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Daily Newsletter, Thursday, 08/31/2000

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The Option Investor Newsletter                 Thursday 08-31-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        08-31-2000        High      Low     Volume Advance/Decline
DJIA    11215.10 +112.10 11310.50 11104.90 1.06 bln   1718/1150
NASDAQ   4206.35 +102.54  4208.73  4127.19 1.90 bln   2481/1612
S&P 100   827.41 +  6.48   832.18   822.03   totals   4199/2762
S&P 500  1517.68 + 15.09  1525.21  1504.44           60.3%/39.7%
RUS 2000  537.89 +  5.56   539.14   532.36
DJ TRANS 2723.63 -  2.54  2740.66  2711.00
VIX        19.28 -  0.31    20.14    18.85
Put/Call Ratio       .43
******************************************************************

That roaring sound you hear is volume returning to the market!

Wow! Just days after the market took a breather when New Home
Sales jumped unexpectedly, Factory Orders fell unexpectedly.
The -7.5% drop was the biggest drop on record. Traders
celebrated with a pair of triple digit gains on the Dow and
the Nasdaq. The attempt to breathe life back into the Fed
dread failed miserably. Retailers also announced today that
slowing sales may impact third quarter earnings and the
race was on. The retailer conspiracy consisted of JCP, GPS,
TGT and ROST. All of which expressed concerns about slowing
summer sales and third quarter profits. While this is bad for
the retail sector it is good for the economic outlook. Add
this to the slowing Factory Orders and traders could not
resist buying before the holiday.







Not all is as rosy as it seems. The Dow was up at one point
+200 points! 200 points, how long has it been since we
have seen a move like that? Unfortunately almost half of the
Dow advance was on the back of a +$16 gain in Dow component
JPM. Yes, it was a good day but the closing +112 gain included
almost +75 points from only one company. We should expect
some weakness in the Dow as the Nasdaq nears 4300 when traders
head for faster moving tech stocks instead of old economy.

The JPM gains came on rumors that the company may be an
acquisition target by one of the giants in the space. Chase
is rumored to be one of the possibles. Sanford Bernstein said
the global mergers are putting pressure on Chase to grow with
an acquisition. JPM receives about 50% of their profits from
international sources and that makes them an ideal target for
the new globally focused giants. Others feel that the current
brokerage community is over priced after their recent gains
and we are not likely to see another merger until some of the
speculation fades from the sector. Still, the gains today
helped power the market and we are not complaining.

$2,000,000,000 loss + $250,000 gain = 15 years in jail.
The person responsible for the Emulex disaster last week was
arrested today and faces 15 years in prison if convicted.
That is or course if he is not released on bail and killed
by an irate investor before his trial. Some analysts estimate
that investors lost up to $2 billion dollars in the sharp drop
that resulted from the bogus press release. In reality I think
it was a lot less since many investors were in too much shock
to react before trading was halted. The former Internet Wire
employee, Mark Jacobs, sent the news release using a computer
at a local community college. He had shorted EMLX stock earlier
and had lost -$100,000 on paper when EMLX continued to rise.
Investigators said he fabricated the press release to force
the stock down and then he covered his shorts for a profit and
then bought 3500 shares of EMLX at $52 and sold those for a
profit when the hoax was revealed. He pocketed a temporary
+$250,000 gain and a probable 15 year sentence for his efforts.

Is that a healthy pulse we see in the market? The Dow finished
July at 10,521 and closed August at 11,231 or a +7% gain. The
Nasdaq closed July at 3766 and August at 4208 for a solid +7%
gain as well. The Nasdaq composite index managed to post an
even larger +11% gain for the month. Yep, just a sleepy August.
Not! The markets have been undergoing a stealth rally for
almost the entire month and have managed to finally close above
many of their previous resistance levels. The Dow, Nasdaq and
OEX are all poised to break their last levels on good news.
The roar you hear is the volume returning with the NYSE trading
1.06 billion shares and the Nasdaq posted 1.9 billion.
Internet stocks, Biotechs, networkers even mineral and mining
stocks were hot. The broad market advance was punctuated by
a 3:2 overall advance/decline ratio with new highs swamping
new lows. The expectations of a post Labor Day rally are
approaching 100%.

Before you start popping the champagne corks we need to
remember the big Employment Report on Friday morning. Good
news is likely to fuel the fire but bad news could cause an
entirely new round of profit taking. It would have to be
very bad numbers but the question is now mute since the
answer will already be known before trading begins on Friday.
Professional traders are still skeptical that the rally will
hold and this could produce some volatility before the holiday.
August window dressing can lead to September window breakage
if the sentiment changes quickly.

While it appears we have the yellow brick road laid out in
front of us we need to keep in mind the results of a slowing
economy. Even if the economy is only slightly slowing there
will be earnings short falls. We are only about a week away
from the start of earnings warning season and the retailers
today along with VIAN and HRZ after the bell are just hints
of things to come. The market will be torn between good
economic data and bad earnings data and bad earnings usually
win. The end of August window dressing helped fuel the rally
today and traders expecting a rally next week are likely to
power the market on good Jobs news tomorrow. Next week will
depend on Tuesday. If everybody is expecting a huge rally and
Tuesday does not start off with a bang then pessimists will
begin second guessing the trend and traders will stay or move
to the sidelines again. A good opening jump followed by good
volume should provide a fun week. A good report could be the
catalyst we need to break out of the last resistance levels.
The Dow has bounced off April resistance at 11250 twice this
week. The OEX is bouncing off resistance dating back to March
at 830 and the Nasdaq is closing on the July 4300 top. It is
just like a July 4th fireworks display. The rockets are all in
place ready for launch and dark is approaching. Now, if we can
just find a match!

Good luck and sell too soon.

Jim Brown
Editor


*********************
FALL SEMINAR SCHEDULE
*********************

Here is your chance to learn from the pros. The three
day Technical Analysis Stock and Option Fall Seminar
Series. Three days of in-depth education.
Don't miss it!

Some comments from recent attendees:

I just got home from attended the Dallas seminar.  It was truly
the most informative clinic I have ever attended.  Lots of AH-AH
moments from Steve and Chris.  I am so tired of the same old stuff
just repackaged in books and seminars, it is about time someone
gave us some GREAT stuff to use so we have a chance against the
big guns.  Keith

I am still BLOWN AWAY by the fact that the seminar had 2
presenters that ARE REAL TRADERS - not just "trader wanna-be"
speakers delivering someone else's concepts.  I do understand
the uniqueness of the opportunity we all had at the seminar
and the opportunity we all continue to have via email contact
with y'all. Thanks, Royce

Chris & Steve, I would like to thank both of you for a great
experience at the Atlanta Workshop. I learned more in the
three days of the workshop about investing and trading than
all of my undergraduate and graduate courses combined. It
was a lot of information in a short time and I hope to put
it to use very soon.  Mike

I attended the Atlanta seminar and wanted to forward my positive
comments. The seminar "really lit my fire". I have been a trader
for 20 years and often go to seminars and this was the first one
that really taught me the most. Dr Lloyd

Jim, I had the good fortune of attending the meeting in Orlando.
Like your newsletter, it was a CLASS ACT. Chris and the others did
a great job. Chris was by far the best performer but the gentlemen
beside me was an option trader with several seminars under his belt
and almost freaked out when Chris finished his Index Presentation.
JC

I am writing this note to compliment you and your staff on the
great job they did in Atlanta.  But more importantly I would like
to single out Steve Rhoades as one of the finest speaker/teacher
on technical analysis that I have ever had the pleasure of hearing.
I am doing my best to persuade other members of the two investment
clubs that I belong to, to attend the Detroit seminar.
Sincerely, ML


We guarantee you will not be disappointed. The class size
is small so you will get plenty of individual attention
from Chris Verhaegh, Steve Rhoads and staff.

At less than the cost of a bad trade you can learn how
to analyze stocks and trade options like the pros.
Don't wait, do it now.

Date      City

Sep 14-16 Chicago
Sep 21-23 Austin TX
Sep 28-30 Boston
Oct 12-14 Charlotte NC
Oct 19-21 San Francisco
Nov 02-05 Phoenix
Nov 09-12 Miami FL
Dec 07-09 Philadelphia
Dec 14-16 San Antonio

Australia coming soon!

Has the market been beating you up? Did you give back
your gains from April? Would you like to understand
all the technical indicators our writers use? Does
the alphabet soup of technical terms like RSI, DMA,
MACD, ROC, Stochastics, Bollinger bands, sound like
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****************
MARKET SENTIMENT
****************

The Good 'Ole Days Again!
By Austin Passamonte

Oh that volatile Dow. For awhile there today we all wondered
if the stodgy old NASDAQ could ever keep pace. Even though
the Dow gave back half today's gains we saw the Comp roll
steadily up into the close.

Some things are becoming apparent. Everyone and their shoeshine
boy expect a major rally to break out post-Labor day. So let's
start buying early to get in and front-run the major move. That
of course has resulted in substantial gains to date.

Will it last? Who cares! Finally we're enjoying some serious
market action across the board. These last three days have
offered possible daily gains of 20 - 50% of purchase on OEX,
SPX, NDX (MNX & QQQ)and DJX calls or puts, depending on which
strike price and what day. We can certainly get used to that.

Typical Thursday rally into a large report and long holiday
weekend. Tomorrow could be volatile either way. The party
continues or profits are taken before the afternoon action
likely goes to sleep. Buy or sell and let the festivities
begin for Wall St tycoons. Most of the action could occur
within the first three hours or less.

Up or down? Were you looking for an answer - we're asking
you! No telling from here. Today's NASDAQ/NDX action was
especially fascinating. Both put in bullish outside days
with long white candles. Or a bearish one-day reversal top.
Was that a runaway gap or exhaustion gap? We'll find out
exactly which, starting tomorrow.

Nothing new bearish to report. VIX is sub-20 and won't stay
there forever. Oil prices are much closer to $40 than $20
per barrel. Whispers are emerging that 3 rd quarter earnings
might be weak, and retail is first to pay that price.

All systems are go and buy-the dip crowds are being elbowed
out by momentum players. New  highs are sure to happen soon.

Or not. The Dow found major resistance near 11,300 today and
the OEX banged it's head near 830 once again. OEX S/R put-call
ratios above 840 are monstrous. 28,128 open calls versus 219
open puts above the 840 strike are what we call disparity.

The entire equity world is betting heavily on new highs soon.
Well, almost everyone. Institutional traders in all equity
markets, 10yr notes and 30yr bonds are betting huge that a
near-term top is close.

One group in this tug-of-war match will be right and frankly,
"Market Sentiment" couldn't care which. Call options one day
and put options the next on 100 & 200+ point market moves are
too good to believe. Please don't pinch us yet!


MARKET SENTIMENT INDICATORS
---------------------------

VIX
The CBOE Market Volatility Index measures certain S&P 100
option pricing to determine investor sentiment. Historically,
readings near 30 signal possible market bottoms while levels
near 20 indicate possible market tops.

Tues 8/29 close: 19.11      Thur 8/31 close: 19.28


CBOE Equity Put/Call Ratio
The CBOE equity put/call ratio is a contrarian-sentiment
indicator. Numbers above .75 are considered bullish, .75 to
40 neutral and bearish below .40

*************************************************************
                             Tues       Thurs         Sat
Strike/Contracts            (8/29)      (8/31)       (9/02)
*************************************************************

CBOE Total P/C Ratio         .55         .43
Equity P/C Ratio             .47         .37


Peak Volume (OEX)
CBOE index put/call ratio is a contrarian-sentiment indicator.
Numbers above 1.5 are considered bullish, 1.5 to .75 neutral
and bearish if below .75

**************************************************************
                        Tues         Thurs        Sat
Strike/Contracts       (8/29)        (8/31)      (9/02)
**************************************************************

All index options      1.88           1.27
OEX Put/Call Ratio     2.32           1.48


OEX Maximum Open Interest Strikes/Contracts:

Puts               800/5,906        790/6,111
Calls              800/4,873        800/4,543
Put/Call Ratio       1.21             1.35


OEX S/R (Support/Resistance) Ratio Index
The OEX S/R ratio is a formula to gauge possible support
or resistance based on open-interest disparity. Numeral
listed for resistance is the ratio of calls to puts. Support
is ratio of puts to calls. Values above "10" considered firm.
Divergence of numbers may indicate future market direction.


OEX                      Tues         Thurs         Sat
Benchmark:              (8/29)        (8/31)       (9/02)

Overhead Resistance:
(920-855)               203.77        128.44
(850/830)                 3.76          4.68

index close:             827            827

Underlying Support:
(825-805)                 1.66          1.50
(800-780)                 2.21          2.47


What the S/R measure indicates: Net open-interest ratios
are firm above 830 and impenetrable above 850 while very
light all the way to 780. A large index move has downside
clearance to 780 or below with relative ease. We could see
805 in a heartbeat.

We still consider another failed test near the 840 range an
excellent put entry.


30-yr Bond:          5.75%          5.68%

Light, Sweet
Crude, Barrel:     $32.72         $33.10


200 Day Moving Average (as of 8/29)
The 200 DMA is widely considered the major benchmark for
critical support in a market.

DOW:   10,816          11,216          11,215
NASDAQ: 3,980           4,082           4,206
NDX:    3,728           3,952           4,077
SPX:     1440            1510            1517
OEX:      778             827             827


CBOT Commitment Of Traders Report: Friday 8/25
Biweekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the
Chicago Board Of Trade. Small specs are the general trading
public with commercials being financial institutions.
Commercials are historically on the correct side of future
trend changes while small specs are not. Extreme divergence
between each signals a possible market turn in favor of the
commercial trader’s direction.


                  Small Specs        Commercials
DOW futures
Net contracts;    +7,165 (long)        - 10,913 (short)
Total Open
Interest %        17.43% net-long       24.29% net-short

NASDAQ 100
Net contracts;     +1613 (long)           +38 (long)
Total Open
Interest %         11.85% net-long       .098% net-long
                  *Corrected figures           (flat)
S&P 500
Net contracts;     + 44,989 (long)     -47,946 (short)
Total Open
Interest %         25.24% net-long       8.5% net-short

What COT Data Tells Us: Commercial positions in S&P 500 and
DJIA remain at or above five-year extreme short levels. Small
specs continue to build net-long extremes.

NDX commercials went from net-long to flat while small specs
went from net-short to net-long the past two weeks.

(Not Shown) Commercial positions in 10-Year Note and 30-Year
Bond markets at or near five-year extreme net-short levels.
Small specs build net-long.

Summary: "Smart money" insiders expect stock market to decline
and interest rates to rise. Small traders directly opposite,
creating diverse set up favoring commercial sentiment for
near-term market direction.


BULLISH SIGNALS

Interest rates
5.68% on the 30-year Treasury Bond make equity markets the only
game in town. Fed-Fund futures are pricing slight chance of
further rate hikes and dwindling.

Benign Government Reports
Latest statistics show the economy is cooling and no further
rate hikes may be needed.

Strength In Financial Sector, Many Dow Components
Financial leaders approach or exceed all-time highs as plenty
of old-economy stocks enjoy strong price leadership

Broad Market Strength
All major indexes are well above 200 DMAs and enjoying solid
gains almost every day. Very bullish behavior


******

BEARISH SIGNALS

VIX
Today’s close near 19 still has us in EXTREME danger zone.

End Of Earnings Season
Earnings season has all but ended with pre-warning cycle
to begin in two weeks. It may not be pretty this time, due
to..

Third-Quarter Earnings Warnings
A number of companies pre-warning slowed earnings later in
the year are being met with extreme selling pressure.

Energy Prices
Prices are still too high. Ultimately this affects profit
margins and inflation. Light, Sweet Crude closed $33.10 today.
All petroleum expected to be extremely high this fall. Prices
in low $20s would be welcome relief but remain beyond reality.

COT Report - S&P 500 & DJIA
Latest updated figures show small spec traders remain heavily
long S&P 500 contracts while commercial traders continue
to hold ten-year extreme short position. DJX commercials added
to net short while small specs added to net long holdings.
Widened divergence strongly implores market turn in favor of
commercials. The market's bottom may still lie ahead.

COT Report - NASDAQ 100
Sentiment reversal with small speculators switching to net-
long while commercials go flat may suggest near-term weakness.


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

As of Market Close - Thursday, 08/31/2000

                                  Key Benchmarks
Broad Market           Last     Support/Resistance   Alert
****************************************************************

DOW   Industrials      11,215      11,000  11,400
SPX   S&P 500           1,517       1,485   1,550
COMPX NASD Composite    4,206       4,000   4,300     **
OEX   S&P 100             827         814     845
RUT   Russell 2000        537         485     540
NDX   NASD 100          4,077       3,900   4,300     **
MSH   High Tech         1,116       1,080   1,170     **

BTK   Biotech             773         690     800     **
XCI   Hardware          1,637       1,500   1,680
GSO.X Software            481         450     500     **
SOX   Semiconductor     1,153       1,000   1,200
NWX   Networking        1,368       1,325   1,390     **
INX   Internet            579         495     600

BIX   Banking             608         550     610
XBD   Brokerage           677         660     700     **
IUX   Insurance           722         680     725

RLX   Retail              784         770     815     **
DRG   Drug                390         380     415
HCX   Healthcare          811         795     855
XAL   Airline             156         148     168
OIX   Oil & Gas           305         280     320

Up, up and away.  Double digit gains for both major indices
has put many alerts on the screen.  Nasdaq, Software, Networking
and Brokerage to name a few.


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

It’s TA Week at OIN
By Molly Evans

Alright, chop, chop!  No time for chitchat tonight.  I'm holding
class.  So many of you wrote to ask about the mysterious "E's"
trading system (last Thursday's "You Too Could Be a Writer"
article) that I feel I must address those issues right here and
now.  Pull up a chair and take notes.  This must be TA week at
OIN - I just got Wednesday night's newsletter and see that Austin
and Eric are beating me to the punch.  Well, let's just get it
all out into the open.  There's a nugget in every little indicator
and we'll leave no stone unturned in the quest to better read
the market.  Secrets are whispered in these indicators and we've
got to tune in our senses to be able to see and hear them.

There are many forms of analyses for determining price forecasting
in the market place.  Fundamental analysis will tell you all the
compelling arguments for why XYZ should be in the stratosphere or
the gutter and technical analysis will tell you just how high or
low XYZ will probably go based on identifiable and repeatable
human behaviors in the form of a chart.  I've known both extremes
of investor.  There're the folks who don't know diddly about where
to enter or exit the stock; they just know that they love the
story or they drive by a company's storefront everyday and want
in.  Then there are others who don't even remember the company's
name, they just know it's got a great looking chart and want those
letters in their portfolio.  It is our recommendation that you
practice both analyses in your investing careers and that is why
we write our plays in the manner that we do.  You've got the scoop
on the goods and then you're told how we based entry and exit
points upon the technical indicators.

My friend "E", as I told you previously, is a Williams %R and
DMI chartist.  Many charting services do not offer the %R
indicator but if you can get it, it’s a powerful little tool.
For you Q charts users, if you’ll change your %D line of
stochastics to white color, your length of %K to 10, the
smoothing to 1, the thickness to 2 and the %D smoothing to
3 - you’ll have %R.  The %R indicator was developed by Larry
Williams, futures trader extraordinaire.  The %R is simply, in
a nutshell, the fast or %K line of the stochastics indicator
that Austin discussed last evening.  However, %R is correctly
plotted upside down and lacks the smoothing that the stochastics
indicator has (%D line).  To display the %R indicator on an
upside-down scale, it's usually plotted upon negative values
such as -20%.  We tend to ignore that and just look at the values
of the numbers themselves.  Readings in the range of 0 to 20%
indicate that the equity or index is overbought and in the
80 - 100% range indicate an oversold condition.

%R, like fast stochastics, is a leading indicator and puts us
"on watch" for a change in trend when it crosses either the 20%
or 80% band.  As with all overbought and oversold indicators, it
is best to await confirmation of a change in the security's price
before a trade is made upon it.  While price action is always
one step further than any indicator, the %R and stochastics can
certainly remain in overbought and oversold states for a long
period of time as the stock's price continues to rise or fall.
Selling simply because the price is overbought may take you out
long before the stock price shows signs of deteriorating and vice
versa with the buying of an oversold stock.

What we can do to confirm it is look at the DMI.  The DMI stands
for Directional Movement Index and was introduced to the trading
world by J. Welles Wilder Jr. in his book "New Concepts in
Technical Trading Systems" in 1978. The DMI is valuable to us in
that it confirms the presence or absence of a trend.  Thus, it
deciphers out the noise of directional vs. non-directional phases
of stock price movement.  DMI is plotted in the graph using three
lines: the ADX, or average directional movement, the +DI or
positive directional movement and the -DI, negative directional
movement.  The ADX is a smoothed version of the directional
movement and as it rises and falls, points to trending in the
stock whether it be up or down.  It's the +DI and -DI that whisper
the buy and sell signals.

If you follow the indicator the way Wilder had intended you would
utilize the "extreme point rule".  This is a law intended to keep
you honest and out of trouble of being whipsawed and from making
too many trades.  The extreme point rule requires that on the day
that the +DI crosses and rises over the -DI, the extreme price is
the high price of the stock on that day.  Conversely, when the +DI
falls below the -DI, the extreme price is the low price on the day
that the lines crossed.  From here, the extreme point is used as a
trigger point at which you may implement the trade.  Let's say you
saw the buy signal with the +DI crossing the -DI, you should then
wait until the stock's price rises above the extreme point (the
high price on the day that the +DI and the -DI lines crossed)
before you buy the stock or options.  If the price fails to take
out that extreme point, you have a failed buy signal or you may
hold onto your short position.

When a stock has risen several days in a row, the +DI is going to
be much higher than the -DI and depending on the number of days
that the trending higher has been taking place, the ADX will also
be rising.  The converse is true when the stock has been plunging.
The ADX points only to a trend.  In Wilder's own words, "The more
directional the movement of a commodity or stock, the greater will
be the difference between the +DI and the -DI."

Shall we review a couple of the charts that Austin put up last
night to see how our new signals compare?  I know many of you had
to have printed his article out last night, it was a classic.
Get those out and let's look at those charts.







While Austin's stochastics and my %R are great for giving you
short term trends and trading signals, the DMI will serve to keep
you in a play if it's trending.  Believe it or not, before this
summer we had trending markets and I had some glorious returns on
runs where the -DI never even bothered to budge off of the bottom
to shake me out.  This is how E keeps so disciplined, she awaits
the entries and exits based upon the confirmation of buy and sell
signals.  As I mentioned to you before, E says that every time EMC
and SUNW go into oversold on the %R she’s there to scoop it up.
It has served her well with those two giants for the most part.
Not all stocks will act this way.  You have to determine by
observation how your favorite stocks move with an indicator.
Look for repeatable trends.  Your paycheck is in the details.
Personally, I tend to want to play the faster lanes and therefore
look to the candles, stochastics and coiling stock plays to
dictate my own trading but this might be something you throw into
your toolbox and pull it out if and when you ever get a position
you'd like to stay with for a time.

I want to show you one more chart.  This is the anatomy of a
trade by a bored young woman that needed to get onto something
more productive.  I can't believe I do these things.   Please
learn from me.  This should be so easy - you read this chart and
tell me what you would have done and you can guess what I did.
We're going under the microscope here to look at the five-minute
chart.




You all must think I'm an idiot!  I'm not but I can pull some
doozies.  Pay attention to those signals.  They do work.  My
going short here was just another reality check to me about how
quickly the market punishes you if you're careless and just
playing.  Actually, I didn't get hurt here beyond commissions.
As soon as I put on the short, I noticed my tiny order buried in
between one lot of 10,000 shares and another of 12,000 shares!
And that was at the high of the day at that moment.  I've been
waiting for this thing to roll over for some time now.  Waiting
and waiting and waiting.  My first clue was that my fill was
almost instantaneous at the high of the day even after the stock
had momentarily stalled in trading.  Do you recall in Jurassic
Park where the water in the glass jiggled and you knew a T. Rex
was approaching?  That very image popped into my head when I got
that fill.  Then I looked at the time and sales and saw my order
in between those two blocks, and I FELT the vibrations of the T.
Rex.  This little bear cub scampered to the nearest cave she
could get to.  Woops!  Wrong door!  Please pardon me for crashing
this party, I was just leaving!

If you are a novice at technical analysis and are looking for an
easy read to learn more, far and away my favorite recommendation
is John Murphy's, "The Visual Investor: How to Spot Market
Trends."  I also happen to like Jack Schwager's "Getting Started
in Technical Analysis" but more so for the trading principles and
rules in the back than the TA portion of the book.  The other
thing you can do is get to one of the seminars that Chris
Verhaegh is involved with.  I had the good fortune to attend the
OIN seminar this past spring and now get to do it again in Chicago
September 14 - 16th.  Chicago is an awesome city and Chris is an
exceptional speaker.  I hope to meet many of you there.  I can't
wait!

molly@OptionInvestor.com


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*************
SECTOR TRADER
*************

Is the Train Leaving the Station?
By Buzz Lynn
sectortrader@OptionInvestor.com

Volume is what we wanted to justify the markets' recent advances -
we got it today.  Just when we thought summer was getting boring
and we'd have to wait until after Labor Day for a meaningful move,
almost 1.9 bln shares traded hands on NASDAQ (and over 1 bln on
the NYSE) sending the NASDAQ up over 100 points to 4206, and the
Dow up 112 to 11,215.  Considering 1.4 to 1.5 bln NASDAQ shares
are all we've seen during these slow summer days, 1.4 bln NASDAQ-
traded shares with one hour remaining in the day was looking
respectable.  But 1.9 bln?  Whoooo-weeeee!!  The train appears to
be leaving the station.  Barring poorly accepted economic news
tomorrow, this may a whistle stop that not many cash-rich fund
managers will want to miss, vacation or not.  Who wants to wait
when there's money to be made?

While this is shaping up to be a strong rally, we still want to
exercise caution and try to anticipate Murphy and the things he
can cause to go wrong.  First of all, tomorrow's hourly earnings
(est. +0.35%) and unemployment rate (est. 4.0%) could put a damper
on the rally if actual figures surpass current expectations.
Second, both the NASDAQ and the NYSE are nearing resistance levels
again at 4300 and 11,400 respectively.  If the market doesn't have
enough conviction for a breakout, 4050 could come up pretty fast
in the windshield on the NASDAQ as could 11,000 on the Dow.
Finally, it's Friday and it's still Summer which means traders
could clear the decks for the long weekend just to be safe and
wait to re-enter another time, maybe again next week.  We're not
saying that this is likely, just that it's a possibility we need
to be ready for.

The conductor appears to be calling "all aboard".  Make sure the
train is actually leaving the station and that you are on the
right train.

As for other business, look for some positive changes coming to
this section soon!  We're going to expand our focus on high volume
indexes that are more liquid and efficiently traded.  If you have
a favorite index that you like to play, OEX, SPX, DIA, SPDRs, SOX,
or something else, let us know.  We constantly strive to make this
site better for you and want your input on likes, dislikes and
suggested improvements.  Send in those cards and letters (OK, e-
mails!).  Thanks in advance for your contribution!

Index             Last    Mon    Tue    Wed    Thu    Fri    Week

QQQ NASDAQ-100   101.81   0.47   0.63   0.00   2.94   0.00   4.03
HHH Internet     116.75  -4.19  -0.13   4.13  -0.88   0.00  -1.06
BBH Biotech.     201.94  -2.44  -1.50   3.06   6.38   0.00   5.50
PPH Pharm.        94.56  -0.88  -1.38   0.00  -0.06   0.00  -2.31
TTH Telecom       66.88   0.56  -0.69   0.75   0.56   0.00   1.19
IAH I-net Arch.  106.81   2.19   0.06   0.00   2.63   0.00   4.88
IIH I-net Infr.   62.50   0.25   1.13   2.56   2.06   0.00   6.00
BHH B2B           52.44  -0.44   0.13   4.00   0.31   0.00   4.00
BDH Broadband     95.19   0.13  -0.25  -0.88   1.56   0.00   0.56
SMH Semicon.      98.69   0.50  -0.75  -0.94   1.88   0.00   0.69
RKH Reg. Banks   107.13   0.31  -1.56   0.88   2.50   0.00   2.13
UTH Utilities    104.75   1.56  -1.06   0.25   1.50   0.00   2.25

**************
Updates
**************

QQQ - NASDAQ 100 $101.81 +2.94 (+4.03 this week) Party hats and
horns!  Please pass the cake!  Finally with the NASDAQ back over
4200, the QQQ has broken $100 resistance and then some on
significant volume, which confirms the move and tells us that the
gain isn't relegated to a few large trades on an otherwise slow
day.  $102.06 is the next level to penetrate, which would break
QQQ out to a new high since its early April thrashing.  After that
$105-$107 should act as resistance.  That's a double-edged sword
since if it doesn't hold that level, it could easily fall back
under $100 again for a brief consolidation.  However, it looks to
us like investors are clearly committed given the high volume.  Be
careful for any signs of weakness based on economic news releases,
or selling before a three-day weekend.  Otherwise, dips to perhaps
$99.50 are buyable as is a breakout over $102.50 with continued
strong volume.  Keep watching DELL, MSFT, CSCO, INTC, ORCL, and
SUNW for confirmation of a direction.  A majority should be on the
upswing

Calendar Spread:

Now looking at mild support at $100 given the last two days, we
never did get that rollover at $100 we were looking for to sell
the short-term call.  QQQ kept right on moving.  No matter, at the
first sign of a rollover, feel free to sell an ATM current month
strike to capture the most time value.  The idea is to keep
reducing the cost basis of the long-term option eventually giving
us a "free" long-term option from credits gained.  If you are
still looking to initiate a spread, you might be better served by
waiting for a pullback to $99.50-$100 to buy the long position,
then "legging in" to the short term position as the price moves up
to resistance at $102, then $105.  Be sure to buy the short
position back if it is ITM and time value decays to near zero, or
nears expiration.

BUY  CALL DEC-100 QVO-LV OI= 8993 at $10.25

SELL CALL SEP-100 QVO-IV OI=11586 at $ 3.75, ND = 6.50 or less
SELL CALL SEP-102 QVO-IX OI=12491 at $ 2.63, ND = 7.88 or less
SELL CALL SEP-105 QVO-IA OI=11883 at $ 1.19, ND = 9.06 or less
SELL CALL OCT-110 QVO-JF OI=  673 at $ 2.44, ND = 7.81 or less

Long Call:

Same as the calendar spread - look for a dip to $99.50-$100 as a
buying opportunity.  Just make sure you see the bounce.  Otherwise
a move over $102 backed by volume could make a good breakout
entry.  Watch DELL, MSFT, CSCO, INTC, ORCL, and SUNW for
confirmation of a direction.  If these are not mostly positive, it
might be better to stand aside.

BUY  CALL SEP-100 QVO-IV OI=11586 at $4.00 SL=2.50
BUY  CALL SEP-105 QVO-IA OI=11883 at $1.38 SL=0.75
BUY  CALL OCT-100 QVO-JV OI= 1850 at $7.00 SL=5.00
BUY  CALL OCT-105 QVO-JA OI=  619 at $4.38 SL=2.50

Average Daily Volume = 19.56 mln


-----

SMH - Semiconductor $98.69 +1.88 (+0.69 this week) Much as we
suspected following the stellar gains over the last two weeks, SMH
was due for a pullback.  While it happened yesterday, the dip was
short-lived and only lasted a few minutes as SMH didn't quite hit
our target of $95, stopping short at $95.75 before bouncing back
up to again test levels near $100.  Nice entry and nice exit if
you could get it.  While the rebound was strong, that pesky
resistance at $100 is proving tough to penetrate.  Once again,
dips to $95 or moves over $100 might make the best entries.
However, stochastic and MACD have begun to point south, so make
sure to see a bounce before you take a position.  Most of today's
strength was from INTC and AMAT.  BRCM was a big contributor too
coming off yesterday's shellacking, despite a new lawsuit from
INTC.  The good news is that the Street appears not to care.

BUY CALL SEP- 95 SMH-IS OI=122 at $ 6.00 SL=4.00
BUY CALL SEP-100 SMH-IT OI=742 at $ 2.75 SL=1.25
BUY CALL OCT-100 SMH-JT OI=370 at $ 7.13 SL=5.00

Average Daily Volume = 405K K


-----

BDH - Broadband $95.19 +1.56 (+0.56 this week) The narrow range
continues, but oh what an opportunity to enter yesterday.  Just
like clockwork, BDH dropped to $92.88, a shade under our $93
trigger, and bounced into the close.  The rise continued today and
allowed BDH its highest close in over a month.  While it broke
above $95 and closed there, it came on only average volume and
failed to significantly penetrate resistance.  With the formation
of a doji on today's candlestick chart, a move over $96 would be
more convincing.  We'd wait for that move backed by volume, or
another bounce off $93 before entering.  Nonetheless, we could be
nearing the end of this play since the MACD and stochastic have
both rolled over.  There may be more room to fall, so play this
one carefully.  Most of the individual components look good, but
LU, which makes up about 24% of BDH's value, is really putting a
damper on the play.

BUY CALL SEP- 90 BDH-IR OI= 17 at $6.38 SL=4.25
BUY CALL SEP- 95 BDH-IS OI=302 at $3.00 SL=1.50
BUY CALL OCT-100 BDH-JT OI= 43 at $4.00 SL=2.50

Average Daily Volume = 114 K


-----

BBH - Biotech $201.94 +6.38 (+5.50 this week) Five, four, three,
Liftoff, two, one.  Something out of order here?  In fact, the
MACD and stochastic rollover from Tuesday proved to be a headfake.
Following a bounce off $192 yesterday, BBH rose steadily
throughout the day, followed today by a gap up and blast off over
$197 resistance.  BBH closed at a new recent high and encounters
resistance again around $207.  Hopefully, barring any bad economic
news, $200 may now prove to be good support.  Many components
exceeded their ADV by a significant margin, and all of them were
in the green - not a speck of red ink today.  This sector got
awfully strong in a hurry and now looks poised for further gains.
Still, watch out for that MACD and stochastic on the 30-min chart
which still show some weakness.

BUY CALL SEP-195 BBH-IS OI= 209 at $12.38 SL= 9.25
BUY CALL SEP-200 BBH-IT OI= 714 at $ 9.63 SL= 6.75
BUY CALL OCT-200 BBH-JT OI= 389 at $16.75 SL=12.00

Average Daily Volume = 632 K


**************
No Play
**************


HHH
PPH
BHH
IIH
IAH
TTH
RKH
UTH


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

Index      Last    Mon    Tue     Wed    Thu   Week
Dow    11215.10  60.21 -37.74 -112.09 112.09  22.47
Nasdaq  4206.35  27.91  11.58   21.64 102.54  39.49
$OEX     827.41   5.64  -1.89   -6.37   6.48   3.75
$SPX    1517.68   7.63  -4.25   -7.25  15.09   3.38
$RUT     537.89   1.37   3.15    2.70   5.56   4.52
$TRAN   2723.63  -3.49 -26.24  -34.27  -2.54 -29.73
$VIX      19.28  -0.82   0.69    0.67  -0.31  -0.13

Calls

CIEN     221.69  11.50   2.50   -1.81  11.56  23.75  Working hard
JNPR     213.75   8.13  -2.94    7.75   9.88  22.81  Surging
VRSN     198.88   5.00   6.13    6.25   5.13  22.50  $200 target
NTAP     117.00   3.06   5.38    2.19   5.56  16.19  Hurdling
IWOV      96.00   2.50   2.75    5.81  -0.06  11.00  Tasting $100
QLGC     113.50  -3.50   2.38    2.63   8.13   9.63  Shaking off
IDTI      87.75  -1.13  -0.19    0.31  10.50   9.50  Patience pays
BEAS      68.06   0.00   2.25    1.63   4.56   8.44  Racing on
ISSX      81.00  -2.94   6.81    2.38   1.75   8.00  New
INKT     130.38  -5.94   1.19    6.81   4.38   6.44  Powering
ORCL      90.94   2.13   1.00    0.50   2.69   6.32  Another high
TIBX     101.94   2.19  -3.69    4.13   3.06   5.69  Broke $100
NEWP     159.00  -5.50  -0.50    2.13   8.88   5.00  Quick rebound
DISH      48.75  -0.69  -0.44    1.88   2.88   3.63  New
LSCC      77.88  -2.75  -0.13    0.69   5.81   3.63  Staying alive
VRTS     120.56   1.81  -0.13   -5.31   7.25   3.63  Coming back
ITWO     169.19  -7.75  -1.13   11.13   0.44   2.69  Good outlook
NEON      35.06   2.13   1.75    0.81  -2.19   2.50  Pullback
SUNW     126.94   3.06  -0.69    0.00  -0.19   2.19  Dropped
VTSS      88.81   4.81  -1.94   -5.00   1.69  -0.44  Dropped
IMCL      96.38  -1.56  -0.31   -2.44   0.81  -3.50  Dropped
BRCM     250.00  -3.00 -13.19  -13.50  11.56 -18.13  Dropped

Puts

KO        52.63   1.00  -0.69   -2.06  -1.63  -3.38  Hammered
NTLI      43.81  -3.00  -2.38    3.94   0.19  -1.25  Acquisition?
UK        40.38   0.50  -0.56   -0.38  -0.25  -0.69  Sliding
AT        50.56  -0.44   1.06   -0.63  -0.25  -0.25  At resistance


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:
*****

SUNW $126.94 -0.19 (+2.19) The NASDAQ posts triple digit gains
and SUNW falls?  It would appear our shining SUNW has run out of
momentum after staging an impressive rally since we picked up the
play.  Over the last three weeks, SUNW has done its part in
carrying the NASDAQ higher by rallying from around the $112
level.  Although volume was less than convincing during today's
dip, it might be time to let this Tech giant rest.  The stock has
fallen into a trading range over the last four days, with
resistance at $128 preventing SUNW from moving on to new highs.
Support has been clearly established at $126, with the 10-dma not
far behind at $125.50.  At this time, we bid SUNW farewell with
profits in hand.

VTSS $88.81 +1.69 (-0.44)  Is this the beginning of a downtrend
for VTSS?  Yesterday, the stock slipped below $90 support and its
5-dma to close down $5, or 5.43%.  Despite this, the break was on
low volume, at 65% of ADV.  Considering the relative weakness of
semiconductor issues yesterday and the recent amazing run, this
was not out of the ordinary.  However, today the 5-dma and the
former $90 level support served as resistance.  In light of the
strong day had by its peers, it appears that VTSS may be assuming
the role of a laggard.  While VTSS managed to finish up 1.94% for
the day and has managed to find some support at the $87 level, we
think we can do better.  That's not to say that VTSS won't bounce
from its 10-dma at $86.16.  In a strong market with so many stocks
making new highs and so many great opportunities, we can choose
to be picky.  With that we close out this play, to put our money
towards stronger stocks with better prospects.

BRCM $250.00 +11.56 (-18.13) Take a high-flying tech stock and
mix in a lawsuit and you get a painful decline.  Although there
seemed to be very little cause for the price drop that came on
Tuesday, the news came out on Wednesday made the picture much
more clear.  Intel is suing BRCM for patent infringement, and
although company officials have stated this is the first they
have heard of the issue, investors sold first and asked
questions later.  Although the stock saw a very strong bounce
this afternoon, recovering from an $8 loss to a nearly $12 gain
at the close, the technical picture still causes us some
concern.  The strong recovery today indicates that the selloff
may have been overdone, and BRCM may still be playable.  But
the stock's inability to clear the $250 resistance level leaves
us felling a little nervous, so we'll take our loss and move on
to healthier plays.

IMCL $96.38 +0.81 (-3.50) Somebody forgot to tell IMCL investors
that the Biotechs led the NASDAQ to its first triple-digit gain
in a long time.  Even though the sector moved strongly, IMCL
just couldn't get out of its own way today.  Running up to
resistance near $100, there was no conviction to push it through
and after rolling over in the first hour of the day, it was all
downhill for the remainder of the session.  Today's bearish
candlestick combined with weakness and low volume all week gives
us no choice but to drop IMCL.  There are plenty of strong
Biotech plays right now, so there is no point hanging out with
this loser until it can get healthy again.


PUTS:
*****

No dropped puts today.


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The Option Investor Newsletter                 Thursday 08-31-2000
Copyright 2000, All rights reserved.                        2 of 2
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********************
PLAY UPDATES - CALLS
********************

NEON $35.06 -2.19 (+2.50) There was no pullback yesterday as NEON
moved up over $1 on excellent volume in the first half hour of
trading.  Volume was heavy at 2 times its ADV and the stock price
was volatile hitting a high of $39.13 before it settled into the
close, $0.81 higher for the day, at $37.25.  Today, NEON decided
to take a rest even as the broader market advanced higher.  Early
this morning, the stock moved into positive territory, although
it didn’t stay there long as it moved back to the flatline, where
it drifted for most of the day on moderate volume.  Late in the
day the sellers came out of hibernation and moved the stock deeper
into negative territory to a low of $34.50, before drifting
slightly higher to close at $35.06, on heavier than normal volume.
Traders should continue to look for a low-volume pullback, to
intraday support at $34 or to the 50-dma, currently at $32.38,
along with a bounce, for an entry point.

TIBX $101.94 +3.06 (+5.69) Following the lead of the NASDAQ, TIBX
has put in two solid days of gains.  Was that an entry point
Wednesday morning or what?  The midday dip to $92.06 did violate
the 10-dma, which was $93.39, yet the stock roared back on better
volume.  Today, after a brief move over $100, profit takers took
a little off the table and TIBX settled in around $97.50.  But,
just after 1:30pm EDT when the NASDAQ started to go, so did TIBX.
Following the midday consolidation, high volume buying drove the
stock through $100, fast and furiously.  Late in the session, $101
provided some intraday support.  Bounces from this short term
support, along with a positive NASDAQ could offer a entry into
this momentum play.  Further pullbacks to $98 could provide more
aggressive entries.  Support below lies at $96, and then the 10-dma
at $93.88.  Overhead, watch for resistance at $102, and then the
50-dma at $104.12.  TIBX was in the news today as they announced
the opening of its new Korean Technical Learning Center in Seoul.
This will help Tibco meet the growing demand from its Asia Pacific
customers, including Samsung and Hyundai.  The news really didn't
affect trading.

CIEN $221.69 +11.56 (+23.75) It's hard work carrying the NASDAQ
higher, but somebody has to do it.  In part, that somebody is
CIEN.  The Networking sector charged nearly 2.5% higher today on
the back of CIEN's double digit gains.  Our play's brief dip
yesterday on typical profit taking volume proved to provide a
profitable entry point as CIEN continues along its path of higher
lows and highs.  Going forward, we'll want to employ similar
strategies in search for entry points as we've used during the
duration of the play.  Given today's burst higher, CIEN's solid
support levels are now located just below at $220, lower near
$215, and around the 5-dma at $210.  Aggressive traders might
look for a quick entry into the play on a bounce off $220 early
tomorrow morning if CIEN looks strong heading into the weekend.
If the profits takers show up, wait for CIEN to stabilize at
either $215 or $210 before considering entry.  CIEN did finish
right near its day and new 52-week high today, watch for an
extension of Thursday's rally early tomorrow in an attempt to
catch another big intraday run.

IDTI $87.75 +10.50 (+9.50) Our patience paid off in a big way
today as IDTI charged into record territory.  Our play received
a boost early this morning after Chase H&Q initiated coverage on
IDTI with a Strong Buy rating and set a $125 price target.  The
analyst from Chase, Sudeep Balain, said he was "extremely
bullish" on IDTI.  We'll take that!  The action in the Semi
sector added fuel to IDTI's momentum as the $SOX charged over 3%
higher.  After its 5-day consolidation, the rebirth of the $SOX
today bodes well for our IDTI play going forward.  The buyers
showed up in a big way Thursday as over twice IDTI's ADV changed
hands.  The return of those bullish buyers early tomorrow might
carry IDTI even higher into the holiday weekend and warrant
consideration for entering the play at its current levels or on a
rally above the $90 level.  Before doing so, make sure to confirm
a follow-through in the $SOX rally.  If any light selling
transpires tomorrow, a trader might look for IDTI to bounce off
support near $85, or lower around the 5-dma at $80, to gain a new
entry into the play.

ITWO $169.19 +0.44 (+2.69) The B-2-B sector bounced higher
yesterday on bullish third-quarter prospects and government
cooperation.  The FTC said it would approve the proposed auto
exchange established by F, GM, and DCX, which ITWO will provide
software to run.  And, Wall Street bestowed favorable comments
on the group, which was confirmed today after ABN AMRO initiated
coverage on ITWO with a Buy rating after setting a $200 target
price.  The return of bullish sentiment to the B-2-B sector
helped ITWO to erase nearly all of its losses stemming from
Tuesday's rumors surrounding the company's loss of a key
contract.  ITWO attempted to bolt to new highs in its ascending
channel today, but later fell as a round of light profit taking
hit the stock.  Watch for a rally in the sector early tomorrow
and consider entering ITWO on a quick burst above $170.  A more
conservative trader might wait for momentum to build and look to
enter the play if ITWO charges to new highs in its range above
$175.  A bounce off support at $165 might provide the aggressive
traders with an additional entry upon further profit taking.

NEWP $159.00 +8.88 (+5.00) The quick rebound we were looking for
in NEWP transpired yesterday with a little encouragement from
Wall Street.  Analysts quickly came to NEWP's defense Wednesday
morning after investors punished the stock the previous day on
the news the company had terminated its stock repurchase plan.
Warburg Dillon Reed reiterated its Buy rating and $170 price
target, saying the termination of the dormant repurchase program
had no effect on NEWP.  On top of the preceding, Merrill Lynch
issued a favorable report on GLW, which ignited the entire Fiber
Optic sector.  NEWP's return of momentum carried the stock to a
new 52-week high today, and might continue to do so if the Tech
sector extends its recent rally.  Consider entering the play on
a quick move above the $160 level early tomorrow if the Tech
sector rolls higher.  Make sure to confirm an attempt at new
highs with healthy volume.  A pullback to support at $155 or near
the 5-dma at $152 might also provide a solid entry into the play
after any light selling tapers off.

VRSN $198.88 +5.13 (+20.44)  Who says you have to live to 200 to
celebrate a bicentennial?  Investors in VRSN are already bringing
out the party hats in anticipation of this milestone.  Volume and
interest in the stock has been advancing along with the price this
past week.  These past two days are no exception.  Yesterday, VRSN
gained $6.25, or 3.33% on higher than average volume.  Today was
more of the same as VRSN tacked on another 2.65%.  Before we start
celebrating, however, we would like to point out that $200 is
formidable resistance.  This will be VRSN's third attempt in the
past 3 months.  Will the third time be a charm?  A strong market
will help, but conservative traders looking to ride the wave will
want to see VRSN break $200 with conviction before entering.
Support for the stock can be found in increments of $5 at $195,
$190 and $185.  There is additional support at the 5-dma at
$187.55.  A bounce off support confirmed by volume could serve as
an aggressive entry.

IWOV $96.00 -0.06 (+11.00)  IWOV's all-time high is so close, we
can almost taste it.  Yesterday, the stock traded sideways for
most of the day, but in the last couple hours of trading it took
off to close up $5.81, or 6.44%, on 117% of ADV.  The strong
late-day move came without any specific news, but was probably
helped by strength in the NASDAQ.  Today, IWOV made an attempt at
its all-time high and the psychological resistance level of $100.
Spending the first half of the day in the upper part of the
range, it got as high as $99.75 before the sellers took over to
close the day.  At this point, IWOV may need to regroup to its
5-dma (currently at $91) before making another attempt at its
all-time high.  There also appears to be support in the $94-95
area.  A bounce from there on high volume may also serve as an
aggressive entry.  A break above $100 with conviction would offer
an entry for more conservative traders.

NTAP $117.00 +5.56 (+15.31)  On Wednesday, trading in NTAP was
tentative as it approached its July highs in the $112-113 area.
The last time the stock was at this level, it quickly and sharply
sold off.  While volume was low, clocking in at 74% of ADV, the
stock managed to advance $2.19.  Today that hurdle was easily
cleared, thanks to a strong market.  Gapping up at the open, NTAP
found support at $112 and from there, blasted off past the next
level of resistance at $115.  Later in the day, the $115 level
served as support, with NTAP testing it twice successfully.  The
past three days of trading has seen NTAP's trend steepen.
Previous advances were punctuated by regular visits to the 5-dma,
now at $108.44.  A pullback to the 5-dma may just be the ideal
entry point for aggressive traders.  Yet, with a strong market,
NTAP may find support above that point at $115, $112 and $110.
A break through $120 on high volume would also be a buy signal
as it sets up NTAP to challenge its all-time high at $124.

BEAS $68.06 +4.56 (+8.44)  A quick visit on Wednesday morning to
the 5-dma and it was off to the races again for BEAS.  Resistance
at the $65 area brought in the profit-takers in the final hour of
trading.  Nonetheless, BEAS closed up $1.63, or 2.63%, on over
150% of ADV.  The advance was helped in part by news of a
strategic alliance with ecommerce software company Access
Commerce Inc., which chose BEAS' WebLogic Server as the Java
application platform to build its Cameleon Software suite.
Today, the stock continued its strong upward momentum.  Like
Wednesday, a quick dip to its 5-dma in the morning was quickly
erased as buyers stepped in to bid the stock higher.  Trading
flatly for most of the afternoon, BEAS took off again in the
last couple hours of trading to close up 7.19% on a staggering
180% of ADV.  The increasing volume accompanying the up moves
this week means momentum, and lots of it.  Aggressive traders
looking to buy on a bounce can find support at $65 and the 5-dma
at $62.50.  Conservative traders seeking confirmation of
continued momentum before entering will look for a strong break
above $70.

INKT $130.38 +4.38 (+6.44) A couple of righteous words from the
analysts and INKT took off!  INKT shares picked up over 9%
after a pair of brokerage firms upgraded the stock to a Buy
rating on Wednesday.  First Union Securities raised its
recommendation to a Buy from a Market Perform while Lehman
Brothers started INKT in new coverage.  The latter firm also
issued a 12-month price target of $150 p/s.  Wednesday's
impressive performance by Amazon.com (AMZN) also gave INKT and
the Internet sector a boost.  Today, $125, just above the 5-dma
($123.49), proved it could hold up as short-term support.  Use
these levels as a solid platform from which to take an entry
into this aggressive Internet play.  In a last minute spike, the
convincing momentum took INKT over the $130 mark, which cleared
a potential obstacle out of the way.  Nevertheless, watch for
some resistance if INKT challenges tomorrow.  Ultimately, we'd
like to see INKT stretch upward towards its split-candidate
level of $150.

JNPR $213.75 +9.88 (+22.81) Juniper Networks, whose share price
has climbed almost 35-fold since it first became public in June
1999, exploded in recent trading.  On Wednesday, JNPR was named
a component of the NASDAQ-100 Index and has since advanced a
whopping $17.50, or 9% in heavy trading.  Juniper will join the
NASDAQ-100 on September 7th and replace VISX, a maker of laser
eye-surgery equipment that's delisting from the NASDAQ.
Juniper's success is an obvious one.  It has emerged as the
leading competitor to the #1 network-equipment maker, Cisco
Systems (CSCO), in the Internet router market.  This in itself
is momentous feat.  Robert Lee, Senior VP and Portfolio Manager
for Sentinel Advisors Company, noted in his examination of
portfolio strategies that the market is, by some estimates,
doubling every four months and currently Juniper is growing
faster than Cisco.  Currently, JNPR is shattering 52-week record
highs at every turn.  Today's pinnacle at $214.38 is the new
number to beat!  Support is firm at the $200 level, in-line with
the 5-dma ($200.71), which is an attractive entry.  But, unless
there's a strong market pullback or some other event, JNPR's
progressive momentum may simply drive the share price upward
from here.  If so, use intraday dips followed by high-volume
advances for a quick in-and-out play.

VRTS $120.56 +7.25 (+3.62) VRTS is the "comeback kid" of the
computer storage industry.  After falling off a cliff at $171 to
finally find footing at $82 in mid-April, VRTS is once again
trying to scratch its way topside.  Today, the share price peaked
at $122.06 amid increasing trading activity.  The strong
challenge at the $120 resistance mark is very attractive.  It
hints that VRTS is poised for a sharp breakout; especially if you
consider that many analysts think the share price is under-
appreciated by the market.  Salomon Smith Barney analyst H.
Clinton Vaughn says VERITAS is "one of the four horsemen of the
computer storage industry, alongside such heavyweights as
Brocade Communications (BRCD), EMC Corp (EMC), and Network
Appliance (NTAP)."  Take entries off light support at the $118
mark and 5-dma ($118.11), which held up well all week.  More
aggressive pullbacks may be too risky for some, but an entry off
the 10-dma at $114.31 could prove lucrative.  In other news,
VERITAS and Infogain, a leader in eCRM and eBusiness connectivity,
announced together they have completed over 100 nationwide High-
Availability projects in the last six months within the
manufacturing, financial service, telecommunication, and
wireless technology industries.

LSCC $77.88 +5.81 (+3.63) Keeping the rally alive, LSCC zoomed
through resistance again today.  After the strong move last
week, it was only natural to see profit taking appear early
this week.  By yesterday afternoon, the selling appeared to be
abating as buyers stepped in to support the price above the
$71 support level.  Their conviction was rewarded this morning
as more traders flocked to their camp, pushing LSCC to a nearly
$6 gain on volume 50% over the ADV.  So why the strong move
today?  How about news from the company that its board approved
a 2-for-1 split, payable on October 11th?  Stochastics and MACD
are still hanging out in bull territory, with today's high
testing the upper Bollinger band.  So what does this tell us?
LSCC continues to be a leader in the Semiconductor sector as it
approaches its July highs, but it also fell back this afternoon
at the $79 resistance level.  With the strong move today, and
the Labor Day holiday close at hand, it would not be unexpected
to see some sell-the-news profit taking tomorrow.  A pullback to
intraday support near $75 looks attractive for new entries as
long as the bounce is confirmed with strong volume.  Otherwise,
wait for LSCC to scale the $80 level on strong volume before
jumping into the play.

ORCL $90.94 +2.69 (+6.31) Another day, another new high.  That's
the kind of performance we love to see, especially with the
NASDAQ charging through 4200 for the first time in six weeks.
Providing the workhorse software that powers the Internet, ORCL
is benefiting from both its strong financial performance and the
resurgence we have seen in many Internet B2B stocks over the
past 2 days.  Anticipation is building for the company's next
earnings announcement, currently scheduled for September 12th.
We've been unable to confirm the actual date, as Investor
Relations' response has been that the announcement will come
after the close in mid-September.  That's a little on the
ambiguous side, and we will endeavor to get a more precise
answer before the weekend.  At any rate, ORCL has now broken out
to a new all-time high, and this could be the beginning of a
nice earnings run.  Don't forget that ORCL is into its
historical split range (over $80), and with plenty of shares
authorized, we are hoping for a split announcement with earnings
in September.  Intraday support near $88 would provide an
attractive entry point on any pre-Labor Day pullback, especially
with the supportive 5-dma ($87.69) not far behind.  If the
NASDAQ continues to run higher, and ORCL goes along for the
ride, current levels also look attractive, as long as buying
volume remains strong.

QLGC $113.50 +8.13 (+9.63) Finally shaking off the specter of
last week's EMLX hoax, QLGC managed to penetrate the $110
resistance level today.  Investors were snatching up shares
of technology companies at a furious pace, and news that
authorities have apprehended the culprit behind the hoax may
have contributed to QLGC's gain today.  Of course, it didn't
hurt that Salomon Smith Barney initiated coverage today with
a Buy rating.  This comes on the heels of a Buy rating from
Robertson Stephens on August 20th.  Clearly, analysts and
investors alike love the stock, and the enthusiasm is being
reflected in the chart.  Tacking on over $8 in today's session
on solid volume (just slightly over the ADV), it looks like
the stock is ready to take a run at the next resistance level
near $117.  A sure sign of strength, QLGC shares have continued
to use the 10-dma (currently at $102.81) as support, and bounces
near this level still look attractive for new entries.  Although
buying into continued strength is still permissible, use caution
as QLGC fell back a bit this afternoon after testing its upper
Bollinger band.  A renewed bounce from support looks like the
best entry strategy at this point, especially with the
possibility of profit taking ahead of the long weekend.


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

UK $40.06 -0.56 (-1.00) If the Techs are running, the Chemicals
are sliding.  The recent rebirth of the Tech sector is not
helping the cause of old-line stocks such as UK.  The simple fact
is the Chemicals sector can't provide the sexy earnings growth
that Wall Street is after.  As long as the NASDAQ, and
specifically the Tech sector, continue to roll higher, capital
will continue to leave the Chemicals.  That fact was clearly
evident today as the major indices posted substantial gains, yet,
UK sank to a new yearly low.  What's more, volume continues to
remain relatively brisk as UK sinks into the mire.  UK is now on
the brink of collapse at the critical $40 level, prices not seen
since the Spring of 1999.  Watch for a failure of support at $40
as a sign the selling has not subsided.  Overhead resistance is
now located at the 5-dma at $40.88, the $41 level, and near the
10-dma at $41.50.  Aggressive traders might look to enter the
play on a bump against one of the aforementioned resistance
levels if UK rallies only to face continued institutional
selling.

AT $50.56 -0.25 (-0.25) Good news, characteristic consolidation,
and a decent overall market kept AT afloat in recent trading.
Today, ALLTEL and Bank One Corp (ONE) announced they entered into
a 10-year software pact.  Bank One will utilize ALLTEL's
Advanced Loan System (ALS) for its key lending functions in an
effort to reduce turnaround time and maximize cost efficiency.
After extensive analysis, Forrest Richardson, director of loan
accounting for Bank One commented that "the ALLTEL system
features and functions represent a 'best of breed' solution for
our customers."  Nevertheless, the lid remains tight on AT.  AT
is currently colliding with resistance first at the 5-dma($50.80),
and then a smidgen higher at $51.50; whereas $52 marked upper
resistance earlier in the week.  The fact that the ceiling is
pressuring lower provides evidence that AT is still struggling
and could break to the downside in a cooperating environment.
Wait for the selling to move into high gear and AT to slip under
the $50 bottom support if you want to play on the side of caution.
Otherwise, if you enter on downward bounces off the current
opposition, set tight stops for protection.

NTLI $43.81 +0.19 (-0.44) It took two days for the dust to
settle, but it appears from today's trading that NTLI is no
longer center-stage.  Late Tuesday evening, it hit the press
that NTL, Inc. had been holding talks with pay-TV firm, ON
digital, and intends to form a competitive marketing alliance to
rival Europe's #2 pay-TV company, British Sky Broadcasting Group,
Plc.  The proposal is to bundle its TV Internet and telephone
services with ON digital TV channels outside of its cable
franchise areas.  This move is crucial to NTLI's long-term
survival.   At this time, NTLI has approximately 230 K customers
while BSkyB, which began offering bundled services in 1998, has
3.6 mln digital-satellite TV subscribers.  Investors were
obviously pleased that NTLI is looking for ways to increase its
revenue and build scale.  The traders started lining up Wednesday
morning to get a piece of the action.  Subsequently, the share
price spiked over 11% in the past two sessions.  On a quick take,
it looked as if the encouraging news blew our chance for a put
play right out the window.  However, we're going to keep NTLI on
the books for the meantime.  If today's intraday high at $44.44
proves to be the top, then we've got an awesome entry into this
momentum play.  A slide back under the 5-dma at $42.70 would
provide reasonable validation to take an entry.  We're looking for
NTLI to resume its breakdown on the previous news that it may be
hunting for bigger fish, like Britain's Telewest, which ultimately
will cost the company more than ON Digital.

KO $52.63 -1.63 (-3.38) Investors in KO are definitely not
smiling this week.  After a brief pause above the 200-dma
(currently $55.56), the bears came on with renewed vigor over
the past 2 days, pushing shares of the beverage company sharply
lower on very strong volume.  Nearly twice the average number
of shares traded hands today, as KO moved as low as $51.50
before a late day bounce.  Prior to today's decline, it was
looking like the stock might find support near the $53 level,
but there wasn’t so much as a pause as KO continued to fall.
Now that the stock is below this level, look for it to act as
resistance on any move higher.  When the buyers run out of
enthusiasm, look to open new positions as KO rolls over from
either the $53 or $55 level (also the site of the converged
200-dma and declining 5-dma).  It looks like last week's
concerns about slowing volume growth are finally coming home
to roost, and with improving sentiment on the NASDAQ, investors
are taking their money back from disappointing stocks like KO
and putting it to work in technology plays again.  A failure to
hold support near today's low of $51.50 looks like it could be
a good conservative opportunity to jump into the play as
selling pressure continues to depress KO's price.


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

DISH - Echostar Communications $48.75 +2.50 ($3.63 this week)

DISH is commonly known as the company that sells those great
satellite dish television systems that give you access to 500
channels of digital video and CD quality audio programming.
However, DISH currently operates three interrelated businesses,
with over 8,000 employees worldwide including the DISH Network,
Echostar Technologies Corporation and Satellite Services.  DISH
network is the subscription based portion of the business
(i.e. paying them monthly for TV cable service).  The other two
divisions deal with the design of the set top boxes/satellite
receivers and the delivery of the video, audio and data services
to business television customers and other satellite users.

There is no doubt that DISH has struggled technically since March.
The stock hit a 52-week high of $81.25 on March 27 and then
drifted lower for the next few months, as low as $30.75 on June
28th.  On July 6th, DISH moved up convincingly and closed at
$35.94.  Since then, DISH had been stuck in a trading range
between $36 and $46.63, held captive by its 200-dma (currently at
$46.96).  During the second quarter of this year, DISH reported
that their subscriber base grew to 4.3 mln subscribers, up from
2.6 mln in the second quarter last year.  Today, DISH crossed over
and closed above its 200-dma for the first time since June 2.
Volume came in at 3.1 mln shares (1.3 times ADV) as it closed near
the top end of its intraday trading range.  Ideally, traders
should look for a pullback to $47, the current 200-dma, or
intraday support at $44.50, along with a bounce, to enter new
trades.  However, due to recent performance of the NASDAQ, special
attention should be paid to this index for direction and sentiment,
to confirm DISH’s bias.  Keep a watchful eye out for profit taking
after such strong gains in the NASDAQ.

Of late, DISH has negotiated further distribution arrangements for
their satellite dish television systems, with the likes of Bradlees
(a 105 store retail chain),  H.H. Gregg (an electronics retailer in
the Midwest), and P.C. Richard & Son (a 42 store chain in New York
and New Jersey).  Business seems to be robust!  During the month
of August the brokerages came out and showed their love for DISH.
CIBC World Markets reiterated coverage with a Strong Buy and a $60
target, Merrill Lynch resumed coverage with a NT Buy/LT Buy and a
target of $56.  Finally, Lehman Brothers reiterated their Buy
rating and target of $85.

BUY CALL SEP-40 UAB-IH OI= 988 at $9.25 SL=7.00
BUY CALL SEP-45*UAB-II OI=2781 at $4.88 SL=3.00
BUY CALL SEP-50 UAB-IJ OI=1602 at $2.00 SL=1.00
BUY CALL OCT-50 UAB-JJ OI=1103 at $5.13 SL=3.25
BUY CALL DEC-55 UAB-LK OI=1074 at $6.63 SL=4.75
                       					
Picked on August 31st at  $48.75     P/E = N/A
Change since picked        +0.00     52-week high=$81.25
Analysts Ratings       9-7-0-0-0     52-week low =$14.00
Last earnings 06/00   est= -0.32     actual= -0.28
Next earnings 11-01   est= -0.34     versus= -0.28
Average Daily Volume =  2.31 mln



ISSX - Internet Security Systems $81.00 +1.75 (+9.00 this week)

Internet Security Systems, formerly ISS Group, is the pioneer
and leading supplier of adaptive security management systems.
They provide enterprise-wide information protection software and
are a worldwide innovator of security solutions designed to
augment the security performance of existing systems by
complementing security safeguards such as firewalls,
authentication and encryption.  The ISS SAFEsuite family of
products empowers organizations to proactively monitor, detect
and respond to the growing number of network vulnerabilities and
threats to enterprise information.  The Company is based in
Atlanta, GA.

A strong recovery has launched ISSX back to a respectable
support level and pinned it as an official split-candidate.  The
company's current trading price is at a turning point.  Take a
look at a three-month chart and you can visually confirm the "V"
formation.  It's now or never.  The convincing momentum that
took ISSX off a low of $51.13 on August 16th and propelled it to
today's intraday high of $81.94 should carry ISSX back towards
$110.  Today's steady trading at a higher price level of $80 and
the strong close over the converged 50, 100, & 200-dmas indicates
ISSX is poised for an upside breakout.  Besides the promising
technicals, the fact that ISSX is back at a split-candidate level
could also generate some excitement.  Pullbacks to former
near-term resistance at $74-75 may appear attractive, but be
careful, this strategy poses quite a bit of risk.   Aggressive
traders may instead want to enter at the current prices.
Otherwise, wait for the stock to advance through $85 and challenge
$90.

On the global front, Internet Security Systems announced its
acquisition of privately held ISYI, an Italian leader in advanced
network security services for large network and eBusiness
environments.  This acquisition represents an important
development in the Italian security industry.  Also, in the news
this month, Individual Investor, in its seventh annual ranking,
announced ISSX is among this year's list of 100 fastest growing
companies in the U.S.  They gave ISSX a "thumbs up" vote too,
which means they expect the share price to continue to grow.

BUY CALL SEP-75*ISU-IO OI= 87 at $ 9.38 SL=7.00
BUY CALL SEP-80 ISU-IP OI=181 at $ 6.63 SL=4.75
BUY CALL SEP-85 ISU-IQ OI= 36 at $ 4.25 SL=2.50
BUY CALL OCT-80 ISU-JP OI= 64 at $11.75 SL=9.50
BUY CALL OCT-85 ISU-JQ OI= 42 at $ 9.50 SL=7.25

Picked on August 31st at  $81.00    P/E = 319
Change since picked        +0.00    52-week high=$141.00
Analysts Ratings       6-4-0-0-0    52-week low =$ 22.50
Last earnings 06/00    est= 0.08    actual= 0.09
Next earnings 10-23    est= 0.10    versus= 0.05
Average Daily Volume   =   692 K



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

No new puts today.


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

INKT - Inktomi Corp $130.38 +4.38 (+6.44 this week)

Inktomi develops and markets scalable software applications to
intensify and strengthen larger networks.  Their Internet search
engine, which provides a fast and customizable Web search, is
used by Yahoo!  Other products include a large-scale network
caching application for ISPs (like AOL) and corporations that
need help addressing capacity constraints in high-traffic
network routes.  Inktomi operates in the US and UK.

Most Recent Write-Up

A couple of righteous words from the analysts and INKT took off!
INKT shares picked up over 9% after a pair of brokerage firms
upgraded the stock to a Buy rating on Wednesday.  First Union
Securities raised its recommendation to a Buy from a Market
Perform while Lehman Brothers started INKT in new coverage.  The
latter firm also issued a 12-month price target of $150 p/s.
Wednesday's impressive performance by Amazon.com (AMZN) also gave
INKT and the Internet sector a boost.  Today, $125, just above the
5-dma ($123.49), proved it could hold up as short-term support.
Use these levels as a solid platform from which to take an entry
into this aggressive Internet play.  In a last minute spike, the
convincing momentum took INKT over the $130 mark, which cleared
a potential obstacle out of the way.  Nevertheless, watch for
some resistance if INKT challenges tomorrow.  Ultimately, we'd
like to see INKT stretch upward towards its split-candidate
level of $150.

Comments

INKT gave us an ideal entry point this morning.  The dip on
Thursday's open brought the stock down to $124, which was
intraday support from Wednesday.  INKT hit this level right as
amateur hour ended and the stock took off, climbing steadily to
$128.  It looks like the momentum players are piling back into
this issue.  What was particularly encouraging today was the 500K
shares that drove the stock up to $131 in the final 15 minutes.
Look for entry on pullbacks to intraday support at $128 and $127,
accompanied by a strong volume bounce.  More conservatively, if
INKT surges through $131, jump on board toward $136.  Watch the
NASDAQ for sentiment.

BUY CALL SEP-125*KYQ-IE OI= 765 at $10.00 SL= 7.50
BUY CALL SEP-130 KYQ-IF OI=2581 at $ 7.38 SL= 5.50
BUY CALL SEP-135 KYQ-IG OI=1195 at $ 4.88 SL= 3.25
BUY CALL OCT-130 KYQ-JF OI= 498 at $15.75 SL=12.25
BUY CALL OCT-135 KYQ-JG OI= 443 at $13.50 SL=10.75

SELL PUT SEP-125 KQY-UE OI= 273 at $ 3.75 SL= 5.00
(See risks of selling puts in play legend)

Picked on August 27th at $123.94    P/E = N/A
Change since picked        +6.44    52-week high=$241.50
Analysts Ratings      10-6-2-0-0    52-week low =$ 46.91
Last earnings 06/00    est= 0.69    actual= 0.73
Next earnings 10-23    est= 0.05    versus=-0.05
Average Daily Volume  = 2.95 mln



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

Is it "Window Dressing" or the "Real McCoy?"

The market rallied today after tame economic data gave investors
confidence in the outlook for interest rates and future earnings.


Wednesday, August 30

The Dow industrials slumped while the Nasdaq edged higher as
strength in technology stocks outweighed weakness in the broader
market.  Blue-chip shares consolidated after a recent rally and
the Dow closed down 112 points at 11,103.  At the same time,
Internet issues rallied, pushing the Nasdaq Composite 21 points
higher to 4,103.  The S&P 500 index finished down 7 points at
1,502.  Trading volume on the NYSE reached 817 million shares,
with declines beating advances 1,420 to 1,413.  Activity on the
Nasdaq was moderate at 1.54 billion shares traded, with advances
beating declines 2,149 to 1,903.


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

Vitria         VITR    SEP35P/SEP40P   $0.88   credit  bull-put
Lucent         LU      OCT50C/OCT40P   $0.25   credit  synthetic
Toronto Dom.   TD      JAN30C/JAN25P   $1.68   debit   strangle

Vitria and Lucent both slumped during the session, offering the
target entry prices in each position.  Toronto Dominion was less
cooperative, trading in a small range for most of the day.  The
suggested debit was unavailable on a simultaneous order basis.


Portfolio Plays:

The broad market suffered from a bout of profit-taking today
with stocks losing ground in a number of sectors.  On the Dow,
most issues slumped with International Business Machines (IBM),
General Electric (GE), and Coca-Cola (KO) leading the way down.
Retail stocks were mostly lower, after new statistics showed a
slowdown in the U.S. economy.  Oil stocks also declined even as
Banc of America raised its earnings estimates across the board
on the major integrated oil companies.  The sell-off continued
in consumer products and major drug issues as traders expressed
uncertainty over corporate earnings and the future outlook for
interest rates.  In contrast, brokerage stocks moved higher amid
news that Credit Suisse First Boston would acquire Donaldson,
Lufkin and Jenrette (DLJ) for $13.4 billion.  Shares of J.P.
Morgan (JPM) also rallied in the merger-mania, climbing above
$150 after ING Barings upgraded the stock, commenting that the
company holds a dominant position in global investment banking
and clearly represents one of the premier remaining properties
in the industry.  On the Nasdaq, semiconductor stocks pressured
the index, while Internet issues continued to rally, but neither
sector generated enough momentum to significantly affect the
technology group.

There was little activity worth reporting in the Spreads/Combos
portfolio today.  A few of the big-cap technology stocks enjoyed
favorable gains but the big news came in the lower-priced issues.
Red hat (RHAT) jumped above $25 after computing heavyweights IBM,
NEC, Intel, SGI, Dell Computer and Hewlett-Packard announced they
are joining with major Linux companies to develop the operating
system for high-end, multiprocessor machines.  These companies
are combining forces to create a laboratory in Oregon where the
leading open-source programmers can improve the performance of
Linux and its associated software on the high-end servers.  The
Open-Source Development Laboratory will provide a location for
independent programmers to help the Linux system evolve into a
major competitor in the industry.  Our debit-spread combination
is offering a favorable return and we will look for a potential,
early-exit opportunity if the issue continues to rally over the
next few sessions.  Read-Rite (RDRT) edged up another $0.75 on
momentum from the news that several disk-drive manufacturers will
utilize its latest generation of magnetoresitive recording heads.
Read-Rite officials recently said that Samsung, Maxtor, Quantum
Hard Disk Drive and Western Digital will use its components to
build drives capable of holding 20 gigabytes on 3.5" platters.
Our covered-combination at $5 is expected to expire at maximum
profit.  In the banks and brokerages sector, Delphi Financial
Group (DFG) rallied over $2 to a recent high near $40 and our
bullish credit-spread at $35 appears to be safe for now.

Our new position in Maytag continued to be plagued by reports
from Whirlpool (WHR).  Today the company announced it expects
its third quarter and yearly earnings to be negatively hit by
various factors including Circuit City's (CC) decision to exit
the appliance business.  WHR also expects the European market
conditions to reduce its earnings substantially in the second
half of the year.  As we said earlier in the week, investors
will eventually overlook the troubles at Whirpool and in time,
they will likely refocus on the bullish outlook for Maytag and
its potential as a merger candidate.


Thursday, August 31

The market rallied today after tame economic data gave investors
confidence in the outlook for interest rates and future earnings.
The Dow closed up 112 points and the Nasdaq was up 102 points at
4,206.  The S&P 500 index was up 15 points to 1,517.  Trading
volume on the NYSE hit 1 billion shares, with advances beating
declines 1,727 to 1,151.  Activity on the Nasdaq was heavy with
1.88 billion shares exchanged.  Technology advances led declines
2,488 to 1,616.  The 30-year bond was up 31/32, bid at 108 9/32,
where it yielded 5.67%.


Portfolio Plays:

A renewed confidence in U.S. economic growth as well as future
corporate profits helped spur the market-wide rally today.  The
advance was broad-based and occurred with good volume, signals
that point to continued bullish activity.  Ongoing interest in
the financial sector pushed the industrial average higher while
a rebound in biotech stocks started the Nasdaq off in the right
direction.  Rallies in the semiconductor and networking groups
also helped bolster optimism that the day would end with a big
upside move.  Most sectors enjoyed healthy gains and the main
surprises were in the disk-drive/data storage sector, which led
the technology index in percentage gains, and the Internet B2B
group, which consolidated amid profit-taking.  One industry that
struggled was retail, which continued its recent slide after
reports of disappointing same-store sales figures from a number
of major companies.  Overall, today’s move highlights a healthy
outlook for the market and beyond any short-term dips, stocks
should continue to move higher in the coming weeks.

The market rally was widespread and well-timed and our portfolio
enjoyed upside activity in almost every issue.  Obviously, there
were far too many favorable moves to cover in this narrative but
a number of positions did offer favorable exits.  Echostar (DISH)
jumped $2.88 to $48.75 and our debit-spread combination provided
a $3.25 closing profit during the session.  Redhat (RHAT) climbed
to a mid-day high near $27.12 and the same strategy produced a
$1.38 return for traders who took the early-exit.  In the big-cap
technology group, the leaders were Advanced Fibre (AFCI), Altera
(ALTR), Cisco Systems (CSCO), Infocus (INFS), Network Appliances
(NTAP), Polycom (PLCM), Phone.com (PHCM), Qlogic (QLGC), Sapient
(SAPE), and Vitria (VITR).  Traders who participated in the SAPE
credit strangle can now look for an opportunity to close the
position for a favorable profit.  The market activity was truly
amazing and even our current loser, Anheuser Busch (BUD) made a
favorable move.  The biotechnology rally boosted our position in
Regeneron (REGN) and the leading small-cap performers included
Caremark (CMX), Maxtor (MXTR), Paxson (PAX) and Read-Rite (RDRT).

Questions & comments on spreads/combos to Contact Support
******************************************************************
                      - SPECULATION PLAYS -
******************************************************************
NOVL - Novell  $12.25  *** Bottom Fishing! ***

Novell is a leading provider of Net software that delivers many
services to secure and power all types of networks; the Internet,
intranets and extranets; wired to wireless; corporate and public,
across leading operating systems.  Novell's Net services software
provides the foundation for one Net; a single global network that
supports new applications and forms of business.  Their worldwide
channel, consulting, education and technical support programs,
along with strategic alliances, combine Novell services software
with other third-party products and services to form complete Net
solutions.

The recent past has not been good for Novell and continuing the
trend that started last year, the company again reported weak
earnings for the quarter.  Product sales were down sequentially
and the gradual decline in revenues from NetWare software was not
offset by an upswing in sales of the company's newer products.
Novell’s per share earnings were the lowest since November 1997
and the company noted that the recent turmoil in the upper ranks
of management has taken its toll.  Strangely enough, the issue
has rallied over the last few sessions and there are differing
opinions as to the cause.  Some say the move is based on rumors
of a possible takeover by IBM while others suggest that Novell
is preparing to spin off its key businesses.  Company officials
dismissed the speculation in a conference call, but the current
consensus is that Novell can no longer rely on its old strategy
and "something" must be up for the stock to be reacting in the
bullish manner.

Our outlook for the issue is neutral-to-bullish and any rally
in small-cap technology stocks should propel the share value
well clear of our break-even cost basis at October expiration.
In the event of a future consolidation, we will adjust the
position based on the revised technical outlook for the issue
and the available (ATM or OTM) option premiums.


PLAY (conservative - bullish/diagonal spread):

BUY  CALL  NOV-10.00  NKQ-KB  OI=3030  A=$3.12
SELL CALL  OCT-12.50  NKQ-JV  OI=1428  B=$1.25
INITIAL NET DEBIT TARGET=$1.75  INITIAL TARGET ROI(max)=42%

Chart =

******************************************************************
ENGA - Engage  $14.19  *** On The Rebound? ***

Engage is a leading provider of next generation online marketing
solutions.  Engage, a majority-owned operating company of CMGI,
helps marketers target online audiences and convert them into
loyal customers.  The company operates in three segments: Media,
Media Management and Software and Consulting.  Media provides a
comprehensive system for planning, buying, selling, and managing
Web advertising to advertisers and agencies.  Media Management
delivers solutions to help advertisers execute, measure, analyze
and optimize their Internet marketing campaigns.  Software and
Consulting is primarily engaged in the development and sale of
software that enables Web publishers, advertisers and merchants
to target and deliver advertisements, content and e-commerce
offerings to their audiences.

The Internet commerce sector is "HOT" and Engage rallied again
today as traders speculated that the online ad-serving firm is
on a recovery path ahead of its quarterly results expected in
late September.  A number of well known analysts are expecting
upside surprises for the group and ENGA’s report will be one of
the earliest indications as to health of the online advertising
industry.  Investors say the current rally is based on a belief
that the company will benefit from renewed interest in the sector
and the Internet economy.  Our expectation is optimistic as well
but regardless of the reason for the new interest in the issue,
the technical outlook is favorable and our conservative position
offers a way to participate in the future movement of a volatile
stock with relatively low risk.


PLAY (very conservative - bullish/debit spread combination):

BUY   CALL  DEC-12.50  GZZ-LV  OI=329  A=$4.88
SELL  CALL  DEC-15.00  GZZ-LC  OI=297  B=$3.62
SELL  PUT   DEC-10.00  GZZ-XB  OI=131  B=$1.43

DEBIT SPREAD TARGET=$1.12  NAKED PUT TARGET=$1.50-$1.62
OVERALL NET CREDIT TARGET=$0.38-$0.50  TARGET ROI=75%

This debit spread combination strategy is nothing more than a
sold (short) PUT and a "bull-call" debit spread.  The position
is actually somewhat aggressive, based on the bullish outlook for
both components, but we use "out-of-the-money" options on the
sold PUT to lower the potential risk.  The premium from the sold
PUT is used to finance the purchase of the debit spread.  In this
play, the collateral requirement for the PUT is approximately $425
per contract.

Chart =



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