Option Investor
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Daily Newsletter, Tuesday, 05/02/2000

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The Option Investor Newsletter             Tuesday 5-02-2000
Copyright 2000, All rights reserved.                  1 of 2
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Posted online for subscribers at http://www.OptionInvestor.com
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MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       5-02-2000           High     Low     Volume Advance Decline
DOW    10731.10 -  80.70 10824.50 10710.00 1,015,196k 1,288  1,694
Nasdaq 3,785.45 - 172.63  3948.63  3784.54 1,437,720k 1,502  2,636
S&P-100  779.25 +   9.70   790.30   778.82    Totals  2,790  4,330
S&P-500 1446.29 -  21.96  1467.58  1445.22            39.2%  60.8%
$RUT     505.35 -  13.58   520.32   504.97
$TRAN   2842.53 -  16.15  2861.08  2833.55
VIX       30.87 +   3.55    31.27    28.33
Put/Call Ratio       .58
******************************************************************

Investors Still Playing It Safe

It's tough to find any buyers on Wall Street as every trader
in a funny colored jacket is standing around with nothing to
do.  The buyers strike has forced traders to sit around talking
about the Mets instead of taking orders.  When will this buyers
strike end?  These people have families to feed and Mercedes
payments to make!  Besides, it's hard to make money in this
market with such indecision.

The decision in question was...does the Nasdaq want to breakout
over 4000?  It had been knocking on the door for the past two
days, but ran out of gas this afternoon.  You could feel the
wall of worry about the upcoming April jobs report and pending
FOMC meeting.  The Jobs report is set to be released this
Friday, before the open.  Another dagger on the economic front
could send us right back to the lows on the Nasdaq Composite.
With today's close right at the low, it is easy to envision.
The Nasdaq was down 4.4% to end at 3785.45, -172.63.  Light
trading too with only 1.4 million shares traded.




Fueling the rumors that the Fed will raise rates by 50-basis
points this month are comments from the Fed governors.  They
typically try to pre-announce such moves with hawkish comments
and we have seen that lately.  Last night came comments from
Federal Reserve Bank of Dallas President Robert McTeer that he
was concerned about inflation and the U.S. economy's ability to
grow without overheating, which hurt interest-rate sensitive
issues.  The housing starts numbers today didn't help either.
New home sales jumped 5% in March to a new 16-month high of
966,000.  The thinking behind a 50-point move is the 25-point
moves have done little to nothing to slow inflation.  With that
said, keep in mind that it takes time for the results to be seen.
That is exactly why they started raising rates before we even
saw a hint of inflation.  It's hard for me to believe that Alan
Greenspan would make such a big move and risk putting the economy
in a tailspin.  Also, remember that we have had five 25-basis
point moves in the last nine months and Greenspan did seven
25-basis point moves in 1994.  The 50-pointers don't seem to
be his style.

The DJIA suffered today as well, but not as bad.  Which is a
change from the pattern we've seen the past few days.  Although,
a loss is a loss no matter what spin you put on it.  It closed
at 10731.12, -80.66 and, yes, volume was still weak.  Can you
tell it is almost summer time with this volume?  Once tallied,
the NYSE reported just over 1 billion shares traded.  Note the
lower-highs forming, but support at 10,700 is holding equally
as strong.




The big drag on the DJIA came from AT&T and Microsoft.  They
both had healthy drops on individual news.  First, T released
their quarterly results this morning with EPS of $0.53, right
in line with First Call.  But, they suffered on costs associated
with the purchase of Tele-Communications last year and a decline
in its consumer long-distance business.  Corporate sales growth
also came in on the weak side and they announced plans to
cut up to 6200 jobs.  The stock plummeted $7.13 to $41.88.
Some analysts are less concerned though as it is all part of
a bigger plan to transition from older, less profitable
businesses to the new high-growth areas such as wireless and
broadband.  Second, MSFT sunk on news that Morgan Stanley
Dean Witter analyst Mary Meeker (who is a long time supporter
of MSFT) said she likes the stock, but finds it more attractive
in the sixties.  MSFT finished at $69.88, down $3.56.

There weren't a lot of winners today with the exception of
defensive plays such as Gold and Silver.  Everything that had
some gains posted by midday rolled over, such as Semis, Net
stocks and Banking.  In fact, the biggest point gainer for the
day was BRCM (current call play) up $7.56.  It's rare when the
biggest gainer comes in under a double-digit gain, but it
reflects the sentiment from this afternoon.

The bottom line is, the Nasdaq will likely gap down unless we
get some market moving news.  The question is whether or not
it is a small gap near support at 3735 and a recovery for the
rest of the day, which would obviously be very positive.  Or a
gap down that just keeps sinking.  Support at 3600 deserves a
bounce, but who knows how long that will last.  If we get this
second scenario, the bears will be strong and you don't want to
fight them trying to pick a bottom.  Instead, wait for a more
clear trend.  This buyer's strike we talk so much about has
changed the way you should approach the market.

My gut feeling doesn't exist today.  It is on strike too, I
guess.  I am always up for a rally and here are some thoughts
to keep in mind.  If the ECI from last week couldn't tank this
market, there is a good chance that most sellers have been
exhausted.  It is hard to go lower without sellers.  Quite
frankly, this current correction has already lasted six weeks
and if you haven't sold by now, you aren't likely to.  Also,
if the Fed does move 50-basis points, some say it is already
priced into the market.  The bond market echoed that sentiment
somewhat today as well.  Finally, a lot of stocks I was watching
retreated to support only to find a good amount of volume ready
to buy it up.  If this volume holds those individual stocks at
support, the sell-off is effectively over.  These signs point
to a market bounce off the 10-dma on the open tomorrow.

On the flip side, today's sell-off was swift and decisive.
Clearly, no one was waiting to find out what was wrong.  They
wanted out and they got out.  The Fed is hinting to strong
action at the May meeting and investors are getting scared.
Could it be that Greenspan will break the 25-point trend and
hike by 50 points?  This unknown is making investors nervous.
No one wants to jump back in too soon.

On that thought, and with the futures down at the time of this
writing, you are better staying sidelined than getting run over.
And...when in doubt, get out.


Ryan Nelson
Asst. Editor



**********
STOCK NEWS
**********

Technology Will Trump Politics
By: S.P. Brown

Of all the great things to come from the Internet, the
greatest may be the ability of this new media to render
politics obsolete.

Through most of the world's history, people have been enslaved
to political whims, whether it be communist, excessive taxation
or conscription.  The ideology is often presented to be  in
society's best interest.  More often than not, though, it's
been in the best interest of the ruling political class.

Now, thanks to the Internet, it appears that the ability of
politicians to render oppressive edicts  is becoming seriously
impeded.

In the past, if we didn't like a government structure, we had
to physically pack our belongings and move.  Now, in the new
digital world, we no longer have to vote with our feet.  We can
vote with our modems.

For example, moving one's wealth offshore was a once a luxury
available only to the vert rich.  Today, thanks to the
Internet, millions of ordinary people can move their wealth
between countries as easily as they can sign on to a computer.

In the future, this same freedom of movement will likely be
adopted by business.  If government steps up its attacks on
businesses (think Microsoft) those businesses will be more
inclined to domicile their operations in a more friendly
environment.

In a quickly digitizing world where the Internet and the global
market have come together, financial markets have surpassed
politics as being the most important factor in how we live.
Global economic decisions made by individual investors are
undercutting governmental mandates, and such usurpation is
shifting the mantle of leadership away from politicians to
the individual, where it belongs.

No wonder the latest crop of politicos quiver in fear over the
Internet, and tout scheme after scheme for reining it in.



**************
MARKET POSTURE
**************

As of Market Close - Tuesday, May 2, 2000

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

DOW Industrials   11,000  11,400  10,731    BEARISH   4.28
SPX S&P 500        1,500   1,550   1,446    BEARISH   4.14
OEX S&P 100          800     850     779    BEARISH   4.13
RUT Russell 2000     550     600     505    BEARISH   4.14
NDX NASD 100       4,000   4,500   3,627    BEARISH   4.13
MSH High Tech      1,000   1,150     947    BEARISH   4.13

XCI Hardware       1,600   1,700   1,488    BEARISH   4.13
CWX Software       1,500   1,670   1,204    BEARISH   4.04
SOX Semiconductor  1,200   1,300   1,109    BEARISH   4.13
NWX Networking     1,070   1,190   1,014    BEARISH   4.04
INX Internet         800     940     601    BEARISH   4.04

BIX Banking          530     620     550    Neutral   3.16
XBD Brokerage        500     580     468    BEARISH   4.14
IUX Insurance        540     620     596    Neutral   3.16

RLX Retail           900   1,000     934    Neutral   4.13
DRG Drug             355     385     375    Neutral   4.28
HCX Healthcare       710     775     761    Neutral   4.28
XAL Airline          130     155     146    Neutral   3.10
OIX Oil & Gas        265     300     291    Neutral   3.16

Posture Alert
AT&T's slow growth coupled with the Microsoft saga helped lead the
major indexes down Tuesday, as sectors of "old" and "new" both
felt the selling crunch. Sectors leading the way down include
Internet (-8.14%), NASDAQ 100 (-5.29%), Software (-5.15%), and
Semiconductors (-4.75%). There are no current changes in posture.



****************
MARKET SENTIMENT
****************

Tuesday, May 02, 2000

NASDAQ Short Interest!

The month of May is off to a sleeper start, as Monday's gains
were given back today with volume slowly on the decrease. Shares
of AT&T led the downdraft today, as Ma Bell announced earnings
in-line with expectations. However, AT&T also led analysts to
lower their earnings expectations for the remainder of the year.
This is not the type of forecasts analysts wanted to hear, and as
such, the market swiped $22 billion off the market capitalization
in just a few hours. After the close today, Novell announced
negative comments on their current quarter, and as such, was
trading down substantially in after hours. This is not the type
of back-to-back news that this market needs, especially now that
we are getting close to a fed meeting where a 50 basis point hike
may be coming. Maybe if we are lucky, Mr. Greenspan will disclose
that he is long shares of AT&T and Novell, and that due to their
poor performance, the economy must be slowing down. Then he will
not have to raise rates as anticipated. Well, nice thought, but
we'll stay ready for at least a 25 basis point hike.

One important gauge of sentiment is the level of short interest
on the major exchanges. Investors who sell securities "short"
borrow stock and  sell it, betting that the stock's price will
decline and that they will be able to buy the shares back later
at a lower price for return to the lender. Short interest
reflects the number of shares that have yet to be repurchased to
give back to lenders. In the past, stocks that have heavy short
interest, when combined with some sort of positive news, has
witnessed very quick and powerful up-moves. At times, short
sellers are forced to cover, which only helps the buying
pressure, and this is known as a "short squeeze."

As the NASDAQ market fell in April, so did the short interest.
This is not surprising given the urge for shorts to take profits;
however, this decline in April did break a string of six
consecutive new monthly records. Now the short-sales report came
out Friday, which was delayed from its original release date last
week because of a technical problem at NASDAQ. Regardless, here
is a quick list of the big movers.

Largest Short Positions  (As of April 28th)
Rank                  Apr. 14          Mar. 15           Change
1  Cisco Sys        61,940,785       74,621,338       -12,680,553
2  Dell Computer    40,546,215       47,048,407        -6,502,192
3  Oracle           35,110,226       45,164,314       -10,054,088
4  JDS Uniphase     30,320,678       19,133,105        11,187,573
5  E*trade Group    30,041,915       32,009,032        -1,967,117
6  MCI Worldcom     29,919,167       35,580,800        -5,661,633
7  Microsoft        29,368,032       33,050,557        -3,682,525
8  Global Crossing  28,652,536       29,720,627        -1,068,091
9  Intel            28,378,693       35,897,177        -7,518,484
10 Amazon.Com       27,916,784       32,970,344        -5,053,560
11 Yahoo            27,539,018       28,703,223        -1,164,205
12 Globalstar Tele. 25,145,028       20,150,284         4,994,744
13 Veritas Software 23,914,205       18,733,949         5,180,256
14 Nextel Comm.     22,399,413       27,671,790        -5,272,377
15 PSINet           19,736,330       13,727,941         6,008,389

Largest Changes
Rank                  Apr. 14          Mar. 15           Change
1  JDS Uniphase     30,320,678       19,133,105        11,187,573
2  Palm             12,509,990        5,120,669         7,389,321
3  PSINet           19,736,330       13,727,941         6,008,389
4  Veritas Software 23,914,205       18,733,949         5,180,256
5  Broadvision       9,763,849        4,627,989         5,135,860
6  Globalstar Tele. 25,145,028       20,150,284         4,994,744
7  Smurfit-Stone    11,603,954        8,000,007         3,603,947

1  Cisco Sys        61,940,785       74,621,338       -12,680,553
2  Flextronics Intl  4,109,851       15,585,685       -11,475,834
3  Exodus Coms       7,456,231       18,663,424       -11,207,193
4  Oracle           35,110,226       45,164,314       -10,054,088
5  Metromedia Fiber  7,225,341       14,954,439        -7,729,098
6  Intel            28,378,693       35,897,177        -7,518,484
7  Comcast Cl A Spcl 6,378,814       13,817,993        -7,439,179



BULLISH Signs:

Corporate Earnings:
Major corporate earnings continue to come out strong and ahead of
analyst expectations. General Electric is the latest bellwether
to give positive comments regarding earnings.

Volatility Index (30.87):
The VIX continues to prove that the low 30's are an excellent
buying opportunity, and the low 20's continue to be a great
selling opportunity.

Short Interest (NYSE):
Short interest on the NYSE fell 1.33% to 4,055,931,190 shares on
April 14; however, this is still a high level and from a
contrarian viewpoint, would be considered bullish.


Mixed Signs:

Interest Rates (6.019):
A close above 6.021 may indicate a more substantial move to the
upside, which would be negative for equities.


BEARISH Signs:

Liquidity Crunch:
With the fear of inflation, and the most likely scenario of
several more rate hikes, liquidity in the marketplace will become
a more significant issue and put more pressure on equities.

IPO Dilution:
With so many IPO's hitting the market, there seems to be dilution
occurring where shares of finally freed up to sell by insiders.
$58.6 billion of stock was freed up for trading in March, $67.3
billion this month, and $118.3 billion in May. This is too much
stock for the system to handle.

Energy Prices:
With the rapid rise in crude oil, everything from manufacturing
to transportation will be affected by higher costs. These higher
costs will be felt 1-2 quarters out, and could put pressure on
profit margins.

Investor Expectations:
More and more investors are now expecting high double-digit
growth if not triple-digit expansion in their portfolios. This
extreme positive sentiment could help fuel a future sell-off in
technology shares.


*****************************************************************

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                        (4/28)       (5/2)       (5/4)
*****************************************************************

Overhead Resistance (805-830)     3.03        3.43
Overhead Resistance (775-800)     1.04        1.05

OEX Close                       781.42      779.25

Underlying Support  (745-770)     2.22        2.49
Underlying Support  (715-740)     8.19        4.95

What the Pinnacle Index is telling us:
Based on the above statistics, direct overhead and direct
underlying both remain light, indicating we could either way with
relative ease.



Put/Call Ratio
*****************************************************************
                                Friday      Tues       Thurs
Strike/Contracts                (4/28)      (5/2)      (5/4)
*****************************************************************


CBOE Total P/C Ratio             .51        .58
CBOE Equity P/C Ratio            .41        .49
OEX P/C Ratio                   1.29       1.98


Peak Open Interest (OEX)
*****************************************************************
                     Friday          Tues            Thurs
Strike/Contracts     (4/28)         (5/2)            (5/4)
*****************************************************************

Puts                660 / 5,521   710 / 5,506
Calls               800 / 5,916   800 / 5,440
Put/Call Ratio        0.93           1.01



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 14, 1999        Top                 25.01
July 16, 1999       Top                 18.13
August  5, 1999     Bottom              32.12
October 15, 1999    Bottom              32.06
January 28, 2000    Bottom              29.09
April 14, 2000      Bottom?             39.33

May 2, 2000                             30.86



************
WOMANS WORLD
************

The Law of Numbers
By: Mary Redmond

In the last several months there has been a lot of publicity
about several famous money managers which have had losing
years or quarters, some of whom were deemed to be legendary
by their peers and have ended up leaving the business.  While
the reasons for each of their failures seemed to have been
different, there was one recurrent theme which was brought up
repeatedly: Their funds grew too big.

In his 1998 annual report, Warren Buffet made the following
quote: "One thing is certain:  Our future rates of gain will
fall far short of those achieved in the past.  Berkshire's
capital base is now simply too large for us to earn truly
outsized returns.  If you believe otherwise you should consider
a career in sales but avoid one in mathematics."

Or read the following quote by George Soros when asked to
comment on the poor performance of one of his funds: "A large
hedge fund like Quantum fund is no longer the best way to
manage money.  Quantum is far too big and its activities are
too closely watched by the market to be able to operate
successfully."

Do the comments sound similar?  They should.  Take a look at
the five largest mutual funds in the U.S. and their performance
record over the last five years.  They are almost identical,
and mimic the performance of the S & P 500.  It is a mathematical
certainty that the larger a fund grows, the less likely it is to
show performance which varies greatly from the overall market.

The reasons for this are many.  One of the reasons is the fact
that a fund trying to manage $50-100 bln or more will have
a more limited available basket of stocks to chose from.  A
very large fund usually cannot take a substantial position in
an illiquid or very small cap stock.  The shares are not easily
purchased and sold, and the performance of such a stock will
have little impact on the performance of a very large fund.
The holdings of the largest funds tend to be the largest
capitalized and most liquid growth stocks available, usually
names like Cisco, Microsoft, GE and Intel.

It is also debatable whether one person can even keep track
of 100 billion dollars worth of stocks, and pay attention
to the subtleties in company management, industry changes,
and the overall market conditions.  Usually big fund families
have a team of analysts and consultants, but one or two
people end up making most of the decisions.  In the last
few years there have been many mutual funds which have shown
outstanding years and attracted a flood of new cash only to
disappoint the shareholders the following years with
mediocre returns.

When you are using derivative strategies like options, size
can severely impact performance.  If you have a hard enough
time trying to get execution on a 10,000 option trade, think
how cumbersome it would be to try to buy a billion dollars
worth of options.  Market makers would increase the volatility
on those options to the point where it wouldn't even be worth
buying.  This is one of the reasons very large funds don't use
options, and thus don't have the ability to take advantage of
the leverage and different strategies offered by options.

In addition, it is usually not possible for a very large
fund of $50 bln or more to have the agility to be able
to move in and out of large positions of stock as markets
move up and down.  For example, if you were managing a very
large fund and saw the NASDAQ correction coming, you might
not have been able to do anything about it in terms of
selling billions of dollars worth of tech stocks to raise
cash without impacting the market and the price of the stock.
As you sold, and others saw that large blocks were being
sold, this would push the price down further.  It is very
difficult to sell a large block of a few million dollars
worth of stock without attracting attention.  Once the
traders on the floor notice this, rumors start and volatility
increases.

Contact Support


*****

What A S-l-o-w and B-o-r-i-n-g Day
By: Renee White

In typical Pavlovian style, I realized I have become conditioned
to the wild daily swings of the markets.  Until the final hour,
today was about as boring a day as any intra-day trader could
tolerate.  The narrow trading range made plays difficult until
late day.  The FOMC meeting is still 2 weeks away.  Other than
the spike up or down from the economic report coming out Friday,
it looks like this low volume will continue for a while.  With
low volume, comes a drift downward.

Lately, I have received several emails from brand new option
traders telling me they can't get anything to work.  In case you
have not been told yet, this is NOT the market that beginners
should be trying their new skills in.  For the majority of you,
trying to practice the theories you think you've just learned,
will accomplish little more than eating away at your trading
capitol.  Trading options successfully means knowing how to read
the market AND how to trade it.  For most right now, that means
either staying out, being sophisticated in spreads, very long
term strategies, or only day-trading.  I am holding very few
plays over night, myself.  Today it proved profitable but boring.

At the moment, this is a sideways market at best with poor
volume.  The low volume will get you every time with a slow melt.
Option traders need strong volume for their options to perform
day to day or else the slippage from time decay of holding over
night will bite like ants in your pants.  Don't be fooled into
thinking that now you have learned a few basic strategies, you
can deploy them in a consistently profitable way while the market
is sick with the flu.  Understanding the option strategy is only
one small part to trading successfully.  Take it from a veteran
who has already learned the respect of a sideways market; this is
the time that most should just sit out.  The markets will give
you plenty of opportunities in the future to play, when the odds
are more in your favor.

I hate to harp on this again, but the low volume is telling us
loudly, that few want to buy right now.  If the pension fund
managers, heavy hitters and experienced traders aren't buying and
keep telling you that this is a dangerous market to trade, then
trying to trade contrary to their painful historical experiences
could prove very expensive.  I hope you beginners really aren't
expecting to double your money regardless of market direction,
straight out of the gate.  Don't fool yourself.  Have you ever
heard the saying, "If it seems too good to be true, it probably
is?"  I don't mean to be harsh, but most will lose money in this
environment from: a lack of understanding of the overall markets,
poor entries, being on the wrong side of the trade, not taking
immediate & minimum profits, refusing to exit a losing trade,
not watching plays carefully, not understanding economic effects
on the markets & sectors, an inability to read charts &
indicators, buying the wrong options because they are cheap, or
just not being able to react fast enough.  The most profitable
thing many of us can do right now is to use this time to study
more.  Nobody can ever take away your knowledge.  Not by insults,
or by trading.  Talk about a "wealth effect".

Preserving my account during this weakness has been very
important to me after the recent damage done in April.
Therefore, I have drastically cut back on the number of trades
I make per day or week.  A few well-chosen trades a day, have
been fine.  Instead of staying out or playing options, I am
buying or shorting a few equities and QQQ because there is
less slippage between the bid-ask spread and there is no time
decay if I decide to hold over-night.  With markets up one day
then down hard the next, options just seem too risky to me until
I know that the last market bottom won't be tested again.  I was
hoping for a brief rally with volume this week, but the up volume
was not there yesterday, so I have changed my mind.  I'll enter
options when volume returns to the upside and it feels like it
will hold longer than a day or two.  There is a ton of money on
the sidelines and once those players all feel comfortable jumping
back in again, we should all make some easy money.  I've been
asked why I am not playing puts right now.  It's because of the
whipsaw up & down market without a clear direction, low volume
which increases the pain of time decay; the same thing that
affects calls.  Even basic spread strategies become hard in
this market.

Last week was profitable for me and so far this week, I have
surpassed last weeks gains.  Most of the more successful plays
have been from playing QQQ, although the only bad trade I had
last week was a whopper on Thursday with QQQ.  Yesterday, I
shorted QQQ at 96 and held overnight because I expected a
sell-off today.  I was able to add to the position early this
morning.  I chose to exit the trade at today's close, by buying
back the shares at 90 1/4.  In this environment, I was more than
happy to make $575 per 100 shares owned.  I could have considered
holding again over night for the gap down at the open, but I did
not want to risk losing such a nice profit if we gapped up on the
open for a brief rally.  The money is now in my pocket and I can
look at things fresh, again in the morning.  If a gap up occurs,
I will expect it to be a bear trap and I will probably short it
again expecting more weakness tomorrow afternoon and Thursday.
This is not the market I feel comfortable taking big risks in.
In fact I feel proud that I have been able to trade both
directions for consistent gains.  Granted, they are not as big
of gains as option gains, but any successful trade these days
counts.  This is an improvement in my own trading since last
year.

While on the OIN website recently, I saw an advertisement for
a book I enjoyed reading in the past.  Stan Weinstein's, Secrets
For Profiting In Bull And Bear Markets.  Dusting the book off,
I found it interesting that I opened it to a page where I had
underlined several sentences; "Volume confirmation on a breakout
is crucial."  "Volume is a gauge of how powerful the buyers
are."  And of course, "Never trust a breakout that isn't
accompanied by a significant increase in volume."  Boy, do
those quotes sound familiar or what?!

This was one of the first books I read on technical analysis.
I think it is a great introductory book.  For students new to
technical analysis the first few chapters will teach you the
4 stages of major market cycles.  He clearly discusses the
basing pattern, advancing stage, the top area and the declining
stage along with using volume to interpret where we are in each
stage.  I think this book is timely, since we expect our markets
to be choppy for a while.  He shows you how to decide entry
points, think through moving averages, find support and
resistance levels and how to quick view a chart to either play
now, or ignore.  By just understanding the dynamics of cycle
patterns alone, one could greatly improve their returns by
following his basic advise on entry points discussed in the
first few chapters.  It reads quickly, has self tests at the
end of each chapter with great explanations and is full of
market tidbits that one can review time and again.  In fact, I'm
going to review the book myself, again tonight.  If you order it
now, you could probably receive it and have those chapters read
before this market stabilizes.  Use it to your trading advantage.
Visit the OIN bookstore to order one.

Trade carefully.

Contact Support



**************
TRADERS CORNER
**************

Grading Your Performance
By: Janar Wasito

I am going through a very useful exercise which I highly recommend
to all traders--putting all my monthly closing balances on a
spreadsheet and figuring out my return and profits each month.  I
am going back to 1998, when I started investing in stocks, and
tracking my performance through 1999 and the first few months of
2000.  The results are very interesting and highly instructional.

Most of us do not take the time to do this.  If you are like me,
the statements come from the brokerages, and they pile up.  If I
am lucky, I put the statements and confirmations in the same pile.
But at certain times, you have to clean up your records, and
arrange them.  I have a milk crate with several binders of
information.  The papers are all stacked together.  It's ugly.
I can barely get the energy to cut open all the statements and to
stack them up by brokers.  So, why I am I sifting through the
paper fortress to locate those statements which tell me how I did?

The key is spotting trends and performance.  Without getting into
a level of detail that is too personal, I am going to share some
lessons learned.  Some of these are mistakes, but some are bright
spots.

In 1998, I executed a buy and hold strategy with blue chip stocks,
mostly technology companies.  This strategy worked in the first
few months of the year, but was subject to sustained draw down in
the second half of the year.  That's the danger with buy and hold
if the market in general turns against you.

In 1999, I started trading options with 15% or so of my portfolio.
This resulted in big spikes up in January, July, and December.  In
the other months, I had draw downs.  The lesson learned here is to
use the strategy which is appropriate to the market.  Bullish
directional strategies only worked last year approximately 25% of
the time.

In 2000, so far, January was a positive month, but the gains
mainly came in trades I held over from December and closed early
in the month.  So, the gain is not that impressive.  In February,
I lagged the market, and in March and April, I dropped, with the
indexes.

The main lesson learned here is that one should only trade when it
is profitable.  In general, if you are not printing black and
winning, then the right move is to reduce position size.  I made
a critical mistake in early March in increasing my position size
as my trades were not working.   This resulted in a hole that I
will have to work through the end of this year, probably, to dig
myself out of.  That's not the position you want to be in.

Going through this exercise can be painful and hard, but if you
want to improve as a trader, you need to do this.

Contact Support



***********
OPTIONS 101
***********

Hedging
By: David Popper

Like many of you, I have a trading partner.  I have known Tim
for many years because our children go to the same school.  I
never knew that Tim was an aggressive trader until we both
ended up in the local Borders purchasing a Barron's in May
of 1998.  We talked that day for about a half an hour and have
talked every Monday night since.  Tim has done extremely well
in the market and could easily retire at this point.  However,
he, like many others, love the game.  Last year, our strategy
was simple.  Buy stocks going into earnings or splits.  Sell
on the day of the event.  Buy stocks going into an event,
such as an analyst meeting.  Sell after the spike.  Buy
stocks on dips, sell after a reasonable gain.  For the last two
years, these strategies worked like a charm.  Yearly returns
were in the triple digits.  Then came March 2000.  Splits
meant nothing, earnings meant nothing.  In March, stocks
taking dips did not have springs, they were trap doors.
Something changed.  I do not know if it is temporary or
permanent, but it has changed.  It does not matter if the
change is temporary or permanent, it is a trader's duty to
play the market at hand.

Over the past several weeks, Tim and I have discussed the
market changes and how to adapt to the new environment.
We have discussed missed opportunities, mistakes and
perhaps better methods of trading.  We realize that many of
our trading strategies over the last year, though profitable,
were perhaps not as precise as they should be.  Bull
markets, however, do not punish traders for purchasing
stock at improper entry points.  Bull markets do not often
punish traders for purchasing too large a position or for
behaving in an emotional manner.  When the market turns,
however, a trader's every weakness is immediately exposed.

We concluded that the market, between now and May 16 will be
volatile.  There will be endless discussions on whether the
Fed will increase interest rates 1/4 point or 1/2 point.  The
emotions of the market will be not unlike that of a teenager.
Somedays teenagers are human, somedays they are not.  We
concluded, as traders who cannot watch a screen all day in
this volatile environment, that perhaps covered call writing
would be appropriate for the next two weeks.  I personally
have purchased quality stocks and written covered calls with
one-half of my cash portfolio leaving the other one-half in
cash.  This cash is available to buy quality stocks on dips to
support level.

Currently, I purchased PMCS, BRCM, JDSU, SUNW, ORCL and CHKP
on dips and have sold calls on the spikes.  All have provided
me with a 10% premium and a chance to earn even more if the
options are exercised.

Again, the key point here is not necessarily to persuade you
to try to write covered calls.  The purpose is to convince
you that it is important to trade the market as it is today,
not how it was three months ago or how it will be three months
hence.  The issue du jour is the Fed meeting on May 16th and
all short term trading must be done in light of that meeting.

Contact Support



*************
DAILY RESULTS
*************

Index      Last     Mon     Tue    Week
Dow    10731.12   77.87  -80.66   -2.79
Nasdaq  3785.45   97.42 -172.63  -75.21
$OEX     779.25    9.70    9.70   19.40
$SPX    1446.29   15.82   15.82   31.64
$RUT     505.35   12.68  -13.58   -0.90
$TRAN   2842.53    8.67  -16.15   -7.48
$VIX      30.87   -1.54    3.55    2.01

Calls               Mon     Tue    Week

BRCM     182.00    1.88    7.75    9.63  Bucking the trend today
KANA      49.31    3.75    3.00    6.75  Recovering nicely
QCOM     113.69    1.31    3.94    5.25  New, rumors and technicals
GE       161.06    2.13    1.69    3.81  Split run until Friday
SCMR      82.06    7.69   -4.13    3.56  Next support @ $78
NOC       72.94    2.63   -0.56    2.06  Shooting for 52-wk high
AMD       89.50    0.88    1.13    2.00  Still a HOT stock
SFE       44.00    7.63   -5.75    1.88  Profit-taking on strong vol
DHR       57.75    1.75   -1.13    0.63  Consolidating recent gains
ARBA      74.56    9.75   -9.38    0.38  Waiting for buyers...again
GM        93.38   -0.94    0.69   -0.25  New, revving up it engine
TER      108.00   -0.69   -1.31   -2.00  Semi has sights set on $115
TIBX      84.44    3.69   -8.31   -4.63  Sellers aren't lining up
ADBE     115.50    9.75  -15.19   -5.44  Still in ascending channel
ADI       71.31    0.88   -6.38   -5.50  Dropped, gave it up today
MERQ      84.44   -1.25   -4.31   -5.56  The time is coming again
ADCT      55.06    1.13   -6.81   -5.69  Dropped, broke below 10-dma
CMVT      82.06    0.88   -8.00   -7.13  Dropped, sold off w/techs
NTAP      65.25   -2.94   -5.75   -8.69  Could have a silver lining
CMGI      62.38   -1.75   -7.13   -8.88  Who pulled the rug out?
JNPR     197.88    6.25  -21.06  -14.81  Sitting right on 10-dma
RMBS     209.50    2.94  -23.44  -20.50  When will the knife stick?

Puts

CTXS      48.63   -5.06   -7.38  -12.44  New, beautiful descent
BOBJ      94.88    2.93   -5.94   -3.00  New, rolled over late today
HNZ       33.94    0.19   -0.25   -0.06  Ketchup or blood letting?
PG        59.81   -0.06    0.13    0.06  Dropped, selling dried up
ADRX      51.81    2.75   -2.13    0.63  Plummetted in mere minutes
LOW       50.88    2.50   -1.13    1.38  Nibbling is the key word


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:
*****

CMVT $82.06 -8.00 (-7.13)  The buyer's strike Tuesday caused
detrimental harm to our CMVT play.  The stock had been holding
up quite well relative to the broader market.  Then traders came
back from lunch and refused to step in and prevent CMVT from
sliding lower.  In fact, the stock experienced a surge of volume
in the last hour of trading as the sellers came out in full
force.  With today's selling, CMVT plunged below its 10-dma and
its critical support of $84.  The stock is now precariously
positioned above a major support of $80.  The break of the upward
trend and heavy selling towards the end of trading Tuesday has us
exiting our play in CMVT.  Kudos to an alert reader who notified
OI that we had printed the wrong earnings date for CMVT last
Sunday.  We apologize if this caused any confusion and appreciate
the prompt response.

ADCT $55.06 -6.81 (-5.69)  ADCT announced several key
partnerships Tuesday and unveiled the first real-time customer
management and billing solution for communications providers.
But, the announcements didn't matter much to traders as ADCT fell
victim to Tuesday's sellers.  Like many leading tech stocks, ADCT
drifted along much of Tuesday only to fall in the final hour of
trading.  The late day plunge pushed ADCT below its moving
averages and below its major support levels.  ADCT had major
support at the $56 level, but fell through it Tuesday without
hesitation.  The selling in ADCT came with more conviction than
the rest of the tech sector Tuesday.  Traders exchanged nearly a
half million shares in the final thirty minutes of trading
Tuesday.  The mass exodus late Tuesday has us concerned that the
selling isn't over for ADCT.  It's time to exit too soon and
leave ADCT for the sellers.

ADI $71.31 -6.38 (-5.50) ADI never came off its lofty pedestal
on Monday to offer reasonable entries into this momentum/pre-
earnings play.  And today's late day descent was so sharp and
quick that we're dropping it tonight.  Initially it was smooth
sailing today with ADI testing resistance above $79.  Merrill
Lynch even came out and reiterated a Near-Term Accumulate and
Long-Term Buy, but to no avail.  The intense sell-off shot ADI
down 8.2% in a mere hour.  And considering ADI's chart pattern
of the past two months, the slide below the 30-dma ($73.98) is
in and of itself is a very bearish sign.  But don't 'throw the
baby out the window with the bath water'.  ADI could perk back
up in a couple weeks.  The company is expected to report
earnings on May 17th, before the opening bell.  At the Merrill
Lynch Hardware Heaven conference, Jerald Fishman, president and
CEO of Analog Devices restated that "his company expects revenue
to rise 50 percent in fiscal 2000 to roughly $2.3 billion" as a
result of "its focus on the faster-growing communications market
(data processing)".  For now though, we will move elsewhere.


PUTS:
*****

PG $59.75 +0.13 (+0.06) After getting brutally punished, first
for an earnings warning and then for the actual earnings
numbers, it seems that the selling in PG has just about dried
up.  Selling volume was very light today posting less than a
third of the ADV, and with the broad markets weak, we would
have expected PG to break through $59, a level which is
looking stronger as a support level.  With the conditions
that attracted us to the play rapidly disappearing, we'll take
our cash and move on before the buyers return and PG moves
against us.



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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 5-02-2000
Copyright 2000, All rights reserved.                  2 of 2
Redistribution in any form strictly prohibited.


********************
PLAY UPDATES - CALLS
********************

ARBA $74.56 -9.38 (+0.38)  If you didn't watch the markets the
past couple days, you might think trading in ARBA has been
really quiet this week with a gain of only $0.38.  Nothing
could be further from the truth as shares of the Internet
software shot up $9.75 on Monday and then gave up all but a
fraction of that gain today.  Following the lead of the
Internet sector, ARBA saw strong buying volume yesterday, and
suffered from a lack of buyers today.  As the NASDAQ weakened
late in the day, there was nothing to support the gains from
Monday and the price dropped to support at $75 as volume
increased.  The decline finally halted and bounced in the
last 5 minutes, but use caution as the week progresses.
Interest in the Internet sector and the NASDAQ will likely
dictate ARBA's near-term fate as the April earnings cycle
winds down.  Wait for the buyers to return and confirm a bottom
for the stock before playing - a drop to the next support level
at $70 may be necessary before the bounce occurs.

CMGI $62.38 -7.13 (-8.88)  Is anybody else wondering who pulled
the rug out from underneath the Internets?  Rather than calling
it a definable event, it appears that investors are still very
nervous about the long term direction of the market and sector
and the looming interest rate hike.  After the beating meted
out to many investors in the past 2 months, they are quicker to
take their money and stand aside.  Moving up to resistance at
$75 early on Monday, CMGI had no buyers remaining and the slide
began in earnest during the last hour of the day.  Falling to
support at $68 near the close, CMGI showed some stability for
the first part of the day today, before the stock once again
fell victim to the lack of buyers in the Internet sector.  As
the volume increased, the price dropped quickly and is now
challenging the next level of support at $60.  Consider
entering new positions on a bounce from support, but confirm
that it is backed by strong volume and corresponding market
strength.  With earnings still a month away, CMGI will likely
trade at the mercy of the NASDAQ and the Internet sector as
investors wait for direction from the remaining economic
reports ahead of Greenspan's next market-spooking appearance.

DHR $57.75 -1.13 (+0.63)  Well, nothing lasts forever, and the
consistent daily gains in DHR ran into that reality today.
Pressured by broad market weakness, the stock retraced the
majority of yesterday's $1.75 gain, and closed the day at
$57.75.  The culprit today is the light volume we have been
concerned about recently as DHR barely topped 250K shares.
Weakness in both volume and price pervaded the markets today,
due to a lack of buyers, rather than a flood of sellers.
Closing at the low of the day is not encouraging, but at least
the decline stopped just above the recent $57.50 support level
and the 5-dma ($57.38).  Stronger support is found at $56 and
a bounce at this level could provide a good entry going forward.
This was the first day we have seen DHR respond to market
weakness and this could be another indication that some
consolidation of recent gains is necessary before continuing
higher.  A more cautious approach would be to wait for volume
to return and push DHR through resistance at $59 on its way to
the $62 resistance level.

TER $108.00 -1.31 (-2.00) It seemed that Tuesday was a replay of
Monday for TER.  The stock showed impressive strength throughout
the day only to fall in the final two hours of trading.
Executives from TER presented to analysts Tuesday.  The company
told Wall Street to expect continued strength from the semis.
Analysts went on to say that bookings for the semi equipment
companies are sustainable for the next two quarters.  Also on
tap, a semiconductor industry watch group will be releasing sales
figures for the month of March later this week.  Traders are
saying a positive report may help to perpetuate the semis
further.  TER's momentum carried the stock to an all-time high of
$115.44 Monday, but the stock followed the broader market lower
towards the end of trading.  Tuesday was a mirror image of the
prior day's trading, the stock hit $114.69 then sold-off in the
latter part of trading.  From here, TER will face resistance at
the $115 level.  The stock has major support at $105 should the
broad market weakness continue.  Look for a bounce off support
for a possible entry or wait for TER to clear resistance for a
more conservative entry point.  Wait for volume to pick-up, and
confirm direction before entering into a new play.

NOC $72.94 -0.56 (+2.06) We saw heavy buying in NOC early Monday
morning as the stock surged in the first half-hour of trading.
The momentum carried over into Tuesday as NOC sailed past
resistance at $74, falling just short of its 52-week high.  The
stock held up relatively well Tuesday until the last hour of
trading when the broader market weakness finally pulled NOC down,
back below $74.  There hasn't been any news in the last two days
to propel NOC higher.  But, we're looking for the momentum to
continue if the broader market strengthens.  Even with Tuesday's
downdraft, NOC is still trending above its 5-dma, which has
provided strong support during its recent run.  NOC will find
major support at the $72 level should the market weakness
continue.  The $74 level will prove to be resistance for NOC again
before the stock can move higher.  Watch for a bounce off the
5-dma as an aggressive entry into the play.  A move above
resistance would provide an entry point for a more conservative
trader.  Whichever strategy you choose, pay close attention to
the volume and the broader market direction.

ADBE $115.00 -15.19 (-5.44) ADBE led the tech charge Monday as
the stock hit an all-time high of $131.  Come Tuesday, buyers
disappeared along with the gains from the previous day.  The
stock fell from a combination of no buyers and concerns over
Microsoft's upcoming software releases.  MSFT will release its
new Windows Millennium Edition later this summer, it will include
features such as digital video editing and enhanced graphics
capabilities.  Some analysts believe the push into graphics by
MSFT will cut into market share for companies such as ADBE.  The
concerns may be short lived, as many believe ADBE has a superior
product.  Accounting for Tuesday's sell-off, ADBE remains in its
pattern of higher highs and higher lows that we have come to
know.  The stock found support at its ascending 10-dma Tuesday,
and could bounce from the level should the buyers step back in.
However, if the selling continues, ADBE will most likely find
support at $110, within its ascending channel.  Volume has been
anemic recently, confirm any move higher with increasing volume
as a sign that the buyers have returned.  Watch for a strong move
back above $120 for a possible entry point.  An aggressive trader
might look for a quick rebound in the next few days as ADBE has
very little resistance above its current level.

SCMR $82.06 -4.38 (+3.56) As we've said before, nothing goes up
forever in a straight line, but with 4-day chart leading from $55
to $91, we should expect a bit of profit taking.  That's
especially true if the rest of the NASDAQ does a 172-point
rollover.  That the damage was limited to slightly over $4 is
commendable.  Despite the beating it could have taken, SCMR
remained well above its 5-dma of $74.73 and the 10-dma of $65.25.
Both still need to play catch-up.  But that's only one side of
the coin.  The flip side is that SCMR opened near its low at $81,
moved up $10, then finished near its low, thus creating a bearish
candlestick pattern.  We wouldn't be concerned if the volume was
low, but at 54% greater than the average, more sellers may emerge
tomorrow.  You may want to consider tightening up your stops at
the next level of support around $78.  The story is still good,
so if you get stopped out, you can always buy it back cheaper
(say at the 5-dma or 10-dma depending on your risk profile).
There is still the strong possibility of a sympathy move as CSCO
approaches earnings on May 9th, though SCMR won't report until
May 18th.  Just make sure to confirm the market direction before
taking a position.

TIBX $84.44 -8.31 (-4.63) Yes, a big loss looks bad.  However the
good news is that TIBX took its lumps on relatively low volume -
just 72% of the ADV.  In other words, nobody is lining up to sell
this Internet portal plumber.  That may be because TIBX software,
originally developed by Reuters, continues to win business from
B2B companies in need of a platform (CSCO, ORCL, HWP, ARBA all
use TIBX products).  Also CSCO has integrated the stuff into some
of their new equipment.  The more they sell, the more TIBX makes.
We may get a glimpse of TIBX's success when CSCO reports earnings
on May 9th.  Technically, TIBX tagged the low side of the
ascending channel and should theoretically bounce back up given
their good story.  But don't dive in just yet (unless the market
conditions change back to positive) since TIBX also now sits
below its 5-dma of $85.09 (also previous support) and still has
room to fall to find its 10-dma at $74.89.  Historical support is
in the middle at $80.  With such a volatile issue, you may want
to tighten up the stops a bit so you don't backslide right out of
the profit.  Hopefully $85 will be crossed to the North and will
hold tomorrow.  Otherwise you can target shoot to your favorite
level of support, depending on your risk profile.  Next
resistance is at $88, then $95.

BRCM $182.00 +7.75 (+9.63) Hmmm. . .there's that pesky $180
resistance we wrote about Sunday.  While it was a problem
yesterday, today the technical hurdle was cleared as volume
picked up to 58% over the ADV on news from Hardware Heaven
(Merrill Lynch conference) that BRCM would introduced a 10-
gigabit optical networking chip.  That's up to 10 times the
rate currently possible over the same media and distance
according to the company.  The stock has been aptly rewarded.
Technically, ascending red candlesticks are unusual.  It shows
that sellers are winning at the end of the day, while next
morning buyers are pushing the price up another level.  While in
the end the stock closes higher than the previous day, it's hard
to predict that the upward trend will remain in tact.  After
hours trades were already going off in the $176 range.  Since it
closed at its low of the day, you may be well served by placing a
tight stop and attempting re-entry at the 5-dma of $170.71 or
target shoot $165 and $160 support.  This company is also a split
candidate.  But don't let enthusiasm for the issue (a sentiment
we share) cloud good trading strategy by making you think, "it
will come back".  Watch for strong volume to confirm the move up,
and weak volume to confirm that any dip is just a buying
opportunity.  Big volume and a big price drop means find another
play.

GE $161.06 +1.69 (+3.81) ZZZZZ. . .You'd think that a 3:1 split,
the likes of which GE hasn't seen for a while, would make a great
catalyst for a price run.  Not this time.  While $157 would have
made a good entry on Friday, the best we got Monday was around
$158 at the open from where it traded fairly flat, never
exceeding $162 yesterday and today.  The good news is that GE,
normally a barometer for the rest of the market, bucked the
downward trend today by gaining $1.63.  That's a positive in our
book despite the low volume.  However, if GE is going to give us
that big move up with the potential for breakout at $166, we're
going to have to see more volume.  There isn't much time since
the split will occur after the close on May 5th with split
adjusted trading to begin on May 8th.  Support has eked up to
$158.  Nonetheless, tread with caution.  If the market
continues to show weakness, we may be able to get a good entry,
but a deadline of Friday may keep us from seeing much
appreciation.  Pray that initial jobless claims on Thursday and
the non-farm payroll figures on Friday don't cause the market to
dig a bigger hole.  Forget the stock specific news.  This is all
about a split run vs. a temporary market pullback.

NTAP $65.25 -5.75 (-8.69) We had a more positive move in mind
for NTAP when selecting it to our list.  The drop in price so
far this week could be the silver lining for our new play.
Investors turned a bit skittish again today, and a much better
entry point could be in store for traders with patience.  Need
to be convinced?  First of all we have the 10-dma showing
up at $63.58, as well as good support in the $61-$62 area.  NTAP
gained about 69% last week from its low near $44, so some profit
taking is not unexpected.  Compared to the move up, the volume
has dropped off the first two days of the week.  That said, NTAP
could continue to see profit taking occur if the sentiment in the
broad markets begins to erode further.  Again we suggest patience
when looking for an entry point for this play.  Confirm any moves
higher with volume.  As expected NTAP did introduce on Monday the
Netcache C1100, a thin specialized server.  This would normally
have helped the momentum continue, however, with the present
market conditions, don't fight the tape.

SFE $44.00 -5.75 (+2.00) Not a bad start to a new week and a
new play.  Yesterday, SFE announced IBM and Compaq Computer each
invested $50 million in the company.  Commenting on the IBM and
Compaq investment, Joel Krasner, an analyst at First Albany Corp,
said "people are recognizing that whether you're in B2B or B2C
your going to need more broadband, more infrastructure, more
network services, and companies that support that development
will get investor support."  SFE got great support on Monday
as investors bid the price $7.50 higher, with the Internet
incubator company gaining nearly 18%.  Today was a different
story as traders sold shares of SFE right out of the gate.  By
the closing bell, our new play gave back all but $2 of Monday's
gains.  No specific news, just profit taking and what seemed to
be broad market uncertainty.  The volume was strong both yesterday
and today, and the pullback could be providing a good entry point.
Target shooting an entry off the 200-dma which now sits at $41.78
could produce favorable results as long as there is good volume
behind the move.

RMBS $209.50 -23.44 (-20.50) You've heard the term, "don't try
to catch a falling knife?"  Well that's the case here, BUT, be
prepared to pick it up when it sticks.  The sticking point could
be coming soon.  Let's face it, RMBS is a volatile play, and not
for the faint of heart.  Since being added on April 23rd, at
$167.50, RMBS peaked out on Monday at $248 before profit taking
set in.  No company specific news so far this week, just a lack
of interest in RMBS and the $SOX in general.  The semiconductor
stocks have struggled since late Monday morning, but we would
look for opportunity's to jump on board once RMBS finds support.
The area between $190 and $200 could be the sticking point we
are looking for.  The 10-dma is now found at $191.23.  As many
analysts suggest, we may be range bound for a while, which could
provide numerous opportunities for those following RMBS.  Once
interest in the $SOX returns, RMBS should begin to thrive as well.
If we see a bounce, be prepared to pull the trigger and sell too
soon, to protect profits on any new positions.

MERQ $84.44 -4.31 (-5.56) Hang in there, our time is coming
again and perhaps very soon.  Wouldn't it be nice if every
position, in every play went straight up and never paused to
catch its breath?  Honestly, probably not.  The $80 area we
mentioned last week may now become a reality.  Investors have
turned cautious heading into this week's reports, and the Fed
meeting, which is not necessarily a bad thing.  Frustrating
maybe, but not bad.  Since being added at $58.75 we've had
several chances to take some money off the table, and now
it's time to rest, and prepare for another entry into this
play.  Actually MERQ's bounce off the $86 area this morning
appeared to be a good entry point.  However, at the end of the
session MERQ gave way to the sellers, and fell to close near
its low of the day.  There's not much support now until the
$80 level, with the 10-dma residing at $79.60.  If the bears
continue to have their way with MERQ, we would look to
establish new positions near support if bounces are accompanied
by solid volume.

AMD $89.69 +1.31 (+2.19) AMD is maintaining its high altitude
and hovering around the $90 mark.  The glass ceiling now lies in
broken pieces shattered by AMD's strong momentum!  The intraday
accelerations gave way to AMD striking new 52-week highs in both
sessions this week.  The record now stands at $92.38.  These
positive moves amid a "buyer's strike" on the NASDAQ today and
profit mongers taking some chips off the table confirm AMD is
still a hot stock.  Near-term support is firm near the 5-dma
($86.61), but is establishing itself higher at $88 and $89.  The
shareholders' meeting last Thursday didn't net a split
announcement, but the company did file with the SEC to increase
their number of authorized shares; thus clearing the path for a
future stock dividend.  So in the meantime while the BoD may or
may not make a split announcement, look for AMD to continue
powering higher on pure momentum.  In other news yesterday, AMD
joined a consortium of high-tech companies led by Compaq
Computers (CPQ) and Hewlett-Packard (HWP) to create an Internet
market exchange for electronics and computer components.  The
companies expect this venture to reduce costs and speed
delivery.

KANA $49.31 +3.00 (+6.75) Buyers were hot on the trail of this
sizzling infrastructure stock.  KANA tacked on another 15.9% to
its recovering share price.  This strong momentum is keeping it
on the upside of the 10-dma (now at $40) which is very
important.  Remember KANA hasn't seen the upside of this
technical since it began its freefall back on March 13th.  Even
the unwavering sell-off late day couldn't bring KANA to its
knees today.  The stock's intraday low of $47 clearly outpaced
yesterday's strong close.  So chalk up another one for KANA.
Goldman Sachs was also hot for this stock too.  The firm upped
its rating from a Market Outperform to the Recommended List.  In
other news, Kana Communications announced it's providing
Firstdoor.com, an emerging human resources and benefits center,
with the technology needed to develop a B2B online source.

JNPR $197.88 -21.06 (-14.81) Yup...that's an Internet for you.
Up $44.38, or 25.4% in five sessions and down $21.06, or 9.6% in
one brutal day at the market.  Honestly it's not as bad as it
sounds.  JNPR simply returned to firm support near $200 and is
now sitting on the 10-dma ($197.49).  Plus we can't expect such
a high-flyer not to take a breather after such lucrative gains.
If the pullback continues tomorrow then it's possible JNPR could
experience another 20-point drop to $180, so be prepared with
trailing stops (whether real or imagined).  But at the moment
we're left with a great launching point for entries into this
momentum play.  Of course you want to wait for upward
confirmation after amateur hour opening new positions.  News was
scarce this week and so far there's nothing company-specific to
effect trading.



*******************
PLAY UPDATES - PUTS
*******************

HNZ $33.94 -0.25 (-0.06) Tuesday was a good day to be long a put.
HNZ edged lower with the broader market weakness Tuesday, falling
to $33.13 before slightly rebounding in the last hour of trading.
HNZ could have fallen lower, but traders said that some money was
shifted from the tech sector into defensive stocks such as HNZ.
With the long bond moving above 6%, inflation worries entered the
minds of traders, and some found solace in buying a basket of
inflation immune stocks.  HNZ is still trending lower, finding
resistance at its 10-dma.  A bump against the overhead 10-day may
provide a good entry point into the play.  If buyers decide to
step back into the tech sector, HNZ could fall further, possibly
past support at $33.  That level has proved to be major support
for HNZ.  A move below $33 may provide an entry point for a more
conservative trader.  Another sign that the food companies are
facing problems came Monday when Nabisco said it would cut about
130 jobs and close two warehouses.

ADRX $51.81 -2.13 (+0.63) Volume was moderate to strong and ADRX
couldn't crack the $55 level, which is great.  It did trade
narrowly between there and $53, near the 10-DMA.  So from
a technical standpoint this wasn't the best either.  Essentially
ADRX is stuck between a rock and a hard place.  However, we're
keeping ADRX on the OIN put list for the interim because the
intense drop in share price of over $2 in mere minutes implies
there may be more to come.  Conservatively, let's wait for a
breakdown below $50.  It'd be better to see this level of
previous support dissolve before committing to new positions.
Otherwise, more aggressive traders can enter on downward moves
off the 10-dma($53.44).  Confirm ADRX is still channeling in a
lower range.

LOW $50.88 -1.13 (+1.38)  After getting beat up last week LOW
and many of the retail stocks began to find buyers nibbling
at their feet early this week.  Nibbling is the key word here.
We mentioned this weekend LOW could see a bounce up to the
$52-54 area.  In the first hour of trading today buyers did
bid the price up to $52.69 before sellers stepped in again.
The decline today wasn't huge, but could be just what we were
looking for as far as an entry for this new play.  The buying
earlier came on anemic volume, but picked up as the selling began.
Lowe's and others were named as defendants in a lawsuit in
Georgia.  Probably not big deal in the overall scheme of things,
but not something anyone ever wants to deal with.  Sentiment in
the broader markets may now be the key for our play.  With the
DJIA and NASDAQ each weaker today, the economic data and the Fed
will continue to be on the mind of most investors.  If LOW
continues to show weakness, we would look for opportunities to
buy puts.  If buyers appear from somewhere, we would still look
for the $52-$54 area to provide resistance for Lowe's.


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

GM - General Motors $93.38 +0.69 (-0.25)

Maintaining its position as the world's #1 maker of cars and
trucks, GM has managed to diversify its business so that it is
more than just a car company.  Its automotive business
encompasses the Buick, Cadillac, Chevrolet, GMC, Oldsmobile,
Pontiac and Saturn brands, as well as others through its
affiliations with Suzuki, Saab, and Isuzu.  Non-automotive
operations include Hughes Electronics (satellites,
communications), Allison Transmission (medium and heavy-duty
transmissions), and GM Locomotive (locomotives, diesel engines).
GM has successfully spun off Delphi Automotive Systems, the
world's #1 auto parts maker.

After posting stronger than expected earnings on April 13th,
shares of GM have been marching steadily higher and over the
past week the stock has been revving its engine for a run at
the 52-week high of $94.88.  Now supported by the 5-dma ($92.88)
and fueled by positive news (see below), GM could be driven
higher as investors search for strong companies with rational
valuations.  As an added incentive, GM is historically a split
candidate above $90 and has more than enough shares authorized
to announce at any time.  Volume would seem to confirm the
strength of interest in shares of the auto maker, as today's
gain (in a weak market) was supported by volume more than 75%
over the ADV.  The drop at the open this morning confirmed the
$90 support level (also the site of the 10-dma) and GM recovered
nicely for the balance of the day as investors sought out stocks
with any sign of strength.  Stronger support is found near $88,
and a bounce near this level could provide a very attractive
entry point.  Look for intraday pullbacks to initiate new
positions, but confirm the bounce before playing.  More
conservatively, wait for shares to trade to new highs and break
through the $95 resistance level before taking a seat.

Today, GM announced strong vehicle sales for the month of April,
posting a 2% increase for all vehicles.  Light trucks continue to
gain market share and GM is seeing strong performance across many
of its major brands.  Of particular note is the 16% year-over-year
increase in retail sales of mid-size cars.  Allaying investor
fears, GM appears to have avoided a labor dispute at its Morraine,
Ohio, sport utility vehicle manufacturing plant.  The two parties
have reached a tentative agreement on a four-year contract ahead
of the looming May 3rd deadline.

BUY CALL MAY- 90*GM-ER OI= 4468 at $5.13 SL=3.25
BUY CALL MAY- 95 GM-ES OI= 3089 at $2.31 SL=1.25
BUY CALL MAY-100 GM-ET OI= 2794 at $0.94 SL=0.00
BUY CALL JUN- 95 GM-FS OI= 1449 at $4.88 SL=3.00
BUY CALL JUN-100 GM-FT OI=20118 at $3.50 SL=1.75

SELL PUT MAY- 90 GM-QR OI= 1517 at $2.00 SL=3.75
(See risks of selling puts in play legend)

Picked on May 2nd at     $93.38     P/E = 11
Change since picked       +0.00     52-week high=$94.88
Analysts Ratings      6-7-5-0-0     52-week low =$59.75
Last earnings 04/00   est= 2.66     actual= 2.80
Next earnings 07-13   est= 2.70     versus= 2.66
Average Daily Volume = 4.58 mln
/charts/charts.asp?symbol=GM


QCOM - Qualcomm Inc. $113.69 +3.94 (+5.25)

Ever heard of CDMA technology?  QUALCOMM Incorporated is a
leading developer and supplier of digital wireless communications
products and services and is the innovator of CDMA, a technology
that has become the world standard for the wireless
communications industry.  Just as Microsoft gets paid almost
every time a PC is sold, QCOM gets paid the same way every time a
Sprint PCS or GTE phone is sold in the U.S.  The rest of the
world adds more.  China is likely to adopt the standard soon too,
which will open up CDMA's potential to 1 bln people.

Let's see...Qualcomm buys a 10% stake in Netzero for $144 mln,
while Lehman Bros reiterates a Buy rating and the Street goes
nuts?  Not really.  Don't get us wrong.  Every little bit helps.
The fact is that QCOM's business story keeps getting better as
its CDMA technology is adopted as THE new standard in wireless
protocol throughout the world.  Technically, QCOM bounced off its
200-dma on April 27 and hasn't looked back - a strong bullish
sign.  In fact, it's cleared and been finding support in the last
three days at its 10-dma, currently $108.15.  While the technical
picture alone makes for a good story, the real horsepower in the
play comes from a rumor circulating on the Street that Nokia,
Finland's wireless behemoth sporting over $200 bln in market cap
(Europe's biggest market cap company) will make an offer for
QCOM.  We have no idea if that's true or not, but that didn't
stop a huge surge of volume in the last hour of trading on a
previously lackluster day, including a total of 233 block
trades.  The price went from $114 to $120 in a matter or
minutes, and back down again into the close.  Strong support is
at $105, $110 and $113.  Even if the rumor is false, there's a
tradable story and a technical chart to back it up.  The rumor is
gravy.

In the news, DDI, Japan's third largest wireless carrier is
likely to adopt the CDMA standard.  To us it looks like a sure
bet since Kyocera, the Japanese wireless handset firm that bought
QCOM's handset operations last year is a 25% owner in DDI.  A
country a week - that's all we ask!

BUY CALL MAY-105 AAF-EA OI=5696 at $12.63 SL=9.50
BUY CALL MAY-110*AAF-EB OI=9249 at $ 9.50 SL=6.50
BUY CALL MAY-115 AAF-EC OI=3377 at $ 7.13 SL=5.00
BUY CALL JUN-115 AAF-FC OI=1632 at $12.25 SL=9.00
BUY CALL JUN-120 AAF-FD OI= 334 at $10.00 SL=7.00

SELL PUT MAY-100 AAF-QT OI=1072 at $ 2.00 SL=3.50

Picked on May 2nd at    $113.69     P/E =141
Change since picked       +0.00     52-week high=$200.00
Analysts Ratings      8-6-4-0-0     52-week low =$ 21.50
Last earnings 04/00   est= 0.24     actual= 0.26 surprise = 8%
Next earnings 07-18   est= 0.27     versus= 0.19
Average Daily Volume = 17.8 mln
/charts/charts.asp?symbol=QCOM



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

CTXS - Citrix Systems $48.69 -7.31 (-12.44 this wk)

Citrix Systems helps juice up Windows-based computer networks.
The company's WinFrame and MetaFrame software products enable
networked computers such as Macintoshes, UNIX machines, and pre-
Windows PCs to run Windows-based applications from a central
server.  Customers outside the US account for about a third
of sales.  Co-founder and chairman Edward Iacobucci led the
IBM-Microsoft engineering team that created the OS/2 operating
system back in the mid-1980s.  Microsoft accounts for about 15%
of the company's sales and owns about 6% of CTXS.

As the King of Software slides, so goes the little softees.  The
antitrust suit against MSFT has caused problems for the rest of
the software sector.  MSFT took another punch Tuesday from a
Morgan Stanley analyst, who set a price target for the stock
between $60 and $70.  The MSFT meltdown has dragged the software
stocks sharply lower over the past two months.  And CTXS is no
exception.  The stock has fallen nearly 60% from its high of $122
reached last March.  The selling Tuesday pushed CTXS below
support of $50.  In a day when the broad market volume was bleak,
the downward spiral for CTXS came on extremely heavy volume.
Traders turned over nearly three times the ADV en route to
forcing CTXS through support Tuesday.  The heavy selling and
broken support could lead to lower prices for CTXS.  The next
level CTXS will find support is at $45.50.  Below that level, the
stock could very easily retest its lows from last Fall at $40.
Should CTXS enjoy a relief rally in the coming days, the stock
will most likely find resistance at its descending 10-dma,
currently at $49.50.  Two ways you might consider playing CTXS
is to wait for the stock to fall through support or watch for a
bump against the 10-dma.  With the former being more conservative
strategy and the latter more aggressive.  Watch the action in the
other software stocks, especially MSFT, and look for heavy volume
on any downward move.  The action in MSFT could set the tone for
CTXS since the two companies are so closely linked.

BUY PUT MAY-50*XSQ-QJ OI=731 at $5.25 SL=3.25
BUY PUT MAY-45 XSQ-QI OI=640 at $3.00 SL=1.50

Average Daily Volume = 4.53 mln
/charts/charts.asp?symbol=CTXS


BOBJ - Business Objectives S.A. $94.88 -5.94 (-3.00 this wk)

Business Objects S.A. develops, markets, and supports "Web
Intelligent" software.  Their suite of software tools are geared
towards non-technical end-users and allow them to easily access,
analyze, and report information in relational databases.  The
company's clientele include blue-chip companies like AT&T and
Walt Disney.  Over 70% of sales come from outside of France.

Despite recent analyst coverage and outstanding earnings'
numbers, BOBJ can't run through overhead resistance at $102 and
$103.  So along those lines we're starting coverage on BOBJ as a
technical play.  In every recent attempt it inevitably was shot
down to its current level or lower near $90.  That by itself
is a decent spread.  For the DMA watchers, the outlook appeared
very bearish today.  BOBJ violated the 10-dma ($98.56) in
trading and is now perched precariously on the 30-dma ($94.68).
The latter technical could effectively be a decisive factor in
the near-term.  During the March-April chaos, BOBJ fell
significantly after it slipped below this line.  As mentioned
earlier, BOBJ received coverage recently.  Last Friday,
Prudential Volpe Technology Group reiterate an Accumulate
recommendation following the company's earnings report.
Business Objectives came in at $0.16 p/s versus $0.08 same
quarter last year beating estimates by $0.03.  And today, First
Security Van Kasper started BOBJ with a Strong Buy and a $120
price target per ADR.  So while we still expect BOBJ to continue
its descent over the next few days, it's important to know all
the variables that have or may effect BOBJ's trading behavior.

BUY PUT MAY-100 BBJ-QT OI= 6 at $13.00 SL=9.75
BUY PUT MAY- 95 BBJ-QS OI=15 at $ 9.88 SL=7.00
BUY PUT MAY- 90*BBJ-QR OI=43 at $ 7.38 SL=5.25

Average Daily Volume = 702 K
/charts/charts.asp?symbol=BOBJ



**********************
PLAY OF THE DAY - CALL
**********************

GE - General Electric Co. $161.00 +1.69 (+3.75)

Unless you've been a cave dweller for the last 100 years, you
probably know what GE does.  Just in case you need a refresher,
GE is a diversified services, technology and manufacturing
company that operates in more than 100 countries and employs
nearly 340,000 people worldwide.  They make light bulbs, jet
engines, medical equipment, however they are mostly a finance
company from which they derive most of their profits.  If you are
in the financial markets, you probably know them as the parent
company of the CNBC business television.

Most Recent Write-Up

ZZZZZ...You'd think that a 3:1 split, the likes of which GE
hasn't seen for a while, would make a great catalyst for a price
run.  Not this time.  While $157 would have made a good entry on
Friday, the best we got Monday was around $158 at the open from
where it traded fairly flat, never exceeding $162 yesterday and
today.  The good news is that GE, normally a barometer for the
rest of the market, bucked the downward trend today by gaining
$1.63.  That's a positive in our book despite the low volume.
However, if GE is going to give us that big move up with the
potential for breakout at $166, we're going to have to see more
volume.  There isn't much time since the split will occur after
the close on May 5th with split adjusted trading to begin on May
8th.  Support has eked up to $158.00.  Nonetheless, tread with
caution.  If the market continues to show weakness, we may be
able to get a good entry, but a deadline of Friday may keep us
from seeing much appreciation.  Pray that initial jobless claims
on Thursday and the non-farm payroll figures on Friday don't cause
the market to dig a bigger hole.  Forget the stock specific news.
This is all about a split run vs. a temporary market pullback.

Comments

GE is splitting after the close on Friday.  Given that the NASDAQ
has been trading in a range with light volume, calling which way
the next move is difficult.  Yet today, the DJIA really was better
than it looked, as most of its losses were from T, INTC and MSFT.
GE has held up well and has been finding support at $158.  This
may be a good play with only a few sessions left before the split,
given the recent market uncertainty.  Target shoot on intraday
pullbacks.

BUY CALL MAY-155 GE-EK OI= 1992 at $ 9.75 SL=7.25
BUY CALL MAY-160*GE-EV OI= 3529 at $ 6.63 SL=4.75
BUY CALL MAY-165 GE-EM OI= 4576 at $ 4.13 SL=2.50
BUY CALL JUN-160 GE-FV OI= 3520 at $10.25 SL=7.50
BUY CALL JUN-165 GE-FM OI= 2291 at $ 7.75 SL=6.25

SELL PUT MAY-150 GE-QU OI=10270 at $ 1.75 SL=2.25
(See risks of selling puts in play legend)

Picked on Apr 25th at   $166.00     P/E = 48
Change since picked       -5.00     52-week high=$166.31
Analysts Ratings     7-15-1-0-0     52-week low =$ 91.81
Last earnings 04/00   est= 0.76     actual= 0.78 surprise=3%
Next earnings 07-18   est= 0.97     versus= 0.85
Average Daily Volume = 7.50 mln
/charts/charts.asp?symbol=GE



************************
COMBOS/SPREADS/STRADDLES
************************

Title: Equities Fall On New Inflation Fears..

Monday, May 1

The markets rallied today with technology issues leading the way.
The Dow closed up 77 points at 10,811 and the Nasdaq moved up 97
points to 3958.  The S&P 500 Index climbed 15 points to 1468.  The
volume on the NYSE was a relatively light 950 million shares, with
advances beating declines 1,959 to 1,044.  Nasdaq volume hit 1.49
billion shares with advances beating declines by 2,576 to 1,575.
The 30-year U.S. Treasury bond fell 13/32, with the yield rising
to 5.99%.


Sunday's new plays (positions/opening prices/strategy):

Mattson         MTSN   MAY40C/MAY45C   $4.00   debit   bull-call
Ocular Science  OCLR   MAY15C/MAY17C   $1.50   debit   bull-call
Oxford Health   OXHP   MAY15C/MAY17C   $2.06   debit   bull-call
Halliburton     HAL    MAY35P/MAY40P   $0.50   credit  bull-put
Protein Des.    PDLI   MAY60P/MAY70P   $0.00   credit  bull-put

The majority of our new positions offered favorable entry points
in today's session.  Unfortunately, our new Protein Design Labs
play was one day too late as the rebounding issue climbed over
$20 during the biotech rally.  The bullish move did not allow
a favorable opening credit.


Portfolio plays:

Technology issues helped investors regain confidence today and
the enthusiasm boosted the industrial group as old economy stocks
came back into favor.  Many of the classic issues are exhibiting
new signs of strength with some recently downtrodden companies
now seen as attractive investments.  The top performers on the
Dow included Hewlett-Packard (HWP), AT&T (T) and Walmart (WMT).
Biotech stocks also continued to recover with traders attributing
the advance to momentum buying after a period of consolidation
In the broad market, tobacco, footwear and textiles advanced,
while cosmetics, office equipment and industrial power companies
moved lower.  Gains in Microsoft supported both the Dow and the
Nasdaq as analysts came out in support of the stock after the
government's proposal to split the company.

A number of brokerage stocks rallied and analysts say that may
be a signal that the worst of the recent market turmoil is over
In contrast, finance stocks were less bullish as investors were
still concerned about what the Federal Reserve is going to do
with interest rates later this month.  Most experts believe the
market has factored in a 25-basis-point move but not a 50-point
increase.  A larger increase is not out of the question because
the Fed would like to raise rates significantly but not during
a time when it can have an effect on the presidential election.
In any case, most investors no longer perceive we are facing a
bear market and based on recent trends, the best place to invest
for the long-term is still in growth stocks, which are mainly
technology companies.

The Spreads/Combos Portfolio performed very well today and the
big winners were Sepracor (SEPR) and Adobe Systems (ADBE).  The
recent recovery in major drug stocks continued with SEPR rising
over $10 after a technical break-out.  Our bullish LEAPS/CC's
spread is at maximum profit and with the short option at $90, we
will look for a pullback to roll up and forward to a June option.
Adobe moved to a new all-time high with a $10 rally to close at
$130.  Our bullish credit spread achieves maximum profit at $100.
The speculation play on Temple Inland (TIN) has received added
attention and the technical indications suggest it may be bracing
for an attempt at a new high.  Our position is at maximum profit
with the stock below $55 but it can also be profitable if the
stock breaks to a new trading range.  The key resistance area is
near $52.50-$53.00 and a close above that price (on increasing
volume) would likely signal a new trend.


Tuesday, May 2

The market consolidated today as investors took profits from the
recent rally in technology stocks.  The Dow Industrial Average
slid 80 points to end at 10,731 while the Nasdaq Composite fell
172 points to close at 3,785.  The S&P 500 Index was pulled down
by both indices, closing 21 points lower at 1,446.  On the NYSE,
declining issues outnumbered advancers 9-to-7, with 1,702 down,
1,313 up and 421 unchanged.  The NYSE trading volume was active
at 1.01 billion shares.  On the Nasdaq, trading was subdued with
1.43 billion shares exchanged.  The 30-year bond was off 10/32
with the yield rising to 6.02%.


Portfolio plays:

Technology stocks finally gave way to profit-taking after three
days of solid gains. The broad market was also down on concerns
of a potential interest hike.  The Federal Reserve holds its next
policy-making meeting later this month and many investors expect
the Fed to raise interest rates by 25 basis points.  In addition,
recent signs of booming economic growth have amplified worries
that the FOMC might increase rates by as much as 50 basis points.
Of course higher interest rates are generally bad for stocks, so
fears of a sharper-than-expected increase are going to affect
the market for the next two weeks.  Many traders have moved to
the sidelines to wait for next Friday's economic report, which
concerns employment data and with recent surveys showing little
evidence of an economic slowdown, the new fears may have basis.
In fact, some analysts say the FOMC would appear timid if it
raises the rates only 25 basis points.  If that's the case, lets
all pray that Mr. Greenspan remains unaffected by public opinion.

There were a number of portfolio winners today, even as the broad
market consolidated from recent gains.  Halliburton (HAL) led our
group of hedge positions, up over $3 to close near $37.  The new
"bull-put" credit spread has a break-even cost basis of $39.50.
Unocal (UCL) has also been quietly on the move, closing at $38.38
in today's session.  The conservative, oil industry issue is now
trading almost $10 "in-the-money" with a maximum position profit
achieved above $27.50.  Warner Lambert (WLA) and Johnson & Johnson
(JNJ) led the Major Drug group and Medtronic (MDT) continues to
be a solid performer in the Health Services sector.  Another of
our many safety issues, General Electric (GE) moved higher today.
The market bellwether rallied above the $160 mark, a recent area
of support and a good base for the upcoming split rally.  The
issue splits 3:1 on or about May 8, 2000.  A surprising recovery
was observed in Mattson Technology (MTSN), which managed a bullish
close while the majority of semiconductor stocks moved lower.

Questions & comments on spreads/combos to Click here to email Ray Cummins
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                         - NEW PLAYS -
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NBR - Nabors Industries  $40.68  *** Oil Sector Rally! ***

Nabors Industries is the largest land-drilling contractor in the
world, with over 500 actively marketed land rigs.  Nabors has oil
and gas land drilling operations in the United States, Canada,
and internationally primarily in South and Central America and
the Middle East.  The company markets platforms, jackup and barge
rigs in the Gulf of Mexico and several international markets.  It
also offers well-site services, including oilfield management,
engineering, transportation, construction, maintenance, logging
and other support services in selected domestic and international
markets.  In short, Nabors participates in most of the significant
oil, gas and geothermal markets in the world.

Oil drilling stocks advanced today as the crude oil contract for
June rose $1.02 to $26.89 per barrel.  For now, the oil industry
continues to look promising and NBR has demonstrated that it can
perform well in a bullish environment.  Last quarter, the company
announced record operating income of $33.2 million versus $22.0
million in the first quarter of 1999 and nearly double the $16.6
million recorded during the fourth quarter of 1999.  Revenues for
the quarter were $289.7 million versus $153.0 million and $216.9
million in the first and fourth quarters of last year.  That's an
incredible gain for just twelve months and the CEO says he is very
pleased with the way things are progressing.  All of NBR's unique
business units are seeing solid improvements with record results
from Canadian operations, a strong construction season in Alaska,
the beginning of a significant increase in international activity,
and further improvement in offshore and well servicing operations.

With all of this positive activity, it's no wonder that Nabor's
share value has moved to a new all-time high.  With the volume
increasing on the rally, the short-term trend should continue.
Our position is relatively conservative at a cost basis near the
middle of the current trading range.


PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-35.00  NBR-QG  OI=336  A=$0.38
SELL PUT  MAY-37.50  NBR-QU  OI=10   B=$0.68
INITIAL NET CREDIT TARGET=$0.38  ROI(max)=17% B/E=$37.12

Chart =
/charts/charts.asp?symbol=NBR

*****

ASH - Ashland Oil  $35.19  *** A New Trading Range? ***

Ashland is a specialty chemical and crude oil refining firm.  The
company's businesses are divided into numerous industry segments.
These include APAC, which performs contract construction work;
Ashland Distribution, which distributes industrial chemicals,
solvents, ingredients, thermoplastics and resins, fiberglass
materials and fine ingredients in North America and plastics in
Europe; Ashland Specialty Chemical, which manufactures and sells
performance chemicals, resins, products and services and certain
petrochemicals; Valvoline, a marketer of branded, packaged motor
oil and automotive chemicals, automotive appearance products,
antifreeze, filters, rust preventives and coolants; Refining and
Marketing, which involves the operation of seven refineries; and
Arch Coal, a coal producer in the United States.  Additionally,
Ashland recently formed the Service Businesses Division.  This
new division will be responsible for managing businesses that
provide a wide range of unique services to their customers.

Ashland reported earnings last week and although second quarter
income rose sharply, the results were still shy of Wall Street
expectations.  The company reported net income of $25 million,
or $0.35 a share compared with net income of $0.08 a share, for
the same quarter a year ago.  Analysts were forecasting $0.36 per
share, slightly above the actual earnings, but investors appeared
to focus on the outlook rather than past performance.  With the
industry's profit margins expected to increase during the next
few months, revenues for the top companies in this group should
continue to improve.

Our position is based on the recent bullish trend and today's
move above the previous trading range.  When the broad market
falters, investors generally pour money into the hedge sectors
and oil stocks are currently one of the leaders in that group.


PLAY (aggressive - bullish/diagonal spread):

BUY  CALL  JUN-30  ASH-FF  OI=0    A=$6.00
SELL CALL  MAY-35  ASH-EG  OI=958  B=$2.06
INITIAL NET DEBIT TARGET=$3.75-$3.88  TARGET ROI=28%

Chart =
/charts/charts.asp?symbol=ASH

*****

TBI - Tuboscope  $18.88  *** Break-out Coming? ***

Tuboscope is the world's leading supplier of oilfield internal
tubular coating and tubular inspection services; oilfield solids
control equipment and services; and coiled tubing and pressure
control equipment to the petroleum industry.  Additionally, the
company provides in-service inspection of pipelines; constructs
high pressure fiberglass tubulars; leases/sells advanced in-line
inspection equipment to makers of oil country tubular goods; and
provides quality assurance and inspection services to a diverse
range of industries.

In mid-April, Tuboscope reported excellent earnings with revenue
increasing 14% year over year and 7% above the previous quarter.
Tuboscope's gross earnings increased to $19 million, a 41% rise
over the prior year's period.  The CEO said that the company's
strong operating leverage is a result of the increased volume
of activity in oil services, along with the benefits of previous
cost reductions.  Tuboscope is also beginning to experience an
increase in demand for coiled tubing capital equipment, a bonus
for future revenues.  The bullish report reflects the continuing
improvement in the Oil Equipment Industry and the company's
well-known market and technology leadership.

Of course the recovery in crude oil prices has a major effect on
the success of this industry and fortunately, the current trend
is expected to continue through the summer months.  This position
is very conservative but we will need a small pullback in the
issue to help reduce the initial debit.


PLAY (conservative - bullish/debit spread):

BUY  CALL  MAY-15.00  TBI-EC  OI=200  A=$4.12
SELL CALL  MAY-17.50  TBI-EW  OI=206  B=$1.75
INITIAL NET DEBIT TARGET=$2.12  ROI(max)=17% B/E=$17.12

Chart =
/charts/charts.asp?symbol=TBI



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