Typically, this occurs only with individual stocks when a large open option position will "pin" the stock price to a particular option strike price. Big players do some simple math and determine it is economical to spend money to prevent a stock from going up or down, thereby preserving their profits on an option play.

What is unusual this time is the pinning action is affecting the whole market. This is a direct result of the bearish actions of institutions the week of 9/17. So many institutions bet against the market that week by going long put options it created a huge overhead resistance point.

Once the overhead resistance is gone when everything expires on 10/19 and is cleaned up during the first part of the trading day on 10/22, the market should be able to move more freely. Many people are expecting the market to move lower and retest the September lows. We would seriously doubt that will happen for one simple fact: outperformance worries.

The institutions that move the markets are locked into a battle with one another. Those who outperform their competitor get more money. More money means more personal wealth. They don't even have to outperform the market -- just each other. There were a handful of smart people who did like we advised over on NymbleInvestor.com and bought the week of 9/17. Their performance is way up over the people who sold -- perhaps even enough to really make their entire year in the span of 2-3 weeks. Now their competitors have to play catch up. They cannot risk missing the next off-the-bottom bounce because nearly everyone expects it will be the last such move this year.

An increasing number of people are coming around to our way of thinking (which we first elucidated pre- 9/11) the bear market has been broken. Trading the week of 9/17 should have been enough to break the back of the bear market at least for significant further declines. We would consider the worst case scenario to be an extended period of bumping along the bottom as the markets feel out the economic and geopolitical situation. We see the 19-month trend of broad underperformance of equities ending.

Such flat trading boosts the performance of fundamental analysis and stock picking and detracts from the performance of momentum investing. While the NIBM Team has an excellent track record as momentum investors (see NymbleInvestor.com's Performance section for more information), we firmly believe the kind of deep sector analysis we are doing here at NIBM/BiotechMonthly.com is the key to outperformance over the long term.

Long term equity investors who have been sitting in cash should consider placing 10-15% of cash reserves in the market at these levels. The balance of cash should be parceled into the market after more direction is seen post 10/19 and as the economy begins to show some signs of resiliency through the end of the year. Biotechnology is a good place for money because of the beginning of the medical and scientific conference season. Contrarians might try discount retailers given everyone believes Christmas will be terrible this year even though surveys have shown most Americans are planning to spend the holidays with family -- and what American goes to a family gathering without gifts of some kind?

New accounting rules going into effect on January 1st will give the appearance of much higher earnings for acquisitive corporations because of changes regarding goodwill amortization. However, one-time charges against goodwill for "asset impairment" will rise so investors choosing to play this game will have to choose wisely. Focusing on companies with a history of successful acquisitions where the acquired companies have kept their value to the purchaser will provide the most benefit. All but the largest biotech companies will be immune to this phenomenon, but the overall market will certainly feel its effect.

Long-range, we expect 2002 to be an excellent year for biotech stocks -- especially development-stage biotech stocks. While gains may not be as outsized as in 2000, the explosion of Phase III trials in 2000 and 2001 should be felt in an explosion of approvals in 2002 -- including the FDA approval of the first cancer vaccine products. One major worry is the increase in the time between submission and FDA approval which has recently moved from 12 months to over 18 months. A continuation of that pattern would be harmful to the sector. The swift appointment of an FDA Commissioner by President Bush would likely help matters and provide a boost to the sector.