Option Investor
Market Wrap

This was a great day in the market as buyers overpowered sellers!

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        1-07-98         High     Low     Volume   Advances Decline
DOW     9537.76 -  7.21 9616.29  9369.12  820,428k  1,136   1,952
Nasdaq  2326.09 +  5.47 2333.70  2284.24  530,174k  1,539   1,756 
S&P-100  632.76 +  1.76  633.11   624.95   Totals   2,675   3,708
S&P-500 1269.73 -  2.61 1272.34  1257.68            41.9%   58.1%
$RUT     427.83 +   .04  428.16   423.79
$TRAN   3319.67 +  2.21 3339.00  3270.75
VIX       24.15 +   .55   25.47    24.00
Put/Call Ratio      .43

This was a great day in the market as buyers overpowered sellers!

After a huge profit taking drop at the open and a general sell off at midday the market clawed its way back to zero from a -118 point deficit. The Nasdaq, S&P-100 and Transports all closed in positive territory and all the major indexes appear poised to soar again.

Besides the expected profit taking several other factors drug on the market. Abbey Joseph Cohen made headlines by reducing her weighting of stocks in her model portfolio to 70% from 72%. She increased her bond holding to 27% from 25. The reweighting was more flash than substance. The reason given was the current market levels were conducive to profit taking and reinvesting the profits in more conservative bonds. Must have been a slow news day!

Brazil also made headlines again as a state governor under financial pressure, announced a 90 day debt moratorium. This shock wave sent the Brazil markets down -5.1%. The initial worry was an Asian style economic crisis developing in Brazil. As the day wore on the news improved with confidence that this was an isolated incident and feelings that Cardosa would take whatever action was needed to keep the IMF bailout payments flowing.

Since the market appears to have already discounted the impeachment trial and traders bought the dip aggressively today, we are still bullish on the general trend. Overhead resistance seems to be evaporating as more and more money continues to flow into the funds. Yesterday alone, TrimTabs said funds received $4 billion in new cash in addition to $3 bln in the last week.

The market continues to be driven by forecasts that Asia is starting to recover and the Fed is on watch. The PC/Internet boom continues to gain momentum with no end in sight.

Speaking of Internets, if you are like me, you look at the huge gains made every day and wish you had the guts to bet on them yesterday. You have repeated the phrase "they can't go up anymore" every day for the last two months. Don't look now but they just keep gaining speed. AMZN added +20.88 today and +74.25 for the week. CMGI was up +19.25 today, +63.75 for the week. (splits tomorrow) YHOO +29.00 today, +83.06 for the week. BRCM +14.00 today, +52 this week. If the Internets were overpriced last month, last week, then what are they this week?

CSCO is coming home for dinner. They announced a new push to put their technology into every home to deliver voice and data. The Internet giant is now pressing into the biggest market of all. Set a new 52 week high, again.

The Airtouch saga just keeps getting better. News that WCOM and now a German company are preparing a bid for ATI just keeps pushing the price upward. The results of this bidding war may not be known for some time but the $95 Vodaphone bid may not be the winner. Some analysts think it will take over $100 to get the prize.

Several earnings warnings hit the street today but had no impact on the market as a whole. J.C. Penny and Borders Group were the culprits. Holding up the retail sector with stronger sales were Walmart +9.4%, Dayton Hudson +6.5%, Kmart +4.2%.

This was the fifth record close in a row for the Nasdaq and using the same analogy as the Internet stocks, "it can't go up much longer". We are due for a Nasdaq correction and Friday would be the perfect day. After the HUGE Internet and tech stock rises this week there will be a strong reluctance to leave these profits on the table over the weekend. If we do get a pullback then look at it as an opportunity to start some new tech positions.

The "buy the dip" mentality is still alive and well. This is good news of a continued rally. When traders quit buying the dips we will need to worry. Until then keep your stops close on Friday and don't worry about getting taken out for a profit. S&P futures are down about -1.50 at 8:PM ET.

Good Luck

Jim Brown

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