Prime Stock Advisory Letter for December 14th, 1998

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Today's Comments:  The overall market finished Friday mixed as measured by the major market indices of the Dow Jones Industrial Average 'INDU', the S&P 500 'SPX',  and the S&P 100 'OEX'.  The Dow Jones Industrial Average 'INDU' was slightly lower,  and the OEX & SPX where slightly higher.  In my opinion the Dow Jones Industrial Average 'INDU' continues to be the market leader of the major market indices.  In addition to this we received a sell signal on the Morgan Stanley High Tech Index 'MSH',  and the CBOE Technology Index 'TXX'.  We received a Buy Signal on the Thirty Year Bond Index 'TYX'.  The move upwards in interest rates is not a positive development for the market on a short term basis.  The overall market was significantly lower during the day until a late day rally pushed it higher.  In my opinion this late day rally was the result of short covering and not a turn in market sentiment.  On Friday,  there was strength in the Healthcare,  High Tech,  and Retail Indices.  There was weakness in the Biotech,  Cyclical,  Transportation, Telecommunication, Financial,  and Commodity based indices.  As this indicates the rally was rather narrow in its focus.  The recent upward trend of the market has been clearly broken.  After a very impressive move upwards the market is in the process of under going a correction.  Overall the most active issues say heavy volume to the downside on Friday, and the majority of the stocks to gap open on Friday gapped to the downside.  This week is options expiration week.  It is also "Triple Witching" expiration.  The Bottom Line:  The market should move lower.

Company:   AG Edwards, Inc.      Symbol: 'AGE'       Closing Price: $33.875/share.
YH: $48.69     YL: $22.625       EPS: $3.00     P/E: 11.2    Forecasted EPS: $2.98
Dividend: $0.56     Yield:1.65%    Ex Dividend: 12/02/98
Price Targets:  $30.625 & then $25.125      Upside Stop: $35.875
Options Recommendation: December 35 Puts,  Symbol 'AGEXG' @ $1.625/contract.

Company Description: This company is a major brokerage firm.

Recent News:  11/30  Brokerage firms move with market and merger fever.

Our Analysis: AG Edwards is a component of the Amex Broker/Dealer Index 'XBD',  which I have rated as moving lower from its current levels.  The shares of 'AGE' gapped lower on the open of trading on Friday.  They finished the day by closing below a key support level on heavier than normal trading volume.  The shares of 'AGE' should continue to move lower and test $30.625/share,  the point from which they gapped higher in mid October of this year.  If they close below that level then they should continue to move lower and test $25.125/share,  the point from which they gapped higher in early October of this year.  Brokerage stocks tend to move with the overall stock market,  which is currently moving lower.

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