Option Investor
Market Wrap

Ralph Makempoorer predicts only Dow 8600 this week !

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MARKET STATS FOR LAST WEEK AND PRIOR WEEKS
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        WE 10-16         WE 10-9          WE 10-2          WE 9-25
DOW     8416.76 +517.24  7899.52 +114.83  7784.68 -244.08  +133.21
Nasdaq  1620.95 +128.45  1492.49 -122.47  1614.98 -128.61  + 79.85
S&P-100  520.95 + 37.31   483.72 -  2.77   486.49 - 19.78  + 11.21
S&P-500 1056.42 + 72.18   984.32 - 18.25  1002.60 - 42.11  + 24.82
RUT      342.87 + 24.47   318.40 - 31.31   349.71 - 19.31  +  5.76
TRAN    2780.87 +351.35
VIX       35.84            45.69            42.36            35.60
Put/Call    .61              .81              .85              .80
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Ralph Makempoorer predicts only Dow 8600 this week !


No kidding Ralph Acomporaspan was on CNBC Friday. At least they
kept him off the air until after the market closed. He was asked
about his Dow 6500 forecast from last week and he said he still
thought the market was locked in a trading range but could the
range could have expanded. When asked if he thought the Dow would
go higher he really went out on a limb and said maybe 8600 in the
next week or so. That's only 200 points higher than we are now.

I hate to say it but I think he may be right. We may not get more
then +200 more in the next two weeks. First we have to backup and
consolidate the gains from last week. Which means we may have a
serious down day this week. We did not accomplish the down we were
expecting intraday on Friday. Some sectors did hesitate and back
up slightly. The tech sector for instance was very mixed with the
high flyers mostly negative but only slightly.

With the Dow up +6.5% for the week and the Nasdaq +8.6% and the
Russell +7.5% there has to be some profit taking soon. It is
normal and healthy. The initial rate cut euphoria will wear off
and traders will take profits. Then the real buy and hold guys
will move in to take a position. Lower rates and the PROSPECT of
even lower rates means the Fed is not going to allow the U.S.
oasis of prosperity to dry up in a recession. Not on Greenspan's
watch!

A little know fact reported Friday was that Greenspan acted on his
own to cut rates again. He did confer with each member of the
committee by phone but no vote was taken. He said this is what I
think needs to be done and he did it. Way to go chief !! Rumors
persist that two of the members were still against the first rate
cut. The official statement said the rate cut was at the request
of eight of the twelve Fed banks.

The historical trend has been three cuts and a jump. Meaning three
rate cuts have always propelled the markets to a big jump. It is
almost a given now that there will be another rate cut in November
at the FOMC meeting. The markets are counting on it and I would
hate to be invested if it did not happen. It would be a very bad
day.

Investors were ready to move money back into the markets this week
and $6.3 billion returned to equity funds through WEDNESDAY! Thursday
and Friday surely created the instant wealth lure that caused fence
sitters to write that check and make that phone call. We will not
see those results until next Wednesday but it is bound to be strong.

I can always guage investor sentiment by the number of subscriptions
we get for the newsletter. We got more subscriptions Fri/Sat this
week than the entire previous week. Markets up, they are happy.
Markets down, fewer free trials pony up their credit cards. Wallets
snap shut.

It is official. Last week was the largest point gain week in Dow
history. Maybe October really is the bear killer month and all these
October superstitions are just that, superstitions. Market stats
confirmed another 2 billion share day and the volume was 70% up
and only 30% down on the NYSE.

But, Monday is the 11th anniversary of the October 1987 market crash.

We are definitely not out of the woods yet. Earnings are still
on the top of everyone's mind. We have some big one this week.
Tuesday is sometimes referred to as Super Tuesday. All the major
banks announce and the financial sector will live or die by their
success. Microsoft will take time off from the trial of the century
to announce Tuesday night after the close. They are not expected
to miss or beat estimates but careful attention will be paid to
their forecast. Not to be outdone Texas Instruments and IBM will
also announce Tuesday. Gateway and Xerox are the big tech names
for Thursday. Proctor & Gamble fills in as the worldwide consumer
favorite on Thursday.

Rumors still persist about other hedge funds with problems and
a large bank close to failure. The bank is rumored to be Bankers
Trust. Every knowledgeable person says this is stupid but the rumors
keep coming. Some large short is making a killing. The problem is
still weighing on other banks and brokerages.

Quick, name 10 companies that are strong plays now, that did not
go up +$10 last week AND are not announcing earnings this week.
Couldn't do it could you. It was very tough picking plays this week.
Everybody that was on our hit list was up huge numbers and subject
to pullback on profit taking SOON! If they were not up big numbers
then they were announcing earnings this week and therefore not a
strong play for Monday. We don't recommend holding over earnings
so many good possibles were passed over. When you are predicting
a pull back it is tough to recommend calls on Sunday.

So what should we do? I warned about possible pullback intraday on
Friday and the best we could do was the -80 point drop from +140
to only +60 at 12:15. The late day buying started early and it was
all up from there. If you add the previous Fridays +167 points to
last weeks +517 you get 684 points of profit to take any day now.
The intraday pause (we won't call it a drop) was probably some
minor P.T. but the euphoria was just too strong. After the weekend
has given heads time to cool, ANY weakness in the market will be
the catalyst to run for the sidelines with the cash. The Asian
markets were up even stronger than our markets Friday with Hong
Kong and Singapore up +9% and Japan +2.2%. Their economies are
the ones in the tank and their markets may show the strain first
on Sunday night (Monday). Should they give back some of their gains
tomorrow we are likely to follow suit.

This is good! The sooner we can get this over with the sooner we
can move on. We recommend not starting any new positions, or at
least not any large positions, until the market pauses to let the
sellers off. If you want to start new positions, say 20 contracts,
then maybe buy 10 to start and wait a day or two to buy the other
10. That way you can be in the market in case it does not wait for
us, but you also are ready to take advantage of cheaper prices in
the event it does pull back some. We firmly believe that the market
direction is now upward and we should get fully invested as soon
as possible. THAT DOES NOT MEAN PANIC BUYING! It means slow, rational,
planned positions. Take advantage of dips, even just intraday.

The best thing that could happen to the market would be a -100
points drop at the open Monday and stay there until after lunch.
Then a strong rally back to positive in the afternoon. That would
be the clear signal to climb aboard! Please wait for the strong rally. 
Buying the dip before it starts back could be suicide. There may still
be volatility but the direction has been set by the Fed. Mr Greenspan
can't stop a runaway bull but he can, did and will stop the raging bear.

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

Good Luck

Please read the reader survey info below, thanks.

Jim



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