Option Investor
Market Wrap

The market choked on Coke and took a pause to refresh.

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        3-30-99          High     Low     Volume   Advances Decline
DOW     9913.26 - 93.52 10003.84  9874.41  731,295k  1,245   1,718
Nasdaq  2480.29 - 12.55  2506.79  2477.62  897,122k  1,692   2,239 
S&P-100  655.98 -  3.49   660.22   651.43   Totals   2,937   3,957
S&P-500 1300.75 -  9.42  1310.80  1295.53            42.6%   57.4%
$RUT     398.78 -   .98   400.55   397.92
$TRAN   3367.80 + 73.43  3380.26  3290.21
VIX       23.74 -   .62    26.24    23.38
Put/Call Ratio      .59

The market choked on Coke and took a pause to refresh.

An earnings warning from Coke this morning put fear of reality back into traders. Coke said that it was suffering a decline in world wide sales that would impact their future earnings. Things are not well in the global economy.

Gillette suffered lowered earnings estimates by at least one analyst today as a direct result of lowered global sales estimates.

Meanwhile, back at the ranch, the Marlboro man was bucked off and landed in world of trouble. Phillip Morris was hit with an $81 million judgement in a case brought by the family of a man who died from cancer after smoking Marlboros for years. This followed another +$100 million verdict in recent weeks. MO fell -$3.44 in heavy trading. This accounted for -15 Dow points.

The Nasdaq tried vainly all day to surpass the previous high of 2510. It came close with an intraday high today of 2506. The Internet stocks led by Amazon helped hold it up in spite of the Dow's problems until the last few minutes before closing.

The Federal Reserve decided at the FOMC meeting today to leave interest rates unchanged for the time being. More important their bias toward interest rates has remained neutral since November. A change in bias to a raising stance would precede an actual rate hike in most circumstances. Their next chance to cause trouble will come at the May meeting. The fall in the Dow today could also be a classic "buy the rumor, sell the fact". Since nobody expected a rate increase today there was not a possibility of good news, only bad.

AOL was the recipient of an upgrade today as Paine Weber praised them and raised his price target to a whopping $215. Citing their aggressive marketing practices overseas and soaring market share in new markets he feels they are undervalued at present. AOL gained +12.13 to $144.50, only a stock split announcement and split run away from $215.

Is the pullback today just profit taking or a new direction change? Here is the obligatory reference to the advance/decline line, negative again today by 4:6. After closing above 10,000 yesterday the "cash in profits now" crowd was out in force. I stated on Monday that the key was to hold above 10K which of course we did not do. I think there were many pockets of strength in spite of the Dow drop. IBM, GE, DD, MRK and UTX all finished positive. WMT and Citigroup were unchanged and several other Dow stocks were only down fractionally. In the Nasdaq the big four held the line. Dell +.44, MSFT +.63, CSCO -.06, INTC was unchanged. No sell off here!

We could go down further but the trend is with us. Tomorrow is the last day of the quarter which is normally up. The two days before Good Friday are normally up. The last two days of the month and first four of the next month are normally up. Sounds like a combination of trends to work in our favor. Today could have just been profit taking and Fed worry which brings up another trend I should mention. The day after a Fed meeting is normally down. All of these are just trends and this does not mean you can count on them. Murphy's law says that the more money you have invested is directly related to the chances of a trend being broken. With the Nasdaq only 30 points away from a new high I view any morning drop as a possible buying opportunity for another quick trade before my exit point on Thursday. I do not plan to hold over the holiday. The next major obstacle is the Non-farm payroll report on Friday. If the employment report comes in too strong the market could react negatively on Monday morning. Also a three day weekend allows for possible negative developments in the war. I would rather be safe than sorry. I will enjoy the weekend better knowing I am in cash.

Speaking of holidays, with the market closed Friday there will be no newsletter on Thursday night. We will publish the normal weekend edition on Saturday.

Good Luck, Sell too soon.

Jim Brown

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