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Market Wrap

Fourth Time's A Charm

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        12-29-99           High     Low     Volume   Advance Decline
DOW    11484.70 +   8.00 11543.10 11425.60   574,543k 1,989  1,095
Nasdaq  4041.46 +  69.35  4041.54  3987.88 1,150,170k 2,455  1,800
S&P-100  793.64 -   1.07   797.69   791.85    Totals  4,444  2,895
S&P-500 1463.46 +   5.80  1467.47  1458.74            60.5%  39.5%
$RUT     497.01 +   8.53   497.01   488.48
$TRAN   2941.99 -   2.52  2951.81  2936.52
VIX       24.37 +   0.68    24.92    24.08
Put/Call Ratio       .51

Fourth Time's A Charm

You know what they say, fourth time's a charm. For the fourth consecutive day, the Nasdaq traded above 4000, but this time it was able to hold its gains. This incredible tech-heavy index is now up over 83% year-to-date. Just think, to start the year the Nasdaq was barely over 2200 and most analysts were hoping for some gains in the first half of the year before a dreaded Y2K sell-off in the second half. Still, no one is complaining. It is one of those rare instances where it feels great if you were wrong in predicting the markets. This is a prime example of why you play the trend and not your emotions. Today's record close for the Nasdaq was the 60th record of the year and if the year ended today, it would be the strongest one-year return for any U.S. market in history.

Let's give credit where credit is due. The S&P 500, Dow, and even the Russell 2000 also closed at record highs. The record close for the Russell was its first in over a year. So despite the lack of volume, stocks have been drifting higher. Here are the closings for the four record indices. Nasdaq 4041.46 +69.35, Dow 11484.66 +7.95, S&P 1463.46 +5.80 and the Russell finished at 497.01 +8.53. (The Russell has endured the tax loss selling pretty well and may be an area to watch for the January effect.) Volume was light though, make no mistake. This was more of a lack of sellers than an influx of buyers. The NYSE turned in 573 mln and the Nasdaq traded 1.15 bln, which is right in line with what you would expect from the week after Christmas and before New Years. Let's face it, people are out and about setting up for their holiday celebration.

Here is the old visual confirmation of today's action...

The market advance was confirmed by a lower bond yield. The 30-year stood at 6.44% by the close today. That is down from the 6.47% of yesterday. Advancers also helped by trouncing decliners by a 2-to-1 margin on the NYSE. The VIX is in check at 24.37. It has been awhile since we've seen strong internals like that. The little sell-off late in the day on the Dow was attributed to investors selling some cyclical stocks.

The driver in today's market was QCOM, once again. The fire was lit under Qualcomm today when an analyst from Paine Webber set a $1000 price target for the stock. Sure, why not? It is a nice even number. Valuations were tossed out the window a long time ago. This market is all about momentum now. Or at least that is what some would have you believe! It's hard to rationalize how some of these numbers are being crunched. In my opinion, I would prefer if they just came out and said "we like the stock a whole lot and aren't planning on selling any time soon." Good enough for me, but these astronomical numbers make it easy to become emotionally involved. Remember, don't enter this play without a rock solid game plan. You don't want to be the one left holding the bag when reality sets in. QCOM closed at 656, up $153 today and was already up to 696 in after- hours trading.

Other movers included DCLK. They jumped $28.19 on news that DLJ analyst Jamie Kiggin revised his price target of $300, up from $190. The Internet sector was a happening place once again with the usual suspects showing the big gains. VRSN was +12.19, YHOO +13.44, JDSU +14.19, and INKT +8.88. Even NOK took off late in the day on big volume. The stock spiked up nearly $15 in the final hour.

The online brokers got a push today from Charles Schwab. The discount brokerage house told investors that it expects record results for the 4th quarter, a positive pre-warning of sorts. They said December is shaping up to be their busiest month yet. SCH was up $5.50 to $39.81. In fact, the entire sector pushed higher on the news. EGRP +2.75, AMTD +2.88, and NITE +2.56. The one loser of the day was ANTC, who revealed insight to their 4th quarter as well. Unfortunately the news wasn't as good as Schwab's. Antec Corp said they would not meet expectations of $0.30 cents per share. The stock fell $8 to $29.94.

Commerce One gave us the example of why buying up at lofty levels can prove hazardous to your portfolio's health. CMRC was up to $330 at 2pm on Tuesday before rolling over to close under $210 today. There was a lot of momentum players that may not have understood the situation. CMRC has a huge chunk of shares that are past the lock up period and are now available to sell. This has pressured that stock. CNBC reported some confusing news on this story and stock went on a roller coaster ride which obviously derailed today.

One pre-market report to tell you about for tomorrow. Leading Indicators for the month of November will be released. The expectations are for an 0.2% increase during the month. Other than that it will be pretty quiet on the economic front. On Friday we will see the Chicago Purchasing Managers report and preliminary 4th quarter GDP numbers. That should liven things up a little, especially if the numbers are not what is expected. You can imagine what that may do to a thinly traded market.

So what's your prediction for next year? Are you more bullish than the you were heading into 1999? Things do look good in what some are calling the "new economy", but I still cringe to think that I just wrote the Nasdaq 3000 Market Wrap last month. That's right, November 3rd. Who would have guessed that it was such a short journey to 4000? So enjoy this market euphoria while you can. There are definitely profits to be made here. In truth, we are starting to see a lot of window dressing that is typical of this time of year. The mutual funds want to show only the brightest of up and coming stocks in their portfolio, especially since it is becoming more and more difficult to beat the indices. This should keep the markets trending up for the rest of the week. If there are any Y2K sellers left, they are probably waiting for the final hour on Friday to catch any potential upside.

One final note, the average P.E. on the Nasdaq is at 140. Even if you only account for the profitable companies, the P.E. is above 40. These are just some more examples of astronomical numbers. Don't get lulled into thinking this can continue indefinitely and sell too soon.

Ryan Nelson
Asst. Editor

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