Option Investor
Market Wrap

So close! 10,001.50 only nine minutes before the close.

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        3-18-99           High     Low    Volume  Advances Decline
DOW     9997.60 +118.20 10001.50  9845.83  831,975k  1,559   1,353
Nasdaq  2462.96 + 33.99  2463.01  2423.54  940,415k  1,926   1,993 
S&P-100  659.25 +  8.37   659.71   649.41   Totals   3,485   3,346
S&P-500 1316.55 + 18.73  1317.41  1294.74            51.0%   49.0%
$RUT     399.55 +  1.12   399.92   398.41
$TRAN   3433.07 + 96.28  3450.07  3328.10
VIX       25.95 -  1.33    27.50    25.91
Put/Call Ratio      .58

So close! 10,001.50 only nine minutes before the close.

Actually the Dow briefly broke 10,000 again at the close but settled just slightly under the magic number about two minutes later. This is caused by reporting of trades in progress at the moment the bell rings.

The rally was in doubt after a brief drop at the open to 9845 but after 11:00 the market was strongly focused on the goal. The Dow stocks that helped today were Merck (MRK) AND Wal-Mart (WMT) which both set new highs. Merrill Lynch, Citicorp, JP Morgan and American Express were also strongly higher. AXP surged to a new high with a +$6.50. When all was said and done we only needed one Dow stock to post an additional $.69 gain at the close to push the Dow over 10,000. IBM and HWP proved a drag today as IBM lost -$1.06 and HWP -$.63. Actually this was a long way from the intraday lows for each of IBM -$5.75 and HWP -$3.81. Together they accounted for -43.02 Dow points at their lows. The tech drag was prompted by strong rumors that IBM would prewarn of an earnings shortfall. Some think that IBM is holding off until after the Dow 10K event because of the impact it would have on the DOW.

Every sector except PC hardware was strong today. Transports even rallied +96 points in spite of the AMR earnings warning today. AMR said they suffered over -$200 mln in losses from the pilots strike. After the announcement AMR dropped but then turned around and closed up +4.63. Federal Express announced earnings that beat estimates today and announced a 2:1 split. They led the transports with a +$5.19 even in the face of oil rising over $15 a bbl.

The bullishness is running rampant. The bears are disappearing back into the woods. A rainbow must be hovering over Wall Street. If the outlook in the press was any better the Titanic would be floating back to the top any day now. With all the euphoria it would not be politically correct to say anything negative about the market tonight. Sorry, I guess political correctness does not run run through the office here. I am still concerned about the rampant bullishness. I do believe the economy is great, the global market is improving, interest rates are dropping.... You know my bullish refrain. I would love to pile into the market but the internals are still a problem. Granted they were better today and may even get better next week. Advancers actually beat decliners for a change 3485 to 3346. A very slim margin of only 139 issues. The Dow was up +118 but we only had 139 more advancers??

The good news, and maybe we saw the light today, was the broad sector rally. Drugs, banks, brokerages, manufacturing, etc. The tide may have turned in our favor and tomorrow may be the market turning point. If we close above 10,000 tomorrow, and it looks very likely, then the momentum may convince the cash on the sidelines to climb onboard or miss the train. There is still a lot of concern that the selling pressure will mount as we cross the 10K line but others may see a close over 10K as confirmation of a spring rally.

The wildcard here is options expiration Friday. The bias for a positive week was this week but the next week is negative. Something like 13 of the last 15 triple-witching expiration cycles have been positive for the week of expiration but down the week after. However, market pundits feel that if we can close above 10K this week it might give us enough momentum to keep it going next week too.

Actually I am glad to see we did not drop after the first 10K event and fall back substantially. Also there were no sell programs triggered by the 10K break today. The fact that we have hovered near 10K all week is strongly bullish. If 10K is resistance, and most agree it is, then we are slowly eating away at it and the longer we hover here the weaker it will become. The drop to 9850 today was immediately met with strong buying, much more than analysts expected. It looks like the profit taking from last weeks +700 point run may be happening on an intraday basis. The sector rotations have been in full swing but no one sector has been overly strong. If I can be permitted to speak out of both sides of my mouth, the internals are still not good but are improving slightly. The sentiment is rampantly bullish. While I am cautious about the internals we could actually be at a major breakout point. Only time will tell.

The Nikkei soared over +315 in early trading tonight and other world markets are likely to follow suit after the Dow closed just under the 10K line. The party is likely to break out in earnest tomorrow as the sentiment powers us forward. The earnings warning by MMM today did not sober anybody up and at this point even an IBM warning might not stop this express train. S&P futures are up over +2.20 at 8:00 and there is no rain in the forecast. If we can overcome the fear of weekend darkness on Friday afternoon we "could" be off to the races. "Could" is still the operative word. Be careful about starting new positions at this level. I did not say "don't", I said be careful and be prepared to bail if the emotion fizzles after 10K. There is still a lot of profit taking potential here and things tend to drop faster than they rise.

Sell too soon!

Jim Brown
Editor

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