Option Investor
Market Wrap

The bulls voted for profit taking today.

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        11-03-98         High     Low     Volume   Advances Decline
DOW     8706.15 +   .00 8744.52  8677.58  700,129k  1,612   1,409
Nasdaq  1788.43 - 12.48 1799.37  1779.76  890,897k  2,048   2,039 
S&P-100  544.25 +   .21  546.89   541.60   Totals   3,660   3,448
S&P-500 1110.84 -   .76 1115.02  1106.42            51.5%   48.5%
$RUT     387.56 +   .74  387.79   385.06
$TRAN   2918.32 - 36.53 2955.07  2903.25
VIX       26.37 +  1.35   27.07    25.32
Put/Call Ratio      .65

The bulls voted for profit taking today.

After four days of gains totaling +340 Dow points the bulls rested today and took time out to vote. After opening and running past our new resistance level of 8740 the Dow promptly slid lower on broad based profit taking. No sector was spared and airlines was the only sector hurt substantially. After the big gains in airlines on Monday they are still up for the week.

Nothing material cause the sell off today. Economic reports were neutral and news events were bland. Just plain old profit taking.

By closing unchanged today the Dow broke a streak almost two years old. The last time we closed at zero was Dec-2nd 1996.

The Dow traded in a 60 point range today but the low was reached at 12:PM and we trended up from there. Several sell programs kicked in at 30 minutes before the close to wipe out substantial gains and push stocks back into the negative column. At the close ticks on the NYSE and the DOW were both positive.

After hours futures have been trending up and Japan opened up strongly at +418. If this trend continues we could see a stronger open tomorrow.

Disney, a Dow component, posted earnings after the close and beat estimates by $.01 but did not have many positive things to say about the future outlook. This stock has been beat up severely and I would not expect it to impact the Dow either way on Wednesday.

Qualcom also announced and beat the street with $.54 vs estimates of $.50 and traded up in after hours trading. This could help the telecom sector tomorrow.

Cisco announces after the close on Wednesday and is expected to beat the street. All eyes will be on their forecast. Their is a possibility that Cisco will rise after earnings since there has not been a strong jump in the stock price. I know it has been moving up steadily but not in big gaps. We still urge caution on holding over an earnings announcement.

We hit a home run on Boston Scientific this week. We started them as a PUT play last week when they delayed their earnings announcement. There were rumors of accounting problems. BINGO ! The rumors came true today. BSX is down -$8.00 for the week and trading was halted at midday before the bad news was fully disclosed. They found $40-50 million in mis-reported sales in the Japan unit and the International Unit President resigned. They will have to restate earnings for the last 9 months. The street hates this and there is sure to be a huge drop when/if it reopens for trading on Wednesday. You heard it here first last week.

Our forecast for the week is still bullish. We feel that the current market sentiment is strongly positive and the prevailing global sentiment is also positive. The don't fight the Fed mentality is bringing in the cash from the sidelines in large amounts. The recent strong rally has all the earmarks of a new bull run that could take us well over 9000 and nobody wants to be left behind.

Market breadth was positive with advances leading declines in the broad market. The Russell and the S&P were both positive which is a good sign. The blue chips were not the leaders today. In fact several normal leaders were absent. Dell, Cisco, IBM, all took the day off.

If the elections go well tonight we could see a resumption of the rally tomorrow. By "go well" I mean an even number of Republicans and Democrats are elected. Personally that prospect is ridiculous but the market does not want any new challenges that a landslide in either direction could produce. While your political views may lean in one direction or the other, and I assure you mine do, the best result for the market short term is a draw. The main shoot out will be in the year 2000 elections. We will cross that bridge when we get there.

At 8:40 ET the futures are soaring +4.60 on the races already announced and the +427 Japan market. Keep your fingers crossed that this trend continues all night.

Good Luck, Good Trading

Jim

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