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Market Wrap

The Books Close on 2003

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     12-31-2003            High     Low     Volume Advance/Decline
DJIA    10453.92 + 28.88 10462.44 10407.04 1.19 bln   1245/1575
NASDAQ   2003.37 -  6.51  2015.23  1996.62 1.54 bln   1285/1831
S&P 100   550.78 +  1.71   550.90   547.53   Totals   2530/3406
S&P 500  1111.92 +  2.28  1112.56  1106.21
RUS 2000  556.91 -  8.56   566.74   556.91
DJ TRANS 3007.05 - 31.10  3034.37  3004.65
VIX        18.31 +  0.63    18.86    17.41
VXO        17.51 +  0.54    17.81    16.93
VXN        24.49 +  1.13    24.76    23.43
Total Volume 3,280M
Total UpVol  1,662M
Total DnVol  1,525M
52wk Highs     819
52wk Lows       16
TRIN          0.76
PUT/CALL      1.25

The Books Close on 2003
By James Brown

It's not every day that the floor traders at the NYSE serenade the TV audience with "Wait till the Sun Shines Nellie" so that must mean one thing. Happy New Year! Wow! It's hard to believe 2003 has come and gone so quickly. The last session of the year was a mild one with low volume and a negative advance-decline line but the Dow managed yet another gain and the NASDAQ managed to close above the 2000 mark. For those market conspiracy traders out there it was no coincidence that the NASDAQ ended the year 2003 by closing at 2003 with a truly last minute spike higher.

Today ends the best year for the markets since 1999. The Dow Jones Industrial Average climbed 25% in 2003. The S&P 500 added 26% and the NASDAQ composite soared a massive 50%. Gains like these have certainly re-ignited interest in stocks but 2004 will have a hard time keeping up with a pace that strong and most analysts are looking for a slow down in the gains. Fortunately, the outlook for 2004 is generally positive.

Market internals were actually mixed. The advance-decline numbers were negative with almost 16 losers for every 12 winners on the NYSE and 18 losers for every 12 winners on the NASDAQ. Up volume did manage to outpace down volume on both exchanges. Total volume was light with just 1.19 billion on the NYSE and 1.5 billion on the NASDAQ.

Chart of the DJIA:

Chart of the NASDAQ:

The big news today was the initial jobless claims report, released early due to the market holiday tomorrow. Economists had been expecting a number close to 350,000 but the markets were surprised with a much-improved figure at 339,000. This is a drop of 15,000 claims from last week's figure (354K). This is the lowest level in jobless claims since January 20th, 2001. More importantly the four-week moving average, which tends to even out any seasonal fluctuations, fell to 355,750, which is the lowest level for the four-week moving average since February 2001. Obviously, this is great news for Wall Street and Main Street as the biggest concern next year is job growth and these declining numbers show a steady improvement in the labor market. Unfortunately, most investors had already packed up for the year and there was no one to respond to the good news.

The decline in the U.S. dollar has been a constant headline for the markets here and abroad and today was no different. The euro rose to an intraday high (and all-time high) of $1.2647 before settling closer to 1.2605. The dollar dropped 20% against the euro in 2003 making it the worst year for the dollar since the euro began trading in 1999. It also happens to be the worst decline in five years for the dollar against the Japanese yen.

The dropping dollar continues to prop up gold prices although gold futures slipped more than $1 to $416 an ounce in Wednesday's session. A declining dollar and geopolitical unrest have pushed gold to a 20% gain in 2003. Some of the more enthusiastic gold bugs are speculating that gold will reach the $500 level by the end of 2004. While that may sound like a wild claim not many would have predicted gold at $415 a year ago. Whatever your stance on the shiny metal it will be a sector to watch next year.

One of today's big news stories was the drop in AmerisourceBergen (ABC). Shares were actually halted midday but not before the stock plummeted below the $60 level and its 200-dma. ABC, America's biggest drug wholesaler, just got a little bit smaller after announcing the loss of a major contract. The $3 billion a year contract with the Department of Veteran Affairs will end this coming March and ABC lowered its earnings guidance for the year. ABC lost the contract to rival distributor McKesson (MCK), who just announced a two-year deal the government agency.

It will be interesting to see where the markets take us on Friday and next week. As Jim has pointed out the historical trends are bullish. Funds usually begin putting their fresh 401K/IRA money to work. The wild card is always a terrorist event. It's become rather surreal to think of the millions of New Year's Eve and New Year's Day partiers celebrating while government helicopters and F16's circle the major events to protect the no-fly zones.

From everyone at our family at OptionInvestor.com to yours we wish you a happy New Year! We're looking forward to a great 2004.

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