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Market Wrap

The fourth horsemen of the apocalypse rode into view today.

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2-08-99 High Low Volume Advances Decline DOW 9291.11 - 13.13 9334.88 9209.24 707,593k 1,411 1,558 Nasdaq 2404.92 + 31.30 2414.98 2364.54 883,182k 1,879 2,163 S&P-100 621.70 + 4.03 623.35 614.51 Totals 3,290 3,721 S&P-500 1243.77 + 4.37 1246.71 1231.94 46.9% 53.1% $RUT 411.33 - 1.39 415.69 410.13 $TRAN 3209.25 - 38.41 3250.56 3186.67 VIX 30.43 - .04 32.49 29.61 Put/Call Ratio .52

The fourth horsemen of the apocalypse rode into view today.

Ralph Acompora (Acomporaspan to us) rode out of the darkness this morning and slew the budding rally. After being up strongly at the open the Dow immediately dropped and never returned to positive territory. The highly oversold Nasdaq also dropped back to negative but struggled back to close +31 at the end of the day. Ralph did not really announce any new news, just another restating of his previous warning. Just in case you missed it, last week he said the averages were extended and could drop -5% or more before moving upward again. Today, with the averages having dropped over -5% from the high, he came out of the closet again just to make sure we knew who to attribute the "call" to. I prefer to think of it as "blame" the drop.

Dick McCabe, from Merrill Lynch, took the cue from Ralph and jumped on the down market hoping to make his bearish prophecy come true. His dire predictions see the market falling to as low as 7200.

The other two horsemen, Barton Biggs and Tom Kurlak tried their best last week to dim hopes for a February rally.

Guess what guys?? The market did not drop !! Sure it was weak and choppy on the news, but nothing was different from last week. The base is still here and the Dow only penetrated below 9260 one time and quickly rebounded. We continue to feel there is hope for this market.

We need the three bullish musketeers, Abbey Cohen, Elaine Garzarelli and Joe Battaglia to mount their white horses and charge out into the limelight again. Proclaiming loudly the bullish mantra of low interest, continued growth, liquidity, and recovering global economy, they could turn the tide and send these bears back into hiding.

The choppy day today was on very light volume. The NYSE only traded 700 mln shares (normal 850 mln) and the Nasdaq only traded 883 mln (normal 1,200 mln). Certainly no rush for the exits. Traders attribute the low volume as hope for a rally but waiting for confirmation.

We are up over +50% on the Nasdaq and +35% on the Dow since the Oct 8th low. It is understandable that we could have some continued consolidation here. We have no driving force to move us upward. The earnings parade has slowed and the Fed meeting has passed. Without some good global news or some mega mergers to liven up the market, we could trade in a range for some time. Because the market failed to drop the last few days we feel it may still have legs. People are looking at the market and saying "what is wrong?". There is nothing wrong. The market over the last several years has ebbs and flows every day. It is just that the last 12 months have gotten traders accustomed to 100 point swings, mostly up, on a daily basis. To only move 10-30 points and trade on both sides of zero is like watching paint dry to some new investors. Be patient. I would be perfectly happy to see NORMAL market movement return. I would like to be able to go to sleep at night with open positions without waking up the next day to the futures lock limit down for some new reason.

Remember when there were no Internet stocks to watch. A +$5 move in one day on any stock was a huge move. It caught all the news services and honorable mention on CNBC. With the Internet mania moving stocks +/- $20-30 a day, new investors are spoiled. Trust me, this trend will pass and we will be back to $5 days again.

Don't give up on future market gains here. Just be patient and protect yourself with stop losses in case a new threat shows up on TV tomorrow.

The most positive event for the day was Etrade. I did not get kicked out a single time today. Ameritrade, on the other hand, was down today on server problems. All the Internet brokers traded down today on profit taking.

Good Luck

Jim Brown

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