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Daily Newsletter, Tuesday, 10/02/2001

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The Option Investor Newsletter                 Tuesday 10-09-2001
Copyright 2001, All rights reserved.                       1 of 2
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************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
       10-9-2001           High     Low     Volume Advance/Decline
DJIA     9052.44 - 15.50  9086.97  9004.14  1.1 bln   1488/1595
NASDAQ   1570.19 - 35.76  1607.20  1565.97  1.5 bln   1422/2094
S&P 100   541.84 -  3.04   545.44   540.30   Totals   2910/3688
S&P 500  1056.75 -  5.69  1063.37  1053.83
RUS 2000  408.68 -  3.50   412.27   407.87
DJ TRANS 2128.67 - 54.57  2185.91  2128.67
VIX        36.06 +   .15    36.62    35.57
VXN        66.26 +   .13    67.20    65.86
TRIN        1.18
Put/Call Ratio       .97
*************************************************************

Markets Holding Their Breath!

Traders spent another day watching TV instead of the stock market
and the averages reflected investor apathy. The mood of the
average consumer/investor/citizen is "what's next?" America has
leveled anything of military significance in Afghanistan and Osama
has yet to launch another threatened strike. Everyone knows it is
coming but just not when or where. The mentality of America is
slowly withdrawing inwardly as the constant bombardment of negative
news makes even opening the mail a greater risk than usual. The
markets are actually holding up rather well given the scenario
above.





The main reason the markets lost so much ground today was Microsoft
not Bin Laden. The Supreme Court said they would not hear the case
and left it in the hands of the appeals court. This puts even more
pressure on Microsoft to settle and possibly take more of a beating
than was previously acceptable to Microsoft management. This also
gives the Justice Dept a stronger position and bolstered their
confidence in getting their pound of flesh from the software giant.
(If you are in the editors play for the last two weeks, did you
buy that Put on Monday like I suggested?) Had it not been for MSFT
the Dow would have finished in positive territory. MSFT delayed
until next year the deadline for the new licensing scheme for their
software which created doubts that maybe even Microsoft was under
some revenue pressure as a result of the attack.

While talking about news events regarding Dow components, Intel
also made the news with a class action suit being filed by an
institutional investor. The investor took exception with bullish
statements about demand, improved manufacturing processes and new
products in the summer of 2000. The stock fell from $75 to $35
in the three months following those statements. They eventually
cancelled some of the products mentioned due to technical problems
and lack of market demand. Intel disagreed strongly with the claims
and vowed to aggressively defend itself in the suit. Intel lost
-$.79 for the day.

The brokerage sector bucked the trend today after a news report
that said they would lose $200 million for the quarter compared
with an expected $1.2 billion profit for the group. LEH, MWD, MER
and BSC all closed strongly positive despite the report from the
Securities Industry Association which also said the sector began
to rebound from the attack losses almost immediately.

One sector that did not rebound from a verbal bashing was the
networking sector. JP Morgan cut estimates on Cisco and others
based on falling capital spending. They feel the spending will
continue to decline in 2001 and also drop another -20% in 2002.
The semiconductor sector also drew its share of detractors after
gaining +17% over the prior three trading sessions. Merrill
Lynch. ABN-Amro and CSFB made some cautious comments about the
sector. CSFB said Intel would barely meet estimates or come in
just below them thanks to some "frantic scrambling". ABN-Amro
changed their weighting to "underweight" claiming that investors
have already priced in too much growth. After the recent gains
the sector was due for profit taking regardless of the news.

In the too little too late department an institutional investor
tried to sell twenty-nine million shares of Global Crossing at
the close. The stock had already fallen -47% for the day from
$.73 to $.38. That position fell from $21 million at the open
to $11 million at the close but that pales in comparison from
the $58 million value the prior week or the $290 million from
July. Just suppose you owned it in January for $750 million or
even the $290 million in July, what would you gain from blowing
it out at $11 million at the close today? Commissions, management
fees? While I have no opinion on the survival prospects on Global
Crossing, I do think the investors in that fund should worry
about the survival prospects for their management. We have all
(if we are honest) closed positions in expiration week on options
for an eighth or less that we paid substantially more for weeks
earlier. We made the mistake "with our own money" of failing to
set stop losses and closing those positions. We all make bad bets
and then try to rationalize the poor results but we expect better
from people who manage money professionally. Whoever was trying
to sell at the close was in plenty of company since 141 million
shares of GX traded for the day. Creating the rush for the exits
was a downgrade of their debt, a reshuffle of their management
and being dropped from the S&P-500. Just proves that when you
are on the wrong side of a trade everything seems to go against
you. We all know this feeling!

Say goodbye to the second half recovery, at least for 2001. The
2H recovery is officially dead. In a subtle sleight of hand the
new target for the recovery is now 2H of 2002. Several companies
led by Cisco and Dell have now said that summer of 2002 could be
the earliest a recovery would appear. Analysts are now anticipating
the worst fourth quarter earnings in a decade and there are no
signs of any improvement. This is of course not "new news" but
the numbers of analysts that are now verbalizing what they knew
behind closed doors is increasing. Consumer confidence is eroding
daily as the continued threats from the terrorists are discussed
over and over on TV. The Bin Laden spokesman today that warned of
a "storm of airplanes" in the future and the continued call for a
holy war against the U.S. along with the growing anti-American
demonstrations are causing second thoughts by Americans. "What if?"
is the topic of conversation at the dinner table instead of the
normal family chatter. This is not conducive to a bullish market.

However, the markets once again held above support at 9000 and
1550. Those levels are critical to any future market direction.
The Dow tested 9000 twice at 10:30 and 4:30 and rallied slightly
into the close. The Nasdaq however closed only four points above
the low of the day and but was heavily influenced by the MSFT news.
I know you hear constantly that this or that level is critical to
future market direction until you are totally confused. This
one is really critical. If these levels fail then the odds are
very good we will see a retest of the September lows. The market
has shown very good relative strength the last four days. After
the big rebound we could have easily sold off substantially again
but didn't. The markets are simply stuck in the quicksand of
indecision and uncertainty. While stocks are cheap there is no
rush to buy. Which sector will get hit with the next terrorist
attack? Nobody knows. When will it occur? Nobody knows. Buyers
from last week have disappeared and internals have turned
negative although on low volume.

We are in a news driven environment rather than an economically
driven environment. This may change as earnings announcements
increase in intensity. There are well over 100 companies
announcing this week but next week there are two to three times
that many and most of the big guns. If the unthinkable happens
and companies start giving positive guidance then we could
move up again. The possibility for negative news is greater but
much of that is already priced into the market. The best thing
that could happen to us is nothing. If a week of two goes buy
without an attack on U.S. soil then Americans will start ignoring
the daily threats as harmless. Just another Saddam Hussein with
a big mouth and no way to back up his claims. There have been
618 individuals arrested in the U.S. for suspected terrorist
involvement and over 200 more on the wanted list. The rapid
mobilization of our defensive and protective resources may have
crippled prior plans for follow up attacks. Every day that passes
puts us closer to each terrorist still on the ground in the U.S.
The high profile "bombing war" in Afghanistan is over. The war
that is visible to Americans on nightly TV will decrease as the
job falls to special forces troops on the ground moving under
the cover of night. Once the 24hr intravenous news feed goes back
to regular programming the "threat" will also move back into our
subconscious. We have been bombing Iraq almost weekly since 1998
and nobody has paid any attention. Until the Afghan war fades from
view you know what to do. Go flat or short under 9000/1550 and go
long on any rebound from under those levels.

Definitely, enter passively, exit aggressively!

Jim Brown
Editor


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

Waiting, But For What?
By Eric Utley

The major market averages didn't make much progress in either
direction Tuesday.  Sure, the Nasdaq Composite (COMPX) shed
more than 2 percent, but it was due for a pullback.  But can we
read into the decline in tech Tuesday?  Aside from Microsoft
(NASDAQ:MSFT), there wasn't much happening ahead of the
earnings reports.

Meanwhile, the Dow Jones Industrial Average ($INDU) and S&P
500 (SPX.X) did a whole lot of nothing.  Many of the indicators
I follow have been reflecting the sideways trading so far this
week.  For example, bullish percent data has been relatively
unchanged.

In addition to the indicators flashing apathy, or perhaps
hesitation, many individual stocks are revealing a more telling
picture.  Take General Electric (NYSE:GE), for example.

The stock ramped from its lows a few weeks back, rolled over
last week, and has been holding tight so far this week.  So
tight, in fact, that GE has traced two consecutive "inside days"
so far this week.  That price pattern, which is defined by a
day-over-day decrease in trading range, is indicative of a
consolidation period and is usually a prelude to a big move in
one direction or another.



The chart above reveals GE's coiling price action.  Note that
Monday's high was lower than last Friday's, but its low was
higher than last Friday's.  Fast forward to Tuesday, and we
observe the same pattern.

(GE is a good stock to represent the sentiment across the
broader market because of its size and diversity -- it's the
largest component of the S&P 500 and one of the most diverse
companies in the world.)

If GE's price action is telling of the current market sentiment,
then I think that a big move is around the corner.  I don't
know in which direction the move will unfold and I don't really
care because there are a few ways to trade it.

The first way to trade a big move is to be reactionary.  That's
my least favorite way to trade because I normally have to chase
stocks along with the crowd.  And I've to be honest, I very much
dislike crowds.  But, taking GE for example, a trader could
simply trade in the direction in which the stock breaks from its
consolidation.

The second way to trade a big forthcoming move is to look for
divergences in leading sectors of the market, or stocks for
that matter.  In other words, you can look for the stock/sector
that typically leads the broader market.  This is my favorite
way to trade a big move because it's the most lucrative, but
it's the most difficult.

The third way a trader can profit from a big move, should it
occur, is to slip into a pair of chaps and straddle the market,
a sector, and/or stock by entering the options market.  The
only problem with a straddle/strangle in the current market
environment is that fear is still pretty high judging by the
level of the CBOE Market Volatility Index (VIX.X).  The VIX
closed Tuesday at 36.  Granted, the VIX has recently retreated
from its extreme levels but it's still well above its historical
norm.  Because of the high level of fear, traders have to pay up
in the options market in the form of implied volatility.  But,
if the move in the underlying is big enough, then the current
premium price of implied volatility won't matter as much.

The notion that the market is ready to make a big move is
further reinforced by the bullish percent data we've been
monitoring, specifically the Dow Jones Industrial Average Bullish
Percent ($BPINDU) and Nasdaq-100 Bullish Percent ($BPNDX).  Both
charts are very close to giving a Bull Confirmed buy signal,
which is an aggressively bullish buy signal.  At the same time,
though, both the Dow and NDX Bullish Percent charts could
reverse from their current levels as I've stated in recent
columns, which could lead to the eventual retest of the lows
put in a few weeks back.

-----------------------------------------------------------------

Market Volatility

VIX   36.06
VXN   66.26

-----------------------------------------------------------------

          Put/Call Ratio  Call Volume   Put Volume
Total          0.99        427,030       414,740
Equity Only    0.98        328,661       320,439
OEX            1.55          7,453        11,581
QQQ            0.69         15,818        10,903

-----------------------------------------------------------------

Bullish Percent Data


           Current   Change   Status
NYSE          24      + 0     Bear Confirmed
NASDAQ-100    45      - 1     Bull Alert
DOW           37      + 0     Bull Alert
S&P 500       37      + 0     Bull Alert
S&P 100       29      + 0     Bull Alert

Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart.  Readings above 70 are considered overbought, and readings
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend

-----------------------------------------------------------------


 5-Day Arms Index  1.04
10-Day Arms Index  1.05
21-Day Arms Index  1.09
55-Day Arms Index  1.25

Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when the do, they can signal significant market turning
points.

-----------------------------------------------------------------

        Advancers     Decliners
NYSE      1488           1595
NASDAQ    1422           2094

        New Highs      New Lows
NYSE       53             72
NASDAQ     49            109

        Volume (in millions)
NYSE     1,173
NASDAQ   1,570

-----------------------------------------------------------------

Commitments Of Traders Report: 10/02/01

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.

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 tend
to be wrong.

S&P 500

Commercials   Long      Short      Net     % Of OI
09/18/01      406,387   471,823   (65,436)   (7.45%)
09/25/01      357,873   407,036   (49,163)   (6.43%)
10/02/01      365,200   408,567   (43,367)   (5.56%)

Most bearish reading of the year: (111,956) - 3/6/01
Most bullish reading of the year: ( 41,144) - 5/1/01

Small Traders Long      Short      Net     % of OI
09/18/01      172,988    100,531   72,457     26.49%0
09/25/01      122,613     71,721   50,892     26.19%
10/02/01      124,249     73,882   50,367     25.38%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

NASDAQ-100

Commercials   Long      Short      Net     % of OI
09/18/01       35,497     45,731   (10,234)  (12.60%)
09/25/01       26,761     36,812   (10,051)  (15.81%)
10/02/01       26,703     37,669   (10,966)  (17.02%)

Most bearish reading of the year: (15,521) - 3/13/01
Most bullish reading of the year:  (1,825) - 1/02/01

Small Traders  Long     Short      Net     % of OI
09/18/01       22,876    21,702    1,174       2.63%
09/25/01       10,699     6,580    4,119      23.84%
10/02/01       10,918     6,804    4,114      23.16%

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01

DOW JONES INDUSTRIAL

Commercials   Long      Short      Net     % of OI
09/18/01       28,425    15,077   13,348     30.7%
09/25/01       20,013     7,806   12,207     43.9%
10/02/01       22,755    10,124   12,631     38.3%

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year: 13,348  - 9/18/01

Small Traders  Long      Short     Net     % of OI
09/18/01        7,335    15,044    (7,709)   (34.45%)
09/25/01        4,530    12,621    (8,091)   (47.18%)
10/02/01        4,731    11,868    (7,137)   (43.00%)

Most bearish reading of the year:  (8,091) - 9/25/01*
Most bullish reading of the year:   1,909  - 1/16/01

-----------------------------------------------------------------


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


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:
*****
CMCSK $36.90 -0.07 (-0.61) CMCSK looks tired at current levels.
The stock may continue pulling back, so we're dropping coverage
ahead of any potential weakness.  Traders with open positions
can use any strength early Wednesday to exit plays or consider
a stop around its last two days' intraday lows at $36.72.

ORCL $13.70 -0.20 (-0.50) ORCL has had trouble getting over the
$14 level in the past few sessions.  The stock staged a nice
run late last week, so a little breather isn't out of the
ordinary.  Strength over $14 could be used as an exit point
Wednesday.


PUTS:
*****
TQNT $17.15 +0.65 (+1.09) TQNT continued higher Tuesday on a
day that the Nasdaq finished lower.  Its relative strength is
a cause for concern.  Although it may rollover Wednesday,
we're dropping coverage this evening.


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The Option Investor Newsletter                  Tuesday 10-02-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
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* Option Chains Linked to Order Screens, and Interactive Charting
* NBBO Guaranteed so you get Best Execution Prices
* Stock and Option Watch Lists
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Note: Options involve risk. Risk disclosure:
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**************************************************************


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

ATK $85.00 +1.60 (-0.60) ATK managed to bounce from its ascending
trend line once again, noting its dip Monday.  But its "rebound"
Tuesday was in the form of a gap higher, which was obviously
difficult to play and offered very little in the way of a
favorable entry point.  ATK's strength again Tuesday may have
allowed for those with open positions at lower prices a chance to
exit plays on strength.  But, moving forward, momentum traders
may look to take new positions at current levels in an advancing
market, with a short-term, upside target around $89.  However, to
take positions at current levels, it's paramount that traders
confirm strength in other defense issues, such as NOC, LMT, GD,
and LLL.  In the event of a pullback, look for the $82 to $83
support area to attract buyers.

MO $49.40 +0.03 (+1.11) MO is working exceptionally well for us
so far this week.  But, that shouldn't be too unexpected.  After
all, the highly expected 50 basis point reduction in interest
rates makes MO's big dividend yield all the more attractive.  As
for the stock itself, MO is inching towards a breakout above the
$50 level.  But, MO will most likely need the support of the Dow
to successfully breakout above $50.  With that being the case,
bullish traders should confirm direction in the Dow if new
positions are to be taken on advance above $50.  On the other
hand, perhaps the best strategy with MO is to be in plays ahead
of any forthcoming breakout.  For readers who like that idea,
new entries on pullbacks from current levels is the "better"
strategy.  In executing new trades on a pullback, support appears
to be around the $48 to $48.50 area, so bullish traders might
look for bids to materialize in that general location.  We're
ratcheting our stop up to the $48 level.

RTN $34.98 +1.00 (+0.23) It's becoming painfully obvious that
the $35 level is something of a barrier for RTN.  However, we
maintain that if the stock continues nudging up against that
level then the supply at $35 should eventually be absorbed.
On the demand side of the equation, the $34 level acted as rock
solid support during RTN's pullback Monday.  So, we're left with
a $1 range to trade this stock and look for favorable entries
over the short-term.  Another dip down to $34 may provide a solid
entry, accompanied with an ultra tight stop just beneath that
level.  As for our stop, we're moving risk up to the $33.50
level in terms of coverage on this play

ENZN $55.00 +3.95 (+4.00) There's not much to complain about
when dissecting ENZN's price action Tuesday.  With the exception
of two natural reactions, ENZN traded steadily higher throughout
Tuesday's session.  The stock's strength may have offered those
who entered on the dip down to the $50 level Monday several
opportunities to exit for profit, depending upon individual
time frames and risk tolerances.  Looking forward, ENZN topped
out around the $55 level, which is the site of the stock's gap
lower on September 17.  The $55 level may serve as short-term
resistance if the AMEX Biotechnology Index (BTK.X) pulls back
in the next few days.  Otherwise, continued strength in the BTK,
as well as the Nasdaq, should allow for ENZN to advance above
the $55 level.  In an advancing market and with the BTK rallying,
bullish traders could consider new entries at current levels,
with $57.50 serving as a short-term exit point.  Support down
around $53 could serve as an entry level if ENZN pulls back on
profit taking, just make sure to monitor volume to discern
whether or not weakness in price is profit taking.

MTG $64.20 +1.59 (-1.14) MTG staged a solid rebound Tuesday,
following its pullback Monday.  MTG's weakness Monday wasn't
all that alarming considering the fact that the broader insurance
sector pulled back.  However, the Insurance Sector Index (IUX.X)
went on to trace a new relative high Tuesday, while MTG settled
about $1.50 from its recent relative high.  In other words, MTG
is lagging the IUX.  And because we're bullish on this play,
we obviously don't want to see MTG lag its sector.  As such,
we're on alert for further relative weakness in this play.
Although MTG's under performance Tuesday may have been a one day
anomaly, we want to be on the lookout for further weakness.
Considering the aforementioned, bullish traders with open positions
should be looking to tighten stops.  For those looking for new
entries, consider waiting for MTG to reassert itself in the form
of relative strength.  In terms of technicals, MTG could face
resistance on the way back up to $65, while support appears to
be in place at $62.

BAC $58.48 +0.53 (+1.08) Investors continued to buy Financial
stocks both before and after the Fed's announcement on interest
rates, and the Banking index vaulted through its 20-dma ($794)
on Tuesday.  BAC led the charge, clearing its 20-dma (then at
$57.67) on Friday and continuing that advance this week.  Ending
near its high of the day, BAC closed just below the $60
resistance level and given the solid volume, is showing no signs
of slowing its advance.  We're raising our stop to $57.50 and
intraday dips near the $58 support level look good for initiating
new positions.  Otherwise, wait for continued buying to push BAC
through the $60 level before entering the play.

CMCSK $36.10 +0.67 (+0.23) Continuing its advance this week,
shares of CMCSK showed a bit of weakness on Monday, but held
above the 20-dma ($35.25).  Buyers showed up in force again on
Tuesday, driving the stock up to the $36.50 resistance level
before falling back to consolidate above $36 in the afternoon.
The stock appears to be trying to break through resistance, but
with daily Stochastics in overbought territory, will need
continued strong buying volume to accomplish the task.  With our
stop at $34.50, we would look for a dip back to the $35 area to
provide for new entries.  There is a lot of overhead congestion
between $36.50-38.50, and we'll need to clear the upper end of
that range before we can say CMCSK is clearly in breakout mode.

GE $38.05 +0.41 (+0.85) As a proxy for the DJIA, GE has been
steadily moving higher since September 21st.  Each day that the
positive trend continues, the technical picture looks better.
This week GE has cleared the 20-dma (now at $37.08) and is
steadily approaching the top of the gap left when the stock sold
off after the September 11th terrorist attack.  Look for
resistance to form in the $39.40 level (which had been the site
of previous support), which may make for a good opportunity to
harvest some profits.  We're raising our stop to $36, and would
consider an intraday dip near that level (so long as it is
followed by solid buying volume) as an attractive entry for new
positions.  Earnings are set to be released the morning of
October 11th, and investors may be hoping to ride the stock
higher between now and the announcement.

ORCL $12.60 +0.02 (+0.02) As the only big-cap tech stock that is
higher than on September 11th, ORCL is demonstrating its relative
strength by gradually creeping higher.  Volume has been running
right around the ADV as the bulls try to build up enough strength
to push ORCL through the $13 resistance level.  Intraday dips
continue to provide decent entry opportunities, and right now the
$12 level looks like the floor.  Consider new positions on a dip
near that level, but keep in mind that our stop is now sitting
at $11.75.  We really need to see the Software sector (GSO.X)
continue its fledgling recovery to convince us this move is for
real, and seeing ORCL move above $13 would be a nice
confirmation.  Clearing that level will also provide a fresh
entry point for traders that are still on the sidelines, waiting
for confirmation that ORCL has the capability to power higher
from here.

PPG $46.13 +0.59 (+0.38) Even "old-economy" stocks are
participating in the current market recovery and PPG is making
a convincing show of wanting to move higher.  Buyers continued
to push shares higher ahead of the FOMC meeting and continued
their activity after the event, ending the day just below the
highs.  PPG has now risen to the bottom of the gap left on
September 17th, and we'll need to see renewed strong buying
volume to push the stock into the gap on its way to challenging
the 20-dma at $47.68.  After powering through the 10-dma
(currently $43.63) on Friday, PPG has held above that level on
intraday dips this week, so we have raised our stop to $43.60.
Look for an intraday dip to $45 or even $44 to trigger new
entries, or else wait for PPG to rally through $48 (just above
the 20-dma, and intraday resistance from September 17th) before
playing.

PPDI $29.04 -0.44 (-0.25) A quick look at the daily chart showed
that PPDI was going to have a hard time clearing the $30
resistance level and bullish traders are trying to gather their
strength for a push higher.  Whether they are successful remains
to be seen, but there are some troubling signs for the bulls.
Daily Stochastics are starting to weaken and volume was higher
today as the stock posted a doji candle formation (normally a
sign of indecision).  On the plus side, PPDI is holding above
the 200-dma ($28.10) and the intraday highs are steadily moving
higher.  Target intraday dips to the $28 level for initiating
new positions or wait for continued buying to push through
today's highs near $30.50.  Or stop has been moved up to $27.50.


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

TEVA - Teva Pharmaceutical Inds. $63.38 +2.19 (+2.93 this week)

Producing drugs in all major therapeutic categories, TEVA is a
fully integrated global pharmaceutical company.  In the area of
proprietary drugs, TEVA has focused on products for the central
nervous system disorders, primarily the development of Copaxone,
a treatment for relapsing-remitting multiple sclerosis.  Through
its U.S.-based subsidiary, the company manufactures 137 generic
products in 210 generic forms, which are distributed and sold in
the United States.  TEVA also manufactures over 270 generic
products, which are sold primarily in the Netherlands, the
United Kingdom and Hungary.

With the rest of the market, Drug stocks sold off sharply when
trading resumed on September 17th.  But the pain in the
Pharmaceutical sector (DRG.X) was fairly short-lived, finding a
bottom on September 21st and beginning a solid rally that is
still looking strong.  One strong performer in the sector is
TEVA, which rose to its own 200-dma ($61.10) yesterday, which
happened to be right at the bottom of the gap down from
September 17th.  Buyers were lined up in force this morning,
driving TEVA decisively through the $62 resistance level at the
open and buying volume continued to rise right up to the closing
bell.  The stock ended the day just above the 20-dma ($63.32)
and it looks like the bulls are ready to charge even higher (if
the strong volume continues).  Today's strong rally was due in
part to the FDQ approval for the companies COPAXONE, which is
positioned to become the first and only relapsing-remitting
multiple sclerosis drug therapy to offer its medication in a
prefilled syringe.  We could see a bit of a retracement before
TEVA continues higher, and an intraday dip and bounce near
$60-61 support could provide for attractive entries.  Overhead
resistance sits at $64 and then $66, so momentum traders will
want to wait for TEVA to clear $64 on continued strong volume
before taking a position.  We are initiating the play with our
stop at $59.50, just below the $60 support level.

BUY CALL OCT-60 TVQ-JL OI= 211 at $4.80 SL=3.00
BUY CALL OCT-65*TVQ-JM OI= 979 at $2.00 SL=1.00
BUY CALL NOV-60 TVQ-KL OI=   8 at $6.20 SL=4.25
BUY CALL NOV-65 TVQ-KM OI= 250 at $3.50 SL=1.75

SELL PUT OCT-60 TVQ-VL OI=1610 at $1.10 SL=2.25
(See risks of selling puts in play legend)

Average Daily Volume = 1.26 mln



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

BBY $45.10 +1.75 (-0.35) BBY traced an extremely volatile
session Tuesday.  Hopefully our readers didn't get whipsawed by
the stock's gyrations!  BBY looks as if it may have put in a
short-term bottom over the past three days.  However, the stock
is setting up for favorable entries in terms of risk management.
New entries around current levels can be managed with a tight
stop in the event of a reversal in recent trend.  But, bearish
traders will want to keep a close eye on the Retail Sector Index
(RLX.X) before entering new plays.  If the RLX does weaken early
Wednesday, then bearish traders can start to consider target
shooting entries in BBY around current levels.  Wal-Mart's
guidance after the bell may morph into early strength in the RLX,
so keep that in mind when gauging BBY's price action early
Wednesday.

SV $19.91 +1.36 (+0.41) Bullish analyst comments boosted SV
throughout Tuesday's session.  However, the stock ran right up to
its 10-dma, which currently sits at $19.80.  Its rally Tuesday
may have provided solid entry points into new put positions
going forward, but bearish traders taking new entries around
current levels will want to have the appropriate risk management
procedures in place.  The Fed news may have also contributed to
SV's rally Tuesday, but we'll know whether or not the move has
staying power going into Wednesday's session.  Any follow-through
in strength will have us on alert, and should do the same for
those bearish traders with open positions.

EBAY $47.49 +0.52 (+1.74) Bullish traders are trying to get EBAY
moving up again, but they are meeting stiff resistance in the
$48.50 area.  While volume is running well above the ADV, the
price advance over the past few days is coming on gradually
decreasing volume.  While the daily Stochastics has been rising
and are nearly in overbought territory again, the price has been
unable to clear resistance, and we could be looking at another
attractive entry point in the days ahead.  Further resistance
will likely come in the form of the descending 20-dma (currently
$49.85).  Target a rollover from resistance for initiating new
positions, but stand aside if EBAY moves through our $49 stop.

MVSN $27.76 +0.26 (-0.65) Even a positive day in the markets
couldn't do much for shares of MVSN on Tuesday.  Although the
stock posted a fractional gain, it came on below average volume
and the stock closed well off its intraday highs.  Resistance
just above $29 is keeping the bulls in check, and even if they
clear that level, they'll have to contend with solid resistance
near $30.  Accordingly, we are lowering our stop to $30.25 and
any rollover near that level will provide for fresh entry
points.  Technology stocks couldn't quite participate in
Tuesday's rally, and that leaves MVSN vulnerable to further
downside if the NASDAQ heads lower again later this week.
Still trading near its yearly lows, if MVSN drops through the
$26 level, it will open the door for a drop to the $22-23
support level, dating back to late 1999.  Such a drop would
provide an opportunity to harvest some near-term profits.


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

KLAC - KLA-Tencor $29.31 -1.59 (-2.27 this week)

KLA-Tencor is the world's leading supplier of process control
and yield management solutions for the semiconductor and related
microelectronics industries.  The company's portfolio of products,
software, analysis, services, and expertise is designed to help
integrated circuit manufacturers manage yield throughout the
entire wafer fabrication process, from research and development
to final mass production yield analysis.

Following the Fed's announcement Tuesday, like the rest of the
market, the Semiconductor Sector (SOX.X) sold off.  Unlike the
rest of the market, the SOX didn't rebound into the close.  In
fact, the SOX closed a mere 4 points off of its lows Tuesday.
The SOX has some historical support at the 350 level, but a
breakdown below that level should cause further weakness in
chip issues.  For its part, KLAC has closely mirrored the price
action of the SOX recently.  Except, KLAC settled below its
relative lows Tuesday.  In essence, we've observed that the SOX
is one of the weaker sectors of the market, and KLAC is one of
the weakest components of the SOX.  It's that simple.  However,
this is more of a momentum play, so we need to see the Nasdaq
and SOX weaken in Wednesday's session for this play to work.
If those conditions arise, bearish traders can look for entries
at current levels Wednesday.  If the stock does rebound on
short covering, look for rollovers around the $31.50 level, or
higher around the $33 level.  The latter level is the site of
our stop.

BUY PUT OCT-30*KCQ-VF OI=2603 at $3.10 SL=2.00
BUY PUT OCT-25 KCQ-VE OI= 245 at $1.00 SL=0.50

Average Daily Volume = 7.19 mln



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

MVSN - Macrovision Corp. $27.76 +0.26 (-0.65 this week)

Helping to keep intellectual property rights intact, MVSN
designs, develops and licenses copy protection and rights
management technologies.  Integral to the entertainment
industry, the company provides copy protection for major
Hollywood studios, independent video producers, PC games,
digital set-top box manufacturers and digital pay-per-view
(PPV) network operators.  In addition to helping content
owners protect content such as videocassette, DVD and PPV
movies, and PC games, MVSN also provides the ability to
electronically market that content in a secure manner.

Most Recent Update

Even a positive day in the markets couldn't do much for shares
of MVSN on Tuesday.  Although the stock posted a fractional
gain, it came on below average volume and the stock closed well
off its intraday highs.  Resistance just above $29 is keeping
the bulls in check, and even if they clear that level, they'll
have to contend with solid resistance near $30.  Accordingly,
we are lowering our stop to $30.25 and any rollover near that
level will provide for fresh entry points.  Technology stocks
couldn't quite participate in Tuesday's rally, and that leaves
MVSN vulnerable to further downside if the NASDAQ heads lower
again later this week. Still trading near its yearly lows, if
MVSN drops through the $26 level, it will open the door for a
drop to the $22-23 support level, dating back to late 1999.
Such a drop would provide an opportunity to harvest some
near-term profits.

Comments

MVSN's paltry bounce Tuesday reinforced the fact that the stock
is relatively weak.  Any weakness in the Nasdaq in the coming
days should cause MVSN to trade lower.  Bearish traders looking
for new entries can either take a position on a rollover at
$29.25 or on a breakdown below $26.25, depending on market
conditions.

BUY PUT OCT-30*MVU-VF OI=2185 at $4.90 SL=3.75
BUY PUT OCT-25 MVU-VE OI= 349 at $2.20 SL=1.25

Average Daily Volume = 1.07 mln



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


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