Option Investor
Market Wrap

Is this what a Yo-Yo feels like?

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MARKET WRAP
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        10-5-98         High     Low     Volume   Advances Decline
DOW     7726.24 - 58.45 7788.04  7551.68 808,478k    787   2,389
Nasdaq  1539.69 - 78.29 1591.25  1511.64 878,378k    873   3,324 
S&P-100  480.71 -  5.88  486.49   468.65   Totals  1,660   5,713
S&P-500  988.56 - 14.04 1002.60   964.72             22%     78%
$RUT     336.80 - 14.04  349.71   335.66
VIX       44.44 +  2.08   50.11    43.35
Put/Call Ratio     1.02
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Is this what a Yo-Yo feels like?


After another massive global sell off again last night we did the
retest over again today. The good news is that 7,550 on the Dow did
hold again. This is the 5th time we have retested this level since
August 31st.

We are now on the fence. We appear poised to move upward from here
but we are still at the mercy of the global markets and economic
news. The rally off -230 this afternoon was stronger than the Friday
recovery. This is a good sign but it could also just be a technical
bounce again.

The Nasdaq is just getting hammered. With the -78 point loss today
we logged another record day, the 5th biggest point drop in history.
The good news was the recovery from -102 at midday. I am not sure
the Nasdaq techs are well yet as there was a lot of selling into
the end of day rally. Dell was hardest hit at the close with large
numbers of huge sell orders in the last 10 min. In post close
trading Dell did trade up as high as 58.81 after closing at 57.69.
At these numbers Dell is a great buy and the bargain hunters are
sure to move in tomorrow on any Nasdaq strength.

The G7 meeting and also the IMF reports are being blamed for the
world pessimism and market crashes. Analysts had thought Brazil
would rally today after the Cordosa win but all of Latin America
sold off again on concerns the IMF $30 billion expected bailout
would not be enough and stiff economic reforms are going to be
hard to pass.

The revelation by Japan that 19 banks has less capital then they
thought was also a shock to the markets.

The market rallied on comments by George Soros that there would
be a global rate cut soon and that would be the catalyst to rally
the world markets.

Without any real results at the IMF meeting this week we could
be faced with a new round of sliding prices.

Cisco Systems was downgraded today after news that the FTC was
interested in the details of talks with Lucent and NT. They want
to see if the rumored attempt to divide up the telecom market was
illegal. Cisco was down -$9.00 at midday but recovered some to 
close at -7.44.

Microsoft was dragged down by the market to $96.50 before the 
buyers jumped on the bargain and drove the price back to $101.19.
There is nothing wrong with MSFT and this is a great bargain.

Yahoo, down -$10 at the start pulled back to only -1.19 at the
close. Yahoo has been upgraded by several analysts in the last
few days. 


The best guess for the next two weeks is that the market is going
to be trapped in a range between 7500 and 7900 until the various
events under way work themselves out. Also the earnings reporting
needs to show some winners that beat the estimates to jump start
the market. Motorola helped tonight by announcing +$.07 vs estimates
of +.01.

If the market cooperates and we have a positive day tomorrow
these are the stocks we expect to be the best plays.

Stock Price  Today

MRK  $128.75 +1.00
AGPH $ 35.19 +1.22
LLY  $ 78.69 +1.81
MCK  $ 91.50 + .56
ATHM $ 44.50 + .75
SGP  $ 99.38 - .13
MSFT $101.19 -2.94

While we feel the strong rally off the retested lows this afternoon
is very positive we still urge caution about starting new plays if
the market is still choppy tomorrow.

The S&P-Futures are up slightly + 1.00 at 7:PM but with the 
European/Asian markets not yet open it is not a good indicator yet.

The best plan for traders with this capability would be to sell puts
or calls to take advantage of the premium decay with only two weeks
till expiration.

Selling puts on stocks that have been hammered and have little or
no chance of dropping further would provide a safe play.

DELL, MSFT, INTC, IBM, AOL, COF, PVN    would be good candidates

Wait, watch, learn. Plan your trades and when the time 
is right, execute your plan !

Good Luck
Jim

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