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Market Wrap

The shorts covered but the election is not over!

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        11-14-2000        High      Low     Volume Advance/Decline
DJIA    10681.10 +163.80 10728.40 10528.30 1.12 bln   1839/ 976
NASDAQ   3138.27 +171.55  3145.30  3059.88 1.79 bln   2581/1373
S&P 100   729.67 + 17.51   734.67   718.62   totals   4420/2349
S&P 500  1382.95 + 31.69  1390.06  1361.66           65.3%/34.7%
RUS 2000  486.91 + 10.36   486.93   476.53
DJ TRANS 2823.08 + 49.87  2826.19  2773.21
VIX        30.24 -  1.65    31.09    29.09
Put/Call Ratio      0.68

It looks good on paper but how do you play a +100 point gap open? You don't. Many of the big gains today were only made by those who speculated on the dip to 2860 on Monday. If you did you profited well but if you did not buy the dip then you probably sat on the sidelines wondering if the bounce was real or just another election trap. With the Nasdaq down -620 points on Monday's bottom from last weeks high there was a really good chance for a relief rally even if the judge today had called for a "do over election." We were just too over sold. The bounce on Monday scared the shorts and they bought the open today trying to cover. This is not a new event. The decision by the Florida judge today was not earth shaking but the Dow soared to an over +220 point gain while it was being announced. Sorry folks but saying "the deadline for votes is 5:PM unless you have a good reason for not getting them done by then" is not a decision. In any event we will not know the final outcome until all the absentee votes are tallied and announced on Saturday. With one county's recount taking 90+ votes off the Bush lead it puts the difference at only about +300 out of six million votes. With multiple counties now claiming they will also recount, there is not a winner and we are not close to a winner, period. Still we will take any market bounce and put it into the winning column and contrary to the election status, nobody can take it back.

I was encouraged by the renewed focus on actual stock news today with upgrades, downgrades and earnings taking center stage. Wow, a breath of fresh air! Retail Sales came in stronger than expected showing that consumers are shaking off the higher oil prices and the lower stock market and still spending their wages. Wal-Mart announced earnings of $.31 and met analyst estimates and Home Depot also met analyst's reduced estimates. Not exactly barn burners but the sector is definitely not dead on arrival at the fourth quarter. There is significant expectations that the 4Q will be a shot in the arm for many.

If you are in need of a sugar high you could run out and pick up a dozen Krispy Kreme donuts and help fuel not only your sugar fix but also the dueling analysts war. Merrill Lynch initiated coverage on KREM today with an "intermediate term - reduce", "long term accumulate." Calling KREM a fad and poorly managed Merrill suggested trimming holdings. Other analysts came to their defense saying the company had been around 60 years and hardly qualified as a fad and they were on track to open 28 new stores this year. KREM tripled earnings on a +40% increase in revenue last quarter and a Deutsche Bank Alex. Brown analyst said this "fad" has a lot of legs. While not a tech stock much of the investing public can relate to KREM and while they may not own a SUNW server or buy software from BVSN they can really sink their teeth in Krispy Kreme. This has powered the stock to a high of $110 since their IPO at $29. This has caused concern on Wall Street since the business is so simple that even a child or a broker can understand the business plan.

Other major news events today included NTAP which announced earnings of $.10 per share which was double the prior years quarter. This beat estimates by a penny with sales that more than doubled. Sounds good to me but one analyst said it appeared their rate of growth was slowing (sound familiar) and NTAP dropped almost -$10 in after hours trading. On the opposite side of the ledger ADI also announced earnings with $.54 per share compared to $.20 last year. Their revenue also soared +87% to $806 million and said next year revenues could be close to $4 billion. ADI gained almost +$6 in after hours. SCMR also announced a profit of $.02 compared to a loss of -$.02 last year. First quarter revenue soared more than +517% and they said they expected it to grow more than 200% again in 2001. SCMR gained more than $8 in after hours. BEAS also announced earnings of $.07 and beat estimates by a penny. The growth comments were not as glowing as SCMR or ADI and BEAS was flat in after hours trading.

Other market movers today included Abbey Joseph Cohen who went on record that she was more bullish than ever. Calling the S&P-500 -15% undervalued she said the market was the most attractive it had been all year. She recommended investors boosted their tech holdings to 35% of their total portfolio. Let's see, did she go out on a limb? The Nasdaq hit the low for the year on Monday so "the most attractive it had been all year" was not a major risk statement. With the S&P at 1361 when she made the statement that is -14% under her 1575 target price for "fully valued" that she has been claiming all year. So -15% undervalued appears to be a no brainer also. Abbey, if you are reading this I am not taking aim at you. I actually appreciate you going to bat for us bulls, constantly. I do object to your very carefully scripted interviews with all the catch phrases that allow you to be right if the market moves either way. I guess that comes with being our most visible market bull. With Ralph Acompora and Joe Battaglia getting hammered constantly for wrong calls it is nice to have a bull that picks a target and sticks with it. Just loosen up a little, it will not kill you!

The +171 gain on the Nasdaq today was the tenth largest gain in history but given the -620 point drop you would have expected a giant gain as well. It is the first positive day for the Nasdaq since the election which is one week old today. It seems like months since we sat and watched the returns and tried to guess the results. We are still guessing and billions of words have been spent and billions of dollars have been lost in the market waiting for the outcome and we are really no closer. With the outcome in question until after this weekend the odds of any more huge gains may be slim. Volume was anemic on the Nasdaq with only 1.7 billion shares. No conviction there. The NYSE did better with over 1.1 billion. Advance declines finished positive around 2:1 but the light Nasdaq volume bothers me. Until we see 2.2-2.4 billion shares we will not know if it is for real.

We have a Fed meeting tomorrow and with the big gains today I don't see any way the Fed will cut rates. I was hoping that a continued market in the tank would cause Alan Greenspan to come out of that meeting with an olive branch rate cut to calm the market and ease the crisis. With the gains today I think that is almost impossible. There is no overwhelming reason for him to do it.

The late news from Florida tonight was almost a line in the sand for the Gore campaign. The Secretary of State certified the results reported to her by 5:PM as required by law and there was only an even 300 vote lead for Bush. She said she had issued an ultimatum to the counties trying to recount for the third or fourth time to respond to her by 2:PM EST on Wednesday with a compelling reason of why she should allow them to submit amended returns or those returns would be ignored. By taking a stronger stand than expected the stakes just got higher for the Gore camp. They now have less than 24 hours to press their case. Going to be a lot of midnight oil burned by Democrats tonight. They not only have to find 301 crippled chad votes but enough to overcome the expected Republican lead in the absentee votes as well. With the stalemate crumbling with each passing minute we could actually have a president elect by Monday. That will be freedom day for the market. With no more critical earnings, Fed meetings or election confusion we will only have daylight between us and 2001. We will then be able to rally or fall based solely on the merits of the market and not outside interference. At least that is the way it looks tonight. As long as Murphy's Law is alive and well something unexpected is sure to pop up!

Just after I typed that last line it was announced on CNBC that the Bank of America has filed with the SEC a form that shows they had significant loan losses in the last quarter from a weakening economy. OOPS! Depending on how the market interprets that on Wednesday the financial sector could come under pressure which could hurt the Dow. First Union had already taken a hit today for the same thing. If it becomes an epidemic then look out below.

Good luck and don't buy too soon.

Jim Brown
Editor

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