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Market Wrap

Out of the blue and into the record books...

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        3-29-99         High     Low     Volume   Advances Decline
DOW    10006.78 +184.54 10040.36 9821.61  748,843k  1,829   1,127
Nasdaq  2492.84 + 73.67 2492.84  2440.81  875,433k  2,174   1,765 
S&P-100  659.47 + 15.79  660.52   643.68   Totals   4,003   2,892
S&P-500 1310.17 + 27.37 1311.76  1282.80            58.1%   41.9%
$RUT     399.76 +  5.84  400.00   393.92
$TRAN   3294.37 + 34.26 3295.14  3258.55
VIX       24.36 -  1.47   25.02    23.62
Put/Call Ratio      .52

Out of the blue and into the record books...

Traders everywhere are scratching their heads. Where did this rally come from? With the war not going well, an earnings warning from Kodak and a Fed meeting on Tuesday, where was the reasoning behind today's assault on the record books? As I have said before, "if you want logic, don't look on Wall Street." The futures were down shortly before the open but we gapped up +80 at the open.

The push this morning came from several sources. News of merger talks between British Petroleum and Atlantic Richfield was the biggest reason. The transaction would be worth $25 billion.

Lucent announced a $1 billion deal with AT&T to supply third generation DigitalPCS TDMA wireless networks.

Amazon announced it was going to start an online auction site to compete with Ebay and others. Amazon is quickly evolving into a web retailer empire and a force to be dealt with in every sector.

Computer Associates agreed to purchase Platinum Technology for three times the $9.88 closing price of PLAT shares on Friday.

Kansas City Southern Industries got a pop on news that is will replace AMP on the S&P 500 index.

Critical Path (CPTH) soared +175% on its first day of trading from an opening of $24 per share to close at $65.88. CPTH provides email hosting for Internet Service Providers.

IBM announced a $400 million deal to manage Dayton Hudson's computer operations.

The point to all this is Wall Street likes to see big mergers and big deals. Traders and investors alike feel this is confirmation of a strong economy and good times ahead.

The close above 10,000 could provide the spark to re-ignite investor interest in the market. The rally remains a very narrow attempt. 63% of the stocks on the NYSE are actually down for the year. 47% of the S&P and 55% of the Nasdaq are down as well. The Nasdaq itself is only 20 points away from its all time high.

When everybody was expecting the leaders to eventually weaken and sell off with the rest of the market the opposite has happened. Now the conventional wisdom is moving to expecting the broader market to catch fire as well. Everybody like to ride a winner. The market has taken everything possible in stride in the last three months and kept on climbing. If we do not get a rate increase at the Fed meeting tomorrow then there should not be any further obstacles to a renewed rally. The housing report this morning came in weaker than expected which was good for the inflation picture and the jobs numbers on Friday may also be economically pleasing.

The key of course will be holding above 10,000. If we sell off again quickly then investors will lose interest again. Last week over $4 billion moved out of stock funds as investors grew cautious about the markets staying power. Continued closes above 10k should bring these funds back into the market.

The end of quarterly window dressing is probably shifting into high gear as the Dow flirts with records. Every fund will want to impress clients with their involvement in this winning market.

Market breadth was good today but it needs continue to provide confirmation.

With all the Dow 10K pessimism, yes pessimism, we could actually be at a breakout point. Many analysts have been making a big deal about 10K being a market top. Many have been advising investors to take profits at this level. The pundits have been calling it a barrier. If we pass this barrier then traders that went short the last four times we hit 10K will have to cover or get run over by the train. Cash on the sidelines will see the short covering rally and jump in to avoid being left at the station. Yes, market breadth has been bad but nothing turns around a market faster than bears in trouble. Remember, don't fight the market. Run with it. Play the cards we are dealt until the deal turns cold.

Keep those trailing stops tight and buckle your seat belts. If the booster ignites here it could be a great ride.

Just remember where we were three days ago.....9650.

Good Luck

Jim Brown Editor

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