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Daily Newsletter, Thursday, 09/14/2000

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The Option Investor Newsletter                 Thursday 09-14-2000
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******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        09-14-2000        High      Low     Volume Advance/Decline
DJIA    11087.50 - 94.70 11208.10 11069.30 1.01 bln   1442/1355
NASDAQ   3913.86 + 19.97  3984.33  3897.18 1.70 bln   2222/1725
S&P 100   799.34 -  3.68   806.68   796.74   totals   3664/3080
S&P 500  1480.87 -  4.04  1491.71  1476.73           54.3%/45.7%
RUS 2000  539.21 +  5.21   540.01   534.00
DJ TRANS 2705.48 - 17.98  2727.73  2693.28
VIX        20.69 -  0.79    22.25    20.29
Put/Call Ratio       .56
******************************************************************

Ralph Block, Ralph Acompora, What is it with Ralph?

Volatility is the result of unexpected bad news from a variety
of sources. It is back! Remember the currency problems from the
last couple of years? You woke up in the morning to news that
some currency you could care less about had devalued and repealed
the laws of market physics as we knew them. We are not there yet
but the rumblings are clear. Foreign currencies are now going to
cause us serious problems again. Add in several noted analysts
calling for market highs for 2001 only +100 points from the
September highs or calling for a retest of Nasdaq lows and you
have a picture of today's trading.







PPI? What PPI? The Dow and Nasdaq gapped open on the favorable
PPI news but the euphoria was brief. The PPI headline number
slipped -0.2% in August falling well short of analyst's estimates
for a +0.2% gain. The core rate was only +0.1% and the markets
should have reacted strongly but the good news was overshadowed
by earnings warnings. Even positive jobs data showing that
employment was slowing could not provide additional lift.

The double whammy of McDonald’s earnings warning yesterday and
then the downgrade of Colgate today gave the Dow a serious case
of earnings jitters. The MCD and CL problems were pegged to the
weakening Euro and the trickle down effect that followed hit
all the large multinationals. The weakening Euro causes currency
losses when those sales are converted back into dollars. Other
companies which fell in anticipation of weak earnings were CLX,
PG, JNJ, DD, WY, EL, F, KO and G. Also mentioned was the impact
of gas prices on the cash available to the consumer worldwide.
In Europe they are just glad to get gas and pump prices reflect
the shortage. Macdonald’s said currency problems could take as
much as -.07 off their results.

After the close today Maytag warned that slowing sales would
impact second half results and by doing so joined the swelling
ranks of earnings lepers. The trend is accelerating as sectors
like consumer products, building materials, chemicals and capital
goods companies are faced with failing economic rallies overseas
and slowing sales. The old economy stocks are also the stocks
of rebuilding economies and when those countries stall the
impact is broad.

Tech stocks rallied +91 points on the PPI news and actually
weathered the earnings problems most of the day on the hopes
that Oracle and Adobe would beat estimates after the close.
ORCL did just that with a blowout +.17 actual number which
beat estimates of .13 easily. Unfortunately the increase in
sales was less than many analysts expected. The year ago
quarter was depressed by Y2K concerns and analysts were looking
for stronger comparisons. ORCL also announced a 2:1 split. You
would have expected ORCL to soar in after hours but as long
time readers know, we don't advise holding over earnings reports
for this very reason. Earnings are great, sales are great,
future revenues are great, per Larry Elison in the conference
call, but the street was not happy with the numbers. ORCL
dropped over -$2 in after hours trading.

Adobe also beat estimates by a whopping +.09% with a +26% increase
in profits. They also announced a 2:1 split. Future growth was
also expected to be better than +25% and the stock was up over
+$5 in after hours trading. The difference was expectations.
Oracle was expected to do better and analysts were disappointed.
Another reason for the differences is volume. ORCL traded over
32 million shares today and ADBE only 1.5 million. It takes
a huge amount of retail orders to push ORCL on news. Something
in the tens of millions of shares. That is a huge number of
retail buyers. ADBE however can be pushed around with orders for
only several hundred thousand shares. Volume is something every
option trader should consider when hoping for large, quick moves.
Of course, either stock would crater on bad earnings news so we
do not recommend this strategy.

The Nasdaq was doing really well until traders came back from
lunch. It was starting to bleed but an interview with Ralph
Block from Raymond James on CNBC caused the bleeding to turn
into a hemorrhage. Ralph said he could see the Nasdaq test
the recent lows soon and investors already unsure ran to the
sidelines. Before you assign guru status to Ralph, how much
effort do you think it took to predict a retest of the recent
lows on the Nasdaq with October only three weeks away? This
reminds us of another Ralph, Ralph Acompora, who has been very
quiet lately. Jumping in front of almost a sure direction change
in the market was good for several sound bites and 30 minutes of
fame and Acompora did it well. Block has tried before but has
not been as lucky.

I think we dodged a bullet yesterday when Abbey Joseph Cohen
called for the 2001 high on the S&P to be only 1650. That is
only about +100 points away from our September high. Calling
the market fairly valued (again) she is pulling in her bullish
horns. She called the market fairly valued several times in the
past at much higher levels. This means her valuations are slipping.
She repeated much of this on CNBC today. With Cohen turning from
bullish to bearish and Ralph Block calling for new Nasdaq lows,
which way do you think the market is going? It does not matter
if they are right or wrong, it only matters that they are vocal
and visible. Investors will move to protect themselves and the
market will follow.

The Nasdaq has now formed, according to some, a double top at
4250 and now must retest lows and start over with a new trend.
This fear has caused persistent selling in the Nasdaq big caps
as institutional investors read the writing on the wall. Intel
closed under $60 to hit a four month low. Microsoft fell -2.38
to a four month low at $65.69. This is only $5 away from a 52
week low. Microsoft was hurt as well by a less than exciting
release of the WindowsME product. Cisco, which had bounced from
a low of $58.50 on Tuesday to $63.31 today, rolled over again
and headed back down to possibly retest $60. Dell, another
Nasdaq pillar, is at a six month low and only $1 from a 52wk
low. WCOM is still holding at $30. JDSU is only a few dollars
away from retesting the July low. If you are looking for poor
technicals on the Nasdaq you don't have to look far. With the
drop in ORCL after hours the Nasdaq is likely to open down on
Friday unless we get a CPI bounce.

The bright spot on the Nasdaq was the fiber optic sector. Yes,
that was a bottom on Tuesday as I speculated in the commentary.
No, I did not play it and I am cussing myself as I write this.
CIEN +31 (2 days), GLW +15, SDLI +10. The biotechs continue to
inject gains into the Nasdaq as well as some of the hot Internet
high flyers. ARBA +10, RBAK +10, BRCD +6.75 and don't look now
but EMLX is alive and well (+7.69) and about to break the post
hoax high of $108. It appears the damage is over and investors
are moving back in again.

Friday could be a record breaking day. It is a triple witching
option expiration Friday but that news is old hat and mostly
already priced in to the market. We have the CPI report which
will be announced before the open but is not expected to be
a market mover after the low PPI today. Volume for the last
two days has been heavy. The NYSE has traded over 1 billion
two days in a row and the Nasdaq posted 1.7 billion today.
Friday could be the heaviest day on recent record but not due
to anything listed above. There is a major re-weighting of
indexes scheduled for Friday. The major indexes re-weight
periodically for different reasons but tomorrow is huge. The
estimates from some analysts are for something in the range
of $30 billion in stock to be traded in addition to the
regular volume. Volatility anyone? Many traders will also be
moving to the sidelines to avoid the rash of after hours warnings
expected on Friday. You know the drill. Warn on Friday and hope
investors will forget by Monday. Personally, it is easier for
me to forget if I am in cash than stuck in a long position.

Good luck and sell too soon.

Jim Brown
Editor


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

Flip Your Coin
By Austin Passamonte

That's what Friday will come down to. We have triple-witch and
the usual upward bias of expiration Friday. Coupled with sharp
sell-offs that leave numerous investor favorites looking "cheap",
it's the fixin's of a surprise rally.

The bears are wondering if indeed the sell off has run it's course.
Old-economy stalwarts are lining up at the confessional in rapid
fashion and don't look now but a handful of techs have sidled in
with them.

This could be the final thrust of a major market bottom; the
last stage is usually major capitulation as earning performance
slumps. Next come interest rate reductions and we begin our
bovine party once more.

The Dow plunged almost 100 points and VIX closed lower yet?
Not good. Candle formations are dismal and vital supports are
being tested or broken frequently these days. What's a trader
to think?

Today's relatively tight range for the NASDAQ and it's steadfast
resolve not to tank badly with the Dow is moral support for our
bulls. A benign CPI could be the catalyst for an upside burst
tomorrow.

If that happens and fails to hold off strong selling pressure,
we would look for buyers to throw in the weekend towel and walk
away. It's possible to see dual 100-point moves in both indexes
tomorrow in either direction.

Our best guess is the selling hasn't finished although we could
be close. Good news could pop the markets, bad news will likely
kill it. Be prepared for a volatile day and make sure you trade
the right direction!

*****

VIX
Thur 9/14 close; 20.69

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          .56
Equity P/C Ratio             .52          .50

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          1.01
OEX Put/Call Ratio          1.07           .89

30-yr Bonds
Fri 9/08 close; 5.82%

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 - 820              22,829       6,342         3.60
815 - 800              21,973      18,676         1.18 ***

OEX close: 799

Support:
795 - 780               2,441      15,931         6.53
775 - 760                  72      16,276       226.05

Maximum calls: 810/6,633 *Expect the OEX index to close
Maximum puts : 790/5,110  between these strikes*

Moving Averages
 10 DMA  818
 20 DMA  818
 50 DMA  807
200 DMA  782


NASDAQ 100 Index (NDX/QQQ)
Resistance:
 98 - 96              22,817       22,567         1.01
 95 - 93              27,265       41,719          .65**

QQQ(NDX)close: 93.25

Support:
 92 - 90              22,274       51,072         1.87
 89 - 87               2,397       17,485         8.13
 85 - 83               4,198       25,424         6.06

Maximum calls: 90/25,426
Maximum puts : 90/14,705

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


S&P 500 (SPX)
Resistance:
1525                  14,975         7,740         1.93
1500                  52,639        52,161         1.01

SPX close: 1481.99

Support:
1475                  20,207        18,787          .93**
1450                  11,365        15,680         1.38

Maximum calls: 1500/52,639
Maximum puts : 1500/52,161

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 - Thursday, 09/14/2000

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

DOW   Industrials      11,087      11,050  11,450
SPX   S&P 500           1,480       1,475   1,535
COMPX NASD Composite    3,913       3,650   4,200
OEX   S&P 100             799         796     832
RUT   Russell 2000        539         520     550
NDX   NASD 100          3,737       3,500   4,050
MSH   High Tech         1,037         990   1,095

BTK   Biotech             739         690     780
XCI   Hardware          1,476       1,460   1,600
GSO.X Software            462         435     495
SOX   Semiconductor     1,004         960   1,140
NWX   Networking        1,257       1,150   1,305
INX   Internet            567         525     605

BIX   Banking             626         600     645
XBD   Brokerage           695         685     710
IUX   Insurance           749         705     800

RLX   Retail              869         825     890
DRG   Drug                383         365     410
HCX   Healthcare          799         765     815
XAL   Airline             152         144     162
OIX   Oil & Gas           312         296     324

Zero alarms were triggered in the past two sessions and this
indicates a lack of conviction by bulls and bears.  The DOW,
SPX and OEX are very close to support levels, giving market
bulls the opportunity to buy stocks close to support and
minimizing downside losses with stops close by.  Market bears
will be looking for a break of support, in hopes that more
selling will occur.


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

Are 63% of You Bullish Too?
By Molly Evans

Tell me you don't feel like you're walking on a tightrope here.
On the one hand, we've got a mountain of bearish press to scare
the living daylights out of anyone who's paying attention.  Let
me count the ways that come to mind off the top of my head: "A
Weary Bull" section in the Tuesday Sept 5th edition of The Wall
Street Journal, countless other articles of same sentiment in
other widely read missives, earnings warnings, analyst downgrades,
very expensive oil, weak euro, downgrade of Japanese bonds, margin
debt back to March 2000 levels, seasonal cycle for market lows,
smart money net short and a VIX that seems to be pretty persistent
in staying under 21.

All this and yet the American Association of Individual Investors
reports that 63% of those surveyed remain bullish and only 8% are
bearish.  What does that 63% know that we don't?  I'm afraid
they're the ones trudging off to their jobs everyday and don't
read OIN or any other source of up-to-the-moment market-moving
news.  Can that possibly be right?  63% bullish?  I haven't seen
that many bulls hanging out in my favorite stocks.  I see them
trading them but they're not investing them to buy and hold.  You
don't need me to tell you it's been a nasty battle out here on the
front lines.  Today was mixed; yesterday was mixed, but the Dow is
having trouble closing over the 11,400 mark that it reached
intraday on Sept 6th, and is now off a little over 1% since the
close of Sept 1st.  The Nasdaq, despite having nice waves to trade
today, is still down over 7% on the month.  Lastly, the S&P is
down just under 3% since the close prior to the Labor Day holiday.

So what's the good news?  The good news is that markets love to
climb a wall of worry and we're looking at a mighty big wall.
How's that for consolation?

Now please don't go getting all whigged out on me here for talking
about bear sightings.  Let's comb a few of the issues here.  We
can't dispute that these oil prices are going to hurt both you
and me as we pay for our higher energy bills out of our disposable
income.  I'm betting folks get a little less anxious to put their
monthly deposits into those mutual funds as those bills mount,
especially since the Dow is still down 3.5% and the Nasdaq down 4%
on the year anyway.  And won't it put the skids on corporate
earning's prospects for a time?  Sure it will.  There's a double
whammy assault to corporations to pay for higher energy costs plus
factor in six interest rate hikes in the past 18 months.  Earnings
drive stock prices, no ifs, ands, or buts about it.  Right now
we're dodging bullets being long as companies are in the
"preannounce their struggles" time.

We all cuss the analysts when they downgrade our holdings or even
our sector.  They're out there trying to bring these problems to
light before the fact, as that's how they make their names.  It
does no good to downgrade after the company has shown the crack
in their mirror.  It's got to be an unenviable position.  What
good is it if one only upgrades?  Not all of these companies are
going to make it, yet every stock went up last Fall and Winter.
Gravity still works and analysts are a part of the deal.  The
hits are going to continue to come.  My two cent advice: know what
you own and don't be afraid to short (buy puts or other bearish
plays) weakness.

Margin?  Who's on margin?!?  Surely not you dear OIN reader!
Don't be doing that!  Always, always, always keep a stash of cash
in the portfolio.  The bare minimum is 25%.  Don't look at me
that way!  Margin calls have ended the trading life of many a
trader.  Don't let it be you.  It's bad enough to be on the
wrong side of the trade but it's quite another to have a market
turn and not let you out of its clutch.  I don't want to read
your tale of woe and how you got religion after the fact on some
message board.  Have discipline, please!

It's that time of the season, too. Even the famous author Mark
Twain who lived from 1835 - 1910 understood the cyclical nature
of the markets during his era.  I'm from Mark Twain country,
right in America's Heartland on the Mississippi River.  We take
a lot of pride in his legacy here, so it is only fitting that
I present you with his words of wisdom on the topic.  This quote
should be taken in context of the season: "October.  This is one
of the peculiarly dangerous month to speculate in stocks.  The
others are July, January, September, April, November, May, March,
June, December, August and February."  What a character.  But
as you know, we've discussed all of this at length in previous
articles and commentary.

The international problems, like our own, change day to day.
That's beyond the scope of my capabilities to comment upon but
just know that problems do continue overseas and our markets
are very touchy to instability.

Perhaps the indices will break out of their trading ranges
and go higher.  As I alluded earlier, they love to climb a
wall of worry.  We all rejoice when these economic numbers
come in showing a slowdown because that reduces the likelihood
of continued rate hikes.  Yet, then our stocks are severely
punished when the companies dare to mention that they're
not invulnerable to that slowdown.  Perhaps this week's pushdown
is simply pre-triple witching antics.  If so, we'll have a better
grasp on that next week.  Maybe we're destined to stay in trading
range.  In view of the scenario I shudder to think about, that
sounds really good.

The point is that this is a time to be extra alert to the pangs
of the market.  Dips that you want to buy, might just get deeper
so wait for those bounces on volume.  It's time for defensive
posturing.  It's been time for defensive posturing the whole
year but put that on heightened alert.  One more Mark Twain
quote might be extra prescient here depending on how you look
at the market or look at me for my cautious stance:  "Let
us be thankful for fools; but for them, the rest of us could
not succeed."  Consider that one closely.

On another note, I'm here in Chicago at the OIN seminar.  Chris
is amazing.  You really have to hear him to appreciate it.  We've
gone over technical indicators, hidden features of Q charts,
risk management, fundamental factors of the stocks we trade,
and a host of other interesting bits.  Make your best efforts
to get to one of these.  The knowledge gained should pay for
itself in spades.


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

A Watched Pot Never Boils
By Buzz Lynn
sectortrader@OptionInvestor.com

Seems like we've been waiting a long time for the current trend in
the NASDAQ and the OEX to flatten and reverse to the upside.  In
fact, we figured once some of this week's economic news was
released that it would alleviate investors' inflation/Fed fears,
thus allowing stocks to move up.  Just when we got technical
indicators yesterday showing that we might be near entries on many
issues, McDonald's asked investors for a break today citing
"currency risk" and slowing sales in their international
operations, which would put a damper on profits.  If you guessed
that other consumer stocks like Proctor and Gamble, Gillette,
Coke, and worst of all Colgate Palmolive (down $8.69 today) would
suffer, you win the prize!  After the close, Maytag reported they
would fall short of estimates too.  It's already happened in the
chemical business.

Not only is there a currency risk, but the cost of production is
getting steeper too as a result of increased petroleum costs.
With the high margins Ford, GM and Daimler-Chrysler earn on their
SUVs, just how long before they warn of the same thing?  All of a
sudden, despite good economic news here (lower than expected PPI
and jobless claims), the attention has shifted to the oversees
economies, which will undoubtedly affect American companies with
international presence.  Other companies will surely follow.  In
short, nothing is safe from increasing oil prices.  Get used to it
and look for more landmines as the warning season continues.
That's a bigger trend than any technical chart move will yield no
matter how much the chart says "anticipate a reverse, time to go
up".

Ralph Bloch, known technical pundit and Raymond James curmudgeon
helped with a bucket of cold water around 3:20 this afternoon too
when he advised to remain cautious on the NASDAQ.  While the
NASDAQ had a good start this morning on the positive economic news
hitting 3984 at its high point, it began to drift downward in the
late afternoon before Ralph kicked it into the basement.  That it
happened on over 1.7 bln shares doesn't look good for tomorrow or
going forward.

Lest we leave on a bearish note, take heart.  The daily charts
really have entered an oversold position on many issues, including
the OEX and QQQ.  Now that investors are hunkered down for more
bad news, it may prove to be an over-reaction.  Our economy is
still good.  If (that's a big if) the large cap tech companies can
hold up under more earnings warnings pressure (this means you
CSCO, INTC, IBM, HWP and MSFT), then the market may have found a
bottom.  As Jim notes, it is always darkest just before the dawn.
If you are going to try to pick a bottom (not recommended), try to
limit yourself to little nibbles in selected issues.  This is not
the time to bet the ranch.

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

QQQ - NASDAQ 100 $92.88 -0.63 (-2.25 this week) Sure enough, we
got that bounce yesterday at support of 3800.  Today following a
gap open and gradual selloff, 3900 held.  Yes, both days have been
positive on the surface as the moves have flattened out the
stochastic and MACD on a daily technical chart.  That looks good,
but can we see a bullish entry yet?  Not so fast.  Keep an eye on
CSCO and INTC, which both have strong support at $60.  Big
declines below $60 for either could spell bad news for the whole
index.  The fact is that the generals led the QQQ to a loss while
the remaining 2900 or so issues led the NASDAQ it to a small gain
today.  Eventually, the market index will follow the generals.
Technically, MACD and stochastic are flattening out, which is the
good news.  In fact, the fast stochastic has flattened out and
looks like it will cross the slow line soon.  MACD has flattened
and may also start to show a crossing back to the "zero line".
All we really want to see to get bullish on the index again is for
the fast stochastic to cross back above 20%.  MACD back over zero
would confirm it.  Set your stochastic to 10 (3), 5, and your MACD
to 8, 18, and 6 to see the same thing we do.  Ideally the 60-min
chart would slightly lead the daily chart, so look for it too to
break 20% on the stochastic and positive on MACD.  With the market
currently in a sour mood, we may have to wait until Monday for a
signal.  Don't try to catch a falling knife if earnings warnings
or an ill-received CPI inspire further downward pressure.

Calendar Spread:

Yesterday as the daily MACD and stochastic flattened out on the 60
and 30-min charts in conjunction with the daily chart, QQQ
confirmed an entry for the long leg.  You would have had to be
quick about it as the window of opportunity quickly disappeared by
the end of the day.  If you look at the charts, an entry could
have been made with the QQQ at $92 just after amateur hour, and
following a bounce from support at $91.  Still, it lasted only
through this morning when the QQQ hit about $95.50 (a great time
to sell the short leg if you are fast) before selling off to close
today at $92.88.  While waiting for a longer-term trend to show
itself, we had what we think is a good entry for the long leg of
our spread.  Unfortunately, given the fear of currency risk and
crude prices, we may have to wait until next week to sell the
short position for a nice premium.  Still looking to initiate the
spread?  You may want to wait for a bounce again from $91 to go
long (confirm the MACD and stochastic crossover on the daily
chart) for the long leg and prepare to go short at resistance
(possibly overbought MACD and stochastic on the 60-min chart).

BUY  CALL JAN- 90 QVQ-AL OI= 4976 at $12.13

SELL CALL OCT- 95 QVQ-JQ OI= 3159 at $ 4.38, ND = 7.75 or less
SELL CALL OCT- 97 QVQ-JS OI= 3095 at $ 3.50, ND = 8.63 or less
SELL CALL OCT-100 QVO-JV OI= 4071 at $ 2.44, ND = 9.69 or less

Long Call:

Same story here.  Nice entry was available yesterday after an
amateur hour bounce when the daily, 60 and 30-min charts lined up
to show a MACD and stochastic reversal.  Unfortunately, the daily
is still flat, but still shows signs of a bottom.  We may just
need to wait another day or until negative sentiment related to
crude and currency blows over.  With the indicators in oversold
territory, we still don't think the past week's downtrend will
last long so long as support remains above the 3800-3900 level on
the NASDAQ and 90-91 on the QQQ, both good levels of historical
support.

BUY CALL OCT- 90 QVQ-JL OI= 2437 at $7.50 SL=5.25
BUY CALL OCT- 95 QVQ-JQ OI= 3159 at $4.63 SL=2.75
BUY CALL OCT-100 QVO-JV OI= 4071 at $2.63 SL=1.25

Bullish Put Credit Spread:

If you took this trade, you are undoubtedly gnawing your
fingernails off waiting for the bomb to explode.  On one hand the
technical indicators are pointing toward a reversal.  On the
other, your SEP options expire tomorrow and you will likely be
assigned or put the QQQ shares if the price falls under $90.
Hopefully you played the suggested OCT strikes.  We still think
this level will hold barring any unforeseen bad news.  Fortunately
ORCL NKE, ADBE and RHAT all beat estimates, thus dodging another
bullet.  Anyway, the objective is to sell an OTM put and
simultaneously buy a lower OTM put for a net credit to your
account.  It's a bit like a naked put, but safer.  By taking in
slightly less premium, you also limit the downside risk.  Support
is at $90.  Don't attempt this play unless you understand the
workings and how to exit if the trade moves against you.

SELL PUT OCT-90 QVQ-VL OI=7439 at $3.38
BUY  PUT OCT-85 YQQ-VG OI=1749 at $2.06
Net Credit = $1.33 or better

Average Daily Volume = 18.4 mln


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

OEX - S&P 100 $799.34 -3.68 (-13.56 this week) Hanging on by its
finger nails at support of $800 (close enough) OEX too is showing
technical signs of a reversal on the daily chart.  However,
earnings warnings borne of currency risk and crude oil prices are
keeping our largest market cap companies under pressure.  It isn't
a U.S. economy problem.  It's more of an international economic
slowdown that hasn't landed here yet.  That has investors nervous
about the next six months.  As we noted in tonight's summary, that
may be a stronger trend than the lines on a chart.  If it turns
out to be investors just injecting a bit of fear into the previous
weeks' overbought market, we would term this healthy and stand by
the indications given by a flattening MACD and stochastic on the
daily chart.  Like the NASDAQ yesterday, the OEX too gave us an
entry yesterday morning taking us as high as $808 today before the
backslide.  Profitable, yes.  But you had to be fast and
acknowledge the 60 and 30-min charts decline from overbought just
like you had to acknowledge oversold the day before.  If the
market decides not to advance again tomorrow, support is very near
at $798 and again at $791.  Watch for more earnings warnings as
these will definitely affect the index.

Long Call:

Technical indicators MACD and stochastic on the daily chart have
definitely entered and flattened in the oversold territory telling
us that a bottom is near if not already here.  Unfortunately,
fundamental news like oil and currency may keep it here a bit
longer.  However, we believe it is only a matter of time until it
reverses, perhaps as early as next week.  Support is good at $800,
though OEX is in a cliffhanger position right now at $799.  Next
stop is $798, then $791.  Wait for the MACD to cross back positive
and for the fast stochastic to cross back over the slow stochastic
and the 20% on the daily chart and confirm it with the hourly
chart, which should lead it out of its current oversold condition.

BUY CALL OEZ-JR OCT-790 OI= 495 at 27.63 SL=19.50
BUY CALL OEX-JT OCT-800 OI=1550 at 20.50 SL=14.75
BUY CALL OEX-JB OCT-810 OI=3740 at 14.75 SL=10.75

Bullish Calendar Spread:

With the technicals all lining up for a buy signal yesterday,
congratulation to those who took the long leg entry.
Unfortunately, thanks to McDonalds and other consumer goods
companies citing currency risk and higher production costs, OEX
backslid today.  Still it found support at $798 and closed just a
hair under the $800 support level we expected to hold.  It's a
tossup as to whether or not we see gains tomorrow, but the
technicals tell us they are coming.  MACD and stochastic are
oversold now on the daily chart, with the 60-min rolling over.  If
those two can simultaneously break out of oversold territory, that
would confirm our entry.  That may not happen until next week, and
we still need to be careful of earnings warnings as that will
overpower any indicator.  Remember to sell the short at resistance
and to cover any SEP shorts that are ITM.  You don't want to get
called out of this spread unlike a covered call.

BUY  CALL DEC-840 OEX-LH OI= 615 at $17.38

SELL CALL OCT-840 OEX-JH OI= 908 at $ 4.13, ND=13.25
SELL CALL OCT-850 OEX-JJ OI=1972 at $ 2.25, ND=15.13

Bullish Put Credit Spread:

Unless you are a skilled surgeon, don't let yourself get assigned
on the SEP-800 put.  OEX is barely hanging on to $800 support,
which may not last long if more bad news spooks the index lower.
This play is only profitable if both the long and the short close
over $800.  While the downside is limited to a $5 per share loss,
you still stand to lose if you let the trade get away form you,
especially if you took in less than that in the form of a credit.
Because this play is based on SEP strikes, you need to close the
play tomorrow or have your prayers for a close over $800 answered
in the affirmative.  A regulation T call on Monday can result,
which requires you to bring in fresh cash if your account won't
cover the amount required to settle when you are assigned.  Don't
let this happen to you unless you can afford to settle in cash.
Now you know why we called this a risky play suitable for
gunslingers only.  The risk is no longer worth the reward for now.
Perhaps we can bring back OCT strikes this weekend.

Average Daily Volume = 1269



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

Index       Last    Mon    Tue    Wed    Thu    Week
Dow     11087.47 -25.16  37.74 -51.05 -94.71 -133.18
Nasdaq   3913.86 -82.06 -46.84  44.38  19.97  -64.55
$OEX      799.34  -4.78  -5.55   0.45  -3.68  -13.56
$SPX     1480.87  -6.65  -5.86   2.92  -4.04  -13.63
$RUT      539.21  -2.08  -1.19   1.57   5.21    3.51
$TRAN    2705.48 -41.56  -5.82  38.06 -17.98  -27.30
$VIX       20.69   0.27   0.22   0.30  -0.79    0.00

Calls

ITWO      175.88  -2.38   3.00  10.88   3.88   15.38  B2B is back!
ABGX       84.50  -2.28   1.31   6.75   7.19   12.97  New
CHKP      153.94  -8.19   2.69  11.13   2.06    7.69  Another high
CFLO      120.56  -3.63  -0.19   5.56   5.44    7.19  Breakout!
PALM       51.31   0.00   2.13   1.38   2.81    6.31  Lookin' good!
AGIL       77.06  -0.88  -0.75   1.75   6.06    6.19  Blast off!
BEAS       66.81  -1.13  -0.81   4.44   1.25    3.75  Volatile!
YHOO      106.94   2.19   0.69  -0.63   0.56    2.81  New uptrend?
AFL        60.69   0.75   0.06  -0.75   0.38    0.44  AFL rests...
NTRS       87.94   1.25   1.06  -1.56  -0.44    0.31  Consolidation
CMRC       70.75   3.75  -6.00  -1.63   3.25   -0.63  Came back
COF        64.38   0.53   0.06   0.25  -1.63   -0.78  Profit taking
AZA        76.50  -1.75  -0.31   2.69  -2.13   -1.50  Pull back
IDTI       90.75  -3.69   0.69  -2.75   3.38   -2.38  Rebounded

Puts

CMTN       43.13  -0.63  -3.00  -2.94  -0.81   -7.38  Keeps falling
SCMR      110.25   4.88  -7.69  -0.75  -2.44   -6.00  Struggling
MMM        85.00  -1.00  -0.88  -1.56  -1.50   -4.94  Beaten down
CREE      118.50  -2.31  -4.44   0.00   2.00   -4.75  Chips stable
LVLT       78.25  -1.56  -3.50   3.63   0.38   -1.06  Good entry?
UK         37.94   0.13  -0.19   0.00   0.00   -0.06  Stable at $38
PCS        48.00  -0.34   1.50  -0.75   0.50    0.91  Hello entry!
DIGL       76.06   1.88  -1.25  -2.00   3.69    2.31  Be careful
TLGD      110.56  -5.69  -6.38  14.38   0.81    3.13  Dropped


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:
*****

No dropped calls today

PUTS:
*****

TLGD $110.56 +0.81 (+3.38) It's simply amazing how quickly
sentiment and psychology in a stock can shift, especially with
help from good news.  In the case of TLGD, an announcement
yesterday of a new customer in Choice One Communications helped
the stock move up an astounding $14.38 on 106% of ADV.  Closing at
$109.75, just below strong resistance at $110, there was still
hope for our put play.  A failure to break through $110 could have
provided for an ideal entry but today's action in the stock
convinced us otherwise.  TLGD managed to gap up this morning and
from there, was range-bound between $110 and $115 before some late-
day selling brought the stock to close up fractionally.  While the
stock did have trouble with resistance at $115 today, yesterday's
strong move should have prevented entry into the play and today's
strength confirmed our decision to drop coverage on CREE.


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The Option Investor Newsletter                 Thursday 09-14-2000
Copyright 2000, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

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

IDTI $90.75 +3.38 (-2.38) IDTI continues to provide profitable
entry points with amazing regularity.  The stock dipped just below
its 10-dma yesterday, but bounced back like a rubber ball today.
The action in the Philly Semi Index ($SOX) has been somewhat
bearish recently, which might explain IDTI's inability to move
substantially higher.  Granted, the stock has added over $20 since
we first initiated coverage, so a little more consolidation might
be in order before IDTI runs again.  The $SOX has stabilized over
the last two days, which might aid IDTI's cause.  If the Chip
sector decides to rally tomorrow, aggressive traders might look to
enter IDTI on a bounce off its $90 support level.  If the bears
and bulls continue to battle for market direction, traders might
continue trading IDTI's range between $90 and $95.  If the stock
falls below $90, watch for a bounce off the 10-dma near $88.  The
more conservative traders will wait for IDTI to gain momentum and
look to enter the play on a rally above resistance at $95.
Confirm sector direction, and watch for a return of strong volume,
before entering IDTI on a rally.

ITWO $175.88 +3.88 (+15.38) What a difference two days make.
ITWO finally broke out of its trading range yesterday, spurred by
the resurgence in the broader B-2-B sector.  ITWO's trading range
between $160 and $170 was nearly eight trading days long.  The
stock's breakout from its range bodes extremely well for the
health of our play.  What's more, ITWO retested its breakout
point today, which is obviously the $170 level, and bounced
higher to hold onto the majority of its gains, despite the late-
day sell-off in the NASDAQ.  The B-2-B sector enjoyed gains across
the sector today, and might be ready to roll on to new highs.  If
the NASDAQ shows strength early tomorrow, aggressive traders might
consider entering ITWO at its closing level, or on a bounce off
support just below at $175.  If the B-2-B sector pulls back on
profit taking, watch for ITWO to find support at its pivot point
at $170, and wait for the buyers to step in.  A more conservative
trader might wait for ITWO to rally above its intraday high at
$178, or wait for another breakout above the $180 level.

CHKP $154.25 +2.38 (+$8.00)  CHKP looked weak at the open
yesterday, down more than $4.  As the NASDAQ bounced back and
forth around the flat-line in early morning trading, the CHKP
buyers lifted the stock to a mid-day level of $148.50 after the
NASDAQ tentatively moved into positive territory.  Yesterday
morning, CHKP announced that eB Networks, a leading network
infrastructure solutions company and wholly owned subsidiary of
Computer Horizons, had expanded its partnership with CHKP.  By
the end of trading Wednesday, Tech buyers were out in force
picking up their favorites.  CHKP was the recipient of solid
buying all afternoon and it closed up $11, to finish at $151.75 on
2.74 mln shares (1.73 times ADV).  This morning, the market and
CHKP kicked it into overdrive, fueled by benign economic data.
CHKP was in positive territory from the get-go and had eclipsed
its old yearly high of $158.50 within the first half-hour of
trading.  By mid-day, CHKP was up $5 at $156.88, after hitting a
mid-morning high of $159, on heavy volume.  From there, the
NASDAQ spent the rest of the day backing and filling, and so did
CHKP, although the stock remained in positive territory, even
after pulling back to almost even just prior to the close.  By days
end, CHKP ended up $2.38, to close at $154.25 on heavier than
normal volume.  Aggressive traders might watch for a move above
$159, the high for today, on strong volume as a reasonable entry
point.  From there, you will find no technical resistance.
On the other hand, you might want to watch for a pullback to
yesterday's close of $151.88 or back to the 10-dma at $146.90,
followed by a bounce with supporting volume, as an ideal entry
point.  In any event, continue to monitor market sentiment and
direction before entering any new trades.

AFL $60.69 +0.19 (+0.44) On Wednesday, The Duck Rested!  All quiet
on the AFL home front, as the market attempted to find its  way
for the day.  Volume was average for AFL by mid-morning as it was
hanging close to the flat line, down -$0.25 at $60.81.
Financials as a whole did not perform well Wednesday, as Techs
took the lead.  Stability was the name of the game for AFL as it
was only down -$0.63 on the day to finish at $60.44.  Volume was
above normal on Wednesday logging in at 1.18 mln shares, however,
two large block trades that totaled 442K shares.  As the Tech
sector continued to run on Thursday, AFL felt some further selling
pressure, albeit calm and on light volume.  AFL was down -$0.25 to
$60.75 in the first half-hour of trading this morning.  The Tech
sector remained strong as the Financials continued their day of
rest.  AFL was down -$0.38, at $60.13, on average volume by mid-
morning.  By the end of the day, some fear leaked into the Tech
sector and some buyers showed up on AFL's doorstep, who took the
stock above the flat line to close at $60.69, up +$0.19 for the
day on volume of 948K shares (2.1 times ADV).  Traders should
continue to watch for a pullback accompanied by light volume and
followed by a bounce from the 5-dma or the 10-dma (currently $56
and $57.10), for an ideal entry point.

CMRC $70.75 +3.25 (+0.00) The B2B's bounced higher today on the
Tech recovery and general optimism ahead of company conferences.
After yesterday's downdraft, CMRC opened strong, and quickly
returned to trading near $72 and $73.  For the more calculating
traders, this level is considered a pivotal position.  High-volume
moves from there, coupled with a definitive break through
immediate resistance at $75, would provide better confirmation
that CMRC can stretch higher on momentum alone.  Earnings are
expected next month around October 17th so don't count on an
earnings run just yet.  Be aware of the task at hand.  The real
opposition is not at Monday's peak of $78.13, but rather at the
staunch resistance of $80, which marks the gateway back to
higher price levels seen in early Spring.  In the news, CMRC got
a pat on the back from Thomas Weisal Partners with a Buy
reiteration and the company also announced it completed its
stock-for-stock acquisition of AppNet (APNT), a leading provider
of end-to-end Internet services.  The addition of AppNet's
comprehensive services is expected to dramatically accelerate
CMRC's ability to bring marketplaces online and improve business
functionality.  The deal is valued at approximately $2 bln.

NTRS $88.00 -0.38 (+0.37) The past two sessions of consolidation
provided evidence that near-term support is firming at $88 and
$89, right above the 5-dma ($88.56).  This level should serve as
a solid launching pad for entries on a breakout.  Yesterday,
NTRS flirted with its all-time high of $90.38 on volume that
almost doubled the ADV.  It will be important in the coming days
to look for intraday activity in the range of 400-500 K to
signal potential advances.  If you would rather take a "wait-
and-see" approach, then watch for NTRS to develop more strength
above $90  and challenge the century mark.  Northern Trust is
confirmed to  report earnings on October 16th, before the market
opens.

AGIL $77.06 +6.06 (+6.19) After consolidating for the past two
weeks, AGIL has made a break through formidable resistance.
We saw AGIL gap down yesterday at the open.  Getting close to it's
200-dma at $66, the stock quickly bounced as buyers came in to
offer support.  From there, the stock traded sideways for the rest
of the day to close up $1.75 or 2.53% on 122% of ADV.  Today,
conservative traders finally got their entry point into the play
as it broke through formidable resistance at $75 on strong
volume.  Beginning the day with a quick visit to the 5- and
10-dma (at $71.63 and $72.18), the stock spent the rest of the
day moving higher.  On the last hour of trading, the stock shot
up past the $75 mark on high volume to close the day up $6.06 or
8.54% on an astounding 541% of ADV.  This move came with no news,
just high volume buying.  With $75 out of the way, the next
resistance levels are at $80 and then $85.  A successful test of
new support at $75 would be an attractive entry point but make
sure it bounces before entering.

BEAS $66.81 +1.25 (+3.75) Despite the low volume, yesterday was a
volatile but rewarding day for BEAS as the stock gapped down to
open at $59.50.  From there, the buyers stepped in and bid the
stock up for the rest of the day to finish up $4.44 or 7.26% on
80% of ADV.  The move put BEAS back above its 5- and 10-dma (now
at $63.75 and $65.57).  Today saw BEAS adding slightly to its
gains.  Gapping up to start the day, BEAS spent the rest of the
day trading sideways in a narrow range to close up 1.91% on 72%
of ADV.  The stock has had some support at the $66 level.  A
bounce off that point or it's 5- and 10-dma could offer an
aggressive entry point.  Overhead, resistance can be found at $68
and then $70.  Conservative traders may want to wait for BEAS to
break through $68 with conviction before entering.

CFLO $120.56 +5.44 (+7.19) Persistence pays off.  After four
straight days of attempting to break through formidable
resistance at $115, CFLO managed to accomplish the task
Wednesday. The stock came roaring out of the gates and rallied
the entire day to close up $5.56 or 5.08% on 87% of ADV.  The
final close price for Wednesday was just 13 cents above the
resistance at $115.  This move put CFLO back on the right side
of the 5-dma at $113.71.  Today saw CFLO's new support level hold
up strongly.  The stock never got lower than $115.25 for the day.
After a spike up during amateur hour, CFLO spent most of the day
digesting its gains before ending the day with some buying
to close up 4.72% on 150% of ADV.  At this point, there is
support at $117 as well as $115.  Target-shoot these levels
for aggressive entries but confirm bounces with volume.  Overhead
resistance can be found at $125 and then $130.

AZA $76.50 -2.13 (-1.50) Consolidation has set in our AZA
play as the bulls and the bears duke it out between the $76
support level and resistance at $80.  Volume remains near the
daily average, with no real pattern to the intraday trading
activity.  Investors just can't decide whether they want to buy
or sell shares of this specialty pharmaceutical company.  The
2-for-1 stock split, which was announced on Tuesday, is far
enough in the future that it won't have any effect in the near-
term, so we are left to play AZA on the current merits of the
stock.  After the strong run over the past month, some
consolidation was necessary, and the big question now is, "How
long it will last?".  Today's closing price was fractionally
below the 10-dma (currently $76.69), making it even more
important for AZA to hold the $76 support level if the momentum
run is going to survive.  Any volume backed bounce from current
levels looks buyable, although more conservative players will
want to wait for strength to really return and push the price
above the $80 resistance level.

COF $64.38 -1.63 (-0.78) Nothing goes up in a straight line and
COF proved it today.  Succumbing to weakness in the broader
Financial sector today, the stock fell back early in the day and
closed lower for a loss.  The Financials have been surging
lately on continued merger speculation, but yesterday's deal
between Chase Manhattan and JP Morgan seems to have burst the
bubble a little, as the sector drifted lower again today.
Although today's loss violated the 5-dma (currently $65.38),
the stock looks like it may be finding some mild support near
$64, fractionally above the 10-dma at $63.50.  After that, we
have to look to the $62 level for support.  If COF can't find
support and put in a bounce by that point, we would advise
standing aside and letting the play go - a 10% decline is hard
to absorb while keeping a momentum run alive.  The highs this
morning were just fractionally off of the stock's all-time high,
keeping the $67 resistance level in place.  The best
conservative entry strategy right now is to wait for buying
volume to return, propelling our play to new highs.  More
aggressive players can target shoot new entries on intraday
dips as long as the bounce is confirmed by a resurgence in
buying volume.

PALM $51.31 +2.81 (+6.31) Dodging the weakness in the broader
markets, PALM is continuing to surge on increasingly heavier
volume.  Trading well over 150% of its ADV today, and posting
more than a 5% gain makes our play even more impressive in light
of the lack of conviction seen in many sectors today.  The
technical indications are still pointing north, with the
10-dma (currently $45.19) providing consistent support on the
brief pullbacks.  Obviously, the company has tapped into a rich
vein in the consumer market with its popular line of handheld
computing devices, and investors seem to be catching the buying
fever as well.  Due to the sharp decline that took place after
the PALM's IPO in March, there are not any nearby levels of
formidable resistance.  The closest one is $55, followed by
$60.  We have now had 6 up days in a row, and our play is likely
due for a bit of consolidation, before continuing its run.  Look
for a pullback to the 10-dma, right at the $45 support level
to provide an attractive entry point.  Wait for the buying
volume to pick up again and then jump in and enjoy the ride.

YHOO $106.94 +0.56 (+2.81)  After Wednesday's rounding out at
$104.50, YHOO continued higher this morning.  The stock traded to
a high of $109.38 today where it rolled over in conjunction with
the NASDAQ.  It may be slow and rolling, yet certainly tradable.
Since last Friday's dip to just above $100(an ideal entry point),
YHOO has been making its climb slowly but surely.  Although we
typically don't use the MACD, it is worth mentioning today that
the fast line is getting ready to cross over the signal line to
the upside.  This should occur very soon and may indicate a
renewed uptrend.  Ideally, this play offers good intraday trades
between support and resistance.  Entry can be obtained on bounces
from $104.50-$105, as it has done throughout the week.  Overhead,
resistance will be encountered at $109.38, and then at the 10-dma
of $110.25.  A strong volume close above $110.25 could bring back
the momentum needed for an earnings run.  Earnings are confirmed
for October 10th.  In the news, YHOO and Medallion Financial rolled
out New York City's first Internet-enabled taxicabs.  Ten wired
cabs offer riders the luxury to surf the Web for free from a
PALM VII handheld computer.


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

CMTN $43.13 -0.81 (-7.44) Dain Rauscher Wessels reiterated its
Strong Buy rating and its $150 price target on CMTN yesterday.
The result, CMTN fell.  A lower-than-expected PPI report this
morning set the Tech sector a light.  The result, CMTN rolled
over and slid lower.  Despite the analyst attempt and the Tech
sector rally this morning, CMTN can't catch a break.  The big
players continue to unload stock with fervor as CMTN continues to
fall on increasingly heavier volume.  With the roll over in the
NASDAQ this afternoon and the heavy institutional selling
increasing, we're looking for CMTN to continue sliding lower
tomorrow.  Look to enter the play if CMTN falls below its recently
established $43 support level.  Aggressive traders might consider
entering the play after any intraday rally subsides.  Watch for a
bump against resistance at $45 and again near $46, and wait for
the big sellers to return before shorting a rally.  Another big
down day on the NASDAQ might carry CMTN to its major support level
at $40, which might provide a good exit point for our play.

UK $37.94 +0.00 (-0.06) Yawn.  It's been very, very quiet in UK
over the past week.  The stock has settled on the $38 level as
its acquirer DOW has settled on a similar support level.  UK is
bouncing on a regular basis between $37.50 and $38.50.  Aggressive
traders might consider trading that small range in an attempt to
scalp profits.  Otherwise, we want to wait for UK to fall lower
before entering new positions.  The low level of the euro and the
still-high prices of oil might start to pressure UK again, which
could induce the failure of support we're waiting for.  With that
said, watch for the obvious breakdown below the $38 level, while
more conservative traders will wait for UK to fall several ticks
below $37.50 before entering the play.  Confirm heavy volume with
any support failure and watch the direction in DOW.

PCS $46.69 -0.81 (-0.44) Not much to get excited about for PCS
on Wednesday.  The stock kept its head on straight, even as the
Tech sector was looking scary in the early morning.  PCS traded
as low as $47.69 early Wednesday and remained in negative
territory, down -$0.25, at $48, by mid-day, even as the Tech
sector started to firm up.  PCS did not join the afternoon
buying party for the Tech stocks as was evidenced by the light
volume on the day coming in at 1.8 mln shares, half of its
average daily volume.  PCS finished at $47.50, down -$0.75 for
the day.  Thursday morning, PCS moved fractionally into positive
territory as the Tech sector remained strong, fueled by market
friendly economic data.  However, PCS continued to have
trouble moving up past its current 10-dma at $48.20.  This
continues to bode well for our short position.  PCS showed
continued weakness as we approached the half-way point today,
down -$0.88 to $46.63, just below its current 5-dma at $47.10.
Not much new for PCS as it neared the end of its trading day on
Thursday.  Weakness continued to be its theme, as it closed down
-$0.81 to finish at $46.69 on continuing light volume.
Positively, PCS's close was held below the current 5-dma and
10-dma, currently at $47.10 and $48.20, respectively.  Traders
should look for continued weakness and ideally, increasing volume
to the downside before entering new trades.

DIGL $76.06 +3.69 (+2.31) If you took your entries earlier in
the week, then yesterday you reaped a harvest!  DIGL opened in a
weakened state and tumbled down below the $70 on respectable
volume.  The intraday volatility continued to offer target
shooters entries near $72 and exits as low as $68 before all was
said and done.  Today, however, was altogether a different
story.  The bulls bid DIGL up to its near-term resistance right
from bell, but nevertheless couldn't bring it over the top.  The
10-dma ($79.63) continued to hold firm as a ceiling.  But, take
heed.  Even the most enterprising traders should go on full-
alert if DIGL moves through $80 with any strength.  Today's
last-minute sell-off on increasing volume was also good news.
But again, let's not throw caution to the wind.  Instead,
consider waiting for DIGL to slide back under $75 and the 200-
dma ($75.68) before taking on new positions.

SCMR $110.25 -2.44 (-6.00) SCMR's recent trading reflects the
mixed attitude amongst Telecom investors.  In the past two
sessions, SCMR primarily bounced back and forth between $112 and
$116 on robust volume.  However, the share price broke down
during the last hour of trading today.  SCMR slid through the
crucial 100-dma line ($113.09) and shattered the near-term
bottom of $110.  It may have taken three sessions to crack $110,
but the bearish move to $109.94 and the weak close implies that
perhaps SCMR might fall lower.  Depending on your risk
portfolio, consider taking entries on downward bounces off the
5-dma line ($114.74) if the volatility permits.  Although, it
may be wise to wait for SCMR to make additional moves under its
current bottom before starting new plays.

CREE $118.50 +2.00 (-4.75) The 5- and 10-dma, now at $119.22 and
$124.21, respectively, continue to act as formidable resistance
for CREE.  With help from a positive NASDAQ yesterday, CREE took
a respite from its downward ways to close unchanged for the day on
110% of ADV.  Gapping down at the open, the stock found support at
the $110 level before spending the rest of the day recovering.
Today, CREE did the opposite.  Gapping up at the open, the stock
moved higher until mid day.  Unable to break through its 10-dma,
CREE rolled over.  Despite the weakness, CREE closed up $2 or
1.72% on almost 90% of ADV.  In doing so, the stock closed below
its 5- and 10-dma as well as resistance at $120.  A failure to
rally above these levels could provide for an entry point.  There
is also strong resistance at $125 thanks to the convergence of
the 50- and 200-dma.  As CREE has had little news lately, it has
been moving in step with the NASDAQ so make sure the index
confirms direction before making a play.

LVLT $78.25 +0.38 (-1.06) Still waiting for an entry point?
The bounce that began Tuesday afternoon has continued over the
past two days, but it is looking a little weak.  While the
bulls were able to exert their influence and effect a bounce at
the $72 support level, they haven't been able to get any buying
momentum going and LVLT looks like it could be ready to roll
over from resistance at $78-79.  Adding to the strength of
this resistance level is the 100-dma, sitting at $78.83.  The
strength over the past two days (if we can call it that) is
likely due to enthusiasm for its network services agreement with
SAVVIS Communications, which was announced yesterday morning.
In this unfriendly market environment, such run of the mill
deals are unlikely to be sufficient to hold investors'
attention, much less their money.  Adding further downside
pressure is the declining 10-dma (currently $80.06).  Consider
new positions as LVLT rolls over from current levels and heads
back south.

MMM $85.00 -1.50 (-4.94) The beatings will continue until
morale improves.  Although MMM is not a high momentum play,
those that entered the play last Wednesday when it rolled over
near $95 have enjoyed a nice ride.  Earnings warnings and
concerns about the effect of the weakening euro on stocks
exposed to the European marketplace continue to pressure MMM.
The stock has barely taken a pause to poke its head up above the
5-dma (currently $87.63) as it has nose-dived for the basement,
and it is now trading very near a major support level ($84).
After a 10% decline in a little over a week, an oversold bounce
is not out of the question, and we may have seen the beginnings
of this as MMM bounced from the $84 support level at the end of
the day.  The next level that is likely to provide significant
support is $82, followed closely by $80, and then $78.  If you
have been riding this play down from the mid-90s, this would be
a good time to tighten up those stops to make sure you don't
give up your profits.  The best approach for starting new
positions will be to wait for an intraday rally to fail at
either the 5-dma or even the $88 resistance level, just above
the 10-dma (currently $87.69).  Then feel free to jump in for
the next round of beatings.


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

ABGX - Abgenix, Inc. $84.50 +7.19 ($12.95 this week)

Abgenix is a biopharmaceutical company that develops and intends
to commercialize antibody therapeutic products for the treatment
of a variety of disease conditions, including transplant-related
diseases, inflammatory and autoimmune disorders, cardiovascular
disease, infectious diseases and cancer.  XenoMouse is a
proprietary technology ABGX has developed that produces antibodies
with fully human protein sequences. There are four antibody
candidates that are currently under development.

In the last month, ABGX has entered into numerous agreements with
companies such as ImmunoGen, CuraGen and SangStat.  Most recently,
they announced a collaboration with ImmunoGen, giving ABGX
access to their Tumor-Activated Prodrug technology to use with
Abgenix's fully human antibodies generated with XenoMouse
technology.  ABGX will pay ImmunoGen a $5 mln dollar technology
access fee as well as potential milestone payments and royalties
on net sales of any resulting products.  Abgenix also agreed to
purchase $15 mln of ImmunoGen's common stock at $19 a share.
Technically, ABGX is looking fantastic.  The stock has been in
A beautiful up-trend since hitting its yearly low of $25.91 on
April 4th.  Since then, ABGX has spent equal amounts of time
above and below its 50-dma, currently $63.70, however the stock
has not closed below its 200-dma, currently $51.20, since April
17th.  Today, ABGX broke above the double top it had formed
beginning with an intraday high back on July 11th of $79.94 and
then another high on September 5th at $80.25.  This occurred
today on convincing volume of 1.86 mln shares (2.7 times ADV).
It is possible this run could continue at the beginning of
trading tomorrow, as there is no technical resistance until the
$90 and $92 range.  Beyond that level, the old high of $103.25
will act as the last bit of resistance.  However, conservative
traders want to look for a pullback to the previous intraday
high of $80.25  on light volume, followed by a bounce, as a way
to gain entry into the play.  Aggressive traders may find a
pullback to intraday support of between $82-$83 as a good spot
to get started.  The current 5-dma and 10-dma are quite a bit
lower at $72.50 and $73.30, respectively.  In any event, watch
market sentiment and direction for confirmation before entering
new positions.

It is interesting to note that back in March, Abgenix signed an
agreement providing Millenium Pharmaceuticals, Inc., with
extensive access to their XenoMouse technology for the creation
of fully human antibodies.  They received an undisclosed upfront
payment and potential future payments that could reach $100 mln
plus royalties on product sales.  Last week Prudential
reiterated coverage of ABGX with a Hold rating.

BUY CALL OCT-75 AXY-JO OI=155 at $15.38 SL=11.50
BUY CALL OCT-80*AXY-JP OI= 94 at $12.38 SL= 9.00
BUY CALL OCT-85 AZU-JQ OI= 53 at $ 9.75 SL= 7.00
BUY CALL JAN-85 AZU-AQ OI=837 at $19.38 SL=13.75

SELL PUT OCT-75 AXY-VO OI=  7 at $ 4.63 SL=8.00
(see risks of selling puts in play legend)

Picked on Sep 14th at    $84.50     P/E = N/A
Change since picked       +0.00     52-week high=$103.25
Analysts Ratings      1-3-3-0-0     52-week low =$  8.03
Last earnings 06/00  est= -0.03     actual= -0.01
Next earnings 11-01  est=  0.05     versus= -0.02
Average Daily Volume   =   695K



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

No new puts today

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

ITWO - I2 Technologies $175.88 +3.88 (+15.38 this week)

I2's RHYTHM supply chain management software helps manufacturers
plan and schedule production and related operations such as
raw materials procurement and product delivery.  Companies that
use RHYTHM include:  3M, Dell, Ford, and Motorola.  Maintenance,
training, and other services account for more than a third of
sales.  I2 is using acquisitions of complementary technologies
and companies to position itself as a leader in the market for
Internet-based production process applications.

Most Recent Write-Up

What a difference two days make.  ITWO finally broke out of its
trading range yesterday, spurred by the resurgence in the broader
B-2-B sector.  ITWO's trading range between $160 and $170 was
nearly eight trading days long.  The stock's breakout from its
range bodes extremely well for the health of our play.  What's
more, ITWO retested its breakout point today, which is obviously
the $170 level, and bounced higher to hold onto the majority of
its gains, despite the late-day sell-off in the NASDAQ.  The
B-2-B sector enjoyed gains across the sector today, and might be
ready to roll on to new highs.  If the NASDAQ shows strength
early tomorrow, aggressive traders might consider entering ITWO at
its closing level, or on a bounce off support just below at $175.
If the B-2-B sector pulls back on profit taking, watch for ITWO to
find support at its pivot point at $170, and wait for the buyers
to step in.  A more conservative trader might wait for ITWO to
rally above its intraday high at $178, or wait for another
breakout above the $180 level.

Comments

Encouraged to see ITWO close above $175, we watched this stock
closely as good volume backed today's advance.  The other
development that happened today was the test of the $170 area,
near the 10-dma at $168.07.  Look for bounces from the 10-dma
with a positive NASDAQ trend to enter.

BUY CALL OCT-170 QYI-JN OI=196 at $20.75 SL=16.00
BUY CALL OCT-175 QYI-JO OI=177 at $18.38 SL=14.25
BUY CALL OCT-180*QYI-JP OI=229 at $16.13 SL=12.50
BUY CALL NOV-180 QYI-KP OI=246 at $22.88 SL=17.75
BUY CALL NOV-185 QYI-KQ OI= 97 at $19.50 SL=15.00

Picked on August 27th at $166.50    P/E = 500
Change since picked        +9.38    52-week high=$223.50
Analysts Ratings     11-19-3-0-0    52-week low =$ 15.19
Last earnings 06/00    est= 0.08    actual= 0.10
Next earnings 10-20    est= 0.10    versus= 0.06
Average Daily Volume =  3.57 mln



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

Technology Stocks Edge Higher...

The Nasdaq overcame late-session selling pressure to finish
positive amid strength in computer software and Internet stocks.

Wednesday, September 13

Technology stocks rebounded today, despite profit warnings and a
number of downgrades on bellwether issues.  The composite index
closed 44 points higher at 3,893.  Meanwhile, the Dow industrials
retreated amid weakness in computer hardware and financial shares.
The blue-chip average ended down 51 points at 11,182 and the S&P
500 index finished relatively unchanged at 1,484.  Trading volume
on the NYSE reached 1.06 billion shares, with advances outpacing
declines 1,425 to 1,412.  Activity on the Nasdaq was moderate at
1.65 billion shares traded, with advances beating declines 1,998
to 1,981.  In the bond market, the 30-year Treasury rose 31/32,
pushing its yield down to 5.73%.


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

Allstate        ALL    JAN40C/JAN25P   $0.06   debit   synthetic
Plug Power      PLUG   OCT35P/OCT40P   $0.50   credit  bull-put
Ballard Power   BLDP   OCT90P/OCT95P   $1.00   credit  bull-put

The bullish movement in Plug Power prevented any entry at the
target price in our new position.  With luck, the issue will
consolidate in the next few sessions and we will achieve the
suggested credit.  The premiums for ALL options were slightly
different than those quoted at Tuesday’s close and the target
price did not become available during the day’s trading.  We
will monitor the position for a better entry in the coming
sessions.  Our target is $0.06 - $0.12 credit.  BLDP retreated
from recent gains and the pullback provided a great opportunity
to enter the bullish spread.

Portfolio Plays:

Industrial stocks came under pressure today due to declines in
bellwether issues.  J.P. Morgan (JPM) moved lower after Chase
Manhattan (CMB) said it would acquire the company for $207 per
share, to form a new firm J.P. Morgan, Chase, & Co.  Technology
giant Intel (INTC) slid to $61 after Banc of America downgraded
the stock and Hewlett-Packard (HWP) was another big loser, down
almost $8 after SCI Systems (SCI) issued a profit warning due to
weak demand in the PC industry.  BofA also slashed its rating
on Advanced Micro Devices (AMD), causing a ripple of selling in
the chip sector.  In opposition to the trend, Rambus (RMBS) rose
to $84 after forming a pact with NEC to develop RDRAM and Micron
Technology (MU) rallied after a bullish comment from PaineWebber.
Networking issues also edged higher with shares of Cisco Systems
(CSCO), Lucent Technologies (LU), and Nortel Networks (NT), all
joining the upside activity.  Telecom equipment stocks recovered
from a recent slump and in the broader market, airlines rallied
despite the fact that Goldman Sachs lowered its future earnings
estimates on Alaska Air Group (ALK), America West Holdings (AWA)
and Midwest Express (MWH), and downgraded US Airways (U).  The
bullish move in transportation issues was probably related to a
drop in crude oil futures.  The per-barrel price of oil fell to
$33.82 as politicians pressured the Clinton administration to
release crude from the U.S. Strategic Petroleum Reserve.

The big news in our portfolio came in the form of merger rumors
for Knight Trading Group (NITE).  Rampant speculation drove the
issue to a mid-day high near $38 and our remaining position in
the debit straddle almost doubled in value.  Rumors continue to
circulate in the investment community that Morgan Stanley Dean
Witter (MWD) is interested in acquiring the market-maker and the
issue is likely to move higher in the coming sessions.  Our exit
target has already been achieved but it will be interesting to
see how high the stock can go on simple speculation.  A number of
other stocks in the group benefited from the activity including
Ameritrade (AMTD), which was up over $2 at one point, providing
yet another profitable exit in our bullish synthetic position.

Technology issues were the leaders in today’s activity and we
experienced a number of big winners.  Protein Design Labs (PDLI)
was the top performer, up $12 to close at $105 amid strength in
the biotech sector.  Our bullish, put-credit spread is over $40
in-the-money.  Juniper Networks (JNPR) rebounded $9 to $98 after
a series of down days and it appears our neutral credit strangle
will finish at maximum profit.  Other surprises in the section
included Vitria (VITR), which jumped $5 to $46 with a peculiar
one-day reversal and Echostar (DISH), which came roaring back
after a week of losses.  The issue gained $3.50 to end at $48.
Notable activity was also seen in Altera (ALTR), Oracle (ORCL),
Network Appliance (NTAP), Polycom (PLCM), and Qualcomm (QCOM).
In addition, our large-cap industrial sector plays on Anheuser
Busch (BUD) and Wellpoint Health (WLP) appear to be safely above
the sold options and are expected to expire profitably on Friday.

Thursday, September 14

The Nasdaq overcame late-session selling pressure to finish
positive amid strength in computer software and Internet stocks.
At the same time, concerns over slowing earnings growth in the
consumer products sector sent the broad market lower.  The Dow
Industrial Average ended down 94 points at 11,087 and the S&P
500 Index closed 4 points lower at 1,480.  The composite of
technology stocks ended up 19 points at 3,913.  Trading volume
on the NYSE reached 1.0 billion shares, with advances beating
declines 1,451 to 1,355.  Activity on the Nasdaq was moderate
at 1.69 billion shares traded, with advances beating declines
2,229 to 1,729.  In the bond market, the 30-year Treasury fell
1 6/32, pushing its yield up to 5.81%.

Portfolio Plays:

Technology stocks rallied again today amid optimism over benign
economic data.  A favorable wholesale inflation report and soft
retail sales data gave investors confidence the Federal Reserve
will leave interest rates unchanged for the rest of the year.
The economic outlook continues to support the idea that the U.S.
economy is experiencing sustainable growth will little pressure
from inflationary factors.  One problem remains however, the price
of oil, and it could eventually affect the core rate of inflation
and force the Fed to increase interest rates in the future.  In
most categories, inflationary measures have remained relatively
optimistic in the face of rising energy costs but with gasoline
and heating oil prices moving higher, the outlook will eventually
change.  One of the primary effects on stocks can be seen in the
recent Dow slump.  The industrial group has come under pressure
as earnings worries continue to plague its old-economy components,
particularly consumer stocks.  Higher energy prices and the weak
euro are expected to adversely affect third-quarter earnings in a
number of these issues.  In contrast, the technology industry is
expected to be less influenced by the changing economy and the
increasing cost of doing business.  Today, the group saw gains in
networking and Internet issues, the future of communication and
information distribution in our society, and a number of leading
stocks made substantial recoveries.  Inside the broader market,
biotech stocks edged higher while retail, drug, airline and most
transportation issues moved lower.  Share values in utilities
also consolidated after a recent, month-long rally.

The Spreads/Combos portfolio was again dominated by technology
issues.  The leaders in today’s session included Virata (VRTA),
Vitria (VITR), Phone.com (PHCM), Protein Design Labs (PDLI),
and Voicestream (VSTR).  Honorable mention went to Oracle (ORCL),
Polycom (PLCM), Network Appliance (NTAP), International Rectifier
(IRF), Infocus (INFS), Qlogic (QLGC), and Commerce One (CMRC).
In the lower-priced issues, Covad Communications (COVD) and Red
Hat (RHAT) both recovered from recent losses and Knight Trading
Group (NITE) continued to rally, climbing to a mid-day high near
$40 as speculation over a potential buyout of the company drove
share values skyward.  Two of our new positions, Allstate (ALL)
and Plug Power (PLUG) slumped during the session and the target
entry prices might have been achieved by aggressive traders.

One of our under-performing categories, the consumer products
group moved lower following a number of analyst downgrades.  A
slowing in household spending in August is seen as the possible
beginning of a real economic slump and some of our long-term
positions are suffering from that outlook.  Maytag (MYG) is the
issue we are most concerned with and if the share value falls
below the recent support range near $34, we will consider an
early exit in the bullish synthetic position.  The other stock
in the group is Mead Corporation (MEA) and this issue is also
at a key moment.  A move below $24 would suggest that a lower
trading range is forthcoming and we would likely sell the long
position, while leaving the (short) OCT-$30 call uncovered, in
expectation that the issue will remain below the new resistance
area.

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

Based on the requests I receive for specific strategies, the OIN
could hire another researcher to simply look for credit spreads.
There is always an amazing demand for this particular approach,
and fortunately we have some excellent candidates for the bullish
technique.  The following positions are based on popular issues
in favorable industries.  Each play is evaluated for probability
of profit using the current price or trading range of the stock
and the recent technical history or trend.  Market sentiment and
current news will have an effect on these issues, so review each
play individually and make your own decision about the future
outcome of the position.  In addition, a number of technology
stocks have made significant gains in the past few sessions and
a correction will likely occur in the near-term.  Plan to target
higher premiums in these spreads initially and adjust the entry
prices, based on the future movement of the underlying issues.

******************************************************************
HNCS - HNC Software  $61.25   *** A Unique Situation! ***

HNC Software is a business-to-business software company that
develops, markets, licenses and supports predictive software
solutions for various service industries, including companies
in the insurance, financial services, telecommunications,
e-commerce, and retail industries.  The company's predictive
software solutions help service industry companies manage and
optimize their customer relationships.  By analyzing volumes of
customer transactions in real-time, the company's predictive
solutions help companies shift the decision-making process from
a retrospective to prospective basis.  The increasing conduct of
e-business over the Internet increases the demand for analysis
of large volumes of real-time information, which the company's
products provide.  Electronic customer interaction is necessary
to manage and respond to customer activity and expectations in
all markets.

There are many excellent things to say about the company but
apparently, a rather unique factor is affecting the price of
this issue in the near-term.  HNC holds about 40 million shares
of Retek (RETK), a business-to-business software company that HNC
spun-off in an initial public offering last November.  HNC has
declared a dividend on HNC common stock of all the shares of RETK
common stock owned by the company.  The Retek shares will now be
distributed on or about September 29, 2000 to HNC shareholders of
record after the close of trading on September 15, the record date
for the dividend.  HNC’s current holdings represent approximately
84% of Retek's outstanding common stock and the ratio of RETK
shares to be distributed (for each HNCS share) will be determined
by the number of HNCS shares outstanding as of September 15.  The
potential outcome of the distribution issue is relatively complex
and a position in the stock prior to the record date involves
potential ownership of Retek.  Obviously, the situation is very
difficult to explain thoroughly in this forum but we believe the
position offers a favorable risk/reward outlook for speculative
traders who wouldn’t mind owning shares in great B-2-B software
issues.

Note: This position warrants serious due-diligence!

PLAY (speculative - bullish/credit spread):

BUY  PUT  OCT-40  NSQ-VH  OI=0    A=$0.56
SELL PUT  OCT-45  NSQ-VI  OI=156  B=$1.00
INITIAL NET CREDIT TARGET=$0.62-$0.75  ROI(max)=17%


******************************************************************
RIMM - Research In Motion  $81.75  *** On The Move, Again! ***

Research in Motion Limited is a designer, manufacturer and
marketer of innovative wireless solutions for the mobile
communications market.  Through development and integration of
hardware, software and services, they provide solutions for
access to e-mail, messaging, Internet and intranet-based
applications. Research in Motion's technology also enables a
third party developers and manufacturers worldwide to improve
their products and services with wireless access.

According to International Data Corporation, 50 million handheld
devices will be in the workforce by 2003, many of them wireless.
Forrester Research predicts that over 50% of the workforce will
have mobile connections to the workplace, and that number is
expected to grow substantially as the devices become popular.
Research in Motion is set to capitalize on the emerging wireless
market, producing a hand-held wireless device, the 957, that
allows wireless access to corporate e-mail, along with their
Inter@ctive Pager product line and the BlackBerry wireless e-mail
solution.  RIMM recently announced a deal with private software
firm Brience to expand enterprise applications to their devices.
Brience specializes in adapting and delivering unique proprietary
corporate information to any handheld in customized form, and the
potential for applications for RIMM's devices is significant.  In
addition, MODCOMP, a subsidiary of CSP (CSPI) and a top developer
of E-commerce and M-Business solutions, just announced that its
integration software, ViewMax, now supports wireless access to
mainframe, midrange, and UNIX applications via the BlackBerry
wireless email solution.  The ViewMax solution will seamlessly
connect any enterprise system, or "green screen," application to
the popular handheld, which recently won the 2000 PC World Class
Award for best wireless communication device.

Although the company is growing by leaps and bounds, Research In
Motion is considered the opportunist in the hand-held computer
sector, coming from relative obscurity to a top contender.  Its
stock, which has begun a new up-trend in recent sessions, may not
be for conservative, "buy-and-hold" investors.  However, if you
want excitement and the potential for excellent growth, consider
selling premium in this credit spread and get paid for trying to
take a position in the issue.


PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-60  RUL-VL  OI=125  A=$1.38
SELL PUT  OCT-65  RUL-VM  OI=58   B=$2.00
INITIAL NET CREDIT TARGET=$0.88-$1.00  ROI(max)=25%


******************************************************************
MANU - Manugistics  $91.50  *** New, All-Time High! ***

Manugistics Group is a global provider of intelligent supply
chain optimization solutions for businesses and eBusiness
trading networks.  Its solutions include client assessment,
software products, and consulting services, all of which can
be customized for a clients specific requirements.  Their
newest generation of solutions help businesses to improve
their logistics and trading with their partners by utilizing
the Internet.

Speculation that Manugistics may have won a new contract with
Cisco Systems (CSCO) pushed the company’s shares to an all-time
high last month.  According to published reports, the company has
secured a multimillion dollar contract for supply-chain software
and the deal may grow larger as Cisco deploys the new products.
In addition, Manugistics also recently landed a contract with
John Deere, which will use the company's e-business software to
improve its product flow to distribution centers and enhance
communication with carriers.  Manugistics' technology will help
develop capacity utilization at fleet and distribution centers,
improve service levels, and reduce costs.

The rally today was driven by news that Manugistics has been
chosen by the Naval Transportation Support Center (NAVTRANS) to
help create an intelligent global transportation network designed
to improve customer service and reduce costs.  The transportation
arm of the Naval Supply Systems Command plans to utilize MANU’s
NetWORKS to improve item visibility and better manage complex,
multi-modal freight movements from vendors to inventory control
points and on to U.S. Navy forces worldwide.  The software’s
communication and automated capabilities will help ensure the
dependable, reliable and cost-effective shipment of materials.
Manugistics' unique transportation solution was recently rated
"best-in-class" across all key vertical industries in the private
sector and the company also helps power FreightWise, an Internet
marketplace for buyers and sellers of transportation targeted at
third-party logistics services.  They have also been chosen to
enhance connectivity for The National Transportation Exchange.

Those of you who favor the outlook for the company’s products
can speculate on the future movement of their share value with
this relatively low risk position.


PLAY (conservative - bullish/credit spread):

BUY  PUT  OCT-60  ZUQ-VL  OI=102  A=$1.12
SELL PUT  OCT-65  ZUQ-VM  OI=113  B=$1.50
INITIAL NET CREDIT TARGET=$0.56-$0.62  ROI(max)=14%







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