Option Investor
Market Wrap

Are we having fun yet?????

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        01-06-99         High     Low     Volume   Advances Decline
DOW     9544.97 +233.78 9562.22  9315.42  986,370k  2,006   1,091
Nasdaq  2320.86 + 69.60 2320.95  2286.13 1254,400k  2,587   1,630 
S&P-100  631.00 + 15.62  631.20   615.38   Totals   4,593   2,721
S&P-500 1272.34 + 27.53 1272.50  1244.78            56.3%   43.7%
$RUT     427.79 +  5.70  427.81   422.09
$TRAN   3317.46 +125.08 3318.50  3194.46
VIX       23.60 -  0.07   24.08    22.26

Are we having fun yet?????

The U.S. market rocketed to new highs on Wednesday in a strong, broad rally, driving the both the widely watched Dow Jones Industrial Average and the tech-heavy Nasdaq Composite into record territory. The rally extended strong gains that had been racked up the previous two trading days, with a fresh pile of investor cash fueling the momentum. The Dow broke through its November high to end up 233 points higher at at 9544.97. The new year's inflow of cash also boosted big technology stocks like Intel and Microsoft to new highs and propelled the Nasdaq Composite index to another record close. The S&P 500 Index, a wider gauge of the market joined the group with its second straight historical high. The breadth of the rally was the focus of most analysts as the momentum appeared to reach almost every sector and 171 new 'highs' were recorded. The strong market rally had little effect on the Market Volatility Index , the options market's gauge of investor anxiety.

In addition to seasonal strength and excitement about new mergers, the start of the euro helped drive the market higher. Several other bullish news items, including the sale of a seat on the American Stock Exchange for a record $570,000 rounded-out the market wide, upbeat climate. A report that new home sales reached a record pace in November and new strong job opportunities with high consumer confidence fueled broad sector gains. Even the agreement between the National Basketball Association and its players' union had a positive effect as shares of sneaker and other sports companies rebounded on the news. The market just seems to have so much momentum that nobody is looking to sell, they want to hold on to what they have or buy more.

Internet stocks also charged higher, with CMG Information Services, Amazon.com and online auction company eBay leading the group. Shares of American Express and Hewlett packard led the Dow's strongest gainers. The trading that sent blue-chip tech stocks to their new highs was strong as well and Intel and Microsoft were the big movers in that sector. AtHome Network jumped $16 after the company announced a long-term agreement with AT&T (T) to create a nationwide network of Internet services. Airline shares were also higher, driving the Dow transports index up 125.08 points to 3,317.46. American Airlines, Delta and United Airlines all powered ahead.

Not all the market news was good. Northrop Grumman Corp and the aerospace group fell after the company forecast lower 1999 profits. To fuel the fire, an influential Wall Street investment strategist believes the U.S. stock market is headed for a nasty correction this year, a casualty of global financial instability. The expert told reporters that a correction could easily drag the market 20 to 30% from current levels. He also said the Dow's record close was due to "panic buying" and advised investors to seek opportunities outside U.S. financial markets. The views of most other analysts differ significantly and many are forecasting a positive year for U.S. shares, led by small and mid-cap stocks.

While we have been cautiously optimistic for the last two days we are very cautious about Thursday. Back to back gains of over 360 points "SHOULD" be followed by some profit taking. We will be looking for new entry positions on any new rise following a pullback. If you have profits now we suggest setting your stops tight and take the money off the table. There is always another day and another play.

S&P Futures are down -1.50 at 7:PM.

Good Luck


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