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Market Wrap

Everyone is looking for direction?

HAVING TROUBLE PRINTING?
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2-10-99 High Low Volume Advances Decline DOW 9177.31 + 44.28 9183.49 9099.04 723,101k 1,170 1,822 Nasdaq 2309.50 - 1.29 2338.15 2289.90 917,102k 1,577 2,376 S&P-100 612.43 + 5.91 614.27 605.45 Totals 2,747 4,198 S&P-500 1223.55 + 7.41 1226.78 1211.89 39.5% 60.5% $RUT 397.96 - 5.17 403.13 396.95 $TRAN 3119.20 - 35.94 3156.83 3101.56 VIX 31.44 - 1.07 34.09 31.08 Put/Call Ratio .67

Everyone is looking for direction?

At least that seemed to be the mantra of the day today for all of the talking heads on T.V. Everyone appeared to be looking for news to drive the market one way or the other when there was none to be found. What they did discover was a handful of mixed signals tugging the market both directions. If market followers looked overseas for some indication of market direction, all they found was more of the same. Worldwide markets were mixed throughout their respective regions; but Paris, London, and Germany all closed lower while Brazil and Columbia both closed higher today.

Many of the leaders today were the maimed and injured making a small recovery from Tuesday's losses. The Internets were mixed today while traders continued to punish LCOS for accepting a deal from USA Networks. Investors feel that if LCOS is willing to sell themselves for only a 2% premium then maybe these Internet stocks ARE over valued. No kidding! However, in an article describing the general atmosphere at the Goldman Sachs tech conference in New York, Roger McNamee of Integral Partners, was quoted about the general quandary most institutional investors felt for the Internet sector. He said, "80% of these stocks will be $2 to $5 stocks in two years. The other 20% may be worth ten times what they are now." He may be right. Many of his colleagues are waiting to see some firm consolidation.

Good news that might lift the struggling Internet sector was CNET's earnings blowout. They announced $.18 for the quarter beating the street by 8 cents. On top of the strong numbers, CNET announced a 2:1 stock split. While not on the Nasdaq, Internet blue-chip, AOL was full of good news today. It looks like AOL may have found a bottom in the low 140s and closed almost 9 points off its lows after releasing news that they signed a large marketing deal with Columbia House. After the bell, more good news was released concerning the AT&T's planned use for their soon to be acquired cable networks and Internet access. AOL (and the rest of the ISP community) was concerned and willing to go to court to force AT&T not to monopolize their broadband cable access to the Internet. This is a major positive for AOL and should drive the price up tomorrow. In addition to CNET and AOL, the Prodigy IPO is set for tomorrow and they have already sold 8 million shares at $15 raising $120 mln for the company. Why do we care about this over priced, over valued Internet sector? Because this volatile industry group has become some sort of a mascot for the Nasdaq. If the Internets can recover, then the turn around in the Nasdaq might happen sooner (or so the train of thought goes).

Long term the Internets do need a shake out as traders look for that "20%" to invest in. What we are seeing this week may be part of that process. We do feel confident that AOL will be one of that "20%".

Other market shaping news was found across both coasts today. In Germany, the Xetra DAX index slipped for its 3rd consecutive day. However, traders felt a bottom was near and hopes were growing that the European Central Bank might lower interest rates after reports showed German exports were down 2.7% for December. Yet investors felt more concerned about a possible rise in rates in the U.S. Traders also reacted to rumors that Japan might cut interest rates. This would also be a boost for U.S. markets as the urge to repatriate funds fights against a stronger incentive to keep them abroad. The Bank of Japan policy makers are expected to meet this Friday.

Bringing the focus closer to home, news that several Republican senators will not vote to convict Clinton is quickly deflating any momentum still left for the GOP's trial. Senate leaders hope to vote on the charges by 5:00 pm ET tomorrow. Again, while most everyone already knows the outcome (and the market has probably already figured this development in), actually ending the trial would be another boost to push the markets positive again.

So how do we interpret today's market movement into a plan for the rest of the week? The Dow managed to close up +44.28 points to 9177.31 despite the fact that MO was down almost 4 points (equal to -16 points on the Dow). The fact that the Dow held 9100 early (only dipping to 9099) and then held 9120 after testing it several times today was strong. Add to that the end of the day rally and we are +78 points off the lows and only -6 from the high of the day.

The Nasdaq's performance was also encouraging. Closing the day at 2309.50, the Nasdaq only lost 1.29. To close above 2300 after dipping to 2289.90 is a strong plus. If you look at a chart, the Nasdaq spent most of the day in a 15 point trading range and finished on strong up ticks. The drop from 2365 yesterday to 2290 today may be enough to satisfy the market. If the sell off is over, tomorrow may be the beginning of another rally.

Volume is still a factor as the trading on the exchanges remains low. Only 723 mln for the NYSE and 917 mln for the Nasdaq. There was no real selling today. The market just suffered a lack of buyers. What might get the market moving is indications that shorts were starting to cover due to the strong oversold conditions developing.

We are still concerned about the market internals. They remain negative with the combined NYSE/Nasdaq advances lost to decliners 2747 to 4198. However, this is an improvement over yesterday! We are not suggesting anyone jump back into the water until we see advancers beating decliners AND see the advancing numbers increasing throughout the trading day. The broader markets will continue to struggle if the RUT doesn't stop its downward spiral.

This is definitely still a time of "adult swim" and we recommend remaining on the sides of the pool until the bears stop making waves. Tomorrow everyone will be watching the WCOM earnings numbers for "direction".

Good luck,

Kimo,

assistant editor.

P.S. Anyone attending the Broker chat session tonight can send in their comments and suggestions to: Contact Support

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