Option Investor

Daily Newsletter, Wednesday, 11/27/2002

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The Option Investor Newsletter                Wednesday 11-27-2002
Copyright 2002, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Still Some Gas in the Tank
Futures Wrap: Two Hundred and Fifty  
Index Trader : The table's set, and the gravy's just about done
MUI CONTENT OF THE DAY: Weiss, Peck & Greer (WPG) Funds
MUI CONTENT for Thursday: Herbert Ehlers: Heritage Capital 
Appreciation Trust A (HRCPX)

Options 101: Trading on Friday?

Updated on the site tonight:
Swing Trader Game Plan: Just Couldn't Resist

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
11-25-2002                High    Low     Volume Advance/Decl
DJIA     8931.68 + 255.26 8939.91 8678.96  1930 mln  1205/714
NASDAQ   1487.94 +  43.51 1491.45 1462.62  1906 mln  1378/424
S&P 100   480.36 +  13.28  481.44  467.08  totals   2583/1138
S&P 500   938.87 +  25.56  940.41  913.31
RUS 2000  410.24 +  11.92  410.26  398.32
DJ TRANS 2371.82 + 103.47 2377.31  2268.65
VIX        30.84 +   2.10   30.84   26.91
VIXN       47.42 -   0.57   48.73   45.42
Put/Call Ratio 0.67

Still Some Gas in the Tank
by Steve Price

Talk about a head fake! The Tuesday sell-off flew in the face of 
history, as Thanksgiving week has traditionally seen the market 
in the green.  Of course, after a 1500-point gain in the Dow 
since the middle of October, some pullback could be expected. 
That pullback found support on Tuesday at the bottom of the 
recent ascending channel and took off like a bat out of a very 
warm place today.  We have now seen the third higher low in the 
current trend, and although the economic news is not exactly 
astounding, we are starting to see some improvements that could 
push us higher. 

It was certainly a feel good day heading into the holiday, giving 
investors something to be thankful for.  We got several reports 
this morning that looked bullish than we've seen in a while.  
They didn't come without cautious linings, but still led to a big 
rally. The initial jobless claims data for the latest week fell 
17,000 to the lowest level in more than a year.  The four-week 
average, which is widely used to smooth out the data, dropped to 
385,750, the lowest level in 15 weeks. The only fly in the 
ointment here is that continuing claims grew by 91,000 to 3.65 
million, dwarfing the drop in new claims.  This indicates that 
the time to find new jobs is getting longer.  Part of that is due 
to seasonal volatility, as firms put off hiring until after the 
New Year, but it is something that could get in the way of 
spending for the holidays. 

That brings us to the spending number.  Personal spending 
increased 0.4%, which was slightly higher than expected.  This 
contrasted personal income, which rose only 0.1%, and was 
slightly less than expected.  This is probably good news for 
retailers, as it indicates a little more willingness to dip into 
savings and stretch the plastic as we head to the official 
holiday season.  November retail numbers are bound to be low, 
since we had fewer "official" shopping days due to a late 
Thanksgiving.  However, I expect sales to simply shift to 
December, since whatever gifts will be purchased will simply be 
done so a little later.  The real effect that the later holiday 
can have, however, is fewer "full-price" days for retailers to 
reap profits.  Since they can't move Christmas back, prices will 
be heading down the closer we get and leave fewer days to shop 
ahead of those price reductions. 

The other number retail investors need to be looking at is 
Consumer Sentiment.  The index rose from 80.6 in October, to 84.2 
in November.   The increase was bullish overall, but came in 
below the preliminary reading of 85.0, which was release a couple 
of weeks ago.  This was below estimates, which were looking for 
85.4.  The expectations index also came in above October's 
reading, but below estimates. 

One of the most bullish signs we saw this morning was the durable 
goods number.  Durable goods orders rose 2.8% in October, which 
was well above expectations of 1.6%.  Within that report was a 
65% jump in communications equipment orders.  That was the 
biggest one-month gain in over 5 years. The industry has seen a 
big drop-off in capital expenditures and this reading may be 
signaling a turnaround. 

Next we got the Chicago Purchasing Manager's Index (PMI), which 
gave a November reading of 54.3, after sinking to 45.9 in 
October.  Expectations were for 48.5, so on a percentage basis, 
it beat estimates by a mile.  More importantly, any reading under 
50 shows contraction, while readings over 50 show expansion.  The 
flip to the upside of 50 also foreshadows a more positive reading 
for the NAPM national purchasing manager's survey.  

All of this data translated into big gains market wide, sending 
the Nasdaq soaring along with the Dow.  Not only did both indices 
make up yesterday's drop, but ended the day at new relative 
highs, as well. The Dow has now been in an ascending channel 
since it's bounce on October 12, with each pullback followed by 
extreme bullishness.  We have seen three higher lows and now 
three higher highs during the rally.  We are approaching the 
August high of 9077 and if the industrials continue the pattern 
of following the techs, then we could be looking at a few hundred 
upside points to go. The NDX broke the August high at the 
beginning of the month, pulled back and then took off again.  The 
Nasdaq Composite followed a similar pattern, but didn't actually 
break the August high until after the pullback.  Still, it made 
it through on the recent rally. 

The next challenge for the Dow will be the August high, and then 
the 200-dma above that, sitting at 9188.  The Dow has not seen 
its 200-dma since before Memorial Day, after which it began the 
slide that we are still attempting to recover from.  If we can 
get back over both of these levels, then a continued rally 
certainly looks possible.  The economic situation in the country 
will have to improve to support rising equity prices, however, 
this morning's news was a start.   At some point, we'll see an 
increase in spending, and a gain in durable goods orders, along 
with a turnaround in manufacturing, could be signaling a change 
in the tide.  Last week's guidance increase from Taiwan 
Semiconductor, citing an increase in PC demand, could also be an 
important sign. 

Chart of the Dow

The Nasdaq also made up yesterday's losses and with the August 
high in the rear view mirror, looks intent on testing the 200-
dma.  It is getting close now, and after the third higher high in 
the current run, another 10 points will do the job.   That 200-
dma is descending and is now just below the 1500 level.  A break 
over both levels would look even more bullish and could put us 
into new territory there, as well. 

Chart of the Nasdaq

One of the leading tech sectors has been the chip stocks.  The 
Semiconductor Index (SOX) has now put on 78% from its October low 
of 214 on October 9.  The index finished the day at 381.69 and 
looks intent on testing its 200-dma above 400, as well. After 
rallying throughout earnings season, in spite of almost daily 
warnings about the lack of chip demand, it appeared that funds 
simply felt the news wasn't as bad as expected.  However, it is 
hard to explain an almost doubling of value in a month and a 
half.  Traders should also remember that the index traded as high 
as 641 in March and had plenty of room to bounce.  That still 
leaves the sector down 40% in 8 months, even after the 167-point 

Chart of the SOX


We are seeing a pattern here, with most of the broader indices 
approaching these 200-dmas.  Certainly the current rally will run 
out of steam at some point and that level would be a good time to 
start buying protective puts. The bullish percentages are all 
very extended, which is bound to happen in such a furious rally, 
and are telling us that the risk is shifting to the downside. The 
Nasdaq Composite and SPX are both up against their bearish 
resistance lines, while the Dow and NDX are floating around in 
overbought territory over 70%.  While the bullish percentages can 
remain in overbought or oversold territory for quite a while 
before a turnaround, once the three-box reversals down begin to 
occur, it is time to be extra cautious and possibly take some 
profits. The Nasdaq Composite has been turned away from the 
bearish resistance line on its last three rallies, so the fact 
that it is right there now should be a red flag to keep an eye 

Chart of the COMPX Bullish Percent

I am still leaning bullish, as today's new relative highs 
indicate more upside in the immediate future. However, once we 
get to those 200-dmas, I'm going to start picking up puts across 
the board.  Friday is traditionally an up day for the market, but 
expect extremely low volume on the half-day.  Most traders stay 
home, and the options floor is practically silent.  I expect some 
continuation of the rally, however I find it curious that the 
Market Volatility Index finished up on such a big rally.  Someone 
is apparently worried about the downside, as that is usually the 
driver behind a VIX increase. Until we get that rollover, trade 
the trend, which is still up, but begin to exercise more caution 
as we put on a few more points.


Two Hundred and Fifty  
By John Seckinger

The Dow did finish higher on Wednesday by roughly 250 points; 
however, I am referring to the 200 DMA and an important 50% 
retracement level.   

Tuesday, November 26th at 4:15 P.M. 

Contract          Net Change     High        Low        Volume    

ES02Z     937.75    +26.25      941.00      912.00      430,465
YM02Z    8926.00   +261.00     8939.00     8665.00       16,263
NQ02Z    1124.50    +36.00     1145.00     1088.50      177,026

ES02Z  =  E-mini SP500 futures    
YM02Z  =  E-mini Dow $5 futures    
NQ02Z  =  E-mini NDX 100 futures     

Note:  The 02Z suffix stands for 2002, December, and will change 
as the exchanges shift the contract month.  The contract months 
are March, June, September, and December.  The volume stats are 
from Q-charts.  

Fundamental News:  At 8:30 a.m., Jobless Claims reportedly fell 
17k to 364k and beat expectations of a 383k number.  Also, 
Personal Income came in at +0.1% (in-line), while Personal 
Spending rose 0.4% and higher than the +0.3% economists were 
predicting.  Near 10:00 a.m., the final Michigan consumer 
sentiment report showed a reading of 84.2 and below consensus 
estimates of 85.0.  At this time, the Dow was already higher by 
almost 200 points.  Adding to the enthusiasm was durable goods 
rising by 2.8% (estimates for 2.4%), as well as the Chicago PMI 
report jumping over 50 (barometer of contraction and expansion) 
to 54.3 and much better than the consensus estimates of 48.5.  
This rise should have economists increasing estimates for next 
Monday’s ISM report.  In other news, Eli Lilly (LLY, +7.8% to 69) 
received FDA approval for Stattera, a treatment of ADD.   

Technical News:  The bond market imploded, falling over 2 full 
points (64/32) to close at 108’17 during a shortened session.  
Yesterday’s close certainly did prove critical, and Wednesday’s 
weakness now gives us an objective of 103.  Additionally, the 30-
year cash (5.1%) currently has an objective of 5.5%.  As the old 
saying goes, “higher yields (or lower bond prices) usually means 
higher stock prices.”  There is no question in my mind that the 
move in the bond market was a tremendous help for stocks.  
Looking elsewhere, the XAU index fell to 61.64 and almost tested 
a bullish daily trend line (61.30) that needs to hold.  A break 
under this line could be a catalyst for cash to enter the dollar, 
helping equities.  In other news, the Sox index closed up 6.7% at 
381.74 and just above its 200 DMA (exponential) of 381.3.  


With a lot of talk revolving around the 200 Daily Moving Average, 
I want to preface by saying that I will generally look at the 200 
DMA on an exponential basis, but following a Simple MA is 
important as well since a ton of traders look at this reading.  
Here are the differences in a few of the main averages:

Contract (close)		200 (exp)	200 (simple)

Dow Jones (8931)               8947              9188
Nasdaq (1487)                  1487              1496
S&P 500 (SPX, 938.87)           965.31            984
Nasdaq 100 (NDX, 1125.69)      1130.52           1123.16
Semiconductor (Sox, 381.73)     381.73            409.04

With two indices closing right on its 200 EMA, there is a good 
chance this MA will become pivotal as we enter Friday’s shortened 
session and beyond.  

The December Mini-sized Dow Contract (YM02Z)

So, where is the aforementioned 50% retracement?  Looking at a 
chart of the Dow on a daily basis, a 50% retracement from the 
lows in October to the highs in March comes in at 8935 and almost 
matching the intra-day high on Wednesday (8939).  The last time 
the Dow set a relative low and retraced 50% back to the March 
highs traders were evidently ready to sell en masse.  Sure, 
times were different and the high near 9100 did fall on a 
descending bearish trend line; nevertheless, this is still 
something to keep an eye out for.  Note:  The ADX indicator is 
sloping downward from above the 40 level; reflecting that the 
recent upward momentum is losing steam.  However, if the +DI 
crosses above the –DI, bullish sentiment should at least give 
bulls some ammunition. 

Chart of Dow Jones, Daily 

A look at the Mini-Dow contract (10-minute chart) shows prices 
rising above 8800, 8825, and finally 8875 as bulls enjoyed the 
historically bullish timeframe (Wednesday to Monday).  With the 
YM contract above 8875, the next solid area of resistance is seen 
at 9000.  If prices do come under pressure, look for the 
aforementioned levels to provide support.  Note:  During market 
hours, I would recommend looking towards the Dow for guidance.  
Especially for resistance areas.  In my opinion, the key will be 
whether the Dow can move above 9077.  If this does happen, then 
the intermediate picture will change significantly (read: could 
possibly enter an entirely new bullish phase).  

Chart of YM02Z, 10-minute 


Support               Resistance                Pivot    
8875                    8935                    9077
8825                    9000                    9000
8800                    9077                    8875
8750                    9102                    8750

Bold signifies levels within the Dow Jones.  

The December E-mini Nasdaq 100 Contract (NQ02Z)

With the Nasdaq 100 (NDX) closing extremely close to both its 200 
DMA’s (exponential and simple), volatility should start to pick 
up.  It is interesting that the contract did not make a new 
monthly high (1132.80 versus 1133.73) on Wednesday, and this 
relative weakness will have to be watched.  The contract still 
rose 3.5 percent, and there is still a good chance that 1142 will 
be tested in the near term.  The only troubling sign would be a 
close below the 1070 level.  Note:  The top of the regression 
line currently comes in at 1145.

Chart of NDX, Daily 

A look at the mini-Nasdaq contract (NQ02Z) also shows the 
contract’s inability to settle above previous session highs.  
This isn’t necessarily bearish, but to keep the bullish sentiment 
strong the contract should at least hold the 1110 to 1120 level.  
The only reason why I didn’t write “bad tick” at the 1145 level 
was because (1) I did find 2 contracts traded there, even though 
I bet the exchange reverses the trade or changes the fill, and, 
more importantly, (2) when there is a bad tick, the market 
usually goes to that level to see what all the excitement was 
about.  It happened at the CBOT all the time, and could also have 
been related to stops being placed around that area.  Note:  
There really isn’t much resistance from 1145 to 1200.  

Chart of NQ02Z, 10-minute 


Support              Resistance                 Pivot 

1120				1130			1142
1110				1135.50		1135.50
1100				1142			1120
1079				1145			1110
1065				1200			1100

Bold signifies levels within the NDX.  

The December E-mini S&P 500 Contract (ES02Z)

Finally.  The S&P 500 Index finally settled above the bearish 
trend line that began in March, and this level (931.50) should 
hold going forward if bulls are going to continue putting new 
money to work.  Also important was the fact that the rising trend 
line (green) profiled yesterday was psychologically significant.  
Prices should not close underneath this line as well.  Once the 
top of the regression channel (950 area) is cleared, look for a 
move towards 965.  It would not be surprising if stops were 
triggered and prices gravitated upward to the 50% retracement 
level at 971.  

Chart of S&P 500 Index, Daily 

The ES02Z contract barely closed above 937.50, and does portend a 
move to 950.  Risk would be that the contract falls under 931 and 
927; starting a round or profit taking that takes the ES towards 
the bottom of the drawn channel (918.75).  I don’t expect much 
resistance at Wednesday’s high of 941, since that level seemed to 
be related to movements in other contracts; nevertheless, once 
above 941, I expect the level to become slight support.  Bulls 
could expect a trade of 950 before 937 if 941 is taken out; 
however, it will depend on volume due to a potentially light 
Friday session.  Always look for confirmation on an intra-day 
basis, since gaps, volume spikes, buy programs, etc. can quickly 
change the scope of things.  

Chart of ES02Z, 30-minute 


Support              Resistance          Pivot    
931.50			941		937.50
927				950		926.50
923				956		923.50
918.75			965		908.50

Bold signifies levels within the S&P 500.  

Good Luck.

Questions are welcomed,

John Seckinger


The table's set, and the gravy's just about done

We could smell that giblet gravy cook'n Monday evening and 
today's action sure has a bull's table looking decorative with 
last night's horn of plenty as a centerpiece.  The question now 
is what's for dessert?  Will it be pumpkin pie with a scoop of 
whipped cream to top off the "Thanksgiving rally" or a slice of 
mincemeat pie with the meat ingredient being that of a male cow?

The words "disgusting" and phrases like "I hate giblet gravy" 
were common words of traders earlier in the week, as childhood 
memories of such servings at Grandma's Thanksgiving dinner 
triggered were less than palatable.  The same could have been 
true for those that just weren't convinced that the markets could 
reverse an earlier session's drubbing because market history 
tended to be bullish.

We could pose the same question as last night in regards to 
today's economic news and the market's price action.  Was today's 
market response due to better than forecasted economic data, or 
simply a bullish tone ahead of Thanksgiving?  I'd say "a little 
bit of both," but risk for bulls continues to run high.

Maybe I've brainwashed this subscriber as his/her e-mail sounds 
interesting.  Is the trader a bull or a bear?


The markets have just been given the KISS OF DEATH.  BA has just 
traded a double top breakout (35.14) +4.4% and produced a buy 
signal.  Provided no other Dow component has reversed into a sell 
signal, the $BPINDU will rise another 3.33%, inching ever closer 
to that 80% extreme level from earlier this year.  Two more and 
we are there.  I liquidated all my longs here at the close and 
will sit out Friday.  I think the next move will be hard down and 
other than a day or two slip in the timing, is performing exactly 
per the Elliott wave analysis.  I seriously doubt BA can trade 
over the $36.00 level in that time.  With the bullish percents 
where they are, a bull trap looks very likely. Can you say "SHORT 
the weakling next week!"

Enjoy your Thanksgiving

I'd call this trader a "Bullbearo."  That's a cross between a 
bull and a bear that seems to have had the bullish side saying, 
"Enough is enough and I'm doing nothing for the next four days 
except stuffing myself with turkey and watching the CU Buff's 
beat up on Nebraska this Friday" and the trader doesn't want any 
interruptions for the post-Thanksgiving festivities.

However, he might not have been the only one thinking similar 
thoughts.  I can't see everything during a day, but some traders 
made some excellent observations today.  I'm not sure we always 
immediately understand what we see, or why "things" act/trade a 
certain way, but like a detective, the questions posed from 
observations become "clues" that we the detectives must try to 
understand in order to solve the mystery.

What's the trader doing in the above e-mail when talking about 
the more "overbought" bullish % levels?  The trader is looking at 
the market internals from a "big picture" view.  This may be 
analogous to Sherlock Holmes walking into the house of a crime 
scene and taking in a broader observations of his surroundings.  
The observation of Boeing (BA) generating a reversing "buy 
signal" has the very narrow Dow Industrials Bullish % ($BPINDU) 
seeing at least 1 stock (3.33%) added to the bullish %.  While 
these may be reiterations of things we've discussed recently, it 
appears to at least make sense to this trader as Sherlock Holmes 
whips out his magnifying glass.  The BA observation is a subset 
of the bullish %, but may be that one thread of evidence a trader 
uses to finally think.... "now I've seen everything."

And what's this observation/clue about?  Another subscriber 
wondered why the OEX puts he was trading on a short-term basis 
(why the subscriber is trading OEX puts instead of SPX puts I 
don't understand as the SPX has been an out performer when 
downside action takes hold) were actually rising in value as the 
OEX moved higher?  

The first place Sherlock Holmes would look is to the Market 
Volatility Index (VIX.X) 30.83 +7.27%.  What's that!  The VIX 
rising when stocks are rising?  That's DIVERGENCE historically as 
the VIX usually FALLS when stock prices RISE.  Talk about looking 
at a crime scene with a magnifying glass!  Again, another thread 
that may end up solving the puzzle.

Now we have some interesting observations and comments from other 
market participants.  Check out this 5-minute chart of the S&P 
Depository Receipts (AMEX:SPY) $94.28 +2.81%.  The reason I want 
to show the 5-minute chart is that some might have thought I was 
a little "off my rocker" for thinking that 11:00 AM was a time of 
day to begin looking for bullishness to build into the close.  
I'll admit that I didn't get the pullback in the morning that I 
had hoped for, but look at this chart and see if some of the 
things we've discussed so far don't show up in the SPY chart.  
The reason I'm showing the SPY chart is that I can look at 

S&P Depository Receipts "SPDRS" - 5-minute interval

The 5-minute chart of the SPY almost tells a story as today's 
action unfolded and the MARKET received new economic information.  
In the end, one would have to conclude that the MARKET was indeed 
responding bullish (buying) the SPY as the economic data was 
released.  The break above the 200-period (note: 200-PERIOD SMA, 
not 200-DAY SMA) came on the 10:00 release of the durable goods 
orders (2.8% versus 1.8% forecast) and the Chicago PMI (54.3 
versus 48.5).  I find it interesting that after that, the SPY 
rallied to $94 (near recent relative highs of last week and early 
this week) and stayed just below that level.  Then just before we 
thought "senior" trader would head out for the weekend, VOLUME 
picked up for 5-minutes (one interval) which hints of a final 
round of selling to finish up some institutional sell orders 
still yet to be filled by a head trader, before things were 
turned over to the "junior" trader as he/she is left to simply 
execute some smaller retail orders (you and I) into the 
Thanksgiving close.  

However, the observation that the VIX was rising today, despite 
higher price action in the markets is somewhat SUSPICIOUS as is 
the pick up in VOLUME into the close.  My analysis of the HIGHER 
VIX combined with increasing volume and slight downward action is 
that CBOE market makers that were providing liquidity to put 
buyers of SPX contracts, did some hedging against the put buyers 
(the market maker selling puts to the buyers of puts becomes 
OBLIGATED to buy SPX at whatever strike, less premium received, 
the market maker is selling).  It's the combination of the higher 
VIX and rather tapering off SPY trade into the close, that has me 
believing there were a lot of put buyers in the SPX today.  

Now... just because there are a lot of put buyers doesn't mean 
those put buyers are going to be correct in their trade.  
However, with the Bullish % at higher levels and SPX trading 938, 
then thinking becomes that put buyers don't see much upside above 
SPY $95.29 and or SPX 950 as it relates to our retracement.

Today's top 4 volume contracts in the SPX were the Dec. 900 put 
(SXBXT), Dec. 925 put (SXBXE), Dec. 925 call (SXBLE) and Dec. 975 
call (SXBLO), with respective volume of 5.4K, 4.9K, 4.5K and 
4.3K.  Believe me when I tell you I didn't check this out until 
after I thought that there was more put buyers in the market than 
call buyers, but I checked the volume traded just to see if 
analysis was at least partially right.  

Let us also make note tonight as a benchmark that the Dec. 900 
call (SXBLT) currently has 73,402 open interest and largest open 
interest (73.4K) for the SPX.  Let us also make note that the 
Dec. 900 put (SXBXT) is the second largest open interest contract 
(SXBXT) (68.3K).  

S&P 500 Index Chart - Daily Interval

I didn't get the SPX morning pullback near 900 that I wanted for 
a bullish entry, but did get the "horn of plenty" I was looking 
for.  My "gut feel" is that I'm blowing up a balloon that's 
getting bigger and bigger and somewhat "afraid" is going to pop.  
However, with hearing protection on and a tight stop under the 
$94 level in an SPY trade, or SPX 935 I would have held an SPX 
trade into Friday to see if that historically bullish day doesn't 
pan out as well as today did and look to sell some strength near 
949, which is $1 shy of 950.  For those more daring or able to 
keep an eye on the bond market, another strong round of selling 
in Treasuries could see a test of the 08/22/02 relative high.  
I'm not trying to lead bulls along with a carrot but for traders 
that may have booked some gains and now hold just partial 
positions, you've reduced risk in your account, raised some cash 
and can perhaps sit back and see just how far the SPX can run.  
I'm not looking at adding any new bullish positions at this point 
after today's move.

Today's action saw the S&P 500 Bullish % ($BPSPX) see a net gain 
of 5 stocks to new reversing "buy signals" as the bullish % grows 
1% to 66%.  This compares to the August relative high bullish % 
of 58% and March's high bullish % reading of 76%.

S&P 100 Index Chart - Daily Interval

The reason my "gut feel" is that I'm blowing up a balloon that 
could "pop" any minute is similar to the OEX getting so close to 
its relative high of August and the bullish % is now "blowing up" 
to 73% bullish.  If you twisted my arm and asked me if the market 
was found in October, I'd have to say yes.  What I want to touch 
on again tonight is the bullish % readings in the perspective of 
technical highs and lows.  See how the bullish % reading at the 
recent lows of the OEX were 18% compared to July's 8%?  Now we 
see the OEX Index itself at nearly identical relative highs of 
487, yet today's bullish % is 73% compared to 58% in August?  I 
would personally love to see an OEX trade above the August highs 
of 487.42 as that would be a technical sign from the OEX Index 
itself that a bottom could be called in this index.  A higher 
relative high and higher relative low is technical strength 
longer-term.  Just remember, even a longer-term bull market will 
have pullbacks.  We can't call a new "longer-term bull market" in 
the OEX until a relative high is taken out to the upside at this 
point, but even if it is, I think some type of pullback to at 
least 448 would be "healthy."  

NASDAQ-100 Tracking Stock (QQQ) - Daily Chart

Today's trade in the QQQ is suspicious to say the least.  Chip-
equipment maker Novellus (NASDAQ:NVLS) $37.43 +8.5% has the CEO 
saying at its mid-quarter update that he thinks a bottom in the 
chip sector is in.  NVLS did break above and close above its 200-
day SMA of $36.21, but the broader NASDAQ-100 as depicted by the 
QQQ could confirm.  The only two "technical" reasons I can come 
up with to explain today's inability to break above Monday's high 
is the 79% bullish % reading and the 200-day SMA, is finding 
willing sellers (long bulls taking profits and perhaps some bears 
trying to get a top).

Today's action hints that near-term upside becomes very limited 
to $30 and bulls must assess risk to upward trend and rising 21-
day SMA.  That's $2 reward for $2 risk right now and not very 
favorable for new entry and NO WAY I'm holding FULL POSITIONS 
long at this time.  For BEARS, MAX I'd be short or put right now 
is 1/4 as bulls can still get "carried away" to $30.  Plenty of 
time for the bullish % to reverse lower and even then we'd expect 
small rallies to be looking for bearish entry points.

Dow Industrials Chart - Daily Interval

In today's market monitor (15:08:02), I noted Boeing (BA) $35.02 
+4% had traded the needed $35.00 to have its point and figure 
chart generating a reversing point and figure "buy signal" which 
would have the very narrow Dow Industrials Bullish % ($BPINDU) 
seeing a net gain of 1 stock (3.33%) toward the bullish %.  

While it is somewhat bullish to see a laggard stock finally 
generate a reversing "buy signal" it is usually the laggards that 
give the later buy signals when the bullish % charts are at or 
near the more "overbought" levels.  Think about it.  Shorts have 
seen an impressive move higher in the indexes and perhaps some 
handsome gains eroded with the upside move.  After a while, those 
bears eventually understand that the rising tide will surely lift 
most boats and they cover short positions in those stocks that 
they still have some handsome gains in that have yet to erode.  
On the other side of the coin, you've got bulls that have stayed 
on the sidelines for the better part of a months, watched the 
bullish % charts reverse from deeply "oversold" level to now 
"overbought" levels and look to play a little bottom feeder 
action on the "rising tide lifts all boats" scenario.

It can be this type of action and that can then have the bullish 
% charts and so many stocks then on buy signals that market 
participants simply say... things are too bullish, too many 
stocks have given buy signals, and there's just not much upside 
left.  It is at those times that "risk" is perceived as high for 
the bulls and the market has always been very good at removing 

Traders should still be viewing the markets as bullish, but with 
a very cautious eye on things and not be OVER LEVERAGING in new 

The ONLY BULLS that are comfortable in FULL position calls are 
bulls that may have established 1/4 position in a trade at $22, 
then 1/4 position at $24, then 1/4 position at $26 and perhaps 
another 1/4 position at $28 today.  This would have a net cost 
basis of $24 and room to liquidate net profitable on a break 
lower at $26.  To envision this type of institutional trade, look 
at the QQQ chart from above.  Make the tie of $22, $24, $26 and 
$28.  Who knows, maybe the inability of the QQQ to break above 
Monday's high is that some 1/4 position longs from $22 were 
legging out (being sold) at $28 today.  Makes sense perhaps with 
the Bullish % up at 79%, compared to the bullish % at 14% when 
the QQQ was below $22.

I hope everyone has a great Thanksgiving!  Try not to chuckle if 
you sit down at the table and ask the host/hostess what kind of 
gravy was made as it tastes delicious!  The chuckle would take 
place when they say.... "giblet gravy!"  

Also... make an observation of what type of pie is served.  
Pumpkin or mincemeat?  If mincemeat, don't you dare ask what type 
of meat.

I must say that sometimes, I think "age" is catching up with me.  
While I "knew" all day, that today was Wednesday, when the 
markets closed, I somehow thought it was Friday and started 
writing my "Ask the Analyst" column instead of this Index Trader 

Now I don't have our weekly tabulation spreadsheet filled out and 
shown tonight.  I will get that in an update on Friday.  Maybe 
for the 01:00 Update so our friends at PremierInvestor.com can 
maybe make some weekly type observations.

Jeff Bailey

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Weiss, Peck & Greer (WPG) Funds 

Weiss, Peck & Greer of New York City is an investment firm that 
manages a broad range of equity, fixed income and "alternative" 
investments, including hedge funds, private equity, and venture 
capital.  Established in 1970, WPG currently manages around $18 
billion in assets for a variety of clients including endowments 
and foundations, private and public pension funds, Taft Hartley 
plans, corporations, and high net worth individuals.

WPG also sponsors a family of mutual funds called the WPG funds, 
which includes three equity fund products and four fixed income 
fund products that investors can pick from to meet their growth 
and income goals.  WPG Funds have no front-end or back-end load 
charges and require just $250 to establish an IRA account.  For 
regular accounts, the minimum initial purchase is $2,500 except 
for one core bond fund product, which requires $25,000 to invest 

Five WPG funds show up in Morningstar's database and they'll be 
our primary focus herein.  Further information on Weiss, Peck & 
Greer and the WPG Funds is available online at www.wpginvest.com. 

Additional Background

Weiss, Peck & Greer was founded in 1970 by a group of seasoned 
investment professionals to serve the needs of clients.  Today, 
the firm has more than 275 employees, per company sources, with 
offices in New York, Chicago and San Francisco.

WPG's website indicates that the firm's initial focus was asset 
management and venture capital for institutional and individual 
investors.  Soon thereafter "clearing" services were added as a 
service for investment managers, broker dealers, hedge funds and 
banks, the story goes.  Weiss, Peck & Greer added "fixed income" 
investment capabilities in 1974.  

In 1981, the firm began managing private equity investments in 
management buyouts, and in 1986 WPG introduced its first hedge 
fund product.  By 1988, WPG had expanded its "municipal" fixed 
income capabilities.  Additional "hedge" funds have since been 
established in 1997, 1999 and 2000.  Not all of WPG's products 
and strategies are currently offered in the retail marketplace.

WPG was acquired by Dutch asset management firm Robeco Group in 
September 1988 and is now part of the Robeco Group of companies.  
WPG retained its name and remains largely independent according 
to the WPG website.  Established in 1929 and based in Rotterdam, 
Netherlands, Robeco Group is one Europe's leading money managers 
with approximately USD 95 billion in combined assets.

Fund Overview

The WPG Funds fund family consists of three equity funds, two 
fixed income funds, and two money market products, as follows:

 WPG Equity Funds:
 Tudor Fund (TUDRX) 
 Large Cap Growth Fund (WPGFX)
 Quantitative Equity Fund (WPGQX)
 WPG Fixed Income Funds:
 Core Bond Fund (WPGVX)
 Intermediate Municipal Bond Fund (WPGMX)

 WPG Money Market Funds:
 Government Money Market Fund (N/a)
 Tax Free Money Market Fund (N/a)

WPG Tudor Fund, a small-cap growth fund in Morningstar's system, 
began operations on March 4, 1969 and since November 1, 2000 has 
been managed by Walter Prendergast, a senior VP with Weiss, Peck 
& Greer.  The Tudor Fund seeks capital appreciation by investing 
in common stock of U.S. companies with market capitalizations of 
less than $2 billion.  Dividend and interest income is secondary 
to the fund's long-term growth objective.

WPG Large Cap Growth Fund is true to its name.  It seeks capital 
growth over time by investing in equity securities of U.S. large 
cap companies, which offer the prospect for greater than average 
capital appreciation.  C. Lennis Koontz II has run the fund only 
since May 1, 2002.  WPG Quantitative Equity Fund seeks investment 
returns that exceed the returns produced by the S&P 500.  As its 
name implies, this product uses quantitative techniques to select 
"pools" of stocks and then weight them according to optimal risk 
and reward characteristics.  

WPG offers two taxable income products and two tax-free municipal 
income products for current income investors.  WPG Core Bond Fund 
seeks high current income, and capital preservation, by investing 
primarily in "high-grade" debt instruments.  These include notes, 
bills, bonds, mortgage-backed securities, asset-backed securities 
and money market investments.  The fund is designed to serve the 
"core" fixed income investment role.  WPG Intermediate Municipal 
Bond Fund seeks high current income "exempt" from federal income 
tax, consistent with relative stability of principal.  It favors 
high-grade debt securities with intermediate-term durations like 
its taxable fund sibling.

In terms of investment style/strategy, Weiss, Peck & Greer focus 
on the importance of compounding long-term capital growth, while 
also protecting client and mutual fund assets against volatility 
and risk during adverse markets.  WPG says they are committed to 
investment research, innovative strategies, disciplined approach, 
and quantitative investment analysis.  The firm believes superior 
long-term investment results can be best achieved through strong, 
consistent returns.

Fund Risk and Performance

First, to put fund risk or volatility into perspective, below is 
each fund's average standard deviation over the past three years, 
according to Morningstar.  Standard deviation is a risk statistic 
that measures how volatile fund returns have been over a specific 
time period.  It tells you how much share prices have fluctuated.

 Average Standard Deviations:
 3.9% WPG Core Bond Fund
 4.1% WPG Intermediate Municipal Bond Fund
 15.6% WPG Quantitative Equity Fund
 19.4% WPG Large Cap Growth Fund
 34.6% WPG Tudor Fund

For comparative purposes, Vanguard Total Bond Market Index Fund, 
which tracks the return performance of the Lehman Aggregate Bond 
index, had an average 3-year standard deviation of 3.5%, similar 
to the volatility produced by the two WPG fixed income products.  
Morningstar grades both funds as having "average" relative risk.  

Vanguard 500 Index Fund, which mirrors the return performance of 
the S&P 500 index, had an average standard deviation of 16.7% in 
the trailing 3-year period.  Tudor Fund's volatility is somewhat 
higher as evidenced by its 34.6% standard deviation, but average 
relative to its small-cap growth fund peers, using Morningstar's 
risk rating.  The quantitative equity and large cap growth funds 
both have "below average" risk ratings from Morningstar relative 
to their category peers.

WPG Core Bond Fund sports the best relative returns over the past 
five years.  According to Morningstar, the fund's trailing 5-year 
annualized return of 7.7% as of November 25, 2002 was 0.2% better 
than the LB Aggregate Bond index and strong enough to rank in the 
top 4% of the Morningstar intermediate-term bond category.  Since 
adopting its current strategy in 1998, the core bond fund product 
has delivered "high" returns relative to its category peers, with 
just average relative risk.

WPG Municipal Bond Fund's trailing 5-year returns rank in the top 
14% of its Morningstar category, Municipal National (Intermediate 
Term).  The fund's annualized return of 5.4% during the past five 
years was 0.5% less than the LB Municipal Bond index, however, so 
it slightly lagged its benchmark during the period.

Among the three WPG equity funds, the Quantitative Equity product 
sports the best relative return performance over the past 5 years 
according to Morningstar.  For the trailing 5-year period through 
November 25, 2002, the fund produced a tiny 0.6% annualized total 
return for investors, slightly lagging both the S&P 500 index and 
Russell 1000 index.  The fund's 5-year total return ranked in the 
large-cap blend category's 45th percentile near the middle of the 
pack, with below average relative risk.  

WPG Large Cap Growth Fund has also experienced below average risk 
relative to its category peers, producing an annualized return of 
negative 1.3% over the past five years, lagging the S&P 500 index 
by 2.3% but producing results on par with the Russell 1000 Growth 
index.  Long-term investors desiring a conservative growth-driven 
fund have a decent option here, especially when you look at risk-
adjusted performance relative to its large-cap growth fund peers.

Lastly, WPG Tudor Fund sports a 10-year annualized return through 
October 31, 2002 of 4.2%, underperforming the S&P 500 by 5.7% per 
annum but outperforming the Russell 2000 Growth index by 0.7% per 
year on average.  Unfortunately for investors, fund returns could 
have been better, with the fund ranking in the 89th percentile of 
the Morningstar small-cap growth category.  Note that performance 
has improved on a relative basis since Walt Prendergast took over 
the fund in November 2000.


While Weiss, Peck & Greer doesn't offer many mutual fund choices, 
the ones available to retail investors have for the most part put 
up competitive or better returns with average or lower investment 
risk relative to similar funds.  

Investors seeking current income from a diversified portfolio of 
high-grade fixed income securities have a suitable "core" option 
in the WPG Core Bond Fund.  Investors seeking capital growth may 
find one or more WPG stock funds appropriate for their long-term 
financial plan.   WPG Quantitative Equity Fund looks like it may 
offer investors the best return/risk tradeoff of the three stock 

For more information or to download a fund prospectus, go to the 
Weiss, Peck & Greer website located at www.wpg.invest.com.

Steve Wagner
Editor, Mutual Investor


Herbert Ehlers: Heritage Capital Appreciation Trust A (HRCPX)

Herbert E. Ehlers is chief investment officer and leader of the 
Goldman Sachs Asset Management team, which serves as investment 
subadviser to the Heritage Capital Appreciation Trust, a 5-star 
rated large-cap growth fund with a solid long-term track record.  

Working alongside Ehlers is David G. Shell, Steven M. Barry and 
Gregory Ekizian.  The three managing directors of Goldman Sachs 
share chief investment officer responsibilities with Ehlers and 
are senior portfolio managers of the Goldman Sachs team running 
the Heritage Capital Appreciation Trust fund.

Heritage Funds' website (www.heritagefunds.com) states that the 
Goldman Sachs Asset Management team is nationally recognized for 
their ability to identify businesses that are both strategically 
poised for long-term growth and reasonably priced.  The Goldman 
Sachs Asset Management group has a reputation for their skilled 
professionals, strong commitment to service, and products which 
are based upon sophisticated quantitative models and top-ranked 
fundamental research.

Founded in 1985, Heritage Asset Management currently manages in 
excess of $7 billion in assets for individual and institutional 
clients through a diverse family of open-end mutual funds.  The 
Heritage Funds are available through financial advisors and the 
leading brokerage fund marketplaces.  Class A shares have front 
loads of 4.75%; B shares have deferred loads, higher 12b-1 fees 
and conversion features; C shares have level loads.  Our report 
uses the Class A shares for comparison and evaluation purposes.
For more information on the Heritage Funds and Heritage Capital 
Appreciation Trust, log on to the www.heritagefunds.com website.

Fund Overview

Heritage Capital Appreciation Trust A (HRCPX) pursues long-term 
capital appreciation by normally investing at least 65% of fund 
assets in securities the subadviser (Ehlers et al) believe have 
the potential for capital appreciation.  These holdings consist 
primarily of equity securities the Goldman Sachs Asset Management 
investment team considers to be "undervalued" in relation to the 
company's long-term growth fundamentals. 

The Ehlers led team may invest up to 10% of assets in securities 
of foreign issuers including American depositary receipts (ADRs).  
As of September 30, 2002, the fund had no foreign stock exposure 
per Morningstar.  Note the fund was also fully invested with its 
assets invested 99.9% in stocks.

Because the Goldman Sachs team will look for value opportunities 
in growth sectors and securities, the Heritage fund's investment 
style has fluctuated in recent years between large-cap blend and 
large-cap growth according to Morningstar's "style box" analysis.  
With an average market capitalization of $12.5 billion, the fund 
is classified by Morningstar as "large-cap."  The term multi-cap 
may be a better description, with the fund putting 39% of assets 
in the mid-cap sector at quarter-end.  

Accordingly, when evaluating this fund's relative performance is 
may be helpful to compare it to both the S&P 500 large-cap index 
and an index that it has a higher correlation to such as Russell 
1000 Growth index.  In terms of fund comparisons, it may help to 
evaluate the Heritage against large-blend and large-growth funds.  
Given its moderate approach to growth equity investing, the fund 
could serve a "core growth" role in someone's long-term financial 

With the Heritage fund product, you also receive some of Goldman 
Sachs' highest conviction stocks.  According to Morningstar, the 
Heritage fund was concentrated in just 31 stocks at September 30, 
with 55% of assets invested in the fund's top ten holdings.  Two 
stocks constituted over 8% of fund assets at quarter end: Viacom 
Class B (8.9%) and Harrahs Entertainment (8.8%).  The Ehlers led 
team also had over 5% positions in Freddie Mac, Intuit, Westwood 
One, and Fannie Mae.

At 1.22%, the fund's current expense ratio is below average when 
compared to the average large-cap growth fund (1.51%) using data 
from Morningstar.  That gives it a slight expense advantage over 
other large-cap growth funds on the market.    

Fund Risk and Performance

Let me begin by saying that since inception of Heritage Capital 
Appreciation Trust in December 1985, it has produced an average 
annual total return of 10.4% (through September 30, 2002) after 
adjustment for the Class A sales charges.  So, over the past 17 
years, Ehlers' team has delivered competitive long-term returns 
for investors staying the course.

The fund's trailing 10-year average total return through October 
31, 2002 of 12.0% was strong enough to rank in the top 4% of the 
Morningstar large-cap growth category.  It was also 2.1% greater 
than the average return generated by the S&P 500 large-cap index 
and 4.5% above the Russell 1000 Growth index, which includes mid 
and large growth stocks.

During the recent 10-year period, Heritage Capital Appreciation 
Trust had a "below average" risk level relative to its category 
peers using Morningstar's 10-year risk rating.  The combination 
of "high" returns and "below average" risk over the past decade 
gives this Goldman Sachs advised fund one of the better records 
of risk-adjusted performance in the large-cap growth peer group.

Heritage Capital Appreciation Trust's 5-year and 3-year returns 
through November 25 also rank in the category's top decile (10%).  
The fund's 6.3% average rate of return over the past five years 
outpaced the S&P 500 index by 5.3% and Russell 1000 Growth index 
by 8.1%, while ranking in the category's 4th percentile.  During 
the past three years, a volatile period, the Goldman Sachs team 
held the fund's average loss to 9 percent, 2.9% better than the 
S&P 500 index and 9.8% better than the Russell 1000 Growth index, 
ranking in the category's 6th percentile.

Suffice to say, Ehlers, Shell, Barry and Ekizian are getting the 
job done here, generating above-average returns over time versus 
similar funds while preserving capital better than peers in down 
markets.  On a risk-adjusted basis, performance is strong enough 
to earn Morningstar's highest 5-star overall rating.

Though the fund's 16.6% loss over the past 12 months isn't the 
greatest on an absolute basis, it still saved you a percentage 
point relative to the S&P 500 index and curbed 5.9% off of the 
Russell 1000 Growth index decline.  Over the last three months, 
the S&P 500 and Russell 1000 Growth indices are up 5.1% and 5%, 
respectively.  Heritage Capital Appreciation Fund has a 3-month 
total return of 4.7%, not far off the market benchmarks.


Heritage's strategic alliance with Goldman Sachs Asset Management 
gives investors access to one of the leading investment advisers.  
Investors seeking a long-term growth objective fund that invests 
in stocks of companies poised for long-term growth and priced at 
reasonable valuations have a compelling option here.  

With its "GARP" style, Heritage Capital Appreciation Fund serves 
nicely as a "core growth" investment.  With the product, you get 
some of the Goldman Sachs Asset Management team's best ideas for 
long-term growth in the giant-cap, large-cap and mid-cap sectors.  
Its multi-cap core (GARP) style should appeal to a lot of equity 

As the fund's 15-year numbers show, staying the course can raise 
the prospects of success.  Its 10.4% average rate of return over 
the past 15 years includes the market downturns of 1990-1991 and 
2000-2002.	The 15-year numbers provide a reasonable expectation 
of annual return performance.  Morningstar says this fund "gives 
growth investors plenty of reasons to keep the faith".  We agree.

For more information or a fund prospectus log on to the Heritage 
Funds website at www.heritagefunds.com.

Steve Wagner
Editor, Mutual Investor


Trading on Friday?
by Mark Phillips

Yes that's a question for each and every one of you.  Much to
the chagrin of many of my regular readers, I'm not going to say
one word about any sort of trading strategy today.  No charts,
no technical studies, no theories about new and exciting
entry/exit techniques.  No, I'm going to talk about something
FAR MORE important.  

Widely known as one of the lightest trading days of the year,
the day after Thanksgiving (November 29th this year) is not what
I would call a high odds trading session.  I understand that
many of you are loathe to miss a minute of live market action,
especially on a day that has a historical upward bias.  But
trading a historical bias is a thin justification for a trade.

Most traders I know are wrapping up operations by midday today
and not taking a peek at the markets until the opening bell rings
on Monday.  At least in the U.S., this extended weekend is a gift
that we take full advantage of in order to reflect on the many
things for which we have to be thankful, not the least of which
is a free market that we can use as our own personal printing
presses once we learn how it works.  Like any other piece of
machinery, it requires regular lubrication and maintenance,
accomplished during scheduled periods of down time.  This
extended weekend should be blocked out on your calendar as
mandatory downtime, whether you observe the Thanksgiving holiday
or not.  If you do observe the holiday, then the next few days
should be filled with family, friends, food and fun -- anything,
so long as it rejuvenates you and isn't related to the markets.
And if you don't observe the holiday (for whatever reason), then
the next few days should be filled with family, friends, food
and fun.  Notice the parallel?  We all need time away from the
markets in order to recharge our batteries.  Since the market is
closed on Thursday and only open half a day on Friday, this is
a perfect opportunity to accomplish that "task".

So let me pose the question again -- Are you trading on Friday?
Those of you that answered in the negative have clearly learned
from the Options 101 article I wrote a few months back in early
July entitled "Options, Priorities and Balance", where I gave a
real-world personal example of maintaining balance and harmony
in life.  You don't need to read the rest of this article.

The rest of this article is for those of you that are still
planning on trading on Friday.  You may think I'm being overly
dramatic here, but if you do not establish a habit of regularly
taking some time away from the market, you'll either burn out
or eventually blow up your account.  This is a topic that I think
gets far too little coverage in our industry, so I'm endeavoring
to make my contribution to correcting that oversight.

If you're planning on trading on Friday, then in my opinion you
fall into one of two categories:

1. You have no open positions, but are hoping the day provides
   a profitable trading opportunity.

2. You have open positions, which are either underwater or

There, that's pretty simple, isn't it?  Let's deal with the first
group, as it is the easiest.  We've already covered that the
session is likely to have light volume, which usually leads to
a lack of directional moves, and hence a dearth of profitable
trades.  If in light of that information, you still want to sit
in front of your computer in search of profitable trades, then I
would submit that it is entirely possible you have an addiction
problem with respect to the market.

If you can't step away, even when the odds are not in your favor,
that smacks of a gambler's mentality and I would strongly suggest
you need to re-evaluate your priorities.  The market has provided
solid trading opportunities since long before each of us became
involved in this business, and will continue to do so long after
we are gone.  Is one day going to make a measurable difference in
your profits this year?  Would one day of leisure make a
difference to your 6 year-old daughter, spouse or your parents?
Only you can answer those questions, but I think you know the
answer.  If not, why don't you ask your daughter, spouse or
parents how they would prefer you spend the day.

Alright, now lets talk about the group that has open positions
that they feel the need to watch on Friday.  First up, the
positions that are currently profitable.  The solution here is
simple.  Either close the trades for a profit or set a stop that
fits with your own risk profile.  Isn't that easy?  Let the
process take care of itself so that you can enjoy a bit of down

Holding unprofitable trades is a bit more complex, because we
need to examine why they are unprofitable and by how much.  Have
you allowed a loss to grow so large as to be uncomfortable?  If
so, then I'll hazard a guess that you haven't developed (and
followed) a business plan like Jeff Bailey has been advocating
for quite a while now.  If that's the case, then PLEASE go
immediately to his recent Ask the Analyst columns (the past 2
weeks) where he has done some excellent coverage of how to plan
your trading and then follow that plan.  If the pain level on
open trades is greater than what you are comfortable with, then
you are either over-leveraged on those trades or you neglected
to implement a stop-loss strategy, or both.  Getting your house
in order with respect to proper account management would be a
MUCH BETTER use of your time on Friday than baby-sitting a
losing trade.

Keep in mind that it is never too late (until an option goes
'no bid') to implement damage control.  If you bought an option
for $2.00 and it is now only worth $0.50, either sell it to
take the loss, or place a stop loss just below the current
level to prevent that loss from growing.  If you initially
placed the trade with 100% risk capital using proper account
management as Jeff advocates, then there is no need to watch it.
Put in a sell order in case the play achieves your desired
profit level and then review what happened next week.

If you haven't let any of your open trades get away from you,
then the solution for Friday is simple -- place a stop order
at the appropriate level according to your business plan.  The
system will automatically take you out of the trade at your
pre-determined pain level and the damage is limited.  Either
that, or the stop will not be triggered, leaving the position
open and ready to be handled on Monday.  All the while, you are
away from the market, focusing on other activities that will
(among other things) recharge your batteries.

My intent here is not to beat up on anyone that has perhaps
gotten a bit out of balance in his/her trading business.  It
is my sincere hope that nobody actually read this far in the
article, meaning that you all have your life in the appropriate
balance and are already planning on enjoying the long weekend.
If any of the above scenarios apply to you, then please take
corrective action to get the balance back in your trading life.
If this article helps just one of you to refocus your efforts
and get back on track, then I consider it a screaming success.

Here's one last parting thought for those of you that took the
trouble to read the entire article.  Nobody ever lay on their
deathbed and wished they had spent more time at the office.
Make sure to set your priorities correctly and the effort will
pay dividends for the rest of your life, and probably beyond.

Have a wonderful (and hopefully long) weekend!


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Just Couldn't Resist
We finished the day on what looked like a 
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The Option Investor Newsletter                Wednesday 11-27-2002
Copyright 2002, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

In Section Two:
Stop Loss Updates: SLM
Dropped Calls: None
Dropped Puts: None
Play of the Day: CALL - QCOM
As Bull Stampede Continues!

Updated on the site tonight:
Market Watch
Market Posture

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Stop-Loss Adjustments

SLM - put
Adjust from $103 down to $101.50





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QCOM – Qualcomm, Inc. $40.45 -1.45 (-0.23 this week)

Company Summary:
Based on its proprietary CDMA technology, QCOM is engaged in
developing and delivering digital wireless communications
services.  The company's business areas include integrated
CDMA chipsets and system software and technology licensing.
QCOM owns patents that are essential to all of the CDMA
wireless telecommunications standards that have been adopted
or proposed for adoption by the worldwide standards-setting
bodies.  Currently, QCOM has licensed its CDMA patent portfolio
to more than 80 telecommunications equipment manufacturers
around the world.

Why We Like It:
While it is now common knowledge that Technology stocks have been
leading the recent market rally, many investors have missed the
fact that the Wireless Telecom index (YLS.X) was the first
sub-sector to rise above its 200-dma (currently $51).  Since that
breakout, the YLS rose through the $60 level, led in part by
strong stocks like QCOM.  Showing strength relative even to the
YLS index, QCOM broke out above its 200-dma in mid-October, and
once the sector caught up, it helped to propel QCOM through
resistance at $37, and then again at $40.  That initial surge off
the October lows generated a strong Buy signal on the PnF chart,
with a corresponding bullish price target of $60.  Combining
fundamentals with technicals, QCOM has been propelled higher by
positive news in recent weeks, capped off by last Wednesday's news
that Samsung will be using QCOM chips in its new wireless phone.
Since its breakout, we've been looking for a pullback to allow us
to initiate a bullish play on this strong stock, and with today's
bout of profit taking, it looks like our opportunity has arrived.
While the YLS index slid by 4.5% on profit taking, QCOM only gave
up 3.5% and held above the important $40 support level.  This is
particularly impressive when you consider the Legg Mason downgrade
this morning from Buy to Hold due to valuation.  While a rebound
from the $40 level might make for a favorable entry point into the
play, the severity of the broad market weakness on Tuesday has us
thinking that a dip and rebound from the $39 support level is more
likely.  We want to give this play some room to move due to its
sometimes volatile nature, so we're initially setting a fairly
wide stop at $36.75, just below last week's lows.  Any
volume-backed rebound from above that level can be used for
initiating new positions, provided the YLS index is also showing
positive price action.  If momentum trading is your strategy,
then you'll want to wait for QCOM to rally through the $42 level
before playing.

Why This Is Our Play of the Day:

After the consolidation over $40, QCOM never got the dip back 
below that level that looked likely after Tuesday's broad market 
sell-off.  Today's action saw the stock up $1.19 on the day, with 
a high of $41.98.  The high on Monday was $42.00, which gives us 
a good gauge on entry for a momentum play. We like a move over 
$42.00 on a continuation of today's rally.  Look for a breakout 
over that level, and some signs of support there, as well.  
Ideally we will get a break above $42 and then a re-test of that 
level as support intraday, which traders can use for entry.  If 
we get a pullback, look to enter on support at $40. 

BUY CALL DEC-37 AAW-LU OI=15135 at $5.10 SL=2.50
BUY CALL DEC-40*AAW-LH OI=11254 at $3.20 SL=1.60
BUY CALL DEC-42 AAO-LV OI= 5194 at $1.75 SL=0.75
BUY CALL JAN-40 AAW-AH OI=18779 at $4.50 SL=2.25
BUY CALL JAN-42 AAO-AV OI= 5689 at $3.00 SL=1.50

Average Daily Volume = 16.5 mln

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Stocks Rally As Bull Stampede Continues!
By Ray Cummins

The major equity averages roared higher today on news of favorable
economic data.  A slew of reports suggested that consumer sentiment
is improving and personal incomes and spending are increasing at
better-than-expected rates.  Unemployment claims have also fallen
recently and manufacturers' durable goods orders have climbed more
than previously anticipated.  The Dow Jones Industrials gained 256
points to 8,932 led by bellwethers General Motors (NYSE:GM) and
Citigroup (NYSE:C).  The NASDAQ Composite jumped 44 points to 1,488
on strength in computer hardware, networking, and Internet shares.
The broader-market S&P 500 index rose 25 points to 938 as investors
returned to retail, airline and financial stocks.  Trading volume
was light at 817 million shares on the NYSE and at 1.1 billion on
the NASDAQ.  Winners ousted losers 3 to 1 on the NYSE and 5 to 2 on
the technology exchange.  In the bond market, treasury yields fell
amid the bullish activity in stocks.  The 10-year note slumped 15/32
to yield 4.12% while the 30-year bond slid 21/32 to yield 4.98%.




The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of actual traders, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The play commentary (when provided) is simply a service to help
new traders understand when positions might be opened and closed.
In most cases, actions taken based on the commentary would be far
too late to be effective, thus it is not intended as a substitute
for personal trade management nor does it replace your duty to
diligently monitor and manage the positions in your portfolio.

Naked Puts

Stock  Strike Strike  Cost Current  Gain  Potential
Symbol  Month  Price Basis  Price  (Loss) Mo. Yield

CCMP     DEC    40   38.80  58.27   $1.20    7.04%
CDWC     DEC    40   39.15  49.48   $0.85    5.10%
FRX      DEC    85   83.05  106.12  $1.95    5.14%
GILD     DEC    32   31.85  36.77   $0.65    4.41%
KLAC     DEC    30   29.25  42.77   $0.75    6.06%
NBIX     DEC    35   34.30  46.23   $0.70    4.64%
AZO      DEC    75   73.05  80.10   $1.95    6.05%
COCO     DEC    30   29.40  38.20   $0.60    5.89%
GILD     DEC    30   29.40  36.77   $0.60    5.36%
IGEN     DEC    30   29.15  37.68   $0.85    8.01%
MSFT     DEC    50   49.00  56.90   $1.00    4.62%
NBIX     DEC    35   33.85  46.23   $1.15    9.08%
SNPS     DEC    35   34.50  50.12   $0.50    4.31%
CYMI     DEC    25   24.70  36.52   $0.30    4.33%
IR       DEC    35   34.50  44.50   $0.50    4.97%
LLTC     DEC    25   24.75  32.36   $0.25    3.84%
MERQ     DEC    25   24.65  31.96   $0.35    5.33%
QCOM     DEC    33   32.10  40.33   $0.40    4.31%
QLGC     DEC    30   29.60  42.26   $0.40    4.67%
SYK      DEC    60   59.15  61.45   $0.85    4.15%
TTWO     DEC    22   22.20  29.97   $0.30    4.91%

Stryker (NYSE:SYK) offered a great "target-shooting"
entry but now the issue has turned south and it may
quickly become an early-exit candidate.

Naked Calls

Stock  Strike Strike  Cost   Current  Gain  Potential
Symbol Month  Price   Basis  Price   (Loss) Mon. Yield

ABK      DEC    65    65.90  59.82   $0.90    4.88%
ATK      DEC    65    66.05  57.65   $1.05    5.24%
EXPE     DEC    80    81.05  74.88   $1.05    5.16%

Put-Credit Spreads

Stock                                             Gain
Symbol  Pick   Last  Month L/P S/P Credit  C/B   (Loss) Status

FCN     41.18  38.25  DEC   30  35  0.55  34.45  $0.55   Open
MSFT    57.03  56.90  DEC   48  50  0.30  49.70  $0.30   Open
SNPS    47.35  50.12  DEC   35  40  0.60  39.40  $0.60   Open
COLM    40.85  43.71  DEC   30  35  0.60  34.40  $0.60   Open
CCMP    53.80  58.27  DEC   40  45  0.50  44.50  $0.50   Open
ROOM    68.94  70.11  DEC   55  60  0.50  59.50  $0.50   Open
WFMI    50.55  51.00  DEC   40  45  0.30  44.70  $0.30   Open
XL      80.15  79.50  DEC   70  75  0.50  74.50  $0.50   Open

Call-Credit Spreads

Stock                                             Gain
Symbol  Pick   Last  Month L/C S/C Credit  C/B   (Loss) Status

CAH    70.01   61.04  DEC   85  80  0.55  80.55  $0.55   Open
FNM    68.21   62.00  DEC   80  75  0.75  75.75  $0.75   Open
APA    50.00   51.82  DEC   60  55  0.60  55.60  $0.60   Open
LLL    44.49   44.51  DEC   55  50  0.50  50.50  $0.50   Open
TOT    67.37   65.66  DEC   80  75  0.45  75.45  $0.45   Open
BRL    58.13   64.92  DEC   70  65  0.65  65.65  $0.65  Closed
CAH    75.70   61.04  DEC   75  70  0.80  70.80  $0.80   Open
NVS    38.40   37.89  DEC   45  40  0.50  40.50  $0.50   Open

Barr Laboratories (NYSE:BRL) has completely reversed its recent
trend and the bullish activity suggests the position should be
closed to protect gains and/or limit losses.

Credit Strangles

Stock   Strike  Strike  Cost   Current  Gain   Potential
Symbol  Month   &Price  Basis  Price   (Loss)  Mon. Yield

KBH      DEC     50C    52.00   43.55   $2.00    7.68%
KBH      DEC     40P    38.75   43.55   $1.25    6.67%
THO      DEC     40C    40.50   39.73   $0.50    4.34% *
THO      DEC     30P    29.50   39.73   $0.50    4.46%

Conservative traders should have closed the Thor Industries
(NYSE:THO) position when the issue moved up and out of the
recent trading-range top (near $37) on heavy volume.

Synthetic Positions:

No Open Positions

Questions & comments on spreads/combos to Contact Support


The editor of this section is enjoying the Thanksgiving holiday
with his family, thus there will be no new positions this week.
There will be an abbreviated selection of spread and combination
plays in Saturday's edition of the Option Investor Newsletter.

Happy Thanksgiving!



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