Option Investor
Market Wrap

Chalk up another winner for OIN!! Merck announced their 2:1 split today just as we projected!

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        11-22-98         High     Low     Volume   Advances Decline
DOW     9301.15 - 73.12 9380.20  9289.05  770,279k  1,426   1,638
Nasdaq  1965.88 - 11.54 1988.45  1965.38  1,001,4k  1,777   2,461 
S&P-100  585.48 -  2.51  590.76   584.83   Totals   3,203   4,099
S&P-500 1182.99 -  5.22 1191.30  1181.81            43.8%   56.1%
$RUT     396.60 -  1.55  398.20   396.37
$TRAN   3078.72 + 64.87 3104.15  3007.62 
VIX       22.43 +  1.69   24.70    21.14 
Put/Call Ratio      .54

Chalk up another winner for OIN!! Merck announced their 2:1 split today just as we projected!

Add that to the AOL and Sara Lee plays recently and you can see the profits from playing splits BEFORE they are announced. Now if Yahoo comes through for us we can take the rest of the year off! (yes boys and girls we had forecast Amazon as a split but it was not a current play so we can't take credit for it.)

Yesterday I got back into town from a vacation to California just in time to see the market explode on the positive sentiment from Monday merger mania. (not soon enough to place any trades unfortunately) Ray, the combo play editor had filled in for me with the Thursday/Sunday commentary and did a great job! Thanks Ray. If he promises me another Monday like yesterday I will go on vacation more often.

Deutsche Bank recounted their recent denial of merger talks with Bankers Trust by announcing late stage negotiations to buy them for $93 a share in cash. Just goes to show you that you can never believe what any company says about takeover rumors.

AOL, Netscape and SunMicro all linked up to form bigger challenges to Microsoft in a $4.2 billion deal. AOL is the clear winner gaining yet another foothold into everyone's desktop. SunMicro also a big winner with the gain of the enterprise business of Netscape. Good job guys. Microsoft wasted no time in pointing the finger at the unindicted co-conspirators and saying that the deal proved that competition was alive and well and the market had a way of producing bigger competitors faster that the government could act to break up monopolies. Microsoft hit a new all time high on the news.

Yahoo has got to be wondering who is next in the ever shrinking world of Internet portals. If you have to buy out the competition just to stay ahead then Yahoo has got to be burning some midnight oil this week examining the possibilities. After the huge gains Monday on the heels of the Amazon 3:1 split announcement it is almost a certainty that Yahoo will announce a split soon. At $210 they are well into imminent split range. Yes the options are expensive but when a stock can move $25 a day there is risk on the side of the option writers to have to provide stock later at a much greater price. It was down today -$11 but it will be back soon. (buying opportunity!) Amazon was only down -$3 today and we are going to play it as well but not until Sunday.

Several analysts were making a big deal out of the drop in the Dow today. Give me a break!! The Dow broke out yesterday to a new all time high after several weeks of strong gains. Any analyst that has been in the game for more than a week should know that there is always a rest here for several reasons. The Dow has been up for several weeks in a row (+1500 points). The previous high was broken and needs a rest and test before moving to new levels. This is a holiday week. With no volume expected tomorrow or Friday traders will move to take some money off the table to prevent an unforeseen disaster from bankrupting them over the long weekend. I fully expect the market to fall back and range trade until next week. There is no good news to push it higher and no reason to buy until next week.

After Thanksgiving the bull rush should resume in earnest. I doubt we will get to Ralph Acomporaspans Dow 10,000 this year but his original forecast will be very close.

If you are invested in calls we suggest setting your stops and forget about the market until Monday. If you are not in the market you could get another buying opportunity should the market pull back another 50-100 points. I would not hesitate to jump on any blue chip play as soon as the market starts moving up again.

The S&P futures are mixed to slightly down tonight and are about -.80 at 8:30ET. I just don't see another big drop. I am going to be bargain hunting and will probably try to steal some options on any dip. That means I am going to use the "target shooting" approach and set some limit buys about -25-35% less than the ask in the morning. If I get hit on a dip then great! If not than I did not lose anything. I suggest you do the same ONLY if you are an aggressive risk taker. Otherwise I suggest waiting until the market starts moving up again next week.

Since Thanksgiving is Thursday, and if you did not know that then write a check for your life savings and send it to the Bill Clinton legal fund because you don't deserve to have it, there will be no newsletter on Thursday. Surprise ?? Expect a big letter Sunday with lots of new calls to take advantage of the next run.

Have a great holiday!

Good Luck,

Jim Brown
Editor

Jim's Plays

On vacation, no plays.

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