Option Investor
Market Wrap

Up, up and away for John Glenn and the Dow !!

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MARKET WRAP
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        10-29-98         High     Low     Volume   Advances Decline
DOW     8495.03 +123.06 8496.32  8352.40  698,724k  1,847   1,149
Nasdaq  1757.19 + 19.84 1757.73  1729.39  902,684k  2,397   1,677 
S&P-100  531.97 +  8.84  532.09   521.68   Totals   4,244   2,826
S&P-500 1085.93 + 17.84 1086.11  1065.95            60.0%   40.0%
$RUT     374.48 +  3.01  374.48   371.01
$TRAN   2800.52 + 50.28 2803.05  2746.38
VIX       27.84 -  3.24   31.12    27.75
Put/Call Ratio      .71
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Up, up and away for John Glenn and the Dow !!


A strong rally in the blue chips today as investors moved back into
the market after Brazil announced its austerity plan and it did not
include a devaluation of the currency. The overall positive sentiment
worked its magic in the markets as all sectors gained significantly.

Traders and analysts were mixed during the day as volume was mediocre
and there were several false starts in the morning. As the day wore
on the volume increased and more buyers appeared. 

Some point to big gains in defensive stocks like drugs as investors
still unsure about the direction hedging their bets. Others felt
that the mutual funds year end on Saturday could have caused some
year end window dressing buying of big name blue chips today. These
same analysts warn about a possible run of tax loss selling on
Friday as funds wait until the last minute in hopes of dumping their
losers at the best possible price. The upside to tax loss selling is
it always leads to buying shortly thereafter to put the cash back to 
work. Also the stocks likely to be sold Friday are the ones most
people are already avoiding.

Even with the big gain today we are still only up +45 points from 
were we were on October 16th. The week before that was the big +700
point gain. We have spent two weeks now in the rest and test mode.

I am still looking for the market to continue upward but we are 
sitting right at resistance. 8500 on the Dow and 530 on the OEX.
If we can ever breakout the next stop is 8900-9000 but until we can
manage a close well over 8500 we may continue to be stuck in this
trading range 8350-8500.

The recent intraday high of 8652 set on Oct 20th is the next target 
to break. Once we break that the pundits will feel like the rush is 
on to 9000.

We are starting to here the normal catch phrases. "Stocks are
over bought", "markets have recovered, no new rate cut", "Impeachment
may pick up speed if the republicans win in the election." This
makes us worry that we may not get momentum until after Tuesday.

The third quarter GDP will be announced tomorrow and the estimates
range from +1.7% to +2%. This is much less than Mr Greenspan would
like to see. The Labor Cost report today came in higher than expected
at +1% instead of +.8%. Labor costs rising and GDP slowing. Not an
environment for a growing economy.

The best news of the day may have come from the Hewlett Packard CEO.
He said they were seeing no pricing pressures and PC sales were
extremely robust. Everything in tech land seems to be coming up
roses. The Y2K problem is now seen as adding to PC sales substantially
in the next five quarters as people and businesses elect to replace
instead of repair their questionable computers. Windows NT-5 (2000)
is also expected to boost PC sales due to higher overhead requiring
a much larger server. (The Wintel connection at work)

Fearless Friday Forecast: With the strong optimism in the market it
will be hard for us to drop any substantial amount Friday. Last Friday
we dropped at the open, rose midday, dropped in the afternoon but
closed strong. Not a normal Friday. At 8:15 the futures are up +.50.
Not much but they have been down all week at this time. I think we 
have a chance tomorrow for another good day. I would be happy if
we just held above 8475. Anything above that would be taken gladly.
With the normal weekend sell off (which has been slowing) and the
fear of the unknown in the elections Tuesday, I don't expect a new
run to start before Wednesday. I would love to be wrong. The weakness
in the Nasdaq today concerned me. Yes, I know it closed up +19 but
it was a hard +19. (thank you Internet stocks) The four horseman,
DELL, CSCO, MSFT, INTC were all up less than $1. I think it is just
profit taking from the +20% in the last three weeks but I am still
cautious.

If you want to start new plays tomorrow you need to be very picky
about your entry points. Look for a low spot during the day. Maybe
after the morning bump or a possible afternoon slump before starting
a new play. Like I said earlier, I don't expect a significant drop
from here but we could see some more intraday drops. I would view
them as buying opportunities. A lot of stocks have big gains from
the last three weeks so be selective.


Good Luck

Jim


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