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Daily Newsletter, Tuesday, 09/12/2000

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The Option Investor Newsletter                  Tuesday 09-12-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        09-12-2000        High      Low     Volume Advance/Decline
DJIA    11233.20 + 37.70 11255.80 11113.70  985 mln   1366/1402
NASDAQ   3849.51 - 46.84  3958.36  3834.34 1.60 bln   1792/2218
S&P 100   802.57 -  5.55   811.79   801.10   totals   3158/3620
S&P 500  1481.99 -  5.86  1496.93  1479.67           46.6%/53.4%
RUS 2000  532.43 -  1.19   535.95   531.96
DJ TRANS 2685.40 -  5.82  2699.70  2681.70
VIX        21.18 +  0.22    21.43    19.85
Put/Call Ratio       .60
******************************************************************

The unthinkable has come to pass.

Are we having fun yet? The volatility has returned and those slow
and easy profits from August are now history. The Nasdaq has now
lost over -400 points from its intraday high on September 1st and
is approaching a -10% sell off. Multiple support levels have been
broken and large caps are leading the sell off. We anticipated that
the two weeks after Labor Day would be rocky and the results have
certainly been even worse than expected. The Dow dropped -79 points
at the open but rallied back mostly on the JPM news to close up
+37 points. Considering the JPM gain of +16 was equivalent to
almost +80 Dow points you can see where the Dow would be without
the merger news. Chase is the rumored partner today for a $30
billion price tag. The Nasdaq did rally slightly at the open and
struggled to maintain 3950 until early afternoon. Around 2:PM the
bottom fell out and it closed -100 points off the high.







The unthinkable? Cisco closed under $60. Many analysts have pointed
to CSCO as the GE of the Nasdaq and warned that a close under $60
would be a lights out signal for the Nasdaq. August 3rd was the
last day CSCO traded this low ($58.50) and June 1st before that.
CSCO is now significantly under the 200 DMA at 62.27 and investors
are confused as to why. Cisco is the largest company in the tech
sector and has no earnings problems, very strong growth, good
management and great prospects. Quite different from many of the
high ratio companies with little or no earnings. The volume was
quite strong with over 76 million shares trading. Average daily
volume for the last ten days was 33 million. Once it broke $60
this afternoon the volume was huge. There are many who feel CSCO
at $60 is a bargain and I would not be surprised to see a pre-
open recommendation of some kind tomorrow. Still the general is
wounded and the troops will be looking for a sign of life.

Other disturbing factors included SunMicro which closed negative
yet again after trading up most of the day. After that huge drop
yesterday the bounce back to $119 was encouraging but the CSCO
drop was a death blow to the SUNW gains. Oracle which opened
positive also started down much earlier in the day and finished
down -4.06 and appears to be accelerating. The 200 DMA is 70.37,
a number we hope not to see soon since there is strong support
at $73. Microsoft was no help with a -.69 and neither was Dell
with a -.88 but at least neither were heading south at the same
high rate of speed as CSCO and ORCL. Oracle has earnings on
Thursday and this was surely part of the exodus problem. With
warnings galore traders were deciding not to hold over. We were
blessed with one miracle with WCOM closing even for the day. It
appears to have found a bottom at $30 and should not do much more
harm to the Nasdaq until that bottom erodes.

On the good news side of the ledger Intel managed to post a small
gain even as CSCO was falling. Is the PC sector sell off over?
I would not bet on it. Gateway was up fractionally and HWP may
be showing signs of recovering from the drop but it is too early
to take them off life support. They say that as the chip sector
goes, there goes the Nasdaq. Other than Intel the chip sector was
heading south at the same high rate of speed as CSCO today. AMCC
-6, PMCS -2, MU -1.56 (that is actually good), RMBS -2.44, BRCM
-6.12 and AMAT -3.50 on heavy volume. Are all the bottom fishermen
chained to their desks? How much lower will these go before the
bargain hunters show up to nibble?

Worse than the chips was the fiber optic sector and they need
more than Band-Aids to stop the bleeding there. SDLI -19, down
-100 points in the last three weeks. GLW -8, down -52 in two
weeks. CIEN -5, down -51 points in two weeks. Did somebody
invent something to take the place of fiber? I think not.
Michael Murphy's latest release says that the fiber sector
is only 10% of what it will be in the next couple years. I
agree but investors are running for cover like somebody
discovered a fiber eating virus. (My bullish self sees a
possible bottom forming in those three stocks beginning
about 2:30 this afternoon but WAIT FOR CONFORMATION)

Corning, the world's top producer of fiber-optic cable, is
entering the market for gene-research tools known as DNA chips,
joining Affymetrix and Incyte Genomics.  Corning has developed
a high-speed manufacturing process for DNA chips, allowing
researchers to analyze thousands of genes simultaneously.
Spurred by the mapping of the human genome, chipmakers are
supplying research tools for biotechnology and drug companies
racing to discover disease-causing genes and to develop new
drugs. To make its chips, Corning combines technologies,
including a process used in making automotive catalytic
converters, a glass redraw process used to make hair-thin
strands of optical fiber, and a micro-printing process
formerly used to apply decorative patterns to consumer
cookware. Imagine the quantum leap from dishes to DNA chips!

Chips are down, fiber is down, software is down. About the
only sector not in the tank was biotech, again. This love-hate
relationship with the biotech stocks is enough to give you
ulcers. They were up today but with different degrees of gain.
Some were spiking up into the close which is a sign of sector
rotation out of the techs while others like PDLI and FRX are
at recent highs and holding. Still, proving it is a stock
pickers sector AFFX, HGSI and DNA look like they could use
some antibiotics against sellers.

PRI Automation Inc. shares fell 39% after the largest maker
of automation tools for semiconductor plants announced that
fiscal fourth-quarter sales and profit would miss forecast.
Chipmakers, rushing to add capacity for the thumbnail-sized
chips that power computers and cell phones, have pressured
equipment makers like PRI to build tools faster.  Demand for
chip equipment moves in sharp cycles of boom and bust.
Analysts and PRI executives said these warnings don't
indicate that demand for chips is slowing. Want to bet?

When the bears are in control there may not be any safe place
to park your money except cash. Cash looks really good right
now. This is a triple witching expiration week and those are
normally bullish. If this is bullish then I don't want to see
bearish! Recently traders have been buying as we approach the
key economic reports hoping for a good news rally. Do you think
somebody let the cat out of the bag and that is why the big
money was leaving in billions today? Since the recent PPI/CPI
rallies preceded market friendly numbers, a bad PPI report
Thursday would definitely have us scratching our heads. How
did the sellers know in advance? Hopefully the numbers will
be good, +0.1 headline and +0.2 core rate and the market will
breathe a sigh of relief and relax. There is simply a lot of
pent up anxiety this week and we are still three weeks from
October.

The Nasdaq always corrects quickly and sharply. The last six
days qualify as that. The other scenario that shows best on
the Nasdaq is the bear trap rallies. After 2-3 sharply down
days we get a relief bounce and then another drop. After today
the market is approaching oversold once again. The Nasdaq has
support from here to 3725 and then 3655 and then we will run
out of rope at 3500. Under 3500 is no mans land and we don't
want to go there! The next three days are economic minefields
with the Import/Export Prices tomorrow, PPI on Thursday and
CPI on Friday. Add Oracle and Adobe earnings on Thursday and
you have a volatile mix. The Nasdaq appears primed to go
lower without the intervention of a lot of bargain hunters.
The positive side, gloom and doom. When the gloom is so thick
you can't see your screen and the generals are falling left
and right, the end should not be far off. When traders finally
decide that they can't stand the pain and move to the sidelines
we then get the high volume drops like CSCO today. These
climax selling sessions normally lead to rebounds. We just
don't know if tomorrow will be an even bigger selling session
or the beginning of the rebound bargain hunting. The Nasdaq
has given back about -60% of the August gains and could find
a floor at any moment. The continued threat of future earnings
warnings is now priced into the market with the almost -10%
drop from the Sept-1st high. Remember the Fed is on hold unless
we get a disastrous set of economic reports. Once those are
past investors will breathe easier, at least until October!
Now repeat after me, "CSCO is a bargain at $60."

A-T Attitude, a premium provider of real time quotes and charts
has joined the free seminar in Boston next Tuesday. Check out
their website at www.atattitude.com and then come meet them and
see their presentation on Tuesday Sept. 19th. Preferred Trade
will be showing the new 4.0 version of their trading software.
It is free and we feed you breakfast and lunch, plus an afternoon
seminar with Chris Verhaegh and option strategies you can use in
these volatile markets.

http://www.OptionInvestor.com/seminar/dtn

Good luck and sell too soon.

Jim Brown
Editor


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

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

The Austin TX seminar is September 21/23rd. Options
expiration will be over and earnings still several
weeks away. 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 want to thank Chris, Steve and Scott for the excellent workshop
held in Detroit last week.  Having been to the Expo in Denver in
March (which was fabulous), I was ready for a smaller, hands-on
approach to hone my less-than-perfect skills.  I was not disappointed.
One can never get too much education in options investing, and Chris
and Steve offer terrific, unique approaches. Laurie

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
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Sep 14-16 Chicago ** sold out **
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****************
MARKET SENTIMENT
****************

Bottom's Up?
Austin Passamonte

"New market highs" is a phrase we haven't heard in a while.
Nor should we expect to. This market's future looks dreary as
our western NY summer was, if that's the season we call it.

Bad news first. Most everything is a technical mess. All NASDAQ
markets are below 200 DMA and threatening to sink further. The
OEX has broken trendline support dating back to lows set in May.
The Dow and SPX are sitting on important moving-averages and
poking through to the downside. Support for everything else is
now resistance.

Oil prices aren't going down but 3rd quarter earnings might be.
Traders are scared and weak hands have been busy bailing out
the lifeboats. Bellweather CSCO broke the critical $60 mark and
still trades below it in after-market hours. Wonder if any sell-
on-open orders will get parked tonight by part-time traders next
to hit the panic button?

Doom & gloom, gloom & doom. For the bulls who hope we've hit
bottom,let's not go there. Technical studies indicate plenty
of downside room remains.

Further down? We here at Market Sentiment surely think so. All
at once? We surely doubt it just as strongly.

Techs have taken a pounding and trader's darlings are looking
cheap. Further selling at the open tomorrow is more likely
than not but we're looking for near-term bounce soon. Measuring
by option open-interest values, there is minimal overhead
resistance for the OEX from 802 to 825 and the QQQ from 91
to 97.

Do we think the market will hit either of those? Probably not,
but any favorable news at all this week can see us shoot part-
way there in a single day. It might only last one trading session
but intraday-traders playing September contracts will enjoy
profit multiples in the hundreds if it happens.

There are those who believe that government reports are leaked
to market insiders before they actually appear. We don't know
about that, but have watched markets rally into good news with
uncanny accuracy. Now we're selling off instead. Interesting to
see how data shapes up this time.

PPI, CPI, triple-witch Friday. Nervous traders. Markets in great
turmoil. Cheap options moving 200 - 400% or more intraday. Three
sessions left. Where would you rather be than right here, right
now?

*****

VIX
Tues 9/12 close; 21.18

CBOE Equity Put/Call Ratio
The CBOE equity put/call ratio is a contrarian-sentiment
indicator. Small traders are majority of equity-option players.
Numbers above .75 are considered bullish, .75 to .40 neutral
and bearish below .40
*************************************************************
                             Tues       Thurs         Sat
Strike/Contracts            (9/12)      (9/14)       (9/16)
*************************************************************
CBOE Total P/C Ratio         .60
Equity P/C Ratio             .52

Peak Volume (Index & OEX)
CBOE Index & OEX put/call ratio is now a "smart money" sentiment
indicator, as majority of buying done by institutional traders.
Numbers above 1.5 are considered bearish, 1.5 to .75 neutral and
bullish below .75
**************************************************************
                            Tues         Thurs        Sat
Strike/Contracts           (9/12)        (9/14)      (9/16)
**************************************************************
All index options           1.34
OEX Put/Call Ratio          1.07

30-yr Bonds
Fri 9/08 close; 5.75%

Support/Resistance Indicator
The Index Support/Resistance(S/R)Ratio is a formula used to
gauge possible support or resistance based on open-interest
disparity. Ratio listed is percentage of calls to puts or
puts to calls respectively.

Support is factored from dividing puts by calls at strike
levels beneath index closing price. Resistance is factored
from dividing calls by puts at strike levels above current
closing price.

  (Open Interest)       Calls       Puts         Ratio
S&P 100 Index (OEX)
Resistance:
840 - 825              15,781       3,149         5.01
820 - 805              15,279      21,959          .70 ***

OEX close: 802.57

Support:
800 - 785               5,978      15,017         2.51
780 - 765                 589      16,930        28.74

Maximum calls: 820/5,181
Maximum puts : 805/6,439
               800
Moving Averages
 10 DMA  818
 20 DMA  818
 50 DMA  807
200 DMA  782


NASDAQ 100 Index (NDX/QQQ)
Resistance:
100 - 98              31,762       24,534         1.29
 97 - 95              31,416       38,470          .82
 94 - 92              15,533       33,444          .46 ***

QQQ(NDX)close: 91.5

Support:
 91 - 89              17,413       45,374         2.61
 88 - 86               2,558       18,533         7.25
 85 - 83               4,198       25,424         6.06

Maximum calls: 95/24,483
Maximum puts : 90/15,011

Moving Averages
 10 DMA 97
 20 DMA 96
 50 DMA 95
200 DMA 94


S&P 500 (SPX)
Resistance:
1550                  15,042         1,717         8.76
1525                  15,621         7,792         2.00
1500                  52,857        51,962         1.02

SPX close: 1481.99

Support:
1475                  20,355        19,109          .94
1450                  11,438        16,003         1.40
1425                   4,665         9,444         2.03


Maximum calls: 1500/52,857
Maximum puts : 1500/51,962

Moving Averages
 10 DMA 1501
 20 DMA 1500
 50 DMA 1482
200 DMA 1444

*****

CBOT Commitment Of Traders Report: Friday 9/08
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
DJIA futures
Net contracts;    +791 (long)        - 2,700 (short)
Total Open
Interest %        11.5% net-long        12% net-short

NASDAQ 100
Net contracts;    -3,427 (short)        -2033 (short)
Total Open
Interest %        21.74 net-short      4.84% net-short

S&P 500
Net contracts;     + 46,014 (long)     -52,185 (short)
Total Open
Interest %        21.36% net-long       8.95% net-short

What COT Data Tells Us: Commercial positions in S&P 500 and
DJIA remain at or above five-year extreme short levels. NDX
commercials continue to go shorter.

Small specs continue to build net-long extremes in SP00S but
have given ground in DJIA and switched over to heavily net-
short in NDX. Weak hands are shaking out, only a matter of
time in our opinion before they crumble.

(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
future market direction.

Bullish:
Fed's finished ?
Benign government reports ?
Oversold market levels soon ?
Disparity in overhead call/put ratios

Bearish:
Oil Prices
COT reports
Recent pre-warnings, downgrades
Broad market's break of critical M/A support
Market leaders breakdown
Low VIX
Technical chart indicators


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

As of Market Close - Tuesday, 09/12/2000

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

DOW   Industrials      11,233      11,050  11,450
SPX   S&P 500           1,481       1,475   1,535     **
COMPX NASD Composite    3,849       3,650   4,200     **
OEX   S&P 100             802         796     832     **
RUT   Russell 2000        532         520     550
NDX   NASD 100          3,666       3,500   4,050     **
MSH   High Tech         1,013         990   1,095     **

BTK   Biotech             712         690     780
XCI   Hardware          1,475       1,460   1,600     **
GSO.X Software            444         435     495     **
SOX   Semiconductor       988         960   1,140     **
NWX   Networking        1,197       1,150   1,305     **
INX   Internet            543         525     605     **

BIX   Banking             638         600     645     **
XBD   Brokerage           698         685     710
IUX   Insurance           753         705     800     **

RLX   Retail              885         825     890     **
DRG   Drug                383         365     410
HCX   Healthcare          796         765     815
XAL   Airline             150         144     162     **
OIX   Oil & Gas           319         296     324     **

Fifteen alarms were triggered in the past two sessions as
Thursday's triple witching has institutions active.  Since
the 3-day weekend, you can tell the pros are back at work.
Alarms triggered to the downside (SPX, COMPX, OEX, NDX, MSH,
XCI, GSO.X, SOX, NWX, INX, XAL).  Alarms triggered to the
upside (BIX, IUX, RLX, OIX).  We've adjusted support and
resistance levels on many indexes, but we've run out of room
here.  Please check last Sunday's update.  We said, "it was
just getting exciting!"


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

Refinement of Strategies
By David Popper

Is there anyone who has trading down pat?  I do not know any
successful traders who are not constantly refining their
strategies on a routine basis.  I felt that I crossed a
watershed when I ceased bouncing from strategy to strategy, and
instead began to refine the few strategies that I use.  It is
sort of like that old Kentucky Fried Chicken commercial that
said "we do one thing and do it right."  Well, doing one thing and
doing it right does not mean that you should not attempt to
refine and improve your strategy.  It does mean that you should
develop a consistent game plan and stick to it, while at the same
time trying to improve it.  It has been said that any strategy
will work, if properly executed.  By using the same strategy time
after time, you are able to notice the small nuances of the
strategy.  A slight adjustment here and there can sometimes make
all of the difference.  So all that was said to simply say that I
am refining my strategy by further clarifying my buy rules and
sell rules.  Below I will discuss these refinements.

On the buy side, I want to remain cognizant of the fact that it
seldom pays to buy a hot stock in a rapidly rising market.
Inevitably, the buying frenzy subsides and the stock sinks under
its own weight.  Therefore, in making a buying decision, I
consider fundamental, technical, and sentiment issues.  As far as
fundamental analysis is concerned, I limit my purchases to stocks
that I wouldn't mind owning.  My own fundamental criteria is to
buy leading stocks in leading sectors of the economy such as
chips, fiber optics, etc.  The stock should sport an excellent
earnings and relative strength rating according to Investors
Business Daily.

As far as technical analysis is concerned, since I am a position
trader(meaning I hold stock for a few days to a few weeks or
alternatively write covered calls for the current option cycle),
in a positive market, I try to buy these stocks off a base or on
a dip.  In a negative market, I will only make a purchase during
extreme conditions, that is when a stock is free falling and
settles or bounces AND the technical indicators show an upward
divergence.

I sell a stock in an up market when an extreme condition exists.
I define an extreme condition in an up market as when the upper
trend line is breached AND the technical indicators reveal
divergences which indicate that we may be due for a reversal.
This does not mean that I will sell right away, however, I will
tighten my stops to protect my profits.

By sentiment I mean that I try to trade a stock when there is a
compelling reason to own the stock.  For example, ORCL reports
earnings on September 14th, after the bell.  Although the
stock may not go up, due to overall market conditions, if
the market cooperates, there could be a short earnings run
through Thursday.  Another example is RMBS.  It has an analyst
meeting this week.  This upcoming meeting gave RMBS to buck
the trend and go up 3 points on Monday when the rest of the
NASDAQ caved.  Finally, there are a host of companies that are
split candidates during the next earnings cycle.  Many of these
are listed at OIN and its sister publications.  Simply put,
these events cause enthusiasm, and enthusiasm causes short-term
price appreciation.  Realizing that this temporary injection
of enthusiasm is often short-lived, I sell just before the
triggering event.  You see, the market is made up people and acts
just like we act.  I remember as a child, one of the most
exciting days of the year was Christmas Eve, because anticipation
was in the air.  One of the most deflating times was Christmas
afternoon because the excitement was over.  Somehow the toys were
an inadequate substitute for the anticipation.

In short, I have used the above refinements to improve my
strategy of using half of my account to write covered calls and
half of my account to buy dips or to buy stocks heading into an
event.  I also stay loyal to my strategy instead of placing my
loyalty in a stock.  Being loyal to a stock is dangerous.  Read
any message board and you will find a lot of banter about the
merits of particular stocks.  The bulls claim undying love, while
the bears talk about excessive valuations and new technologies
which will blow the company's products.  Over time, both are right.
Stocks will go up and down, analysts will change opinions, and
positive and negative surprises will happen.  Today's market
darling may not be the highflier tomorrow.  Remember IOM?
How about Dell?  It is still a fine company, but an investment
in Dell over the past year would definitely not create a banner
investment year.  Loyalty to a strategy forces you to make
stock selections at least monthly.  This forces you to stay
abreast of the current developments and to continue to trade
the current trend setters.  In short, it forces you to remain
a knowledgeable trader.


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

With The Fed On Hold, When Will We Rally?
By Mary Redmond

During the last week, the markets seem to have been worried about
everything from earnings to oil prices and the Euro.  It seems
that everyone has forgotten something very important.  The Fed
isn't raising rates anymore.  The one factor which has been
dragging down the market more than anything else for the last
18 months is almost certainly over.

Of course, you can't say with 100% certainty that the Federal
Reserve is not going to raise rates at any point in the near
future.  However, the overwhelming majority of recent economic
indictors have pointed to a slowing economy and demand side
inflation which is under control.  Most Fed watchers now feel
that the chances of another rate hike this year are extremely
low, and in fact, the next Fed rate move may be a decrease.

Many high profile market analysts have stated that we could
be setting the stage for a whopper of a Fall rally.  Remember
that the Fed has been dragging down the market for over a year.
Since April of 1999 when we got that first inflationary CPI,
we have had the constant nagging fear of Fed rate hikes.  It
is difficult for a market to rally strongly in an environment
of uncertainty about continually rising interest rates.  Now
the cycle of rate hikes is basically over, and the market is
acting a little like a bunch of kids who don't realize it's
summer vacation.  The Fed has been a worry in the back of our
heads for so long that it feels strange not to be worried
about rate hikes anymore.

The issue is, have the rate hikes slowed the economy so much
that earnings will be slower, and if so will this ruin the market?
Let's consider that the last series of rate hikes was in 1994,
a year in which the S&P 500 stayed flat.  Following the cycle,
we had three consecutive years of superb gains in the Dow and
S&P, although some companies earnings were lower.  In fact,
1995 and 1996 were two of the best years ever in stock market
history.

In addition, the composition of the Dow and S&P have changed
since 1995.  The S&P has a significantly higher percentage of
technology companies now than the index did 5 years ago.  Also,
remember that Dow Jones & Co. jazzed up the Dow last year by
adding Microsoft, Intel, Home Depot and SBC.  Technology stocks
are generally less sensitive to interest rate increases.  So,
although certain sectors in the averages may suffer from higher
interest rates and a slower economy, the overall performance of
the averages may not be adversely impacted.  Companies like Cisco
and Microsoft with little debt usually do not have earnings which
are dramatically impacted by a Fed Funds rate increase from 4.75%
to 6.5%.  It remains to be seen if the major technology companies
earnings will be slower than last year, and if so, how the markets
will respond.

In addition, the 10-year and 30-year bond rates are in very
bullish territory, due in part to the Treasury Department's
ongoing program of retiring the government debt.  This has
helped to keep long term rates stable, although the high yield
corporate debt rate spread is higher than it has been in several
years.  Some smaller growth company stocks have been impacted
by the high corporate cost of borrowing, and may respond well
if we see a Fed rate cut next year.

What is a rally catalyst going to be?  Perhaps we need to see
proof that the major companies in the indexes still have solid
earnings growth.  If interest rates stabilize, even if earnings
decrease somewhat, the markets should rally.  If history is any
guide, the markets hate a rising interest rate environment more
than slower corporate earnings.

During the last week and a half, the market has reacted poorly
to a number of analyst downgrades on tech companies.  However,
we also need to consider that the warnings for the most part
have come from the analysts and not the companies.  Some
analysts may choose to give their estimates on the low side.
It is safer to estimate lower earnings and be surprised to the
upside than to estimate high earnings and be surprised to the
downside.

We need to wait and see what the companies have to say.  If
Cisco, Sun Microsystems, Oracle, JDS Uniphase, or Nortel were
to state that their earnings will be below expectations this
could destroy the NASDAQ.  However, most of the major tech
companies in the S&P 500 have not yet stated that they are
concerned that their earnings will be below expectations.

We also may consider that a weaker Euro may hurt some companies
earnings, but can also benefit the U.S. markets by drawing cash
out of Europe and into the U.S.  Over the last few months, the
Treasury Dept has estimated that approximately $25 bln per
month from European investors has gone into U.S. equities and
equity funds.  Also, it seems every day now we hear about some
large European bank taking over some American brokerage firm.
This brings additional cash into our markets.

While we are waiting for a real rally we can make some money
on quick daily trades using the right technical indicators.
For example, if you see the chart of NT on Monday, there was
an entry point when the stock was oversold and briefly dipped
below 70, after which it moved up to 73.  This occurred nearly
simultaneously with the NASDAQ sell off Monday morning.




Also, Sycamore had a good put entry on Tuesday.  The stock
went up on Monday, however, at 124 it was still not on the
uptrend chart it had been for the last several months.  It
needed to clear 135 to continue the uptrend.  On Tuesday,
the stock struggled to hold its highs, but the technicals
pointed to a contrarian sell signal.  Within an hour, the
stock had sold off from 122 to under 115.





******

Power Play! Hot Sector to Have on Your Watch List
By Scott Martindale

I was on national TV yesterday (did you see me?).  CNBC is holding
their Power Lunch segment in various Southern California locales
this week.  No, I wasn't a featured guest, but the camera panned
by me at the start of the show, and I was ready with a question
(and an OIN plug) if they had asked the audience.  My pal from
Puerto Rico was standing next to me, and his broker back home
called his cell phone right after the camera panned by to tell him
he saw us.  [Nothing like national exposure to boost your career.
I'm waiting for the phone to start ringing right now.]

As the markets search for a bottom to serve as a springboard for
the much anticipated Fall rally, I'm thinking about hot, volatile
sectors that might be fun to play.  You know, a new-technology
sector comprising a handful of high-growth companies sporting lots
of buzz, lots of promise, and lots of upside potential
(particularly those quite a bit off a recent high), but with
relatively little further downside risk.

Okay, so you say there are several of these sorts of sectors.
Well, let's look at a couple that kind of jump out at me.  I'll
highlight one today and perhaps others in this column in the
future.

In honor of my brief exposure to Power Lunch, today I'll talk
about power, specifically fuel cells.  You might not believe this,
but I started writing this article on Monday (everything prior to
this sentence, in fact).  How prescient of me.  Today, most of you
know that fuel cell stocks gapped up and didn't look back, which
serves to illustrate the point I planned to make.

This type of sector is highly news driven.  Because of that, you
must be nimble and ready to strike when the iron is hot.
Yesterday, Ballard Power (BLDP) got a bit of a boost from a CS
First Boston upgrade after the California Air Resources Board
reaffirmed its Zero Emission Vehicle (ZEV) mandate, i.e., 10
percent of automakers' light- and medium-duty vehicle unit sales
in the state must qualify as zero emission vehicles by 2003.  The
Canadian fuel cell maker surged $8 to $110 after the firm boosted
its recommendation to Strong Buy from Buy and reiterated its
$170 price target.

Trading in shares of fuel cell companies such as BLDP, Fuelcell
Energy (FCEL) and Plug Power (PLUG) has been extremely active in
recent weeks.  CS First Boston says that the current price move in
stocks in the group is due to "tangible fundamental developments"
in the sector as opposed to earlier big moves that were largely
the result of general market strength and the momentum on highly
speculative stocks that goes with it.

Fuel cells convert oxygen and hydrogen into electricity via a
chemical reaction.  Because they employ a chemical reaction to
generate power, they have very few moving parts, little noise, and
none of the pollutants you get from mechanical combustion engines.
This makes them very reliable to operate and substantially more
efficient than mechanical engines in the conversion of chemical
energy from any carbon-based fuel into electrical energy.  The
drawback of course is price: they are very expensive compared with
standard combustion.

However, with electricity bills skyrocketing along with oil &
natural gas prices, fuel cell technology is looking more
attractive.  In fact, the market opportunity is enormous,
encompassing virtually every home, office building, car and bus.
The Economist magazine estimates that half of all cars sold in
2018 will be powered by fuel cells.

So after BLDP got its boost from an upgrade yesterday, everyone
else decided to join the party today.  First, FCEL got a price
target increase from Jefferies ($440 vs. the previous $129) based
on an analysis of the company's fuel cell/turbine hybrid.  Then,
IMPCO Tech (IMCO) announced that a team of scientists from IMPCO,
Lawrence Livermore National Laboratories and Thiokol Propulsion
successfully hydroburst tested a high-performance prototype
hydrogen storage cylinder designed for Fuel Cell Vehicle
applications (FCVs).

Well, say no more. If you look at the list of top gainers for
today (on an otherwise disappointing day), it's filled with fuel
cell and other alternative energy companies such as BLDP, FCEL,
IMCO, PLUG, APWR, SATC, ENER, AVA, HPOW, MKTY, CPST, MCEL and
ACPW.  A chart comparing the intraday percentage change in BLDP,
PLUG, FCEL, and CPST shows that there was money to be made today.




A particularly astute trader might have bought a cheap OTM call
after yesterday's more limited action in anticipation of some
follow-through today.  But any trader can jump in early on the
first bounce after the opening gap and pick up a cheap OTM call or
a more conservative ITM call.  Those of you who enjoy that zesty
feeling of going naked might even want to sell short-term puts on
the new show of strength.

Out-of-the money calls allow you to profit from a big gap up on
the news without risking a lot of cash, and buying more than one
contract lets you lock in some gains along the way without having
to completely exit the play.  Plus, you usually get the best return
on investment.  In-the-money calls or naked puts allow you to get
more correlation to the actual stock price move, but that goes
both ways, and of course the percentage return is lower.  Either
way, as OIN constantly reminds us, take some profits off the table
along the way.  As the stock runs on the news, you'll want to lock
in some gains or move up your sell stops.  And evaluate your
position closely before holding it overnight.

Because moves in these sorts of stocks can be so sudden, fast, and
brief, the opportunities are infrequent, so we don't often get
them as recommended plays in the OIN.  But if you stay on your
toes, you can get in on these moves.  Of course, another way to
benefit is to buy the stock when it has come back to rest at firm
support, and just wait for the next move to happen.  [Yesterday,
that would have included such names as PLUG, IMCO, AVA, and MKTY.]
If history is any indication, it shouldn't be too long of a wait.


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

Down Five Days Out of Six for the OEX
By Buzz Lynn
sectortrader@OptionInvestor.com

We noted here on Sunday that weakness could carry over into next
week.  That has been true for the NASDAQ and for the OEX, but not
the Dow.  NASDAQ has been down 6 days out of the last 7 and re-
traced nearly 400 points from its September 1st high of 4259.
While we thought factors unknown, including the price of oil,
might support the market once known, oil ministers volunteered
that there was indeed a real shortage, which has kept the price of
oil above $30 since the meeting.  In short, the price isn't likely
to fall to the $25 target price anytime soon, especially now that
winter is here and sure to drive seasonal demand thus increasing
the cost of heating oil.  No good news here.

However, there is still a chance that unknown economic factors
once known could have a positive effect on the market.  We just
won't know that until import/export prices are announced tomorrow,
until retail sales and PPI are announced on Thursday, or until the
CPI and business inventories are announced on Friday.  No wonder
investors are nervous!  That's a lot of unknown information that
will influence investment decisions.  If those reports are mostly
benign, investors can then breath a sigh of relief and build some
support at these levels.  We would expect that most if not all the
reports would show no inflationary signs, ex oil and food.  Since
nobody eats, drives a car, or heats there home, we're in the clear!
All joking aside, core rates are what the market watches.
There may yet come a day when the "ex" things matter, but until
then it will be treated like an "off-budget" item in Congress.

So if all that doesn't alleviate your fear, you can take heart in
the technical indicators, which are now trending into oversold
positions.  Add to that historical and Bollinger band support on
the NASDAQ 3800 and 800 support on the OEX, not to mention a 6-day
downtrend in need of reversal, and we have reason to start paying
attention for an upside entry.  Did we forget to mention this is
option expiration week, which tends to support prices?  Anyway,
trade smart and wait for an entry.  The time is getting closer -
we just don't know exactly when.

**************
QQQ
**************

QQQ - NASDAQ 100 $91.25 -1.56 (-3.88 this week) Are we there yet?
Bet you've heard that question from your kids.  I always tell my
daughter, "when I was your age, we never got there and we were
grateful".  We both laugh for another five minutes until she asks
again.  In the market, it isn't that simple.  However after
falling for five of the last six days on the NASDAQ, we are due
for at least a bounce.  Every day that it delays only coils the
rebound spring tighter.  Here's what we see.  NASDAQ has
historical and Bollinger band support at 3800.  It also has major
trendline support at 3800.  That translates to about $91 on the
QQQ - $90 for a really firm number.  Stochastic and MACD have now
crossed into oversold territory on daily chart too.  We would
start to look for a flattening out and reversal from here, perhaps
by Friday, but no guaranties.  Keep in mind the bounces we've had
historically over the last 5 years have come at these technical
levels of support.  All the while, oil and interest rates were
falling and profits were rising.  The one wild card that may make
it "different this time" is the price of oil and its stealthy but
real effects on corporate profits.  Warnings have come so far
mostly form smokestack companies.  However, if one of the five
horsemen of the NASDAQ warns, it would likely trigger further
declines.  Despite the technicals telling that we may be nearing a
bottom, that kind of news would be devastating.  For now,
indicators are telling us that we may be late to the party for a
put play, but not quite ready for a call play.  Nearly 1.6 mln
shares on the NASDAQ tell us there may be more to fall.  Keep your
powder dry.  It's worth noting too that as a contrarian indicator,
there is a ton of OI on puts compared to the calls.  Based on this,
it's possible that we are very near a sentimental low.

Calendar Spread:

Maybe we should have listed this as a naked short call play?
There really have been no opportunities to leg into this position
as the price has fallen, at least to purchase the long leg.  There
have however been some opportunities to sell the short as the
price has fallen.  Support is at $90 and $91 and may yet give us
an entry on our long leg.  We would then consider closing our
short positions and go long on the long leg.  Wait for the bounce
and a reversal of stochastic and MACD on the daily chart for
confirmation if this is your plan.  After buying the long leg at a
bounce off support, consider selling the short position after a
rollover at resistance of perhaps $94, $97.50, or $99.50.

BUY  CALL JAN- 90 QVQ-AL OI= 4959 at $11.00

SELL CALL OCT- 95 QVQ-JQ OI= 2732 at $ 4.00, ND = 7.00 or less
SELL CALL OCT- 97 QVQ-JS OI= 2730 at $ 3.25, ND = 7.75 or less
SELL CALL OCT-100 QVO-JV OI= 3892 at $ 2.25, ND = 8.75 or less

Long Call:

As noted above, based on OI, MACD, stochastic, Bollinger Bands,
historical support levels, 6 out of 7 days down, we may near a
bottom.  Unfortunately, one bad economic report could spoil it all
sending this market further into the cellar and lingering oil
concerns aren't helping.  All that said, don't get lulled into a
trade on 1 day's price action.  Wait until you see a reversal of
the technical indicators on a daily and a 60-min chart, and
sentiment start to shift back to the positive.

BUY CALL OCT- 90 QVQ-JL OI=  356 at $6.25 SL=4.25
BUY CALL OCT- 95 QVQ-JQ OI= 2732 at $4.00 SL=2.50
BUY CALL OCT-100 QVO-JV OI= 3892 at $2.25 SL=1.25

Bullish Put Credit Spread:

Getting closer to ground zero by the day, only those on the bomb
squad should attempt this play.  It carries a lot of risk (still
definable and limited though) and will wreck your margin account
in a New York minute if you don't understand it.  The objective is
take in a credit by buying a spread and having both positions
expire worthless.  Let's borrow from Sunday since the play hasn't
changed.  "First, you must be convinced that the slide is halted
and that QQQ is going to turn positive (watch for a stochastic and
MACD reversal).  You then sell an OTM put, say an OCT-90 and
collect a premium - in this case $4.38, and simultaneously buy a
lower strike, say OCT-85 for $2.75.  This puts $1.63 in your
pocket.  The danger is that QQQ closes under $90, or worse, under
$85 at expiration and the stock is put to you at $90.  However you
have the right to put it to someone else at $85 so your maximum
loss is $5 minus your initial credit of $1.63, or $3.38.  However,
you can completely close the position early if the trade gets away
from you and reaches your level of pain prior to maximum loss.
You need a margin account to do this.  At a close over $90 at
expiration, you keep the whole $1.63.  It's like a naked put only
with an insurance policy that lets you sleep a bit better at
night.  You will give up some return for the downside protection."
Support is at $90 and put OI suggests too much pessimism.

SELL PUT OCT-90 QVQ-VL OI=5490 at $4.38
BUY  PUT OCT-85 YQQ-VG OI=1495 at $2.75
Net Debit = $1.63 or better

Average Daily Volume = 18.4 mln


**************
OEX
**************

OEX - S&P 100 802.57 -5.55 (-10.33 this week) In a similar trading
pattern to the NASDAQ and QQQ (see above), OEX too is nearing
support at the 800 level.  Technically, it is pressing on the
lower Bollinger band and is in the oversold position on the
stochastic and MACD.  That indicates a turnaround may be near.
While economic reports should clear up investor uncertainty on the
market's direction, one bad report could send OEX over the 800
edge.  In the meantime, OEX may need a bit more time to
consolidate at this level.  If it can't hold and decides to sell
off more, 798, then 791 are the next levels of support.  But watch
800 to see if holds for now and let investors response to economic
news be your guide to an entry.  VIX?  Currently ineffective, but
watch it for its value as one piece of the puzzle.  Concerning OI,
puts are currently heavily favored indicating we may be at support

Long Call:

Like Sunday, most of the meat is contained above.  Support is
pretty strong at 800, however, we need to see that hold in the
face of coming economic reports.  Stochastic and MACD also need to
stabilize and begin to move back up on the daily and 60-min .  OEX
is close to meeting all these criteria.  Be patient and wait for a
reversal.  Lack of abundant and cheap oil isn't going to help the
cause.  Resistance is at 804, and 807.  Support is at 798 and 791
if 800 can't hold.

BUY CALL OEZ-JR OCT-790 OI=  10 at 31.00 SL=22.00
BUY CALL OEX-JT OCT-800 OI= 562 at 24.50 SL=17.25
BUY CALL OEX-JB OCT-810 OI=3317 at 18.13 SL=13.25

Bullish Calendar Spread:

As noted above, we have not yet found a bottom and have yet to get
a good entry point.  Our luck may be about to change as long as
economic reports are well received and the technical indicators
(MACD and stochastic) flatten out in the oversold territory and
reverse course to the upside on a daily chart.  Leg in to the long
position at support  (likely 800; possible 790) and sell the short
position at resistance (810, 815, 820).  After 5 days down in the
last 6 trading sessions, it is quite possible we are nearing a
bottom.  Again, watch for a bounce at support before entering the
long.

BUY  CALL DEC-840 OEX-LH OI= 610 at $19.50

SELL CALL OCT-840 OEX-JH OI= 823 at $ 5.63, ND=13.88
SELL CALL OCT-850 OEX-JJ OI=1371 at $ 3.38, ND=16.13

Bullish Put Credit Spread:

Flak jacket required.  Gunslingers only.  You need to be able to
exit this position fast if it goes against you.  Don't even enter
it if you don't understand the concept.  Our job is to sell a put
at support and buy a lower strike price put as a hedge in case we
are wrong.  You must be convinced the OEX will finish at 800 or
above on Friday.  That way after you have taken in a credit, you
expectation would be to have both position expire worthless and
you keep the credit in the process.  In this case following the
play below, you maximum loss would limited to $5 minus the $1.63
credit or $3.38 so you need margin.  On any serious dip under 800,
we suggest closing before you reach that threshold of maximum pain.

SELL PUT SEP-800 OEX-UT OI=5072 at $4.13
BUY  PUT SEP-795 OEZ-US OI=2139 at $2.50
Net Credit = $1.63 or better

Average Daily Volume = 1269



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

Index       Last    Mon    Tue    Week
Dow     11233.23 -25.16  37.74   12.58
Nasdaq   3849.51 -82.06 -46.84 -128.90
$OEX      802.57  -4.78  -5.55  -10.33
$SPX     1481.99  -6.65  -5.86  -12.51
$RUT      532.43  -2.08  -1.19   -3.27
$TRAN    2685.40 -41.56  -5.82  -47.38
$VIX       21.18   0.27   0.22    0.49

Calls

YHOO      107.00   2.19   0.69    2.88  Analysts concur OI thought
NTRS       89.94   1.25   1.06    2.31  New, basking at new highs
PALM       47.13   0.00   2.13    2.13  New, Tech on the rise
AFL        61.06   0.75   0.06    0.81  Bucked negative market
ITWO      161.13  -2.38   3.00    0.63  Bottom of range, bounce?
COF        65.75   0.53   0.06    0.59  Continues to shine
AAPL       57.75  -0.44  -0.69   -1.13  Dropped, fell from tree
AGIL       69.25  -0.88  -0.75   -1.63  5 and 10-dma converging
BEAS       61.13  -1.13  -0.81   -1.94  Holding up, bounce at $60?
AZA        75.94  -1.75  -0.31   -2.06  Taking a break, entry???
CMRC       69.13   3.75  -6.00   -2.25  Pull back on profit taking
IDTI       90.13  -3.69   0.69   -3.00  Trying hard to go higher
SNDK       77.63  -4.00   0.31   -3.69  Dropped, Semis slipping
CFLO      109.56  -3.63  -0.19   -3.81  Breakout attempt today
CHKP      140.75  -8.19   2.69   -5.50  Thank you Merrill, Go CHKP
MERQ      112.38  -5.25  -3.75   -9.00  Dropped, good-bye support

Puts

TLGD       95.38  -5.69  -6.38  -12.06  New, Telecom rollever
CREE      116.50  -2.31  -4.44   -6.75  Breakdown below $120 today
LVLT       74.25  -1.56  -3.50   -5.06  New, falling like a rock
CMTN       46.88  -0.63  -3.00   -3.63  Telecoms in the red
SCMR      113.44   4.88  -7.69   -2.81  Yet to find bottom
MMM        88.06  -1.00  -0.88   -1.88  Slow and steadily lower
UK         38.03   0.13  -0.09    0.03  Biding time around $38
DIGL       74.38   1.88  -1.25    0.63  Upgrade scared bears away
PCS        48.25  -0.34   1.50    1.16  Bounced to 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:
*****

MERQ $112.39 -3.73 (-8.99) So much for support!  MERQ's trading
range between $120 and $130 didn't last so much as five minutes
this week as the selling began right at the open yesterday
morning.  The bulls tried to mount a recovery, but failed to
regain the $120 level; they settled for support at $115.  The
sellers let the bulls have their way for most of today's session
and then attacked with a vengeance in the final hour of trading,
pushing MERQ as low as $111.75.  Volume was light today, and we
could see support develop near current levels, but the momentum
run that we wanted to play is over and it looks like there may
be more weakness ahead.  MERQ is booted off the call list
tonight, but we'll keep an eye out for the stock to recover
when investors' moods improve.

AAPL $57.75 -0.69 (-1.13) This Apple fell off the tree and is
rolling down hill!  Unfortunately the market sentiment got the
best of the Hardware sector this week and APPL folded under the
pressure.  The stock was unable to penetrate the key resistance
level at $60 in the past two sessions and is currently finding
support around $57 and $58.  It's certainly not profitable for a
stock to retreat more than advance, as in the present case with
APPL.  Therefore, we're putting AAPL in the rotten fruit bin
tonight.  If you have open positions, target shoot for exits on
intraday peaks.  The company is confirmed to report earnings on
October 18th, after the market close.

SNDK $77.63 +0.31 (-3.69) With weakness in the Semi sector, it
seems the bulls have forgotten about SNDK and its memory products.
On Monday morning, the stock attempted to get above $82 on decent
volume.  Getting as high as $82.50, buying interest waned.  As
volume pulled back, so did the stock.  SNDK may have had few
sellers but with even fewer buyers, there was nowhere to go but
down as it finished the day down $4 or 4.92% on 78% of ADV.  This
was despite SNDK being ranked in an article as one of the top 100
growing companies in the United States.  Today SNDK encountered
resistance once again at $82.  Once again it was the same story,
very few sellers but even fewer buyers. SNDK did however manage
to buck the trend of the semiconductor sector and the NASDAQ to
close up fractionally on 68% of ADV.  News of EMusic.com uses
SNDK's flash cards and a new joint venture called Digital Portal
may have helped keep the stock afloat.  With little interest in
the stock from buyers and sellers alike, we are closing this
play.


PUTS:
*****

No dropped puts today


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The Option Investor Newsletter                  Tuesday 09-12-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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PLAY UPDATES - CALLS
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IDTI $90.00 +0.56 (-3.13) IDTI fought a fierce battle with the
bears today in an attempt to move higher.  The company unveiled a
new memory chip Monday morning, which is intended to handle
Internet data.  Wall Street applauded IDTI's new product as Bank
of America raised its 12-month price target to $125 from $100 this
morning and SG Cowen reiterated its Strong Buy rating and lifted
its near-term price target to $100.  The early encouragement from
Wall Street today drove IDTI to a new 52-week high at $95.63.  If
it weren't for the late-day rollover in the NASDAQ, IDTI might
have held onto its early-day gains and faired a lot better.  The
stock is acting like it wants to go high, if only the broader Tech
sector cooperates.  With that said, aggressive traders might look
to enter IDTI on a bounce off support at $90 early tomorrow, if the
$SOX shows strength.  Another possible entry might be found if IDTI
rallies above the $94 level on healthy volume, with a rally above
$95 providing a more conservative entry.  Confirm direction in the
$SOX before entering the play!

ITWO $161.13 +3.00 (+0.63) The late-day sell-off in the NASDAQ
yesterday took its toll on our play.  For the first time this
month, ITWO finished the day below its support level at $160.
Thankfully, Wall Street came to ITWO's rescue this morning.
Needham & Co. initiated coverage on the stock with a Strong Buy
rating this morning and set a $222 price target.  The analyst
initiation caused ITWO to gap $6 higher this morning, which
didn't allow for a solid entry into the play.  The bullish
effects of Needham's words this morning were soon forgotten
as the NASDAQ sank in late-day trading.  As expected, ITWO
followed the broader Tech sector lower this afternoon to finish
the day right near its trading range low of $160.  As we
previously mentioned, the $160 level is a crucial support area.
If the NASDAQ rallies tomorrow, ahead of Thursday release of
economic data, aggressive traders might look to enter ITWO on
a bounce off $160.  If $160 fails, you might be wise to step
aside.  If we get a substantial rally in the NASDAQ, you might
look for ITWO to pop back above its 10-dma, which is just
above at $162.75.

CHKP $140.75 +2.69 (-$5.56) Monday morning looked like trouble was
going to rear its ugly head again.  CHKP moved down in sympathy
with the NASDAQ in early morning trading.  A low of $140.88 was
logged in, but, by mid-day the buyers had come out of hiding,
lifting CHKP to $148.  CHKP said Monday they were signing as one
of 12 charter members of a newly formed Internet security group,
known as Counterpane Security Associates.  Furthermore, they
released a new product suite for qualified business startups,
known as "SVN Solution Pack for Startups".  By days end, trouble
reared its ugly head for both the NASDAQ and CHKP.  As the market
worsened, the sellers came out and pounded CHKP down $8.19 to
close at $138.06, below its 10-dma at $145.80, on heavier than
normal volume.  Tuesday started off a bit better than Monday
with Merrill Lynch starting coverage on CHKP with an Accumulate
rating.  The coverage and a positive NASDAQ helped Check Point off
to a good start, as it was up over $2 in the first half hour of
trading.  By mid-day, the NASDAQ stabilized and buyers got more
frisky, pushing CHKP to $145.63, up $7.56 just off its intraday
highs of $147.25.  However, things got much worse as we neared the
end!  The NASDAQ slipped into negative territory and CHKP slipped
lower to finish off its day highs.  Volume picked up late in the
day and CHKP stabilized into the close, by finishing up $2.69 at
$140.75.  It was encouraging to see CHKP stay in positive
territory today.  From here, it is imperative to continue to
monitor market sentiment and the direction of the NASDAQ before
you decide to enter a new trade.  Conservative traders may want
to wait for CHKP to move up through its 10-dma (currently $145.80)
on strong volume before jumping in to this play.

AZA $75.94 -0.31 (-2.06) Nothing goes up in a straight line,
and AZA proved that concept this week.  After running up
consistently for 3 weeks, our specialty pharmaceutical play ran
out of steam.  On Friday, the buyers pushed AZA up to a new
high, but general market weakness created too much downward
pressure and we have seen the stock come back to support at the
$76 level over the past 2 days.  Today's close at $75.94 is
just fractionally above the 10-dma ($75.63), and we need to see
this level hold in order to keep our play alive.  Due to the
strong run up over the past few weeks, there isn't any strong
support until the $67-68 level.  Although there is intraday
support at $71-72, a failure to hold the current support level
would be an indication that the momentum run is over.  On the
positive news front, and possibly holding up the share price
today, the company rewarded shareholders with a 2-for-1 stock
split announcement this morning.  Although there will need to
be a shareholder meeting to approve the necessary share
increase, this is likely a sign of management's confidence in
the future of the company.  Assuming shareholders approve, the
record date will be November 1st with the actual distribution
taking place November 15.  A bounce from support (preferably
near current levels) can be considered for new entries, but
conservative investors will want to wait for strong buying
volume to push AZA through $80 before playing.

COF $65.75 +0.06 (+0.59) Financial stocks continued to shine
as investors looked for shelter from the technology sector.  As a
major player in the credit card market, COF is riding the wave
of enthusiasm generated by the knowledge that the Fed is out
of the picture for a while.  Although our play has had a hard
time moving significantly higher so far this week, it has been
encouraging to see COF move fractionally higher each day, with
the support of solid volume.  Monday's trading propelled COF to
a new all-time high at $66.13, and today's close of $65.75
isn't far behind.  Since the rally in Financial stocks began
in the middle of August, the 5-dma (currently $64.63) has proven
to be supportive and did so again today.  COF's dip to its 5-dma
this morning was as bad as it got as the price recovered, then
strengthened for the remainder of the day.  Attractive entries can
be had as COF drops to bounce either at the 5-dma or intraday
support levels found at $64, and then $62.  More conservative
players will want to wait for strong buying volume to push shares
through $66 and back into new high territory before playing.

AFL $61.13 +0.13 (+0.88) Steady Eddie!  AFL did not show any
signs of profit taking Monday morning, even as the markets
continued their declines and by mid-day, AFL was up at $60.75,
on better than average volume.  AFL flexed its muscles later in
the day and bucked the negative market trend, by closing in
positive territory for the day, up +$0.94 at $61 in heavy
trading.  Tuesday morning, sentiment within the Technology
sector became more bullish.  This caused investors to order the
"Tech Soup" and pass on "The Duck in Bernaise Sauce".  In other
words, AFL took an early morning rest, as the stock drifted just
below  the flat line in the first half-hour of trading.  By mid-
morning, the Tech investors were still busy and not paying much
attention to our favorite duck.  Volume was below normal half-way
through the trading day and AFL was down fractionally at $60.75,
still sitting comfortably above all its important moving
averages.  As things got scarier in the Tech sector late in the
day, investors decided to come back to AFL, possibly as a spot
to hide.  The buyers lifted AFL by $0.13 on average volume today,
to close the issue at $61.13, well above its 5-dma and 10-dma,
currently $57.50 and $55.60, respectively.  It's possible this
quacker could keep moving up from here, but, conservative traders
might look for a light-volume pullback to the above-mentioned
5-dma and 10-dma, along with a bounce, for an ideal entry point.

YHOO $107.00 +0.69 (+2.88) With many of the NASDAQ leaders taking
some hard losses today, i.e. CSCO, YHOO managed to hang on to a
gain, bucking the NASDAQ trend.  Helping YHOO do that was a couple
of analyst comments.  Bear Stearns initiated coverage with a Buy
recommendation and a $160 price target.  Jeffrey Fielder of Bear
Stearns said, "YHOO's product range covers nearly every aspect of
the Internet as YHOO attempts to aggregate the best of the Web and
repackage it for use in a multi-device environment."  Then,
Prudential Securities came out in its Analyst Morning Meeting today
stating that investors misunderstood Koogle's comments last week
and reiterated their $155 price target.  Boy, that sounds a bit
familiar, just six days later than OI!  But, we all know by now
why we're playing this one.  Echoing the aforementioned comments,
YHOO offers a unique opportunity of a good entry and with limited
downside, especially considering the NASDAQ's continuing slide.
Volume the past two days has been about average, yet that's alright
given the broader market selling.  We would watch for buying volume
to move the stock to $110, a point of resistance.  A conservative
entry could be attained on a solid move through that level.
Otherwise bounces from $105 or current levels could provide entry
into October contracts.  We would not recommend trading September
contracts.

CMRC $69.13 -6.13 (-2.25) It's not over until the fat lady
sings; she's still in her dressing room.  Today's pullback to
firmer support at $69 and $70 doesn't indicate that CMRC won't
give an encore to yesterday's stellar performance.  On Monday,
the FTC put antitrust issues aside and approved the formation of
Covisant, an enormous online marketplace for the world's largest
automakers.  It's estimated that their combined annual spending
of $300 bln will eventually be funneled through the single
portal, along with another $500 bln from suppliers.  The FTC's
approval of the Internet auto-exchange in conjunction with an
upgrade from Prudential propelled CMRC out of its five-month
consolidation.  CMRC was in the news again today, announcing
its plans to develop a global content network to rival a
partnership made last week between IBM, I2, and Ariba to form an
online business directory.  CMRC retreated with the NASDAQ
today.  No matter though, the audience still cheered for this
B2B.  UBS Warburg yelled Buy and upped their price target to $90
from $75.  Bear, Stearns, & Co could also be heard with a Buy
recommendation and a target price of $75.  Next week, Commerce
One and Ariba will kick off conferences to showcase what's in
their product pipeline, expand on recent announcements and
perhaps, make dazzling proclamations of future exchanges that'll
drive up the share price even more.  The anticipation alone
should keep the momentum in gear.  So look for volume levels to
keep topping the ADV of 8.14 mln shares and we've got a winning
show on our hands.  Consider taking entries off the pivotal
point near the $72 level or look to enter the play on a rally
above resistance at $75.  If you'd like to enter on better
strength, wait for positive direction from the NASDAQ, and watch
for CMRC to move through Monday's intraday high at $78.13.

AGIL $69.25 -0.75 (-1.63) It appeared the sellers got up earlier
than the buyers on Monday morning as AGIL dropped in the first
hour of trading.  Getting close to it's 200-dma at $65.80, the
stock bounced at $66.38 when the buyers finally woke up to bid
the stock higher.  Encountering resistance at the 10-dma, AGIL
settled down by mid-day and ended down 88 cents or 1.23% on 35%
of ADV.  Like yesterday, today saw the 10-dma, now converged with
the 5-dma at just below $71.50, act as resistance.  An early
morning attempt to rally above that point was met with selling.
From there, AGIL traded lower to close the day down fractionally
on 77% of ADV.  A bounce off support at $68 or the 200-dma could
provide for an aggressive entry point.  Those looking for
confirmation will want to see AGIL clear $71.50 before entering.
The company announced today that it signed a contract worth over
$1 million with Universal Scientific Industrial Ltd.  AGIL will
implement its Agile Anywhere and Agile Buyer solutions worldwide.

BEAS $61.13 -0.81 (-1.94) Considering the rough start to the week
for the NASDAQ, BEAS has been holding up quite well.  Attempting
to stage a Monday morning rally above its 5- and 10-dma, the
stock was successful until it hit resistance at $65.75.  From
there, the sellers took over to close the stock down $1.13 or
1.78% on 63% of ADV.  Today the 5- and 10-dma continued to act as
a barrier.  Opening above the 5-dma (now at $63.13), the stock
made an attempt at the 10-dma at $64.81 but with a softening Tech
market, BEAS closed down fractionally on 47% of ADV.  A bounce
off support at $60 would be a good target to shoot for but make
sure volume confirms a bounce.  A more safer way to play BEAS
would be to wait for BEAS to move strongly above its 10-dma.  On
Monday the company announced an alliance with wireless company
Capslock to jointly adapt and develop mobile commerce
applications based on the BEAS platform.

CFLO $109.56 -0.19 (-3.81) So far this week CFLO has been
persistent.  It appears that the $115 level is proving to be
formidable resistance.  On Monday the stock attempted for the
third time to break through $115.  Touching it in the early hours
of trading on strong buying volume, the stock traded drifted
lower for the rest of the day when the volume eased to close down
$3.63 on 154% of ADV.  Not one to give up easily, today CFLO
again attempted to break through $115.  Getting as high as
$115.50 in the early going, the stock traded sideways before end
of day weakness in the Tech index dragged CFLO down to close down
just fractionally on 98% of ADV.  Trading volume in CFLO has been
tapering off since mid-August.  CFLO will need that volume to
return if it is to break $115.  Doing so will be confirmation of
strength in the stock and offer a conservative entry point.
Aggressive traders will look a bounce off support at $105 as a
possible entry.


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PLAY UPDATES - PUTS
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CMTN $46.88 -3.00 (-3.69) The telecom equipment makers took a
turn for the worse today as fears of a spending slow-down and
earnings warnings reigned supreme.  CMTN slipped past its
pivotal support point at $50 yesterday and fell further into
the sell-off mire today.  The trading activity in CMTN
continues to remain robust as the stock slides lower, which
bodes well for those of us on the short-side.  Since breaking
through support at $50, CMTN doesn't have major support again
until the $40 level.  That's not to say the stock might
stabilize before $40, but from the looks of today's trading,
CMTN's path of least resistance is down.  In order to gain entry
into the play, aggressive traders might pull the trigger early
tomorrow morning if the NASDAQ continues to slide.  Otherwise,
wait for the selling to pick-up steam and target shoot for
entries near whole levels; watch for a failure next at the $46
level.  Aggressive traders might also consider entering the
play during intraday rallies.  If CMTN advances, watch for the
stock to find resistance at the $48 level and consider entering
the play if the bears return.

UK $38.00 -0.13 (+0.00) It's been a quiet two days in the
Chemicals sector so far this week.  UK has essentially
churned around the $38 level for the last three trading
sessions.  Volume has tapered off over that time, which
might suggest the big sellers have taken a break from
beating the stock down.  However, it was a little
surprising to see UK edge lower today while the NASDAQ
bled red.  Traders typically find solace in the Chemicals
sector while the Tech sector stumbles.  Obviously, that
wasn't the case today.  In light of the mysterious trading
in UK today, we decided to hang around.  The obvious and
more conservative entry into the play would be on a failure
of support at the $38 level.  Make sure to confirm the
return of volume in conjunction with lower prices before
entering the play.  Aggressive traders might consider
entering the play on a UK rally to resistance at $39.00 or
near the stock's descending 10-dma near $39.50.

MMM $88.06 -0.88 (-0.94) Now that's the kind of action we like
to see.  Although the decline is proceeding slowly, our MMM play
is definitely headed in the right direction.  Friday's close just
below the 200-dma (then at $90.06) left the door open to a
possible recovery early this week.  But, the bulls couldn't
deliver, and that door slammed shut yesterday as MMM fell
throughout the day.  After bouncing at the 100-dma (then at
$88.50), the bears finally sent the bulls packing today as they
turned back an attempted recovery at the 200-dma and pushed MMM
lower still, closing at $88.06, below the 100-dma.  This was
the last of the supportive moving averages that MMM had to lean
on and it will now have to rely on historical support, found at
$86.50 and again at $84.  Driving the decline over the past 2
weeks are concerns about rising oil prices and economic slowdown.
The warning last week from Dupont was the opening salvo and
traders are simply waiting for the other shoe to fall.  The best
strategy for new entries is to wait for a bounce up to either the
100-dma or 200-dma, and then buy puts as the selling volume picks
up and MMM rolls over.

PCS $48.25 +1.50 (+1.12) Monday morning's downdraft didn't scare
PCS stockholders like you would hope.  We saw PCS open in
negative territory, only to bounce back above the flat line, with
not much trouble and by mid-morning PCS was flat on the day.  Even
after the market worsened, PCS held up well only closing down
-$0.38 for the day at $46.75, on lighter-than-normal volume. The
positive sentiment in the Tech sector Tuesday morning provided PCS
with a chance to move up by over $1 in early morning trading and
by mid-day, PCS was up $1.75 at $48.50, just a fraction above its
10-dma (currently $48.40).  Even as the markets headed lower PCS
maintained its sea legs going into the closing bell.  Volume was
light for the day, which is encouraging for those of us short.
PCS closed in positive territory, up $1.50 at $48.25, but just
below its 10-dma (currently $48.40)  Look for further price
deterioration on heavier volume from here as a good entry point,
as PCS's close was held below its 10-dma.  Conservative entry
might be provided by way of a failed rally attempt, confirmed
with weak volume up to the $49-$51 range.

DIGL $74.38 -1.25 (+0.63) DIGL's robust volume accentuates the
battle of the bulls and bears.  Since last Wednesday, trading
activity has been at 25% to 125% above the norm on the decline.
This week, DIGL attempted to rebound off Friday's low of $72.
However it slammed into a wall of resistance at $79.38 and
$77.94, respectively, while still trading near $73 intraday.
The volatility offered the more adventurous entries off the 5-
dma ($77.63).  If you err more on the side of caution, then wait
for DIGL to fail and violate recent support before jumping into
this downward momentum play.  The dismal forecast impacting the
telecoms and the jittery market should continue to pressure the
share price in the short-term.   However, be aware that two
distinguished firms are bullish on DIGL.  On Monday, Robinson-
Humphrey upped DIGL to a Buy from Outperform and issued a $145
price target.  First Union also began coverage with a Strong Buy
recommendation and a $125 price target.  Keep stops tight to
protect against unplanned events.

SCMR $113.44 -7.69 (-2.81) It initially appeared SCMR was base-
lining at $120-$122 and settling into a comfortable trading
zone.  Today's performance, however, gives evidence that SCMR
has not yet found bottom.  Directly from the open, SCMR slid
below the pivotal $120 mark.  It then fell hard under $115 on
strong volume and eventually landed below the 100-dma ($112.14),
smack on the $110 mark.  A weak close just above this technical
indicator is a bearish sign.  If the telecoms continue to turn
lower and the broader market weakens, SCMR might be poised for
a big fall.  There's plenty of room before SCMR finds some
support around $100 and $105.  If there's an intraday rebound,
consider taking more enterprising entries off upper resistance
at $120 and the 5-dma ($121.08).  Keep stops tight.  From a
more reserved perspective, look for SCMR to bleed a little
more and trade  under the 100-dma line.

CREE $116.50 -4.44 (-6.75) Overhead resistance reigns supreme in
this put play.  The 5-dma is proving to be formidable resistance
for CREE.  On the rare times it does peek through, the 10-dma
provides yet another barrier.  Just above that is the 50- and
200-dma converged in the $125 area.  Above that the 100-dma is at
$130 has been impenetrable.  With so much resistance up above
combined with a weak Tech market, it is no wonder why our put
play in CREE has so far been nicely profitable.  So far the
failures to rally above the 5-dma have provided with aggressive
traders with entry points on a daily basis.  As long as this
trend holds it will continue to do so.  We mentioned on Sunday
that a break below support at $120 would see the next strong
support at $112.  Look for former support at $120 to act as
resistance and a failed rally above that point as a possible
entry.  Below $112 is support at $110 and $105.


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**************
NEW CALL PLAYS
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PALM - PALM, Inc. $47.13 +2.13 (+2.13 this week)

Known for its ubiquitous Palm-branded handheld devices, PALM
brought handheld computing to the masses.  Although Apple
pioneered the concept of the Personal Digital Assistant (PDA)
with its ill-fated Newton series, PALM, which was spun off
from 3Com (COMS) in March, has managed to convince consumers
they can't live without these little electronic gadgets.  The
company's product offerings have grown and now include the
Palm III, Palm V, and the Internet-enabled Palm VII product
families.  These pocket-sized PDAs allow users to use pen-based
input and to copy and synchronize information between the
device and a personal computer.

The IPO of PALM in early March was one of many new offerings
last spring, and it received an amazing amount of interest on
its first day.  Opening the day at more than double its offering
price, the stock quickly shot as high as $165 before more
rational thinking prevailed, bringing the price back to earth.
In the midst of the spring NASDAQ correction, PALM shares
languished for months, finally bottoming near $20.  Finally,
in late June, volume began to increase, and the stock has seen
significant accumulation ever since.  The most recent bout of
profit taking ended in mid-August, and the subsequent rally has
brought the price up through resistance near $45.  Today's strong
gains pushed PALM through this level to close at its highest point
since late March.  The technicals, such as MACD and Stochastics,
are still looking strong, and the 10-dma (currently $43.44) has
provided support on each pullback over the past 3 weeks.  The
bulls ran into resistance today at $48, and above that looms the
$53 level.  Below the $45 support level is solid support around
$40.  Use pullbacks to support as buying opportunities, but make
sure volume confirms the bounce before playing.  The pullbacks
recently have been brief and shallow, so the $45 level looks like
the best point to target shoot.  Continuing strength that pushes
PALM above $48 on strong volume will provide a more conservative
entry.

The newswires have been busy reporting all that PALM has been
up to lately.  After announcing its 100,000th registered
developer for their handheld platform yesterday, PALM debuted
a new support network for its army of developers, which will
offer easier access to technical information and professional
networking services.  The sheer number of developers indicates
the strong demand for their devices and assures a steady stream
of new products and software.  Also on Monday, Computrade
Systems upgraded PALM to a Buy, based on the improving
technical picture.

BUY CALL OCT-45*UPY-JI OI= 3396 at $5.38 SL=3.25
BUY CALL OCT-50 UPY-JJ OI= 2066 at $3.00 SL=1.50
BUY CALL OCT-55 UPY-JK OI=   83 at $1.69 SL=0.75
BUY CALL NOV-50 UPY-KJ OI=15272 at $4.50 SL=2.75
BUY CALL NOV-55 UPY-KK OI= 2957 at $2.88 SL=1.50

Picked on Sep 12th at    $47.13     P/E = 529
Change since picked       +0.00     52-week high=$165.00
Analysts Ratings      6-2-1-0-0     52-week low =$ 19.88
Last earnings 07/00   est= 0.00     actual= 0.03
Next earnings 10-19   est= 0.02     versus= N/A
Average Daily Volume = 8.29 mln



NTRS - Northern Trust Corp $89.94 +1.06 (+2.31 this week)

Northern Trust Corporation is a Chicago-based multi-bank holding
company established in 1889. The company is known primarily for
its flagship operation, The Northern Trust Company.  They
provide banking, investment, and trust services to businesses,
financial institutions, and affluent individuals worldwide.

The financials are basking in the glow of takeover speculation
and all the scuttlebutt concerning the potential takeovers is
driving many stocks to new 52-week highs.  NTRS, who already
possesses one of the most solid long-term uptrends in the
industry, is a happy recipient.  Today, in a recent series of
new highs, NTRS set the latest record at $90.38.  The volume
was heavy as investors bought into the sector on news of
"serious talks" between JP Morgan and Chase.  NTRS, with one of
the best earnings track records, was a top pick in today's rush.
Besides which, NTRS is clearly at a price that would suggest
that a split could be pending.  Historically speaking, the past
three splits all occurred in December.  Therefore it's possible
that we may have to wait a few months.  But with NTRS entering
the $90 range, the anticipation could generate some excitement
of its own.  At the moment, our play on NTRS is based on the
current momentum.  The stock appeared to gather strength once it
crossed over the 10-dma ($84.94) last Friday.  The near-term
support is now higher at $88, just above the 5-dma ($87.34).
Confirm strength above $90 and watch for challenges at the
century mark.  Consider entering on intraday bounces off $89 and
$90 if we aren't afforded any pullbacks.

Northern Trust is confirmed to report its earnings on October
16, before the market opens.

BUY CALL OCT-80 NRQ-JP OI=292 at $11.50 SL=9.25
BUY CALL OCT-85*NRQ-JQ OI= 93 at $ 7.38 SL=5.50
BUY CALL OCT-90 NRQ-JR OI=221 at $ 4.25 SL=2.50
BUY CALL JAN-85 NRQ-AQ OI=102 at $10.00 SL=7.50
BUY CALL JAN-90 NRQ-AR OI=192 at $ 7.75 SL=6.00

Picked on Sep 12th at   $89.94    P/E = 47
Change since picked      +0.00    52-week high=$90.38
Analysts Ratings    1-4-11-0-0    52-week low =$40.16
Last earnings 06/00  est= 0.50    actual= 0.53
Next earnings 10-18  est= 0.53    versus= 0.44
Average Daily Volume  =  728 K



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

TLGD - Tollgrade Communications $95.38 -6.38 (-12.06 this week)

Tollgrade Communications designs, engineers and manufactures
network assurance equipment for the telecom and CATV industries.
TLGD develops solutions for today's network testing problems - and
those of the future.  Their solutions are engineered for fast-
changing telecom and CATV networks comprised of fiber, copper and
coax.  As well, their solutions are designed to transport tests
and test information quickly and automatically between centralized
network locations and customer lines.  TLGD's patented MCU
technology allows local exchange carriers to remotely diagnose
problems in the local loop.

Sector sympathy goes a long way when considering a play.  With
many telecom-related stocks hitting their highs in mid to late
July, it's been for the most part, downhill ever since.  Like its
peers, TLGD hit its peak in mid-July at $168.88.  Encountering
strong resistance at $170, the stock sold down mercilessly before
finding bottom at the $80 level.  From there TLGD moved higher
along with the rest of the NASDAQ.  Its recovery hit a snag
when the stock was unable to break through resistance at $130.
Since then, the stock has drifted ever lower, with strong
resistance provided by the 50-dma, now at $120.  While August did
provide some relief for investors in TLGD, September, so far, is
shaping up to be a rough month.  Unable to break through
resistance at $120, the stock for the past few days has been
selling off on the back of its 5-dma, currently at $105.84.
Psychology also plays a role when considering a play, as today
TGLD broke below the psychological support level of $100.  Now
below par value, the stock also broke support at $98.  In
addition to this, TLGD closed definitively below its 100-dma
today, which is located at $102.21.  While volume was light, at
only 65% of ADV, the ease with which TLGD has been violating
support levels is a message that comes through loud and clear.  At
this point, aggressive traders will look for the failures to make
it above the 5-dma as entry points.  As well, failed rallies above
$100 and the 100-dma are also good entry points.  Above that,
there's resistance in increments of $5 at $105 and $110.  Make
sure volume confirms the downside before entering.  Support can
also be found in increments of $5 at $95 and $90.  The final level
of moving average support at the 200-dma is all the way down at
$70.  As there has been little company-specific news for TLGD,
confirm direction with sector sympathy when considering a play.
With the fall today, TLGD slipped past its lowest OCT options
series.  Look for at-the-money and out-of-the-money contracts to
be issued in the coming days, and wait for OI to build before
jumping in.

BUY PUT OCT-105 TQK-VA OI=10 at $18.25 SL=13.00
BUY PUT OCT-100*TQK-VT OI=23 at $15.38 SL=11.25

Average Daily Volume = 775 K



LVLT - Level 3 Communications $74.25 -3.50 (-5.06 this week)

Billing itself as a major bandwidth merchant, LVLT is building
more than 20,000 miles of fiber-optic networks in the US and
Europe.  Based on Internet protocol (IP) communications, the
company's network also includes undersea capacity across both
the Atlantic and Pacific oceans.  Thinking ahead, LVLT has
packed its network with fiber and conduits for future upgrades.
Currently serving such data-intensive customers as ISPs and
telecom carriers, the company's services include dedicated
circuits, Internet access, server and network equipment
collocation, and dark fiber leasing.

The long steady decline in the Telecom sector has LVLT firmly
in its clutches.  Falling nearly 50% during the Spring decline,
the stock has attempted three times to recover, only to be
turned away every time.  The rally in August represented the
first time that the stock was unable to at least temporarily
clear the 200-dma (currently at $87.94).  The last 2 weeks of
August saw LVLT rise from support near $60 to as high as $88
before the bears reasserted control.  The subsequent selling
has now pushed the stock below its declining 50-dma (currently
at $75.50).  Telecom stocks from T and WCOM to NT and CSCO have
been having a hard time this month, and LVLT seems to be caught
in the middle of a perceived slowdown in the sector.  Even
frequent announcements of new products and services have been
insufficient to slow the selling.  And, of course the September
5th downgrade from a Buy to a lowly Hold rating by Kaufman Bros
certainly didn't help.  Stochastics and MACD are diving
earthward, and the 30-dma (currently $71.13), is the last moving
average that could possibly provide support.  LVLT found support
near $72 this afternoon, but if the NASDAQ's slide continues, it
doesn't look like this level will be able to hold, and unless the
30-dma provides support, $70 will be the next stop, followed by
65.  Feel free to jump on board the decline if continued selling
pressure pushes the stock down through today's lows near $72.
Bucking the trend of the broader market will be difficult, but
we could see an intraday bounce to resistance near $75-76 before
the decline continues.  Bargain hunters will use any such
recovery as an opportunity to get a better entry, initiating
new positions as the stock succumbs to renewed selling pressure.

BUY PUT OCT-75 QHN-VO OI=306 at $7.13 SL=5.00
BUY PUT OCT-70*QHN-VN OI=363 at $4.63 SL=2.75

Average Daily Volume = 2.38 mln



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

COF - Capital One Financial $65.75 +0.06 (+0.59 this week)

As one of the top 10 credit card issuers in the U.S., Capital
One's secret weapon is its vast databases.  The company uses
this data to match a potential Visa or MasterCard customer to
any one of its thousands of cards, varying in annual percentage
rates, credit limits, finance charges and fees.  Ranging from
platinum and gold cards for preferred customers to secured and
unsecured cards for customers with poor credit histories, the
company has a credit card for just about anyone.  The company
also sells wireless phone services, mortgage services, and
consumer lending products.

Most Recent Write-Up

Financial stocks continued to shine as investors looked for
shelter from the technology sector.  As a major player in the
credit card market, COF is riding the wave of enthusiasm generated
by the knowledge that the Fed is out of the picture for a while.
Although our play has had a hard time moving significantly higher
so far this week, it has been encouraging to see COF move
fractionally higher each day, with the support of solid volume.
Monday's trading propelled COF to a new all-time high at $66.13,
and today's close of $65.75 isn't far behind.  Since the rally in
Financial stocks began in the middle of August, the 5-dma
(currently $64.63) has proven to be supportive and did so again
today.  COF's dip to its 5-dma this morning was as bad as it got
as the price recovered, then strengthened for the remainder of the
day.  Attractive entries can be had as COF drops to bounce either
at the 5-dma or intraday support levels found at $64, and then
$62.  More conservative players will want to wait for strong
buying volume to push shares through $66 and back into new high
territory before playing.

Comments

We're looking for another new all-time high for COF.  Given the
recent run, we would look for a normal pullback near $64 - $65
for entries, with a bounce of course.  Better-than-average volume
has backed COF's advance over the past six sessions.  The 10-dma
lies at $62.45.  If profit takers step in tomorrow, we would view
pullbacks a good entries into a strong uptrending stock.

BUY CALL OCT-55 COF-JK OI=  31 at $11.75 SL=9.00
BUY CALL OCT-60*COF-JL OI= 306 at $ 7.75 SL=5.75
BUY CALL OCT-65 COF-JM OI= 803 at $ 4.63 SL=2.75
BUY CALL DEC-60 COF-LL OI= 916 at $10.25 SL=7.50
BUY CALL DEC-65 COF-LM OI=2203 at $ 7.25 SL=5.25

Picked on Sep 10th at   $65.16     P/E = 33
Change since picked      +0.59     52-week high=$66.13
Analysts Ratings   12-12-2-0-0     52-week low =$32.06
Last earnings 07/00  est= 0.54     actual= 0.54
Next earnings 10-11  est= 0.58     versus= 0.45
Average Daily Volume  =  967 K



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

Technology Slump Continues..

The market rotation persisted today as the Dow rallied while the
Nasdaq slumped.

Monday, September 11

The market ended lower Monday amid new concerns over earnings in
the technology sector.  Investors also worried about the impact
of rising energy prices on the economy.  The Dow closed down 25
points at 11,195 and the Nasdaq ended down 82 points to 3,896.
The S&P 500 index fell 5 points to 1,489.  Trading volume on the
NYSE reached 902 million shares, with advances beating declines
1,531 to 1,299.  Activity on the Nasdaq was average with 1.48
billion shares exchanged.  Technology declines outpaced advances
2,440 to 1,569.  In the bond market, the 30-year Treasury fell
12/32, pushing its yield up to 5.72%.

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

Enzo Biochem   ENZ    OCT40P/OCT45P   $0.62   credit   bull-put
Steven Madden  SHOO   MAR15C/OCT15C   $1.12   debit    calendar
Juniper Net.   JNPR   SEP220C/170P    $3.00   credit   strangle
Oracle         ORCL   SEP95C/SEP75P   $1.00   credit   strangle

Stocks traded in a wide range during Monda's session and all of
our new positions were available at or near the suggested prices.

Portfolio Plays:

The market slumped today on concerns over declining corporate
profits.  Weakness in biotech, airline, and drug stocks pulled
the Dow lower on expectations of lower third-quarter earnings
and worries over energy costs and how they will affect stocks
in the second half of the year.  Hewlett-Packard (HWP) led the
blue-chips lower, falling $8 after reporting it is in talks to
buy the technology consulting arm of Price-Waterhouse-Coopers
for up to $18 billion.  IBM (IBM) fell almost $5 after Goldman
Sachs lowered its fourth quarter and yearly earnings estimates
on the company as a result of the strong U.S. dollar.  Shares
of Alcoa (AA), Coca-Cola (KO) and 3M (MMM) also moved lower.
Pessimistic views on some of the leading technology issues by
Wall Street analysts spurred investors to take profits from the
recent Nasdaq rally.  A number of top companies dropped after
their ratings were lowered and numerous heavyweights followed
the downward trend.  Computer networker Juniper Networks (JNPR)
tumbled $14 to $183 while Ciena (CIEN) fell $15 to $184.  Sun
Sun Microsystems (SUNW) slid $5 to $115 and Cisco Systems (CSCO)
fell almost $3 to $61.  On the Nasdaq, biotech stocks were also
very weak as merger announcements took a toll on Genzyme (GENZ)
and Human Genome Sciences (HGSI), two major companies who sought
to enlarge their market presence.  Fortunately, losses in the
broader indices were tempered by gains in banking and financial
shares, which benefited from rumors of further consolidation in
the sector, and retailing stocks, which rebounded from a recent
sell-off.  Oil services issues also moved higher as crude oil
prices edged back to 10-year highs, despite an agreement by OPEC
to boost output.

The majority of stocks performed poorly today but we did have a
few winners in the Spreads portfolio.  Business-to-business
Internet company Commerce One (CMRC) vaulted higher after it and
Intershop Communications AG announced a deal to integrate their
electronic commerce software systems.  Commerce ended almost $4
higher at $75 and our new, put-credit spread is off to a great
start.  Covad Communications (COVD) jumped over $2 to a mid-day
high above $20 after the company announced that it will reach an
installed base of 200,000 subscriber lines, exceeding analysts'
expectations for subscribers in the third quarter by over 30%.
In addition, Covad and SBC Communications (SBC) announced a new
making Covad an in-region and out-of-region DSL provider for SBC.
SBC also announced plans to invest $150 million to acquire a
stake in Covad and the companies reported that several pending
antitrust and regulatory legal issues were settled prior to the
agreement.  Our bullish debit spread achieves maximum profit if
the issue remains above $17.50.  Anheuser Busch (BUD) continued
to lead the "Murph's Law" category, up $1.38 to $82, less than
one week after we closed the position for a small loss.  The
original position is profitable with the stock price above $80.

On the downside, a number of issues continue to display signs of
weakening technicals and we have decided to close some positions
and make adjustments in others to protect current profits and
limit future losses.  Our bullish plays in Leap Wireless (LWIN),
Mail.com (MAIL), Ryder Group (R) and Vitria (VITR) were closed to
protect profits.  In addition, we are monitoring the short-term
credit strangles on Sapient (SAPE) and Southdown (SDW) for any
significant changes in character.  Both positions offer positive
returns but we won't risk a losing outcome for a few pennies.
The Reader's Request positions have produced mixed results this
month.  Both Polaroid (PRD) and Lucent (LU) have slumped to new
yearly lows and there is little indication that either issue will
recover in the near-term.  The PRD calendar spread was closed for
a small loss and the bullish portion (OCT40-NP) of the synthetic
position on Lucent is being rolled forward to January for a small
debit ($0.25).

Tuesday, September 12

The market rotation continued today as the Dow rallied while the
Nasdaq slumped.  The blue-chip average closed up 37 points at
11,233 but the technology index fell for a third straight session,
ending down 46 points at 3,849.  The S&P 500 index fell 7 points
to 1,481.  Trading volume on the NYSE reached 981 million shares,
with declines beating advances 1,398 to 1,378.  Activity on the
Nasdaq was moderate at 1.59 billion shares traded, with declines
beating advances 2,221 to 1,801.  In the bond market, the 30-year
Treasury fell 10/32, pushing its yield up to 5.74%.

Portfolio Plays:

Technology stocks plunged today as investors continued to fret
over upcoming earnings and future revenue growth.  The Nasdaq
moved higher early in the session but the gains evaporated late
in the day as profit-taking consumed the group.  Among the major
stocks, networking and chip issues led the downward slide with
Cisco (CSCO), JDS Uniphase (JDSU), Lucent (LU), and Advanced
Micro Devices (AMD) all moving lower.  In contrast, The Internet
group held its ground after Bear Stearns initiated coverage on
a number of popular stocks with bullish ratings.  Yahoo (YHOO),
Lycos (LCOS), InfoSpace (INSP), About.com (BOUT), and Amazon.com
(AMZN) were among the companies tagged with optimistic forecasts.
The widespread selling pressure spilled over into the blue-chip
average which, in spite of the negative undercurrent, managed to
end with positive results.  The Dow leaders included Intel (INTC),
Home Depot (HD), Exxon-Mobil (EXOM), and drug bellwether Johnson
& Johnson (JNJ).  J.P. Morgan (JPM) also participated in the
upside activity with renewed merger speculation fueling its gains.
In the broad market, financial, paper, utility and airline stocks
sagged while retail, major drug and biotechnology shares climbed.
Oil shares moved in conjunction with crude oil futures and stock
values fell in reaction to the dip in oil prices.

The primary theme in the market has been an ongoing rotation from
sector to sector but a shift from growth to value has been evident
in our portfolio.  A number of leading technology issues appear to
be establishing near-term tops that will limit their potential for
the next few weeks.  Many of our best performers are moving into
range-bound patterns with well defined resistance areas and there
is little indication that the trend will reverse to the upside
anytime soon.  Fortunately, there were a few bullish moves in the
Spreads/Combos section today.  Juniper Networks (JNPR) rebounded
almost $7, closing near $190 and for now, it appears that our new
credit strangle has a good chance of expiring at maximum profit.
Qualcomm (QCOM) and Virata (VTRA) rebounded from recent technical
bottoms and these issues may continue to oppose the bearish trend
in the short-term.  Enzo Biochem (ENZ) added $4 to close near $63
after the company was rated a "buy" in new coverage by analyst
Geoffrey Harris at UBS Warburg.  The 12-month target price is $76
per share.  Regeneron (REGN) also edged higher with the biotech
group and the bullish move provided a new, early-exit opportunity
for those in the September debit-spread (SEP25C/30C).  The return
for the position is now $0.75 on $3.75 invested, for one month.

In earnings news, software giant Oracle (ORCL) is due to release
its results on Thursday and a positive report might help stem the
recent selling pressure in technology issues.  Oracle is seen on
average reporting per share income of $0.13, up from the $0.08
announced in the year-ago period.  However, many investors chose
not to wait for the upcoming report, driving the issue $4 lower in
toda's session.  The recent technical support at $84 did not hold
and the next key test will come at $77.  Our credit strangle will
profit with the issue above $74 but a move below the current area
of support (on increasing volume) will be an indication that lower
prices are in the compan's future.  Depending on the movement in
the next few days, we will decide whether to exit the position or
simply roll forward and down, in expectation of a future recovery.

Questions & comments on spreads/combos to Contact Support
******************************************************************
                         - NEW PLAYS -

We received two requests for bullish spreads on technology issues
today, but based on the recent technical outlook, the potential
for further downside movement in the group is very high.  However,
with the Implied Volatility in options favoring put-credit plays,
we have discovered a few positions that present favorable entry
points into attractive issues.

******************************************************************
PLUG - Plug Power  $52.50  *** A Big Day! ***

Plug Power designs and develops on-site electricity generation
systems utilizing proton exchange membrane fuel cells for many
residential applications.  The company's residential fuel cell
system will be an appliance that will produce electricity through
a clean, efficient process without combustion.  The system will
receive fuel from a home's existing natural gas line or propane
tank, convert the fuel into a hydrogen-rich stream, and then
combine it with oxygen from the air in a chemical reaction that
produces electric power.  PLUG's initial residential systems will
be designed to supply 7 kW of baseload power, 10 kW of peak power,
and 15 kW of surge load capacity, which will provide the full
electricity needs of a home.  They plan to bring their first
residential fuel cell systems to market in 2001, and, by 2003
expect to offer different model sizes designed to meet the power
needs of various market segments.

Fuel-cell stocks were on the move today, as investor interest in
the group surged on worries over higher electricity bills, gas
charges and heating costs generated by the rising price of crude
oil.  The industry was also boosted by a bullish report that came
out late last week and in anticipation of PLUG's upcoming meeting
with sector analysts.  On Thursday, Plug Power will conduct an
analysts' meeting at its headquarters and the company is expected
to update its progress in moving fuel cells closer to commercial
production.  As a result, implied volatility and volume in the
compan's options jumped today as the stock rallied over $11 on
renewed enthusiasm for the issue.  A market-maker reported that
signs of short covering were evident in Plug Power stock and he
also noted that the industry, because of all the energy price
increases, is attracting new attention.

This position is based on recent increased activity in the stock
and underlying options.  While the play offers favorable reward
potential, it should be evaluated for portfolio suitability and
reviewed with regard to your strategic approach and trading style.
Because the issue has increased in value substantially during
toda's activity, we will initially wait for some consolidation
to occur before entering the position.


PLAY (speculative - bullish/credit spread):

BUY  PUT  OCT-35  PQL-VG  OI=69  A=$1.38
SELL PUT  OCT-40  PQL-VH  OI=33  B=$1.93
INITIAL NET CREDIT TARGET=$0.75-$0.88  ROI(max)=22%


******************************************************************
BLDP - Ballard Power Systems  $116.12  *** Fuel Cell Rally! ***

Ballard Power Systems is developing proton exchange membrane
(PEM) fuel cells and fuel cell systems.  A fuel cell is an
environmentally clean power generator that combines hydrogen fuel
with oxygen, without combustion, to produce electricity, with
pure water and heat as the only by-products. It produces power
efficiently and continuously, as long as fuel is supplied.
Ballard is developing their PEM fuel cells for use in
transportation, stationary power generation and portable
applications.

The fuel-cell sector is rallying again as investors realize that
with crude oil prices on the rise, the futuristic technology is
becoming much more attractive.  Fuel cells are a low polluting,
energy generating technology that can be used in a wide range of
industries with various practical applications such as powering
automobiles or replacing cell phone batteries.  Their potential
is enormous with supplies of oil falling and the cost of finding
new energy sources rising.  Since they use a chemical process to
generate power without burning, and contain no moving parts, the
unique products are efficient and reliable while emitting few
impurities.  In addition, fuel-cell technology offers potential
in third-world countries as it can be utilized in constructing
power grids with low installation costs in remote areas.

Investor interest in fuel-cell developers is growing and Ballard
Power is a leader in all of the primary technologies.  Ballard's
strong points include sound management and a solid customer base
along with established relationships with many of the potential
end-users in the industry.  The recent rally above technical
resistance was further supported this week after the issue was
upgraded by CS First Boston to a "strong buy" and the momentum
appears to be well-established.  The stock has excellent buying
support near our cost basis and the favorable option premiums
will allow us to speculate conservatively on the future movement
of the issue.


PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-90  DFQ-VR  OI=27  A=$1.81
SELL PUT  OCT-95  DFQ-VS  OI=52  B=$2.43
INITIAL NET CREDIT TARGET=$0.88-$1.00  ROI(max)=25%


******************************************************************
                      - TECHNICALS ONLY -
******************************************************************
ALL - Allstate Corporation  $31.82  *** Cheap Speculation! ***

The Allstate Corporation serves as the holding company for the
Allstate Insurance Company.  Business is conducted principally
through Allstate Insurance Company, Allstate Life Insurance
Company and their subsidiaries.  Allstate is engaged, principally
in the United States and Canada, in the personal property and
casualty insurance business and the life insurance and savings
business.  Allstate's business segments include personal property
and casualty; life and savings; and discontinued lines and other
coverages.

Allstate is in one of the more conservative sectors of the market
but in the past few months, the issue has rallied to recent highs
as speculation over consolidation in the industry continues to
generate optimism for the future of the company.  With this week's
bullish move, the issue appears to have successfully completed a
"head-n-shoulders" bottom and based on the new investor interest,
it may not be long before the stock returns to its old trading
range near $40.  Traders who support a bullish long-term outlook
for the company can use this synthetic position to profit from
continued upside activity, at the risk of owning the issue at a
favorable cost basis.


PLAY (conservative - bullish/synthetic position):

BUY  CALL  JAN-40  ALL-AH  OI=2443  A=$0.56
SELL PUT   JAN-25  ALL-ME  OI=1327  B=$0.38
INITIAL NET CREDIT TARGET=$0.00-$0.12 ROI TARGET=50%  B/E=$25.00

Note:  Using options, the position is equivalent to being long
on the stock.  The collateral requirement for the naked put is
approximately $675 per contract.







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

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