of yesterdays close. Details and rationale behind all of these decisions are available at http://www.the-gears.com/FreeStuff.htm

The information contained in this report is drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does Global Equity Analytics & Research Service, L.L.C. assume any responsibility or liability. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any securities. The inventories of Global Equity Analytics & Research Service, L.L.C. and the holdings of its respective members and officers and companies with which they are associated, may from time to time include the securities mentioned in this report.