Option Investor
Newsletter

Daily Newsletter, Tuesday, 06/08/1999

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The Option Investor Newsletter         Tuesday  6-08-99
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

Posted online for subscribers at http://www.OptionInvestor.com

Also provided as a service to The Online Investor Advantage

Published three times weekly, Sunday, Tuesday, Thursday evenings.
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        6-08-99          High     Low     Volume   Advances Decline
DOW    10765.64 -143.74 10909.07 10724.17  685,146k  1,131   1,789
Nasdaq  2474.51 - 49.65  2534.48  2472.05  850,934k  1,660   2,251
S&P-100  665.50 - 10.65   676.15   663.02   Totals   2,791   4,040
S&P-500 1317.33 - 17.19  1334.52  1312.93            40.9%   59.1%
$RUT     443.77 -  2.89   447.82   443.41
$TRAN   3424.83 - 57.13  3480.85  3417.78
VIX       23.47 +  0.02    24.45    23.20
Put/Call Ratio      .56
************************************************************

Into every pocket, some profit must settle.

Straight from last nights Market Wrap, we bring you the 
following reminder, "though this doesn't negate the trend, 
we have had 4 solid days of gains and may get a profit 
taking day or two along the way."  To this we add another 
tidbit from last night's closing comments, "we stress 
again, trade only when it is profitable to do so."  That 
said, you should have found it difficult to start a new 
play today (unless it was a put) and stayed firmly planted 
on the side of the road, out of harm's way.  Remember, 
first and foremost, our job is to protect our trading 
capital.  Missed money is always better than lost money.  
While we're at it, and probably didn't consciously think of 
it anytime today, part of Trading Rule #10 applies.  Here 
it is in case you missed it: When in doubt, stay out.  
That's pretty simple, right?  Yes, but it's also difficult 
to do if you depend on trading for a livelihood, especially 
in a sideways market.  We don't mean to admonish anyone.  
It's just an important reminder that down days happen and 
we shouldn't force a play when the trend is not our friend.  
Now, let's get down to business.

To begin with, the market started down from the open on a 
slightly sour note, as another airline (US Air) issued an 
earnings warning citing lighter traffic and greater 
expenses, which followed a similar warning last Friday from 
United.  Not only that, Donaldson, Lufkin, and Jenrette 
offered negative comments on many of the box makers, 
including DELL, CPQ, IBM, and HWP citing a corporate IT 
survey that suggested corporations would prescribe a 
lockdown on purchasing new equipment in anticipation of 
Y2K, which will likely affect earnings.  Doh!  Jeez Marge, 
why didn't you tell us sooner?  Pity the poor Compaq 
investor who was also slapped in the face by Piper Jaffrey 
analyst, Ashok Kamur's comments that CPQ could report a 
loss for the quarter, while most analysts still have 
earnings estimates pegged at $0.22.  He further stated that 
CPQ had about 8 weeks worth of over-priced, obsolete 
inventory in the channel, then added that CPQ could fall to 
the "mid-teens" if they miss estimates.  OUCH!  Oh, did we 
mention that a new survey released today puts Dell as the 
#1 business market share leader ahead of IBM and a now #3 
CPQ?  Some days, it just doesn't pay to get out of bed.  
Even in the pessimism, we can all take some solace in that 
the sector has not seen a slowdown in unit growth (though 
maybe not revenue growth), especially from Dell, who 
reports great results so far this quarter.

The Internets like AMZN, YHOO, AOL and CMGI all gave back 
yesterday's gains too, despite that AMZN announced entering 
the digital music fray, currently led by CDNow.  Talking 
heads on CNBC couldn't help pointing out that "every trader 
we talk to is expecting a triple bottom" in this sector.  
That's technical jargon for "we expect another dip before 
it goes up."  While that is certainly one possibility, 
remember that Internets typically form a bottom at this 
point in the earnings season anyway.  One Internet that 
finished the day significantly in the green was Infoseek 
(SEEK, $48.62, +$5.62) on news that Disney would like to 
buy the 57% of the company it does not already own.  A 
second Internet to finish up nicely today was the IPO, 
Drkoop.com, a medical advice site.  The issue, priced last 
night at $9, closed up at $16.44 on its first day of 
trading.  If you are interested, that makes the former 
Surgeon General worth $41 mln. on paper.

As if a tech fizzle wasn't enough, along came more 
inflation comments from yet another illustrious member of 
the Federal Reserve Board (The Fed).  This time, William 
Poole, St. Louis Fed President (who has no voting power we 
might add) cautioned that inflation is a greater problem 
now in our economy than it was 6 months ago and that 
markets should expect a tighter monetary policy going 
forward.  Bonds then took it in the shorts as the yield 
dropped to close the day at 5.99%.  Equity investors didn't 
wait around either.

Pardon us for this reminder, but hasn't that been the 
expectation for the last 3 weeks?  We don't see any news 
here.  The question of whether we have inflation or not is 
still debatable.  Until we get a clearer picture of the PPI 
(a reflection of inflation on the producer level) on Friday 
and the CPI next week, we really won't know the answer.  
Until then, expect more exhibitions of inflation-induced 
schizophrenic behavior from investors.  It's almost like 
Pavlov's spontaneously salivating dogs after hearing the 
sound from a ringing bell.  Someone says "inflation" and 
investors run like roaches under a spotlight.  Anyway, 
suffice it to say another sell-off ensued.  The good news, 
and really the point to taken from the whole day's events 
was that the markets again moved on low volume - the third 
lowest volume day of the year so far.  There simply is no 
major conviction from sellers to sell or buyers to buy.  
Nonetheless, the overall bias still appears to be up.  A 
true scare would have juiced the volume and taken a bigger 
bite out of the market's hide.  

So how did we finish the day?  The DOW lost 143 points to 
close at 10,765, 40 points up from its lowest point of the 
day.  Though decliners edged out advancers, advancers 
remained surprisingly strong given what appeared on the 
surface to be an otherwise bad day.  The margin 3:2 favored 
decliners.  A total of just 686 mln. shares traded hands, 
again the third lowest volume day this year.  NASDAQ 
followed a similar trajectory by closing down 49 points at 
2474, losing most of its ground in the final 2 hours of 
trading.  Decliners slipped past advancers here too by a 
3:2 margin on light volume of just 852 mln. shares.  Our 
interpretation of this light volume remains that there is 
no conviction to sell at these current prices.  Also, the 
Russell 2000 closed off by only 2.89 points today.  One 
thing to notice is that our closing index values today were 
mostly higher than yesterday's low points.  

We'd like to keep it a bit short tonight so let's try to 
pull the sentiment all together.  We need to keep these 
down days in perspective.  Not to cover old ground, but 
with 4 solid days of gains, it's not unusual to see profit 
taking.  Nothing goes up in a straight line.  The selling 
lacks conviction.  What else?  Our old buddies, Mr. Gold 
and Mr. Oil, not to mention their other commodity cousins, 
are drifting lower.  Yes, Fed-speak regarding inflation has 
jawboned bond rates up to just shy of 6%, yet no panic.  
Indicators are that a rate hike is already a foregone 
conclusion.  Still in our opinion, the case for inflation 
is overblown, but we won't fight the market on this issue.  
With a rate hike priced in, we think the general trend is 
up.  Nonetheless, investors will stay on the sidelines 
temporarily until we get some indication from the PPI and 
CPI.  Thus, expect more choppiness in the near term as long 
as volume remains low.  The coast will be clear once we see 
green numbers accompanied by a return of larger trading 
volumes.

Until then, trade only when it is profitable to do so, use 
stops and sell too soon.

Buzz Lynn
Research Analyst



***************
Market Posture
***************

                   Key Benchmarks
Broad Market       Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************

DOW Industrials   10,500  11,000  10,766    Neutral   5.28 
SPX S&P 500        1,315   1,355   1,317    Neutral   6.04   
OEX S&P 100          660     690     666    Neutral   6.04 
RUT Russell 2000     435     450     444    Neutral   5.28   

NDX NASD 100       2,100   2,250   2,087    BEARISH   6.08 * 
MSH High Tech      1,000   1,100   1,038    Neutral   5.28     

                   Key Benchmarks
Technology         Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
XCI Hardware         900     920     875    BEARISH   5.20
CWX Software         600     675     691    BULLISH   6.04  
SOX Semiconductor    390     420     412    Neutral   6.04               
NWX Networking       450     490     547    BULLISH   4.22
INX Internet         540     580     483    BEARISH   5.20             

                   Key Benchmarks
Financial          Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
BIX Banking          700     720     670    BEARISH   5.18   
XBD Brokerage        450     475     404    BEARISH   5.21             
IUX Insurance        645     660     655    Neutral   6.03 

                   Key Benchmarks
Other              Bearish/Bullish  Last    Posture/Since  Alert
****************************************************************
RLX Retail           900     970     875    BEARISH   4.29 
DRG Drug             390     425     363    BEARISH   4.29  
HCX Healthcare       780     850     738    BEARISH   4.29  
XAL Airline          180     210     167    BEARISH   5.21      
OIX Oil & Gas        285     310     296    Neutral   5.13



Posture Alert

Inflation Alert! With the 30-YR Treasury nearing 6.00%, the fear 
of inflation is hanging over this market like a thunderstorm 
cloud. With today's action, we have turned bearish on the NDX. 


A detailed description of our Market Posture and its
applications can be found at:

/members/marketposture




*************************
Market Sentiment
Pinnacle Capital Advisors
*************************

Sell to Soon?

Just when you thought Yahoo or CMGI would have a +75 point run 
like the good old days. Congratulations to those of you smart 
enough to sell into that 2-day rally.

During the last newsletter, we stated about the heavy increase in 
out-of-the-money OEX call buying. The Pinnacle Index for the OEX 
(680-750) was at a whopping 12.4. This was so bullish that we were 
due for a sell-off. We haven't seen this large a number in quite 
awhile. While the Pinnacle Index did decrease since the last 
letter, it currently stands at 10.9, which is still severely 
optimistic. These way out-of-the-oney option traders not only 
called the upswing, but also  predicted the short-term top. Not 
to be outdone, the Pinnacle ndex on the OEX (645-660) is 
currently at .20, which is very bearish. What this tells us is 
that we should have nice support in that range.Until some real 
news comes out (Fed raises rates, major earnings report , 
or a slew of pre-announcements) we are most likely, trading range 
bound. 

We have been warning investors for some time now about the poor 
trend of the long bond. With the 30-Year Treasury just a hair 
shy of 6.00%, any moves above this barrier will most likely 
continue the sell-off. The last time the bond closed above 6% was 
May 11, 1998, when is closed at 6.038%. All investors should have 
the T-Bond on their daily quotes. If you were to overlap a chart 
of the broad market on top of the T-bond for the last two weeks, 
you would be very surprised to see the exact correlation in moves 
both up and down. 



 




 



 


Bullish Signs:

Russell 2000: 
Climbed back above the key 435 benchmark (444). The small cap
stocks are beginning to show strength just above its 50/100 day 
moving average. 

Mixed Signs:

Advance/Decline Line:
After flattening and rolling over last week, the A/D line is beginning 
to check up and could prove Bullish if advancers can out pace decliners
in the week ahead. 



BEARISH Signs:

Investor Intelligence:  
As a contrarian indicator, the percent of Bullish investors spiked 
from a week ago suggesting Bullish sentiment is picking up steam and
investors are ignoring the selloff. 

Interest Rates:
Trading ABOVE 200dma and 5.50% Benchmark (5.99%). Above 6% would 
prove very negative on the short-term.

Pinnacle Index:  
Overhead resistance (OEX 680-750) clocking in at 10.90, 
suggesting that option speculators are expecting the market to 
advance significantly higher.

Peak Open Interest:  
The contraian put-call ratio clocking in at .96 suggesting bullish
sentiment picking up steam.




OTM Call Analysis

As we move through June's expiration cycle, Pinnacle is tracking 
the level of call buying (OTM) between 680-750 among option
speculators. As we have been documenting, excessive out-of-the-
money (OTM) call may serve as overhead resistance.


April Expiration Cycle
OEX OTM Call Analysis (Open Interest Apr 650-700)
******************************************************************
Date                 Open Interest     Change %    Alert
******************************************************************

Friday, March 19            35,626         -
Friday, March 26            60,266      +69.2%     
Friday, April 2             70,952      +99.2%     
Friday, April 9             74,028     +107.8%     


May Expiration Cycle
OEX OTM Call Analysis (Open Interest May 680-750)
******************************************************************
Date                 Open Interest      Change %    Alert
******************************************************************

Friday, April 16            30,697          -
Friday, April 23            53,887       +75.5%      
Friday, April 30            65,936      +114.8%       
Friday, May 7               89,736      +192.3%     
Friday, May 14              97,861      +218.8%     
Friday, May 21             115,336      +275.0%     


June Expiration Cycle
OEX OTM Call Analysis (Open Interest June 680-750)
******************************************************************
Date                 Open Interest     Change %    Alert
******************************************************************

Friday, May 28           53,502        -
Tuesday, June 1          53,293        -.4%
Thursday, June 03        58,515       +9.7%  
Friday, June 04          61,255       +14.5%   
Tuesday, June 08         63,648       +19.0%   *

Market Sentiment at a Glance
******************************************************************
                                 Friday     Tues      Thurs  
Indicator                        (6/4)     (6/8)     (6/10) Alert
******************************************************************

Pinnacle Index (OEX):          

                    (680-750)     12.4     10.9   *
Overhead Resistance (680-700)      6.9      6.6   *
Underlying Support  (645-660)       .8       .6   *
                    (510-660)       .2       .2   *

Put/Call Ratios:

CBOE Total P/C Ratio                .6       .6   *     
CBOE Equity P/C Ratio               .4       .4   *    
OEX P/C Ratio                      1.6      1.6   * 


Peak Open Interest (OEX):

Puts                              600       600   *
Calls                             670       670   *
P/C Ratio                           .96       .99 *

Market Volatility Index (VIX):	

CBOE VIX                           23.5     24.16 *



Investors Intelligence:

Bullish                         61.60%  *
Bearish                         27.70%  *



The Power of Sentiment Analysis

It has often been said that the crowd is right during the
market trends but wrong at both ends.  Measuring and
evaluating the sentiment of the crowd, therefore, can give
savvy option traders a decided edge.

 
Pinnacle Index
******************************************************************
OEX                             Friday      Tues      Thurs
Benchmark                        (6/4)     (6/8)     (6/10)
******************************************************************

                    (680-750)     12.5     10.87   *    
Overhead Resistance (680-700)      6.9      6.45   *

OEX Close                        672.4     665.5   *
 
Underlying Support  (645-660)       .8       .62   *
                    (510-660)       .2       .2    *

 
Average ratings: 
Resistance levels 2.0 / Support Levels .5

What the Pinnacle Index is telling us:
Overhead sentiment resistance is building at the OEX 680/695 level 
while the underlying support is holding at the OEX 645/660 level.


Put/Call Ratio 
********************************************************************
                                Friday     Tues       Thurs
Strike/Contracts                (6/4)      (6/8)      (6/10)
********************************************************************


CBOE Total P/C Ratio             .56       .56   *   
CBOE Equity P/C Ratio            .41       .37   *
OEX P/C Ratio                   1.64      1.57   *


Peak Open Interest (OEX)
********************************************************************
                     Friday           Tues            Thurs
Strike/Contracts     (6/4)            (6/8)           (6/10)
********************************************************************


Puts                 600 / 11,815    600  / 11,747  *
Calls                670 / 12,317    670  / 11,921  *
Put/Call Ratio       .96             .99            *





 




 



Market Volatility Index (VIX)
********************************************************************
                    Major
Date                Turning Point       VIX
********************************************************************

October 97          Bottom              54.60      
July 20, 1998       Top                 16.88         
October 8, 1998     Bottom              60.63
January 11, 1998    Top                 26.38
March 4, 1999       Bottom              28.15   

May 21, 1999                            25.36 
May 28, 1999                            26.38
June 1, 1999                            27.92
June 4, 1999                            23.45  
June 8, 1999                            24.16  *



 



 


Investors Intelligence Survey
********************************************************************
                    Major             Percent     Percent
Date                Turning Point     Bullish     Bearish
********************************************************************

October 97          Bottom            22.0        48.3       
July 20, 1998       Top               52.0        24.0         
October 8, 1998     Bottom            38.5        42.7
January 11, 1999    Top               58.3        30.0
March 4, 1999       Bottom            49.1        32.5

January   6, 1999                     58.3        30.0   
January  13, 1999                     60.0        30.0   
January  20, 1999                     61.7        25.9   
January  27, 1999                     60.7        28.2   

February  3, 1999                     60.0        26.7   
February 10, 1999                     61.7        25.9   
February 17, 1999                     55.7        28.7   
February 24, 1999                     54.1        31.5   

March 3, 1999                         50.9        32.1   
March 10, 1999                        49.1        32.5   
March 17, 1999                        52.6        17.6     
March 24, 1999                        55.9        29.7     
March 31, 1999                        55.6        31.6     

April 07, 1999                        56.4        31.6     
April 14, 1999                        55.9        30.5     
April 21, 1999                        56.4        30.8     
April 28, 1999                        56.1        30.7     

May 05, 1999                          58.1        27.6     
May 12, 1999                          56.9        31.0     
May 19, 1999                          60.9        28.7      
May 26, 1999                          61.6        27.7 
June 2, 1999                          61.6        27.7  *



*****************************************************
Please view this in COURIER 10 font for alignment
*****************************************************
CHANGES THIS WEEK

Index     Last    Mon     Tue  Week
Dow    10765.64 109.54 -143.74-34.20
Nasdaq  2474.50  45.87  -49.71 -3.84
$OEX     665.50   3.73  -10.65 -6.92
$SPX    1317.33   6.77  -17.19-10.42
$RUT     443.76   4.32   -3.13  1.19
$TRAN   3424.83  19.23  -57.13-37.90
$VIX      24.16   0.02    0.69  0.71

Stock             Mon     Tue  Week

LXK      142.06   6.69   -2.94  3.75  Splits June 10th
EGRP      40.75   4.19   -1.13  3.06  Leverage play 
BVSN      55.13   3.75   -1.13  2.62  Strong bounce off 50 dma
BGEN     111.25   5.31   -3.63  1.68  Fell in sympathy with IMNX
CREE      64.50   4.00   -2.63  1.37  Set a new high of $69.13
LGTO      57.63   3.25   -1.88  1.37  Purchasing Vinca Corp.
SEPR      74.63   5.19   -4.06  1.13  Taking a breather
AA        63.06  -0.88    2.00  1.12  Signed a new agreement
AMAT      61.81   1.00    0.00  1.00  Initiated with at "buy"
SCI       45.00   1.69   -0.81  0.88  Entry point?
XRX       59.94   0.69   -0.31  0.38  Solid entry point?
UTX       67.25   1.00   -1.19 -0.19  Sold off with the market
ADPT      32.94   1.44   -1.94 -0.50  Support at $32
BMCS      48.44   1.63   -2.19 -0.56  Trading in a channel
CAT       62.13   0.44   -1.13 -0.69  Near 52 week high
TER       60.75  -1.25    0.56 -0.69  Signed $2 million deal
FNM       67.94   0.19   -1.06 -0.87  Channel bottom around $66
SLR       56.63  -0.06   -1.00 -1.06  Earning on June 14th
ORCL      27.13  -0.19   -1.38 -1.57  Earnings are on June 15th
MRK       68.63  -1.31   -0.69 -2.00  Vioxx doing well
GPS       65.38  -0.44   -1.94 -2.38  Splits 3:2 on June 22nd
GE       102.38  -0.44   -2.06 -2.50  Strong support at $100
LLY       72.50  -3.38    0.63 -2.75  Earnings in line
JNJ       92.75  -0.75   -3.19 -3.94  Moving with drug sector
MEDI      66.38  -1.19   -3.69 -4.88  Drug stocks struggling

Puts

CVC       70.63  -5.00    0.13 -4.87  Hurt by AT&T ruling
FDX       50.56  -0.25   -1.44 -1.69  Punishment continuing
DOW      125.56  -1.00    0.56 -0.44  Dropped, not cooperating
IP        50.31  -0.44    0.31 -0.13  Hanging on near $50
T         53.44   0.13   -0.06  0.07  Open access a hot topic
TMX       75.38   0.94   -0.63  0.31  Flirting with 50 dma
BEN       40.94   1.81   -0.38  1.43  Dropped, positive news 
EK        69.50   2.19   -0.69  1.50  Closed at low of the day
UNM       56.81   2.13   -0.25  1.88  Dropped, holding near 50dma
NTBK      31.94   3.69   -1.38  2.31  Dropped, price target at $60
NSOL      56.00   4.44   -0.19  4.25  Resistance at $60
PVN       85.00   1.13    5.44  6.57  Rallying?



****************
PICKS WE DROPPED
****************
When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time. 
We have hundreds of new readers with each issue who are
`unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


******
CALLS:
******

NONE


******
PUTS:
******

UNM $56.81 -0.25 (+1.88) We are dropping UNM from the put list
for its relative strength compared to other Insurance stocks.  
We have watched the market posture for the Insurance sector 
tracking between bearish and neutral for the past few weeks, but 
UNM has decided to ignore the trend.  Just when it looked like 
the stock was in trouble, it managed to hold just above its 
50-dma during the market jitters.  Now that the market has been 
forging ahead, UNM is following that example and pushing higher.
All in all, it is not acting like a put and we can no longer 
recommend playing it as one.

BEN $40.94 -0.38 (+1.44) Franklin opened the week to a positive
news release that the company has opened a new large cap growth
fund.  This announcement came at the right time as the company's
assets under management continue to shrink.  Most of the reason
for the decline in assets is Franklin's overseas funds which they
specialize in.  They have done poorly due to problems in emerging 
markets, but now the company seems to be hedging their exposure
with 2 new U.S. based funds.  The other is an aggressive growth 
fund due out later this month.  The real story though was the 
stock's ability to rebound after Friday's downgrade.  It is now
comfortably back above the $40.00 level and seemed immune to 
today's sell off.  For these reasons we are removing BEN from 
the put list. 

DOW $125.56 +0.56 (-0.44)  Since adding DOW as a put back on 
Thursday May 27th, the company has been less than cooperative.  
It has actually headed higher.  We had been hoping for a 
rotation out of the cyclicals.  That hasn't really happened 
since investors continue to use them as a safe haven in lieu 
of a possible interest rate hike.  Even though DOW may have 
leveled off near the $125 level, we are dropping it as a play.  
We have been waiting for over 8 trading days for the stock to 
give us a solid entry point.  Even though the stock headed 
down on Monday, its ability to add +$0.56 on Tuesday when 
the market shed over 143 points is not a good sign.  Sorry, 
DOW but goodbye for now.

NTBK $31.94 -1.38 (+2.31)  On Monday NTBK performed more 
like a call play.  It opened low and continued to climb 
tacking on $3.68.  Two news events and Pacific Crest 
Security's "strong buy" coverage and $60 target price were 
the culprits.   CEO, Dr. Grimes, announced NTBK may be 
looking for a suitor since the recent big merger of EGRP 
and TBFC.  Also, they announced a new product.  Along with 
Intellimedia Security, they will offer web-based safe 
deposit boxes for e-documents.  Today, NTBK opened at 
$34.94, but steadily declined for a loss of -1.38.  
Certainly a better pattern, but today's behavior may be 
more a result of the NASDAQ's overall decline.  Considering
the news events and the ever-so-powerful analyst's 
coverage, now is not the time to begin a new position.   


*******************
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***********
DISCLAIMER
***********
This newsletter is a publication dedicated to the education 
of options traders. The newsletter is an information service 
only. The information provided herein is not to be construed 
as an offer to buy or sell securities of any kind. The 
newsletter picks are not to be considered a recommendation 
of any stock or option but an information resource to aid the
investor in making an informed decision regarding trading in 
options. It is possible at this or some subsequent date, the 
editor and staff of The Option Investor Newsletter may own, 
buy or sell securities presented. All investors should consult 
a qualified professional before trading in any security. The 
information provided has been obtained from sources deemed 
reliable but is not guaranteed as to accuracy or completeness.
The newsletter staff makes every effort to provide timely 
information to its subscribers but cannot guarantee specific 
delivery times due to factors beyond our control.






The Option Investor Newsletter         Tuesday  6-08-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

******************
PICK NEWS - CALLS
******************

BMCS $48.44 -2.19 (-0.56) BMCS is not down that much for the
week, but we are a bit cautious about its immediate course.
Looking at a chart of BMCS, we see an ascending channel that
the stock has traded in.  We currently are right in the middle
of it.  We are not going to drop BMCS, but wait for one of two
things to occur before buying in.  Number one: Wait for a bounce
off the lower end of the channel at about $46.  Number two: Make
sure there is market confirmation of a move.  The only thing
predictable about the market right now is that it is very 
unpredictable.  

LXK $142.06 -2.94 (+3.75) We discussed in the weekend letter
that LXK has a split coming up after the close on June 10th.
We also stated that when LXK moves, it usually does so in 
large chunks.  This is exactly what happened on Monday.  LXK
started up at the open and continued up for most the day.  The 
stock did close about $4 off its high of the day.  On Tuesday, 
LXK tried to hold on, but the market weight was just to heavy
and the stock closed down close to $3.  LXK will be taken off
our call list on Thursday, but we still like its prospects
for Wednesday and Thursday.  The stock had its EPS raised by
Salomon Smith Barney on Monday from $.98 to $1.01.  Salomon
also raised its price target from $130 to $160.  Watch for 
a dip to buy on Wednesday and remember the risks of short
term plays or of holding over split dates.

BVSN $55.13 -1.13 (+2.63) BVSN lost a little over a dollar on
Tuesday, but is still positive for the week.  We like the fact
that BVSN bounced strongly off its 50-dma today and closed a
$1.50 off its lows.  Technicals still show buying pressure and
there isn't much resistance until the $66 range.  BVSN and 
Interwoven, Inc. announced today that BVSN is furthering the 
company's strategic partnership with Interwoven by becoming a 
reseller of TeamSite.  Interwoven TeamSite is the leading 
solution for content management for the enterprise Web.  Many
of BVSN's customers like the combination, including Xerox.

ADPT $32.94 -1.94 (-0.50) ADPT, like many techs, had a down
day on Tuesday after a nice gain on Monday.  The net result:
A loss of $.50.  We still like ADPT going forward.  The stock
reached another 52 week high at $35 on Monday.  The technicals
show many bullish signs and ADPT is in a very explosive sector.
There is a lot of publicity about bandwidth and Internet speed.
This are things that bring attention to a stock like ADPT.
There isn't any recent news, but watch for intraday pullbacks
as opportunities to buy.  ADPT's support is at $32.  

GE $102.38 -2.06 (-2.50) We added GE as a post-war rebuilding
play, but GE can't be contracted to rebuild Kosovo until the 
war ends.  Signs are that the ending of the war is very close.
Even if we don't get news on the cleanup soon, GE does have
very strong support at $100.  A bounce off this level might
be a good risk/reward entry point.  GE has been up 5 of the 
last 7 days, so it's not like we are trying to pick GE at the
bottom.  This is a newsy play, though we feel when the war
does end, GE will stand to make a lot of money on the clean up 
efforts.

CAT $62.13 -1.13 (-0.68) CAT is another stock we are playing
as a post-war play.  If and when Kosovo needs to be rebuilt,
heavy equipment will be needed to move debris and help the
rebuilding.  CAT stands to be the benefactor of this event.
The war has yet to be ended, but signs are it could end very
soon.  Intelligence shows the preparation of Serb troops to 
leave Kosovo.  CAT has been up 4 of the last 6 days and is
near its 52 week high of about $66.50.  Again, watch for news
to support our theory before jumping in.  Even though CAT
stands to benefit from the war ending, it doesn't always mean
the stock will jump immediately.

SLR $56.63 -1.00 (-1.06)  On Monday, SLR reached a new all 
time high of $60.00.  However, investors took advantage of 
the move and sold off for a profit.  By the market's close,
SLR actually sunk lower by six cents.  On Tuesday, SLR 
continued to fall only this time it seemed to stem from the 
overall market sell off.  The DOW dropped over 143 points 
and the negative pressure caused SLR to sink -$1.00.  SLR's 
volume was on the light side which may have magnified the 
move.  We suggest waiting for the markets to head higher and 
for SLR's trade volume to draw closer to its average of 1.36 
mln. before opening any new calls.  If you are currently 
playing SLR, set those stop losses tight.  You can always 
get stopped out for a profit and then hop back in once the 
new uptrend is established.  We feel that SLR will once 
again head higher on an earnings run.  The company will 
report its numbers on June 14th.

ORCL $27.13 -1.38 (-1.56)  On Sunday, we pointed out that 
ORCL had posted gains for 5 days in a row and that some 
profit taking could be around the corner.  Hopefully you set 
your stop losses to protect those gains because ORCL did pause 
to consolidate in trading this week- just as we had forewarned.  
But keep in mind that we also said that a pullback could be an 
entry point.  ORCL will report its numbers on June 15th 
(company confirmed).  We feel that this slight dip could be 
buyable but it is extremely important to confirm that ORCL 
is back on its way up first.  ORCL has also been busy with 
business.  Did you know that 8 out of the top 10 specialty 
retailers and general merchandisers ranked by Fortune Magazine 
use Oracle software to run their businesses?  In other news, 
Oracle released a product to help simplify budgeting for 
mid-sized businesses.  With this new automated budgeting 
process, companies could save time and minimize data entry 
errors and focus instead on data analysis.  ORCL also 
announced the acquisition of the data mining business from 
Thinking Machines Corporation in order to help predict 
customer behavior and buying patterns.

SCI $45.00 -0.81 (+0.87)  SCI got off to a nice start this 
week.  On Monday, the company added +$1.69 as the market rose 
over 109 points.  On Tuesday, SCI again continued higher.  It 
reached as high as $45.94.  However, the market sell off cut 
short SCI's momentum.  The DOW dropped over 143 points and 
pressured individual stocks to follow.  SCI was no exception.  
It fell back -$0.81 on the day.  The pull-back could prove to 
be an entry point.  However, never try to pick the bottom.  
Look for SCI to head higher again and hold with a gain 
before opening any new plays.  On Monday, SCI announced that
they had shipped their 5 millionth satellite TV receiver to
EchoStar.  SCI has been shipping receivers to DISH from the
beginning of its operations.

GPS $65.38 -1.94 (-2.37)  After making a nice run last week, 
GPS has temporarily halted its upward hike.  On Monday it 
slipped forty-four cents.  On Tuesday, it fell an additional 
-$1.94 as the market tanked 143 points.  This pull-pack could 
be a bonus.  Last week The Gap gained +$5.20 and we were 
hoping for a buyable dip.  If the markets can rebound, they 
may provide a boost for GPS.  The company will split 3:2 on 
June 22nd.  Look for GPS to head back up before trying to 
open any new positions.  GPS has broken down below its 50-dma
of just above $66.  Wait for a break back above this level.

TER $60.75 +0.56 (-0.69)  After posting big gains last week 
that totaled +$8.63 in just 4 trading days, TER decided to 
take a breather on Monday.  No news in particular sparked 
the -$1.25 sell-off.  It appeared to be simple profit taking.  
On Tuesday, TER was already back and running.  It climbed as 
high as $62 before finishing the day at $60.75.  We liked to 
see TER paddle upstream against the market.  TER had the 
fortitude to head higher even as the market sold off over 
-143 points.  Part of the gains could possibly be attributed 
to TER's announcement at SUPERCOM '99.  TER was chosen by 
Belgacom, a national telecommunications provider in Belgium, 
for an order worth over $2 million to install the new Advisor 
application of the UserLink ™ platform.  We feel that TER 
could continue to head higher especially if the markets can 
bounce back.  Wait for the break above $61 to hold before
opening any new positions in TER.

UTX $67.25 -1.19 (-0.19)  On Monday, UTX added +$1.00 and 
broke above its 30 dma by using the market's upward 
momentum.  However, just as it had nudged UTX higher, 
the market also helped UTX head lower.  On Tuesday, the 
market fell over 143 points.  UTX followed and sold off to 
a -$1.19 loss on the day.  If the markets can rebound, we 
feel that UTX should too.  However, if the market continues 
to fall, so could UTX.  As we frequently state, never try 
to pick the bottom!  Wait for UTX to head higher again before 
trying to enter into new plays.  Investors may be selling 
ahead of the PPI report due out on Friday.  The markets 
aren't going anywhere.  They will still be there.  There 
is plenty of time to wait for an appropriate entry point.

BGEN $111.25 -3.63(+1.69)  BGEN saw a nice gain yesterday, but 
dropped with the overall market today.  However, Monday's gain 
was on strong volume, while today's loss was on very light 
volume--less than half the average.  There just weren't many 
sellers. (Market volume was light on both days.) Some of BGEN's 
loss today can be attributed to a generally down market, but it 
was probably partly a sympathy move with same-sector Immunex
(IMNX).  Immunex shares dropped sharply when it revealed that 
undisclosed Q2 charges would cause earnings to be near the lower 
end of estimates.  Although the revelation has nothing to do with 
BGEN, investors sometimes drop anything in the same sector when 
they see a big sell-off in a stock.  In fact, Piper Jaffray just 
raised its Q2 estimate for BGEN by $.01 to $.63 and reiterated 
a "buy" on the stock.  Jaffray's price target is $119. 

MEDI $66.38 -3.69 (-4.87)  MEDI set a new all-time high yesterday 
of $74, but profit-takers moved in quickly to lock in their 
gains.  Volume was fairly strong and the stock wound up losing 
$1.19.  Today it lost a big $3.69, but volume was fairly light. 
Have all the sellers sold yet?  With strong positive volume in 
the market, MEDI will likely take off again, but please wait for 
confirmation before starting any new plays.  MEDI is just about 
at its 10 dma, which may provide support.  Below that is support 
in the upper 50's.  When the whole market drops, even the strong 
stocks fall down.  Drug stocks in general have struggled so 
far this week.

CREE $64.50 -2.63 (+1.37)  CREE tacked on a nice gain yesterday, 
adding $4 on nearly double its normal volume.  Today it set a new 
high of $69.13 before selling off in the last 45 minutes of 
trading, as fear crept into the market.  Volume was heavy again. 
A little profit taking isn't a bad thing after such strong gains
last week.  This stock wants to go higher and it has the momentum 
to do it, if only rate fears and earnings warnings from other 
companies don't get in its way.  Wait for positive movement 
again before jumping in.  

LLY $72.50 +.63 (-2.75)  After posting solid gains on strong 
volume Friday, the drug stocks gave it back Monday.  Lilly lost 
almost exactly what it added on Friday on equally strong volume. 
Right back to square one.  Today, on somewhat more than average 
volume, LLY managed a $.69 gain.  We would like to see a slow 
and steady climb from here.  Big jumps may be met with profit 
taking from investors who bought in closer to its 52-week high 
of $97.75.  On the bright side, LLY has given guidance that 
earnings will be in line with expectations and expanded its 
share buyback program.  Investors look down the road, however, 
to a possible Medicare plan to cover prescriptions for seniors. 
The plan would likely use pharmacy benefit managers to negotiate 
a large group discount.  For this reason, the drug industry 
opposes the idea.  It is unlikely that Clinton and the Republican 
congress will be able to agree on a plan, but investors may 
factor the possibility into the stock price.  In the news: A 
Massachusetts HMO will soon refuse to cover prescriptions of 
Lilly's expensive anti-depressant Prozac.  Wait for a 
confirmation of positive movement in this stock.

MRK $68.63 -.69 (-2.00)  On Monday, Merck gave back $1.31 of 
Friday's gains, but volume was light.  Today it lost another 
$.69, this time on better volume.  Obviously, the same Medicare 
worries mentioned in LLY's write-up apply to MRK as well.  The 
good news for MRK is that doctors wrote 4,797 prescriptions for 
Vioxx, its new cox-2 inhibitor, in its first 10 days on the 
market.  Rival Celebrex, while very successful in its first 10 
days, only had 3,231 prescriptions written.  Today MRK announced 
that Vioxx was approved for use in the U.K.  Wait for the drug 
sector, and MRK in particular to show you that it is truly 
making a recovery before initiating a new play in this one.

EGRP $40.75 -1.13 (+3.06)  "Put me back in the game coach!"  
EGRP soared +4.19 on strong volume yesterday and its 
mascot, TBFC, advanced a whopping +7.87 points!  Awesome 
gains for the players who jumped into the game.  Today the 
trading range was narrow and steady, then EGRP shed -1.13 
at the close.  And take note, the trading was light today. 
On Monday, there was good news hitting the press.  
E*Offering, an online investment bank backed by E*Trade, 
announced they will offer E*Trade customers availability to 
buy IPO's through www.eoffering.com.  Everyone knows EGRP 
has always been recognized, but today, an analyst assumed 
coverage of the stock.  Senior eFinance analyst, Scott 
Appleby, of BBRS started a "not-rated" (for lack of better 
terms) rating on EGRP.  The important aspect of this 
coverage is that the stock is being acknowledged along with 
AMTD and NITE who received "buy" ratings.  Remember, this 
is a LEVERAGE PLAY using TBFC options to gain a better 
advantage.  I wouldn't feel comfortable without reminding 
you again - INTERNET = HIGH RISK.  Keep the stops tight.

LGTO $57.63 -1.88 (+1.38)  Yesterday LGTO followed Friday's 
lead and made additional gains.  This time it advanced 
+3.25 with strong volume at over 1 mln. shares being 
exchanged.  After the close of regular trading Monday, 
Legato Systems reported they had signed a clad agreement to 
purchase Vinca Corp for $94 mln. in stock and cash.  The deal 
will close in July.  The acquisition will enable Legato's 
customers to access data at a much faster pace.  This purchase, 
plus the recent addition of FullTime Software last October, 
puts Legato in a very profitable position.  They now have a 
leading-edge advantage for providing the best in data 
availability software solutions for distributed systems.  The 
news is inspiring, but with the market sentiment being what 
it was today, LGTO lost some ground.  The good news was that 
the decline was on less than normal volume.  Another news event 
or a negative analyst remark could invariably shoot this stock 
out of the sky.  Always confirm direction with the volume and 
keep those stops in place. 

AA $63.06 +2.00 (+1.12)  AA stayed perched on its resistance 
yesterday and traded in a very narrow range not wanting to edge 
above $61.63.  Today was a different story.  The stock tacked 
on 2 points to break its near opposition of $61-62.  Then AA 
exhibited positive determination as it closed just a fraction 
shy of its daily high.  However, this advance was on less than
50% of its normal average daily volume of 2.5 mln.  Nonetheless, 
AA is edging itself closer to its 52-week high of $66.93.  In 
the news, Alcoa signed an agreement with Metal Arts thus giving 
Alcoa the license to use the MicroSmooth process in chrome 
plating aluminum auto and truck wheels.   

AMAT $61.81 +0.00 (+1.00)  AMAT opened low at $60.50 on 
Monday, then an isolated spike in volume proceeded to push 
the stock to a daily high of $65.  A nice spread if your 
timing was perfect and you hit the bullseye.  Overall, the 
stock traded in a pretty choppy manner for the rest of the 
day on relatively low volume.  AMAT traded consistently 
around $62-63 today, but with no substantial increase in 
volume.  However, there is good news.  Warburg Dillon Read 
started coverage on AMAT with a coveted "buy" rating and 
set a $67 target price.  Look for stronger trading volume 
and positive movement to enter a play.  Always pay 
attention to market sentiment to put more odds in your
favor for a successful play.       

XRX $59.94 -0.31 (+0.38)  XRX made a great effort Monday 
morning and rallied to touch its opposition near $63.  
However, it appears there were profit-takers in the midst, 
and XRX was only able to manage a fractional gain for the 
day.  Today may have presented a solid point for entry as 
it traded narrowly within a point on low volume. but it 
would be better to wait for upward confirmation and more 
favorable market conditions before you begin a new play.  
Recall, its 52-week high is only points away at $63.93, but 
this has been its opposition for quite a while as evident 
in the 6-month chart.

SEPR $74.63 -4.06 (+1.13)  Monday offered more profits as 
SEPR advanced another $5.19 to close at $78.69.  Early 
morning, the stock had even topped $80.  As predicted, the 
stock finally did pullback for a breather.  Considering the 
recent gains and today's market, SEPR did shed some points. 
Yet, it managed to trade above $77 for most of the 
morning.  Having your stops in place would certainly have 
protected your profits during this consolidation.  At this 
point, you want to wait for a positive bounce before 
initiating a new play.  

JNJ $92.75 -3.19 (-3.94) JNJ lost $.75 on light volume yesterday, 
but dropped a big $3.19 today on average volume.  There was 
no particular news to drive the stock, but it moved in step 
with the whole drug sector.  Possible Medicare drug coverage, 
in the news today, sent shivers through all the pharmacy stocks. 
Although JNJ is much more than just a drug company, that part 
of its business is growing the fastest and reduced profit margins 
(implied by the Medicare coverage) will hurt that growth.  A 
Medicare deal will probably not succeed with this administration, 
but investors are cautious just the same.  Wait for confirmation 
that this sector is really in a recovery before initiating a 
position. 

FNM $67.94 -1.06 (-0.87) FNM has stayed within its channel,
but has been on a very bumpy road.  It seems that every
other day we get an inflation scare.  When we don't hear
rumors, FNM goes up; when we do, it goes down.  It could
continue like this until we get the CPI numbers on June
16th.  The channel bottom is around $66.  



*****************
PICK NEWS - PUTS
*****************

NSOL $56.00 -0.19 (+4.25) NSOL is rebounding this week after 
the announcement of the first test-bed registrar is up and
running this week.  Register.com is the first of the newly 
announced competing firms to be up and running.  We would
normally expect this kind of announcement to weigh on NSOL's
stock price, but with a recent sell off and no new facts to
how soon other competitors will be ready to go, investors 
reacted positively.  But, on the plus side, the stock was 
unable to push back above the critical $60 level.  We continue
to watch that price closely as the resistance level.  Volume
was light today which confirms our thinking that this rally 
will be short lived. 

PVN $85.00 +5.44 (+6.56) PVN was able to finally put together 
a rally despite weakness in the financial sector.  Granted, 
the stock is trading based on internal problems and hasn't
moved with the sector lately.  We expect PVN to continue 
to trade based on news reports and analyst comments, but we 
are still cautious on the near-term outlook for the stock.  
This week's gains are still just a fraction of the recent losses.
We see more downside ahead but keep in mind this is going to
be a very volatile play.  Choose your entry points carefully 
and let your stops do their job if the stock rallies.  There
has been no new news this week which is probably the reason
for the rally.  Wait for more bad news to hit the wire first 
before opening new plays.   

TMX $75.38 -0.62 (+0.31) Telmex is still flirting with the 
50-dma at $75.00.  It was able to hold that level on its 
first attempt to break through on Friday, but it is now 
dangerously close to completing the task.  The low on Tuesday
was at $75.06.  We are still cautioning investors to wait 
until we have a close under the 50-dma to open new plays,  
but with interest rate worries back in the fore front, we
may get a breakdown soon.  Without any new news to trade
on, expect the stock to move with the Dow Jones.  It is also
interesting to note that TMX shares have been weaker in Mexico
than the ADRs here in the U.S.

FDX $50.56 -1.44 (-1.69) Federal Express has traded lower both
days this week.  It continues to be punished for breaking its
50-dma at $54.00.  The stock is in a bad technical pattern.  
The next support level is around $47.  Other than that, it is 
a long fall to the 200-dma at $39.50.  There hasn't been any 
news worth trading on which has kept the volume light.  Use your 
stops to trail the play and lock in profits. 

IP $50.31 +0.31 (-0.13) International Paper shares found support
today from the volatility in the broad markets.  The stock 
was down under $50 again on Tuesday, but money came flowing in
as the market sold off.  There are still some concerns with 
interest rate fears and earnings warnings that have investors
holding on to cyclical stocks such as IP.  The stock is trying
to hang on to the $50 level.  If the stock breaks down below 
this level on a closing basis, the next support target would
be at $46.  Remember, we are entering earnings warning season 
so look for any stock in the sector to move the entire group. 

T $53.44 -0.06 (+0.06)  Portland, Oregon's decision on open 
access is still a hot topic.  This past Friday, a court 
ruling ordered AT&T to allow other ISP's access to their cable 
networks.  The ruling could have wide ranging affects across 
the US in other large cities.  T will most likely appeal the 
decision.  Some analysts, including Henry Blodget of Merrill 
Lynch and Kristen Koh from Credit Suisse First Boston, think 
the ruling will be reversed.  Morgan Stanley Dean Witter even 
initiated coverage of T with a neutral rating.  Right now, 
our stance is also neutral.  After the initial drop on the 
news, it remains to be seen if T will continue to head lower.  
We would like to see T drop below $52.50 before suggesting 
any new puts on T.  The company seems to have some near 
term price support at this level.

EK $69.50 -.69 (+1.50)  Until today, Kodak was up 3 days in a 
row and on good volume too.  Although it dropped $.69 today 
and closed at its low, the whole market was down.  If this had 
been a positive market day, would EK have continued its climb? 
This may spell the end of the current down cycle, or it could 
just be that EK needed 3 up days after 8 down days in a row.  We 
will know later in the week.  Meanwhile, wait for EK to show us 
which way it is heading before starting new plays.  In the news: 
EK chairman spoke to the U.S. Ways and Means Committee urging 
that China be allowed to be a member of the World Trade 
Organization.  China is EK's 3rd largest market.

CVC $70.63 +0.13 (-4.87)  With strong volume at 1.58 mln. 
on Monday, CVC twice slid past its near-term resistance of 
about $70-71 to touch $68.  By the finish, CVC had shed $5 
in total to close at $70.50.   Other cable stocks also fell 
in reaction to Oregon's Federal Court Ruling regarding the 
possibility of AT&T having to let Internet companies use 
their cable lines.  This ruling, if upheld, will cost cable 
companies big dollars.  Today, CVC traded flat on average 
volume never dipping below $70 even though the DOW did a 
nose-dive.  Remember, the stock's momentum is the key to 
this play.  Confirm the stock's direction and look for 
heavy trading before you open a new position.    




***************
NEW CALL PLAYS 
***************

NONE




*************
NEW PUT PLAYS 
*************

NONE



************************
THE PLAY OF THE DAY -PUT
************************

FDX -  FDX - Federal Express $50.56 -1.44 (-1.69 this wk)(-2.56)

See details in sector list

Chart = http://quote.yahoo.com/q?s=FDX&d=3m




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See Disclaimer in section one
*****************************

The Option Investor Newsletter         Tuesday  6-08-99  
Copyright 1999, All rights reserved. 
Redistribution in any form strictly prohibited.

*****************
COMBINATION PLAYS   
*****************

Investors Flee As Bond Rates Rise...

Monday, June 7

Stocks rose again on Monday as corporate mergers and new bargains
prompted investors to support a market that is again striving for
record heights. The Dow climbed over 100 points to close within
striking distance of the 11,000 mark. Broad stock indicators also
moved higher as the S&P 500 index rose 6 points to 1,334. The
Nasdaq composite leaped 45 points to 2,524 as technology leaders
and upstart Internet companies posted solid gains. Market breadth
was favorable as advancing issues outnumbered decliners by a slim
7-to-5 margin on active volume of 798 million shares on the NYSE.

Sunday's new plays (positions/prices):

NBR   JUL22C/JUN25C  $1.75 debit  (priced near 9:50 am)
XLNX  JUN50C/JUN45C  $0.56 credit (traded as high as $0.75)
MTZ   JUL30C/JUN20P  $2.00 credit (easy entry at the target)

Our play on Honeywell was one day too late as Allied Signal (ALD)
confirmed its plan to buy the company before the market opened.
The $14 billion stock swap calls for Honeywell shareholders to
get 1.875 shares of Allied Signal stock for each share held. The
morning trading was interesting but the opportunity for any kind
of disparity play was gone by the time options started trading.
The credit spread on Office Depot (ODP) was unavailable due to
an error in the listed quotes.

Portfolio plays:

Another great day for some of the recently abused NASDAQ stocks
and with this continued rally, we recommend that you close the
profitable plays rather than risk a loss in the end. Many of our
exit opportunities on Friday were even better today; CD, CS, CNTO,
CSCO, FDX, PRTL, SKYT, UK, USWB, and WLA are a few of the short
term positions that offer a favorable return. Other good news;
AMZN climbed almost $9 with other web giants after a boost by
two major Internet conferences. The stock was up almost $9 at the
close, leaving our bullish debit spread only $1 from break-even.
We have many concerns about the ability of the Internet stocks to
sustain this rally, and expect to make a humble exit with most of
our trading capital intact. MER & SEPR continued to recover from
their recent drubbing and hopefully, both positions will return
to profitability soon.

On the down side, TWX faltered after we closed the long option on
Friday and the short side will be left open in that play as we
attempt to limit losses in the overall position (JUN70C/75C). WLP
finally gave back some of its recent gains, allowing us to exit
the credit strangle; JUN80C/JUN70P, at a loss of $1.00.

Tuesday, June 8

U.S. markets were hammered on Tuesday after bond interest rates
moved to the highest level in more than a year. The Dow closed
down 143 points at 10,765 and the Nasdaq index plunged 49 points
to 2,474. In the broader market, declines beat advances 1,789 to
1,132 on moderate volume of 680 million shares on the NYSE.

Portfolio Plays:

MER continued to rebound during morning trading but the overall
market trend was too much to compete against and it fell back to
$73 at the close. ARTT made a nice move today on the announcement
of a new 100 mbps wireless network in the Silicon Valley and WMB
climbed $1 higher after the Lithuanian President, Valdas Adamkus
signed amendments allowing the U.S. firm to take a 66% stake in
oil concern Mazheikiu Nafta. CIEN consolidated after big gains on
Monday; you may consider closing the short-term calendar spread
to protect current profits from another rally.

Good Luck!
******************************************************************
				- NEW PLAYS -

Problems with a new computer plagued the spreads/combos section
today but these two volatility plays were obvious even without
position software..
******************************************************************
HRC - HealthSouth Corp  $14.87     *** Upgrades Galore! ***

HealthSouth is a leading provider of outpatient and rehabilitative
healthcare services. They offer these services through a national
network of outpatient and inpatient rehabilitation facilities,
outpatient surgery centers, medical centers and other healthcare
facilities.

In mid-April, HRC reported a first-quarter profit of $0.26 a share,
a penny ahead of the consensus estimate. During the first quarter,
they also repurchased 10 million of a planned 70 million shares of
common stock. That move reflects their belief that the current
trading price of the stock does not reflect the appropriate value
for the future strength of the company. HRC recently demonstrated
a commitment to growth with a large investment in PlanetRX.com,
currently billed as the leading Internet healthcare destination
for commerce, content and community.

Today, Banc of America said analyst Linda Greub initiated coverage
of HealthSouth with a 'buy' rating. That confirms the new bullish
rating issued last Friday by Bear Stearns.

The favorable option pricing and new technical trend for the stock
make this a low risk position with an excellent probability of a
reasonable profit.

PLAY (conservative/calendar spread):

BUY  CALL SEP-15 HRC-IC OI=582  A=$1.68
SELL CALL JUN-15 HRC-FC OI=4276 B=$0.43
INITIAL NET DEBIT TARGET=$1.12 TARGET ROI=50%

Chart = http://quote.yahoo.com/q?s=HRC&d=3m
******************************************************************
BAANF - Baan Company  $14.50     *** New Outlook ***

Baan company is a leading global provider of enterprise business
software. They offer a comprehensive portfolio of best-in-class,
component-based applications for front office, corporate office,
and back office automation are in use at approximately 12,000
customer sites worldwide. Their products reduce complexity and
improve core business processes; are faster to implement and more
flexible in adapting to business changes. In short, they optimize
the management of information throughout the entire value chain.

Last week, shares of Baan rose significantly after they announced
orders from phone directory publisher VNU World Directories. The
VNU agreement calls for Baan to install front-office software at
VNU World Directories operations in the Netherlands, Portugal,
and Belgium. Baan also said it received a smaller contract from
an aircraft component supplier; Weston Aerospace.
			
Baan has seen its share value drop significantly in the last year
but confidence is being restored in the company with new contracts
and the quality of its products. In addition, they have recently
increased spending on marketing and will begin emphasising their
brand name in a bid to boost revenue with a centralised ad program.
The Internet commerce boom may also help Bann recover as they have
launched a new E-Enterprise series that focuses on the business
sector.

To make things more interesting, Bann has recently been a source
of merger speculation in the enterprise software. The company
contends they're going to stay completely independent but implied
volatility on front-month options has been higher this past week.
We will use that favorable disparity to open a long-term, neutral
position.

PLAY (conservative/calendar spread):

BUY  CALL AUG-15 BQF-HC OI=1660 A=$1.38
SELL CALL JUN-15 BQF-FC OI=40   B=$0.38
INITIAL NET DEBIT TARGET=$0.87 TARGET ROI=50%

Note: In both of these spreads, we are reducing the net cost of
the long-term option with the credit from the sale of the nearer
term option. If the near term call expires worthless, we may hold
the long-term position for future profits or sell a July call to
further reduce our debit. There are many other ways to exit this
type of position and you should review those techniques with your
broker prior to entering the play.

Chart = http://quote.yahoo.com/q?s=BAAN&d=3m




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