January 26th, 2003

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The overall market moved sharply lower on Friday. And from the looks of things it is likely to continue, at least for a little while. In speaking with people on Friday, the often cited reason for the market downturn is the increased likelihood of war with Iraq. Personally, I don't buy it. I do not think the chances of war with Iraq has increased dramatically in the last week. I think they are the same as they have always been, pretty much a sure thing. I don't think anyone seriously thought that Saddam Hussein would comply with the U.N. resolutions. What has changed, is that our supposed allies are pursuing their own separate agendas which primarily is either focussed on short term money into their own pockets (i.e.. Economies) or maintaining their own authoritative regimes. I have heard absolutely nothing from them that speaks of the protection of innocent people from terrorism or ending the suffering of the Iraqi people. What I think is impacting the market, is the fact that trade with our allies will suffer if they are not supportive of the upcoming war with Iraq.

General Electric (GE) closed Friday at $23.06 In doing so it broke through support at $23.60 that was established in mid-November. I have been watching GE since the current market began its pullback for an opportunity to sell either the $22.50 or $25.00 February Puts. Friday the Feb. $22.50 puts closed at $0.75 and the $25.00 Puts closed at $2.20 I am expecting GE to continue to move lower and test $22.60, the point from which it gapped higher in early October of last year. If it closes below this level then I would expect GE to test $22.00 per share. If GE reaches $22.60 per share and the February $22.50 Puts are trading above $1.25 per contract then I would look to sell the February $22.50 Puts to generate cash and possibly acquire GE with a cost basis of $21.25/share.

This would be an opportunity to acquire GE at a price not seen since late 1997. On the other hand, if the price of GE rises then the puts can be bought back or allowed to expire worthless. Something to defiantly be considered if the February $25 Puts are sold, since I consider them to be more of a trading opportunity and less of an acquisition method.


The Dow Jones Industrial Average:

The Dow Jones Industrial Average closed Friday at 8,131.01 down 238.46 points. The Dow Jones Industrial Average broke through a couple of levels of support since the Sell Signal was generated on January 16th. The Dow Jones should continue to move lower and test 8,043.63 In looking at the chart of the Dow Jones Industrial Average, the is not a pattern of multiple points of support established to provide a clear indication as to where the current downward trend will find support. There are a couple of minor points of support near the 8,000 level. Otherwise there is not a clear connection between the couple points of support at lower levels. The Bottom Line: I expect the Dow to test the 8,000 level.

The S&P 500:

The S&P 500 closed Friday at 861.40 down 25.94 points. The S&P 500 should continue to move lower and test 854.95 This is a minor level of support in my opinion and the odds are that the S&P 500 will continue to move lower and fill the gap at 841.44 that was created when the index gapped higher on October 15th of last year.

The NASDAQ 100 (NDX)

The NASDAQ 100 (NDX) closed Friday @ 996.18 down 36.49 points. I am expecting the NDX to continue to move lower and test 980.36 and then 972.48 In looking at the chart of the NDX today, it occurred to me that there are numerous gaps all over the place. Therefore, it's reasonable to expect that the NDX will eventually move lower and fill those gaps. In short this index isn't out of the woods yet.

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