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Daily Newsletter, Tuesday, 01/28/2003

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The Option Investor Newsletter                 Tuesday 01-28-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Not What I Expected
Futures Markets: Trading Levels
Index Trader Wrap: Gains evenly distributed among the indexes
Market Sentiment: What Goes Down
Weekly Fund Screen: Two "Capital" Ideas


Updated on the site tonight:
Swing Trader Game Plan: Anticipation


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
01-28-2002                  High    Low     Volume       Adv/Dec
DJIA     8088.84 +  99.28  8144.00 7991.07    1438 mln  2091/1189
NASDAQ   1342.18 +  16.91  1346.50 1321.44    1381 mln  2064/1237
S&P 100   434.65 +   5.18  436.15  429.47      totals   4155/2426
S&P 500   858.54 +  11.06  860.76  847.48
RUS 2000  373.17 +   4.59  373.44  366.59
DJ TRANS 2165.44 +  21.43 2172.09 2141.26
VIX        35.74 -   4.03   38.68   35.52
VIXN       46.75 +   0.34   47.52   45.82
Put/Call Ratio 0.62
************************************************************

Not What I Expected
Linda Piazza

Good news!  The Commerce Department tallied new home sales at an
annualized rate of 1.082 million, rising from November's revised
rate of 1.045 million.  Inventories fell to 3.8 months' worth
from November's 3.9 months' worth.  The median price rose.

Looking beneath the numbers, however, showed flat sales in the
South and declining sales in the West and Northeast.  Only the
Midwest saw increased sales, with that region's surge offsetting
the troubling results in other regions.

Looking beneath the numbers proved advisable when studying the
durable goods number, too.  The 0.2% increase in December orders
disappointed economists who had expected a 0.8% gain, but the
number was even worse than it appeared on the surface.
Commercial aircraft accounted for much of the 0.2% increase, but
aircraft orders can be volatile.  Positive December ISM numbers
had led many to expect stronger growth in durable orders, with
some forecasting a 1.0% rise.

Many look to the non-defense capital goods portion of the durable
goods number as a better measure of economic strength.  That
component showed a 2.85% gain, but commercial aircraft orders
contribute to this component, too.  With aircraft orders backed
out of the non-defense capital goods component, it fell 0.1%.
Orders for cars and communication equipment declined.
Inventories rose, perhaps indicating that capital goods aren't
being shipped as orders slow.

The day's release of economic numbers also included the consumer
confidence number.  That measure slipped to 79 in January from a
revised 80.7 in December, meeting forecasts.

Again, it proved important to look beneath the headline numbers.
While the component that measures current conditions rose from
December's 69.6 level to 75.4, the portion that measures
expectations for the next six months plummeted to 81.4 from
December's 88.1.  Some blamed the 6% unemployment rate for the
decline in consumer confidence.

How did the markets react to these numbers?  Markets climbed into
the 10:00 ET time period, but began falling toward the day's lows
as markets digested the numbers.  Most markets then traded in a
tight range until late in the session when short-covering drove
them up toward new highs.  Markets closed slightly off those
highs.  Moderate volume levels registered 1.45 billion shares on
the NYSE and 1.41 billion on the Nasdaq.

With markets showing short-term oversold conditions, I expected
stronger short-covering today ahead of Bush's State of the Union
address.  Perhaps shorts were enticed to hold their positions by
rumors that Bush will use tonight's forum to unveil evidence that
Iraq possesses weapons of mass destruction.

Others discount that possibility, saying that Colin Powell will
reveal the evidence within the next several days.  The U.N.
Security Council begins debates on Iraq tomorrow, with France,
Germany, Russia, and China urging that the inspectors be given
enough time to complete their work.  Russia reportedly hinted
that it might change its position if evidence of Iraqi duplicity
were presented. The outcome of the debates should prove
interesting.  On Wednesday, Hans Blix surprised many by the frank
tone of his address to the U.N. and by his enumeration of
instances in which Iraq had failed to be forthcoming.

The FOMC meeting concludes tomorrow.  While few suggest that
interest rates will change, CNBC and Bloomberg guests speculated
today that market participants will pay special attention to the
bias statement.  Currently, the Fed maintains a neutral bias.

Ahead of the U.N. Security Council debates and the FOMC
statement, the world's attention focuses on Bush's address
tonight.  Today saw the FTSE 100, the CAC 40, and the DAX post
small gains, but markets across the world have plummeted lately
as they react to fears that the U.S. will immediately engage Iraq
in a war.  Powell set out a timetable yesterday, saying that Bush
would spend this week conferring with world leaders and that a
decision on the appropriate next step would be made the following
week.

While it's not certain that Bush will reveal his new evidence
tonight, he will use his address to convince the U.S. public and
potential allies of the need for action sooner, rather than
later. Acutely aware of his father's perceived shortcomings when
dealing with the U.S. economy, he'll also push his economic
agenda.  Aides claim that half his speech will be devoted to his
economic package, including relief to the elderly facing
expensive prescription medication costs.  That economic package
will assume greater importance as recession talk revives ahead of
the expected flat GDP number on Thursday.

Recession talk has swirled around Japan and Germany for some time
now as the world's second and third-largest economies struggle
with grim outlooks.  Today, Taiwan Semiconductor (TSM), the
world's largest contract microchip maker, reported an
unexpectedly sharp fall in Q4 net profit, but insists that it
will see a recovery begin by Q2 in 2003.

When insurer Assicurazioni Generali announced earnings last week
that included write downs of its stock investments, analysts
concluded that other insurers could be suffering from disastrous
stock investments.  Trader talk this week concluded that
worldwide, insurers were probably selling equities to preserve
funds needed to pay claims.  Today, Fujitsu, Japan's number one
PC maker, reported losses that it attributed both to slowing
sales and to the devaluation of its marketable securities.

Why should we be concerned about what's happening in these
economies?  First, if companies throughout Europe and Asia suffer
from devaluations of their marketable securities, that's likely
happening in the U.S., too.  In addition, insurers and other
companies selling securities to maintain their reserves might be
selling dollar-denominated assets, as has been theorized of late
as foreign investors pull out of the U.S. market.  Also, as these
other economies weaken, our exporters and multinational companies
suffer.

What do the charts say about our economy?  Since we rarely look
at the Wilshire 5000, let's take a look at the broadest of our
markets.  Because most of us are not as familiar with the
Wilshire's chart as we are with others, we can view these charts
with a less biased outlook and the other indices will be covered
in the Index Trader Wrap.

First, let's look at the weekly chart, courtesy of Q-charts.
Notice the green descending trendline, a line that has capped the
Wilshire since early 2000.  Notice that the 21(3)5 stochastics
are just now rolling down from overbought levels while MACD rolls
down from beneath the zero level.  RSI also turns down.  While
some might argue that the Wilshire made a double bottom in July
and August, note that the Wilshire failed in its effort to move
above the peak between the double bottoms, failing to confirm
that double-bottom pattern.  The outlook is bearish.

Wilshire 5000 Weekly Chart:


Next, let's look at a daily chart.  Although it's often possible
to argue about the exact location of the neckline of a head-and-
shoulder pattern, it's clear that the Wilshire broke through its
neckline on Friday.  I've marked that neckline in green.

Of special interest is the behavior of the RSI and MACD
oscillators.  Since late summer, these oscillators had been
forming a series of higher lows.  I've marked those higher highs
in red.  When the Wilshire broke through its neckline, these
oscillators also fell through their ascending lines, confirming
the weakness in the Wilshire.  With that evidence and with the
break of the H&S neckline, the intermediate-term outlook for the
broader markets is bearish.

Note, however, that the 21(3)3 stochastics are buried at oversold
levels and appear to be hinging up.  RSI turned up, too, and
faces the new resistance at that broken trendline.  On the price
chart, today's white candle is a harami, completely contained
within the bigger red candle that preceded it. A harami indicates
indecision, an inside day.  It's possible that tomorrow could see
an upside break of that inside day or harami, but that upside
break should stop short of that broken neckline.  Based on this
evidence, selling rallies still seems the best policy in the
intermediate term.

Wilshire 5000 Daily Chart:


What about the short-term outlook? For that, I've dialed down to
a 60-minute chart.  I've included both the 21(3)3 and 5(3)3
stochastics.  The shorter-term 5(3)3 stochastics show that
today's action relieved much oversold pressure, with the 5(3)3's
moving all the way up into overbought levels.  The 21(3)3
stochastics are just now moving up out of oversold territory, but
note that the last move out of oversold territory brought these
stochastics only up to current levels before they turned down
again. RSI flattened today at levels near where they last turned
down.  MACD, however, dipped far into oversold territory and is
clearly turning up.

What's happening to price while all this occurs?  Today saw
prices moving up in a regression channel that formed higher highs
and higher lows.  This regression channel moved counter to the
prevailing move, which was sharply down.

That's bullish, right?  Not necessarily.  It fits the classic
definition of a bear flag formation.  We won't know for sure if
it's a bear flag until it breaks out to the upside or breaks down
out of that formation.  Most often, bear flags tend to break down
no later than halfway up the previous movement.  I've marked the
midpoint of the previous movement in red.  The neckline of the
H&S formation sits above that, marked in green.

Wilshire 5000 60-minute Chart:


I can see two scenarios tomorrow for the Wilshire 5000 and
therefore for our broader markets.  One is that the Wilshire
confirms the bear flag formation by falling through the
regression channel and then below yesterday's lows.

Another scenario sees the Wilshire push through the top of that
channel, rising to test the midpoint of the previous decline, at
8230, or perhaps rising to test that broken H&S neckline.  I
would expect failure at one of those levels, however, with the
ultimate direction being the same as that in the previous
scenario:  down.

While the COMPX and NDX charts show that they're outperforming
the broader markets, charts of the two S&P's look similar to the
Wilshire's.

Be careful trading ahead of Thursday's GDP number and
geopolitical developments that might change the markets' outlook.
Prepare for possible sharp short-covering rallies by determining
your stops ahead of the trading day, but don't be fooled into
believing that the longer-term outlook has changed.  That outlook
will change someday.  I'll be watching the patterns I've outlined
to pinpoint the moment when that outlook changes.  Now you'll be
watching, too.


***************
FUTURES MARKETS
***************

Trading Levels
By John Seckinger
jseckinger@OptionInvestor.com

All three futures contract gravitated around their daily pivot
levels on Tuesday, but that should drastically change following
the President's speech.  It will then all come down to trading
levels once again.

Tuesday, January 28th at 4:15 P.M.

Contract      Last    Net Change    High        Low       Volume

Dow Jones    8088.84   +99.28     8114.00     7991.07
YM03H        8051.00   +68.00     8094.00     7964.00     26,839
Nasdaq-100   1001.41   +15.00     1006.51      983.95
NQ03H         998.50   +10.00     1008.50      982.50    226,443
S&P 500       858.54   +11.06      860.76      847.48
ES03H         854.50    +7.25      860.00      845.00    744,265

Contract         S2         S1       Pivot        R1         R2

Dow Jones      7941.71    8015.28   8064.64    8138.21    8187.57
YM03H          7906.00    7979.00   8036.00    8109.00    8166.00
Nasdaq-100      974.73     988.07    997.29    1010.63    1019.85
NQ03H           970.50     984.50    996.50    1010.50    1022.50
S&P 500         842.31     850.42    855.59     863.70     868.87
ES03H           838.25     846.50    853.25     861.25     868.25

Weekly Levels

Contract         S2         S1        Pivot        R1         R2

YM03H         7748.00    7933.00    8271.00    8456.00    8794.00
NQ03H          962.75     981.25    1011.25    1029.75    1059.75
ES03H          825.25     842.75     875.00     892.50     924.75

Monthly Levels (December's High, Low, and Close)

Contract        S2         S1        Pivot       R1         R2

YM03H         7726.00    8028.00    8524.00    8826.00    9322.00
NQ03H          861.75     924.25    1041.75    1104.25    1221.75
ES03H          814.75     846.75     900.25     932.50     985.75

YM03H = E-mini Dow $5 futures
NQ03H = E-mini NDX 100 futures
ES03H = E-mini SP500 futures

=================================================================

Note:  The 03H suffix stands for 2003, March, 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.

=================================================================

Jim Brown had a number of business meetings on Tuesday;
therefore, I filled the Futures Monitor with content during the
session.  For more information on my posts, please go to the
following link and download the current market monitor.  If you
already have the most recent version, simply go to the Futures
Monitor Post on the upper left hand portion of the applet.

http://www.OptionInvestor.com/itrader/marketbuzz/download.asp

The March E-mini S&P 500 Contract (ES03H)

We certainly did NOT get a move underneath the 839 level during
trading on Tuesday, and bulls should be somewhat excited about a
move back inside the daily Bollinger Bands.  With the ES contract
closing above Wednesday's pivot of 853.25, there is a chance the
200 EMA will be tested in the near term.  This moving average is
above at 265, and matches up well with the 50% retracement level
of the move from October to December.  I would expect resistance
to be found here.  If this area fails to hold buyers, remember
that the WEEKLY pivot is above at 875.  If bears take over
following the President's State of the Union Address, the 842.75
to 846.75 area should become an important area.  It is a compilation
of the monthly, weekly, and daily S1.

Chart of ES03H, Daily




Looking at a 60-minute chart of the ES contract, we are dealt a
pretty tight range from S2 to R2 for trading on Wednesday.  In
fact, so tight that we cannot even apply the article I wrote
("Half-life") in the Investors Education Section for Tuesday
night.  In the chart below, notice the bull trap seen near 886.
By closing back inside the regression channel, are prices going
to fail here as well?  If so, notice how levels line up near 844.
This even further increases this area's significance.  Remember,
if this area is severely penetrated, traders will then use the
range as a strong area of resistance.

Chart of ES03H, 60-minute chart




Bullish Percent of SPX: 48.90% and down one percent on Tuesday.
The column of O’s remains at eight (Recent High at 66%, Low of
current column at 58).  As noted yesterday, one more "O" (will be
reached at 48%), should portend a move to the 40% level.  Note:
In order to really look for a bottom, I would like to see a move
under 30%, followed by a row of "X's" that takes the indicator
back above this 30 area.

The March E-mini Nasdaq 100 Contract (NQ03H)

We did get a move higher in the NQ contract; thus re-enforcing
the possibility of a "double bottom" pattern.  However, we didn't
get a test of either the 1023 or 980 area.  I expect one of these
levels to be tested on Wednesday.  If the 980 area is broken, the
next intermediate objective will be for a move to the 200 EMA,
currently at 960.  As the 120-minute chart below shows, both the
1023 and 980 area have "levels lining up" and should be
significant going forward.  Closing above the pivot is slightly
bullish, but most likely traders are flat ahead of the
President's speech and will use the opening level as a better
gauge of sentiment.  I believe that it would be 'easier' to trade
a move lower and under 980; however, that usually means we will
be faced with the harder choice of dissecting a rally.  If the
1022-24 area becomes support, look for tiered resistance at 1030
and the 1040 area.

Chart of NQ03H, 120-minute




Bullish Percent for NDX:  This indicator fell 1% to 50% on
Tuesday, and did add another "0's" during the day's trading
session.  There can still be support at the 50% area, but this
indicator continues to portend bears will be selling rallies
going forward.  Note:  The NDX will give a sell signal at 975,
according to P&F charts.

The March Mini-sized Dow Contract (YM03H)

Monday's low was never taken out in the YM contract, so bears
really didn't have a reason to get excited during trading on
Tuesday.  As the daily chart shows, the YM contract traded within
the 7948 to 8152 area on Tuesday and paints a mostly neutral
picture going forward.  However, as bulls will point out, the
contract did close back inside the Bollinger Bands and could
portend a move higher.  With that said, shorts can certainly wait
until there is either a failure at 8152 or weakness underneath
the 8000 area before getting aggressive.  I think that the most
bullish scenario would be for a trade back to 8275; however,
certainly anything is possible.  The mid-point of the Bollinger
Band comes in at 8497.

Chart of YM03H, Daily




A 90-minute chart of the YM contract shows the retracement levels
between S2 and R2, and the chart also shows the daily retracement
areas on the right-hand side of the illustration.  I pointed out
the 8000 area above because of how it seems to be the "apex" in
the triangle pattern below.  It is also just under the 38.2%
retracement area at 8005.  Moreover, shorts should get aggressive
AND longs will most likely exit once we get back into the "7"
handle (7999 and lower, versus the "8" handle, or 8000 and
above).  Trading after Bush's speech should be volatile, so
please trade what you see and not what the speech 'should be
telling investors.'

Chart of YM03H, 90-minute




Bullish Percent of Dow Jones:  The bullish percent for the Dow
fell 3.33% to 36.67%, and the column of O’s is now 11 deep.  The
Bullish Percent indicator still has intermediate bearish
implications.  It does indicate that bears will look to sell
rallies and be aggressive on weakness as well.  Nothing has
changed since Thursday, but a close underneath 30% should start
to shift risk into the bears' camp.  Stay tuned.  Note:  The
DJIA, on a P&F chart, added three more "O's" on Monday and the
contract now has a bearish price objective of 7100.

Good Luck.

Questions are welcomed,

John Seckinger
jseckinger@OptionInvestor.com


********************
INDEX TRADER SUMMARY
********************

Gains evenly distributed among the indexes

The major indexes traded higher amidst a spattering of economic
data, which continues to show a sluggish economic recovery with
some bright spots still found in the new home construction market
not being enough in itself to boost consumer confidence to levels
that might spur spending on durable good.

Today's release of economic data had weaker than expected
December durable goods orders and a January consumer confidence
reading of 79.0, which fell to a 9-year low, being partially
offset by an upside surprise from stronger than expected new home
sales.

At the end of the trading session, the major indexes saw gains
evenly distributed basis with gains just above one percent.

Tonight's State of the Union address by President Bush will draw
some attention, but it will be interesting to see if the current
geopolitical concerns and U.S. economy are as important to
investors and this weekend's Super Bowl was to sports fans.

With several important issues currently at play, President Bush's
speech later tonight is expected to not only address his
administrations views and plans on how tax-cuts are deemed a key
to stimulating job growth and stimulating consumer
spending/confidence, but also the need to address issues
regarding Iraq on weapons of mass destruction, along with a call
for more affordable health care and prescription drug benefits
for seniors.

Trade volume was on the light side compared to recent sessions
with the NYSE turning just over 1.45 billion shares compared to
Monday's 1.69 billion, while NASDAQ volume was identical to
Monday's 1.41 billion level.

If I were to make a statement regarding who did the bulk of the
buying between bulls and bears in today's session that had stocks
looking to reverse recent week's decline, I'd have to say it was
bears looking to lock in some gains ahead of tonight's State of
the Union Speech and not to be forgotten conclusion of the FOMC
meeting.  The reason I think bears did the bulk of the buying was
what I mentioned briefly in last week's Index Trader Wrap, in
that the NASDAQ-100 Index's (NDX.X) 1.5% gain, was just barely
greater than the Dow Industrials (INDU) 1.2% session gain.  It
was my thought last week that for a truly "bullish" rebound to
take place, then the recent relative strength of the NASDAQ-100
Index should show a greater rebound than the more evenly matched
percentage gains found in the indexes today.

A quick note regarding the FOMC meeting, it does not appear that
the market is looking for any type of Fed move on interest rates
as the January Fed Funds futures contract (ff03f) 98.765 priced
in no change from the current Fed funds rate of 1.25%.  Again,
trader will take the 100.00 level, subtract the Fed funds futures
of 98.765, which results in a 1.23% reading to surmise that the
MARKET, which trades the Fed Funds futures expects no change in
interest rates at the conclusion of the FOMC meeting.

Tonight, I've taken the levels from pivot analysis to define
upper and lower ranges for this week's trade.  In Friday
evening's market monitor I posted the following matrix.
Tomorrow's daily S2, S1, P, R1 and R2 levels have been adjusted
after today's high, low and close trades.  Weekly levels are
based on last week's high, low and closing values, while the
monthly levels will not be updated until the conclusion of
Friday's trade, which marks the end of January.

Pivot Analysis Matrix




Today's index trading did see all of the major indexes hold above
their Tuesday pivot levels and come close to testing their first
levels of daily resistance at R1.  After tabulating Wednesday's
daily levels, the major indexes all closed just above their daily
pivot levels.  Retracement on tonight's index charts are derived
from the weekly S2 and R2 to give traders a perspective of a
potential weekly range and we're already starting to see how the
various levels from retracement came into play not only yesterday
as support, but today's as resistance.  As mentioned in Friday
evening's market monitor, I've added a column labeled "S2-R2"
point range to give traders an idea of point range, which may be
helpful when ascertaining various strike and expiration
selections in relation to their preferred time horizons.

One way I'd look to use this information is as follows.  If more
of a swing trader, view the S2 and R2 as somewhat of a WEEKLY
range with the S2 and R2 levels being this week's length of
playing field.  While the S2 and R2 levels by NO MEANS are solid
levels of range whereby the indexes will be bound, they can serve
as somewhat of a "boundary" in which to trade and the various S1,
Pivot, and R1 levels become benchmarks that must be broken to
begin further assessing a next target level.  We will use
retracement to further dissect the weekly range, and look to
uncover levels that market makers or institutions may be trading
as they look to control risk in their stock inventories based on
their perception of buy/sell side order flow from institutional
clients.

Dow Industrials Chart - Daily Intervals




Support on Monday came very close to WEEKLY S1 level of 7,955 and
correlates with 80.9% retracement at 7,973.  This creates a bit
of a "confluence" of support at Monday's lows.  Please note that
the 80.9% level of retracement isn't a default level of weekly
pivot analysis with S1.  If it were, then weekly R1 of 8,465
would correlate more closely with 19.1% retracement of 8,604, and
here we see no correlation of resistance.  Today's 99-point gain
in the Dow certainly looks as if there just might not be a
favorable risk/reward trade in the Dow on a near-term basis and
allowed for today's gains.  Better entry points for shorting look
to be higher back near the weekly pivot of 8,288, which ties in
with mid-October and late-December of support that was broken to
the downside on Friday.  I'm looking bearish a rally in the Dow
back near the 8,288 level closer to overhead resistance with a
downside target of 7,850 by week's end.

Today's action saw the Dow Industrials Bullish % ($BPINDU) fall
3.33%, or lose 1 stock to a reversing p/f sell signal (SBC $24.32
-2.13%).  This has the Dow Industrials Bullish % still "bear
confirmed" at 36.67%.

S&P 500 Index Chart - Daily Interval




Similar to correlative support in the Dow at its 80.9%
retracement and WEELY S1 support level, its not that surprising
that we see similar technicals in the SPX with a confluence of
support taking place not only from the WEEKLY S1 of 845 and 80.9%
retracement of 846, but lower Bollinger Band of 847.  Too much
technical support to keep a bear applying pressure today and a
nice bounce.  Looking for the weekly pivot of 875 to mark a level
for resistance, which was violated to the downside with some
vigor on Friday with formidable resistance at/near 886.

Today's action saw the S&P 500 Bullish % ($BPSPX) see a net loss
of 5 stocks, or 1% to reversing lower point and figure sell
signals.  This has the S&P 500 Bullish % falling to 49.2% and
still reading "bull correction" status.  As a benchmark to the
SPX December 30 and 31 lows of 870, the S&P 500 Bullish % then
reading 57.8%.  Current internals confirm SPX price action of
weakness, so there is no "bullish divergence" being seen from the
internals to be overly concerning to bears.

S&P 100 Index Chart - Daily Interval




In the above chart of the OEX, I'm "counting days" that the
Stochastics oscillator has been in "oversold" territory, and
found periods in September where the OEX Stochastics were
oversold for six sessions, to then see a 2-day rally take hold,
only for the OEX to then trade lower the following two sessions.
These were also periods when the MACD oscillator was trending
lower BELOW zero.  Unless Saddam Hussein were to announce he has
gone into exile I don't see a catalyst for an OEX much above the
444 level and the WEEKLY pivot.

While tonight's State of the Union speech should be closely
listened to by traders and investors, important to listen too
also is the "Democrat Response" to the President's speech.  While
the Republicans control the House and Senate, the extent or lack
thereof in a potential bounce in the major indexes could come
from a Democratic response being "willing to discuss" or "total
unwillingness" to work with the President on topics and plans
discussed tonight.  Don't get me wrong, I'm not saying the
Democrats will be "responsible" for how the markets trade, but a
more united government on issues discussed would in my view would
lend itself to a more near-term bullish response from the equity
markets.

Today's action saw the S&P 100 Bullish % ($BPOEX) fall 2%, or see
a net loss of 2 stocks to reversing p/f sell signals.  This has
the bullish % falling to 46% and still bear confirmed.  On Friday
of last week, the OEX Bullish % fell to 50%, which was "bear
confirmed" status.

NASDAQ-100 Index Tracking Stock (QQQ) - Daily Interval




The final 15-minutes of trading in the QQQ (04:00 PM EST to 04:15
PM EST) had the QQQ finishing up just 1% on the session, but for
the most part, matched the NASDAQ-100 Index (NDX.X) 1,001.41
+1.52% gains.  One thing I wanted to monitor after a "rebound"
type of session like we had today was for a "relatively stronger"
NASDAQ-100 Index to show larger gains that the weaker Dow, SPX
and OEX.  While today's percentage gains were larger for the
NASDAQ-100 Index than the Dow, SPX and OEX, the gains were not to
any type of great degree and has me viewing today's bullishness
in stocks as more attributed to some bears locking in gains that
bulls buying on thoughts of any type of prolonged rebound.  A
late session rally back near $25.00 in the QQQ saw $25.05 (close
to the WEEKLY pivot of $25.10) but sold into the close.

Today's action saw the NASDAQ-100 Bullish % ($BPNDX) fall 1%, or
see a net loss of 1 stock to a reversing point and figure sell
signal.  This has the NASDAQ-100 Bullish % still "bear confirmed"
and falling to 50%.  It was after Thursday's trade that the NDX
bullish % reversed into "bear confirmed" status.

Jeff Bailey


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

What Goes Down
by Steven Price

We were bound to get some consolidation at some point and Tuesday
was that day.  After a sell-off of 800 Dow points in eight
sessions, we finally got a bounce back through the 8000 support
level that was broken on Monday.  With a full slate of economic
data for traders to digest this week, as well as a Federal
Reserve meeting and plenty of happenings on the Iraq front, the
market finally got a bounce ahead of the President's State of the
Union address.  While we can expect some stumping for his new
economic stimulus package, everyone will be looking for clues
about what the timetable for an Iraqi invasion will be.  There
was some tough talk from U.S. officials on Monday, following Hans
Blix's report on what he considered to be a lack of substantive
cooperation from the Iraqis in regard to weapons inspections and
this will be the President's chance to deliver his message
personally.

A couple of economic reports helped the markets this morning.
The Consumer Confidence report, which hit its lowest point in
nine years, still came in slightly above expectations.  The
reading of 79.0 came in above the consensus of 78.5, but the
internals of the report still paint a gloomy picture.  While it
was a positive that the present situation index improved from
69.6% to 75.4%, the expectations index fell from 88.1 in December
to 81.4 in January.  There was an increase in the percentage of
consumers expecting fewer jobs, while there was a decrease in the
percentage of those expecting more jobs. According to Lynn
Franco, Director of The Conference Board’s Consumer Research
Center, “Overall readings continue to reflect the country’s
lackluster economic activity. Now, with the threat of war
looming, consumers have grown increasingly cautious about the
short-term outlook.”  The report is one indication of consumers'
willingness to spend.  Still, since the report was slightly
better than expected, one of the big recipients of those consumer
dollars, the retail sector, got a boost.  The Retail Index
(RLX.X), which sunk to a new 52-week closing low on Monday,
gained 3.24, to make almost all of Monday's loss.

The other positive economic data released today, which was a
positive both in its upside surprise and in its basic data, was
the new home sales report.  New home sales rose 3.5% in December,
to an annualized rate of 1.082 million.  This helped set a record
for 2002, which was mostly due to forty-year low mortgage rates.
It also came on the heels of positive home re-sale data released
on Monday.  The number seems in contrast to the results of may
very unofficial reader survey here at OI, which indicated a
slowing around the country.  However, that survey may not have
been so far off, as the gains were concentrated mostly in the
Midwest, but were flat or declined for the rest of the country.
The increase did, however, cross most pricing plateaus, with
homes priced from $150k to $199k accounting for 25% of sales and
homes over $300k accounting for 23%.

The durable goods report, which reflects demand for high-cost
items such as computers, non-defense capital items and
automobiles, showed a mild gain of 0.2%.  This was below
expectations for a gain of 0.8% and followed a downwardly revised
1.5% drop in November.  It was not terribly encouraging and
underscored the lack of spending in the economy.  Still, it was
not enough to hold back the rally ahead of the President's
address.

With the data that was released today confirming that the economy
remains in a slump (with the exception of housing), the most
likely reason for the broad market rally was a round of short
covering ahead of the President's speech.  With a steep market
drop ahead of tonight's comments, there are undoubtedly many
short sellers looking to protect some of their gains in case of a
big rally.  While the reasons behind any rally remain unclear,
one impetus might be talk of an invasion in Iraq being further in
the future than anticipated.   Bush will be pushing his economic
plan, as well, which could also lead to a snap back from oversold
conditions after a steep drop in a short period of time. Today's
jump in the markets was nice, but it by no means made up a
significant portion of recent losses and the overall trend
remains down. In any case, the State of the Union address while
we are on the verge of war should be considered a possible
market-moving news event and shorts were wise to lock up at least
some of their recent gains.

The bounce actually ran out of steam after cracking the Dow 8100
barrier twice intraday and another late day push was not enough
to maintain that level on a closing basis. In fact, any rollover
from a bounce below the 8200 breakdown level looks like a short
opportunity.  I've talked ad nauseam about the head and shoulders
pattern I believe we are seeing in the Dow/SPX/OEX and if we get
resistance at the neckline break, that should be good for shorts
down to the 7500 range.

We could see some schizophrenic trading tomorrow, following the
President's speech and ahead of the conclusion of the FOMC
meeting and the UN meeting on Iraq.  Traders can keep an eye on
that 8200 level for signs of just how much conviction bulls can
muster.  Once we're above that level, it's anybody's guess, as
we'll be back into serious congestion in the 8200-8300 range.
That range could provide more resistance and a move into it would
still be less than a 50% retracement of recent losses, however,
the picture would become cloudier once we are above previous
support.


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

Market Averages

DJIA ($INDU)

52-week High: 10673
52-week Low :  7197
Current     :  8088

Moving Averages:
(Simple)

 10-dma: 8419
 50-dma: 8572
200-dma: 8835



S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  858

Moving Averages:
(Simple)

 10-dma:  888
 50-dma:  904
200-dma:  937



Nasdaq-100 ($NDX)

52-week High: 1734
52-week Low :  795
Current     : 1001

Moving Averages:
(Simple)

 10-dma: 1027
 50-dma: 1048
200-dma: 1043



-----------------------------------------------------------------
The Semiconductor Index (SOX.X):  The Semiconductor Index was
actually one of the laggards in today's rally.  While it did show
a gain after finishing below 280 on Monday, that gain was a mere
2.50 points.  More importantly, the intraday rebound attempts
found resistance at 284, indicating that the former support level
around 281-284 may now be providing resistance to any rebound
attempt in the sector. While the Nasdaq Composite tacked on 17
points, chip stocks like Intel (+0.13), QLGC (+0.11) and Texas
Instruments (+0.58) showed only minor gains, as did chip
equipment maker KLAC (+0.13).  After the bell, however, equipment
maker CYMI beat estimates by a penny and traded up 0.90 from its
close of $32.96.

52-week High: 393
52-week Low : 214
Current     : 282

Moving Averages:
(Simple)

 21-dma: 309
 50-dma: 321
200-dma: 358

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

Market Volatility

The VIX has been very, well, volatile the last few days.  After
breaking out above resistance at 35 on the breakdown below Dow
8200/OEX 440 last Friday, it soared up to 40 on Monday's
continued sell-off.  As we rallied today, it dropped hard, all
the way back to 35.52.  The significance? We just found support
at prior resistance (35), indicating the equity bounce to the
previous breakdown level may be just an oversold bounce back to
its former level of support, which may now act as new resistance.
Neatly contrarian, wouldn't you say.

CBOE Market Volatility Index (VIX) = 35.52 –4.25
Nasdaq-100 Volatility Index  (VXN) = 46.73 +0.14

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.62        531,599       330,219
Equity Only    0.46        419,669       193,988
OEX            1.10         15,078        16,658
QQQ            0.20         75,382        15,769


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

Bullish Percent Data

           Current   Change   Status
NYSE          46.7    - 3     Bull Confirmed
NASDAQ-100    50.0    - 2     Bear Confirmed
Dow Indust.   36.7    - 3     Bear Confirmed
S&P 500       49.2    - 5     Bull Correction
S&P 100       46.0    - 4     Bear Confirmed

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  1.35
10-Day Arms Index  1.50
21-Day Arms Index  1.32
55-Day Arms Index  1.31


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 they do, they can signal significant market turning
points.

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

Market Internals

        Advancers     Decliners
NYSE       1851          1030
NASDAQ     2003          1175

        New Highs      New Lows
NYSE        75               94
NASDAQ      94               81

        Volume (in millions)
NYSE       1,698
NASDAQ     1,393


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

Commitments Of Traders Report: 01/21/02

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 added similar amounts to both sides, ending the
period slightly less short, but not by a significant percentage.
Small traders also added similar amounts to both sides, finishing
the period with an additional 1,000 long contracts overall.

Commercials   Long      Short      Net     % Of OI
12/31/02      410,968   462,782   (51,814)   (5.9%)
01/07/03      411,542   455,538   (43,996)   (5.1%)
01/14/03      411,052   453,164   (42,112)   (4.9%)
01/21/03      415,028   456,885   (41,857)   (4.8%)

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year: ( 16,472) - 10/01/02

Small Traders Long      Short      Net     % of OI
12/31/02      139,383    75,640    63,743     30.0%
01/07/03      143,169    83,895    59,274     26.1%
01/14/03      144,182    92,358    51,824     21.9%
01/23/03      148,227    95,356    52,871     21.7%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year: 114,510 - 3/26/02

NASDAQ-100

Commercials decreased long positions by 1,000 contracts, while
adding almost 5,000 contracts to the short side.  Small traders
added 5,000 contracts to the long side, while reducing shorts by
1,500.


Commercials   Long      Short      Net     % of OI
12/31/02       31,399     44,387   (12,988) (17.1%)
01/07/03       37,966     48,156   (10,190) (11.8%)
01/14/03       38,057     45,060   ( 7,003) ( 8.4%)
01/23/03       37,174     49,789   (12,615) (14.5%)

Most bearish reading of the year: (15,521) -  3/13/02
Most bullish reading of the year:   9,068  - 06/11/02

Small Traders  Long     Short      Net     % of OI
12/31/02       19,841     5,009    14,832    60.1%
01/07/03       19,708     8,453    11,255    40.1%
01/14/03       20,757     8,320    12,437    42.8%
01/23/03       25,852     6,764    19,088    58.5%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Commercials added 1,000 contracts to the long side, while
reducing shorts by 1,400.  Small traders added approximately 600
contracts to both sides, leaving the net virtually unchanged.

Commercials   Long      Short      Net     % of OI
12/31/02       15,940    11,253    4,687      17.2%
01/07/03       16,210    11,333    4,877      17.7%
01/14/03       17,804    12,427    5,377      17.8%
01/23/03       16,901    11,031    5,870      21.0%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
12/31/02        4,997     6,553    (1,556)   (13.5%)
01/07/03        4,963     8,334    (3,371)   (25.4%)
01/14/03        4,552     7,697    (3,145)   (25.7%)
01/23/03        5,120     8,282    (3,162)   (23.6%)

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   1,909  -  1/16/01

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


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******************
WEEKLY FUND SCREEN
******************

Two "Capital" Ideas

This week, we profile two "world" funds from the American Funds
Group that have different objectives and risk/reward attributes.
One is a global equity fund seeking to provide long-term growth
and income, while the other is a global bond fund that seeks to
provide current income.  Both funds have fine long-term records
of performance and can be used alone or together to achieve the
desired risk/reward potential.  We favor these two funds because
they're prudently managed and reflect the full range of American
Funds' global research capability.

There are five reasons why we like The American Funds.  They're
one of the oldest and most respected mutual fund families, with
roots dating back to 1931.  They are the largest fund family to
be distributed exclusively through financial advisers.  They're
the nation's third largest mutual fund family with assets under
management of over $325 billion and over 15 million shareholder
accounts.  The American Funds are one of the few firms that can
backup their claim that they're truly global focused, with over
$70 billion in non-U.S. assets managed.  Last but not least the
American Funds are part of The Capital Group of Companies - one
of the world's largest money management firms.

The American Funds: Capital World Growth & Income Fund A (CWGIX)
seeks to provide long-term growth of capital with current income
by investing in established growing companies worldwide.  It can
invest anywhere in the world, including the United States.  The
American Funds: Capital World Bond Fund A (CWBFX) has an income
objective and seeks to provide strong long-term total return by
investing primarily in quality fixed income securities issued by
major world governments and corporations worldwide.  It can also
invest anywhere in the world, including the United States.

This week's screen is more of a validation process.  We'll look
at the two funds on a variety of factors including return, risk,
style, and expense.  By the end of the exercise, we hope to have
built a strong enough case for investment in the two funds.  For
our purposes, we'll use the Class A shares, which have front-end
load charges but also the lowest expense ratios of the different
retail share classes offered.  For more information or to obtain
a fund prospectus, go to www.americanfunds.com.  The website for
The Capital Group Companies is www.capgroup.com.

Snapshot View

In Morningstar's system, diversified international equity funds
are divided into three broad groups: world stock, foreign stock
and emerging markets.  The world stock fund category is home to
the American Funds: Capital World Growth & Income Fund.  On the
other hand, Morningstar does not distinguish between world bond
funds and foreign bond funds, putting both in the international
bond fund category.  That's where American Funds: Capital World
Bond Fund is classified.  So, keep that in mind since that does
affect Morningstar's category risk-return ratings for the fund.

The Capital World Growth & Income Fund is down 1.9 percent this
year so far, while the Capital World Bond Fund has a YTD return
of 2.8 percent.  The $9.9 billion Capital World Growth & Income
Fund has a low expense ratio of 0.78% of assets compared to the
average global fund (1.71%) per Lipper.  The Capital World Bond
Fund has net assets of nearly $600 million and an expense ratio
of 1.12% compared to the average global income fund (1.30%) per
Lipper.

Key Characteristics

As of December 31, 2002, the Capital World Growth & Income Fund
had 87.5 percent of assets invested in equities, including 30.1
percent in U.S. equities plus 57.4 percent in non-U.S. equities.
Some 10.4 percent of assets were held in cash equivalents, with
another 2.1 percent held in U.S. and non-U.S. income securities.
The Capital World Bond Fund had no assets invested in stocks; it
had 100% of its assets invested in fixed income and money market
securities at year-end 2002.  At year-end, the fund had 28.9% of
assets invested in U.S. bonds; 64.1% in non-U.S. bonds; and 7.0%
in cash and equivalents.

While the American Funds: Capital World Growth & Income Fund can
invest anywhere in the world, it invests primarily in the common
stock of blue-chip companies here and abroad, and invests mostly
in the world's major developed markets.  The fund's style may be
described as conservative, focused on established companies that
pay dividends.  The American Funds: Capital World Bond Fund is a
conservatively managed and broadly diversified portfolio of debt
obligations denominated in currencies of Japan, Western Europe,
Australia, New Zealand, Canada, United States, and multinational
currency units such as the EMU.

In terms of geographic breakdown, the Capital World G&I Fund had
31.6 percent of assets invested in the United States, with about
30 percent of assets held in Europe.  Asia and the Pacific Basin
accounted for 16.2 percent of assets, with another 12 percent in
Canada and Latin America.  The Capital World Bond Fund portfolio
had 35.1 percent of assets invested in the United States, and 45
percent of assets in Europe.  Asia and the Pacific Basin made up
11.5 percent of assets, with another 8.4 percent in cash & other
investments.

Ratings and Performance

According to Morningstar, the Capital World Growth & Income Fund
has consistently had below average risk relative to its category
peer group (i.e. world stock funds) while the Capital World Bond
Fund's risk level has been on par with other international fixed
income funds.  For the below average relative risk, the American
Funds: Capital World G&I Fund has produced high total returns in
its history relative to other world stock funds.  American Funds:
Capital World Bond Fund's total returns have been slightly above
average relative to its category (i.e. international bond funds),
though Morningstar calls it average overall.

In terms of risk-adjusted return relative to category peers, the
Capital World Growth & Income Fund holds Morningstar's highest 5-
star rating for performance while the Capital World Bond Fund is
3-star rated by Morningstar, signifying average relative returns
adjusted for risk.  However, if you look at year-to-year returns
for the Capital World Bond Fund, you see that its annual returns
have generally landed in the one of the top two quartiles, so we
assume that if the fund isn't 4-star rated, it is close.

Since the Capital World Growth & Income Fund's inception date on
March 26, 1993, the fund has produced an annualized total return
through December 31, 2002 of 11.3% (10.7% with the sales charge).
In spite of the market's downturn since 2000, the American Funds:
Capital World Growth & Income Fund still sports an inception-to-
date return that is higher than the 10 percent historic norm for
stocks.

Since the August 4, 1987 the inception date of the Capital World
Bond Fund, it has earned an average annual return as of December
31, 2002 of 7.4% (7.1% with the sales charge).  That number is a
little more than the 6 percent historic average for bonds, so in
each case, the fund's inception-to-date returns are very strong.

Below is a performance summary for the two funds through Tuesday,
January 27, 2003, including Morningstar's fund category rankings.


1-Year Total Returns:
- 8.2% Capital World Growth & Income Fund (CWGIX) 3rd Percentile
+20.7% Capital World Bond Fund (CWBFX) 33rd Percentile

3-Year Annualized Total Returns:
- 3.4% Capital World Growth & Income Fund (CWGIX) 7th Percentile
+ 7.8% Capital World Bond Fund (CWBFX) 39th Percentile

5-Year Annualized Total Returns:
+ 5.2% Capital World Growth & Income Fund (CWGIX) 4th Percentile
+ 5.7% Capital World Bond Fund (CWBFX) 43rd Percentile

10-Year Annualized Total Returns (December 31, 2002):
N/a    Capital World Growth & Income Fund (CWGIX)
+ 6.7% Capital World Bond Fund (CWBFX) 48th Percentile


You can see that the Capital World Growth & Income Fund's return
performance ranks in the top decile within the Morningstar world
stock fund category over all trailing periods, while the Capital
World Bond Fund's trailing returns rank in its category's second
quartile.  Over the last five years, the American Funds: Capital
World Growth & Income Fund has beaten its index benchmark (MSCI
World index) by an average of 7.9% a year.  Over the past decade,
the American Funds: Capital World Bond Fund has beaten its index
benchmark (Salomon Brothers World Government Bond index) by 0.3%
a year on average.  So, both Capital World funds have gotten the
job done for shareholders relative to their index benchmarks and
category peer groups without incurring excessive risk to capital.

Conclusion

There is more that I wanted to say about the two Capital World
products from the American Funds Group, but due to PC problems
and other issues today, I have to end this report here.  These
funds can serve a role in one's long-term financial plan since
they seek to provide solid, long-term total returns consistent
with prudent management.

Capital Guardian Trust Company, Capital Research & Management,
and the American Funds are world class operations.  These two
funds are managed by teams of seasoned portfolio managers who
have many years of world investing experience.  For more info,
visit the American Funds' site at www.americanfunds.com.  You
will be glad you did.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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


***********************
SWING TRADER GAME PLANS
***********************

Anticipation

That oversold bounce I've been talking about finally arrived,
with the help of some short covering ahead of tonight's State
of the Union address.


To read the rest of the Swing Trader Game Plan Click here:
http://www.OptionInvestor.com/itrader/indexes/swing.asp


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**********

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The Option Investor Newsletter                  Tuesday 01-28-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: CTAS
Daily Results
Call Play Updates: FRX, SYMC
New Calls Plays: COF
Put Play Updates: KO, CTSH, KSS PNRA, TDS
New Put Plays: APD


****************
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:
*****

None


PUTS:
*****

CTAS $41.72 +0.03 (+0.32 for the week) Cintas got a bounce today
with the broader market, but nothing terribly strong. In fact,
considering the strength in the Dow, the $0.03 gain was
relatively weak.  What has us concerned is the action yesterday,
as it bounced from long running support at $41.  We listed the
play at $44.74 and traders who went long the ITM put should have
a nice gain here.  The bounce actually did not break the downward
trend, but we are going to drop the play due to the fact that we
are not recommending new entries so close to support and have not
recommended new entries for some time. Traders can target $40 on
a break below $41 and should think about harvesting gains if we
continue to hold above that level.


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

Please view this in COURIER 10 font for alignment
*************************************************

CALLS              Mon    Tue    Wed   Thu  Week

COF      31.66   -0.78   1.24  New, Bounce off support
FRX      51.40   -0.87   0.37  Filled Gap
SYMC     46.10    0.21   1.90  Convincing Bounce


PUTS

ADP      35.20   -0.25   0.70  New, Breakdown coming
CTAS     41.72   -0.59   0.03  Drop, Profits
CTSH     56.50   -0.02   0.20  Inside day
KO       41.10   -0.56  -0.69  Relative Weakness
KSS      52.89   -1.00   0.39  Low Confidence
PNRA     31.10   -0.74   0.44  Look for $30
TDS      41.92   -0.75  -0.08  Rally failure

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

FRX  $51.40 +0.37 (-0.61 for the week) When we initially entered
this play we knew that further broader market weakness could drag
FRX down to the bottom of the January 3rd gap.  Our expectation
was that buyers would emerge near this level, which coincides
with psychological support at $50.00.  The bulls did not let us
down on Tuesday.  Shares rebounded from a morning low of $50.15
before finishing with a small gain.  This created a hammer
candlestick on the daily chart.  That's a possible reversal
formation, but we'll need to see some follow-through on Wednesday
to confirm the bounce.  It's also important to note that FRX
traded relatively weak versus the DRG.X pharmaceutical index
today.  The stock found resistance at its 50-dma ($51.51) and
wasn't able to break the short-term pattern of lower lows and
lower highs.  This trend will need to be broken if shares are
going to move back towards the relative high at $53.39.  Given
the technical uncertainty, we would not advise taking new long
entries at this time.

---

SYMC $46.10 +1.90 (+2.19) Providing a hint of what was to come,
SYMC was impressive yesterday in the way it held onto the
$43.50-44.00 support level.  A big part of what kept it from
falling into the abyss with the rest of the market may have
been the Legg Mason upgrade from Hold to Buy.  Additionally,
the firm issued a $52 price target, citing attractive valuation
and outperformance relative to its competition.  With a bid
appearing under the broad market at the open, SYMC launched
higher this morning and quickly moved through the $45, and then
$46 resistance levels.  That second level is important because
it resulted in Friday's gap down being filled.  Bullish traders
weren't satisfied with that though, as they continued to drive
the stock higher until some selling finally materialized near
the $46.75 level.  That round of selling at the end of the day
took the stock right back to the $46 level and now we need to
see if it can hold as support for another leg up.  A rebound
from that level can be used for new entries, although a dip and
rebound from the $45 level (possibly on an initially negative
reaction to the State of the Union speech tonight) would provide
a better risk/reward entry.  Given the immediate selling that
came in after the intraday breakout today, entering on a breakout
move does not appear to be a prudent entry strategy.  Raise
stops to $43.50, just below yesterday's intraday lows.


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

COF – Capital One Financial $31.66 +1.24 (+0.14 this week)

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

Why We Like It:
Financial stocks are the lifeblood of any sustained broad market
rally, and despite an encouraging start to the month, this sector
of the market isn't looking so hot as the first month of the year
draws to a close.  But maybe there is yet hope for the bulls, with
the Banking index (BKX.X) trying to hold onto the $740 support
level.  The bulls are going to need to show more conviction than
they did during Tuesday's anemic rebound, but the potential is
there for a solid move higher from here.  The stock that got our
attention is COF, which has been building a series of gradually
higher lows since early August, when it bottomed near $24.  Twice
since then, the stock has been rejected at the $40 resistance
level, most recently in early January.  The continued slide in
the broad market yesterday brought the stock right back to that
trendline, and it caught a pretty decent rebound today, moving
back over $31, but trapped under significant resistance at $32.25.
Another factor in favor of the bulls is that the stock is sitting
just above its bullish support line ($30) on the PnF chart, which
ought to provide support for a move back towards resistance.  The
first upside target will be the bottom of the post-earnings gap
($34), followed by a closure of that gap ($35) and a move to
fairly strong resistance at $36.  Right now, it could either
continue the rebound, or fail and challenge support again.  So we
are placing a trigger on the play, where we only want to enter if
it can push through resistance.  A rollover below $32.25 will
keep the play from going active, but a rally through that level
looks good for new entries.  More conservative traders may want
to wait for a move through the 50-dma ($32.71) before entering
the play.  Once triggered, we'll place our stop at $29.25, just
below the late December lows.

BUY CALL FEB-30*COF-BF OI=3513 at $3.20 SL=1.50
BUY CALL FEB-32 COF-BZ OI=3676 at $1.70 SL=0.75
BUY CALL MAR-30 COF-CF OI=5682 at $4.20 SL=2.50
BUY CALL MAR-32 COF-CZ OI=3132 at $2.75 SL=1.50

Average Daily Volume = 4.52 mln



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

KO $41.10  -0.69 (-1.73 for the week)  Talk about lack of
relative strength!  KO now has not only given us our PnF
breakdown, as well as a trigger down at $41.90, but it added to
its six-year low in spite of the Dow gaining 100 points on
today's broad market rebound.  Part of that was due to Pepsi's
earnings release, which beat expectations due to increased
prices, in spite of U.S. volume coming in on the low side.
Traders focused on the light volume and 2003 forecast from PEP,
selling the stock off early, before it bounced to a mild gain
with the broader markets.  KO was not so lucky, however, falling
$0.69 by the end of the day, and closing near its low, after
setting an intraday low at $41.00.  That low can be seen two
ways. Bulls may view it as support at the round number, while
bears can point to the bearish "O" on the PnF column.  That "O"
added to the sell signal at $41 and dropped the stock below its
$42 "O" on the PnF back in April 2001. That $42 "O" was actually
on a dividend -adjusted basis, but it nevertheless shows up as
the last support level of the last couple of years.  Now we have
moved below it on both the bar and PnF charts. Just to be safe,
new entries can target a momentum move below $41.00 for entry to
make sure it does not continue to act as support.   We are
lowering our stop loss on the play to $44.25, just above the 21-
dma.   More aggressive traders can leave the stop above the 50-
dma of $44.89, while more conservative traders can lower stops to
$43.10, just above Monday's high.

---

CTSH $56.50 +0.20 (-1.34) While it hasn't been an exciting ride,
our CTSH put play has certainly been consistent.  As the broad
market has continued to deteriorate, the stock has steadily moved
below one support level after another.  Last Friday, the 200-dma
finally gave way and that was enough for the bears to press their
advantage on Monday, dropping the stock down to the long-term
ascending trendline (now at $56).  With a broad market rebound
on Tuesday, it was encouraging to see how anemic the bounce in
CTSH was, with the stock consolidating just above that trendline.
Conveniently, we got an inside day on Tuesday, and the break from
that pattern should indicate which way the stock is headed next.
A breakout above yesterday's high of $57.45 should indicate a
more sustained rebound, while a break below the $55.68 low should
have bears pressing their advantage again.  Now isn't the time
to be getting aggressive with new entries, but rather to
prudently managing those that are open.  Traders looking to enter
new positions will want to wait for a break under the $55 level
on strong volume.  On the other side of the coin, a close over
$57.50 will resolve the debate in favor of the bulls and have us
moving to the sidelines.  Accordingly, we're tightening our stop
to $57.50 tonight.

---

KSS $52.89 +0.39 (-0.86) The battle continues around the $52.50
level, which is the site of KSS' lows in early January.  The
stock broke below that level yesterday, but then tried to recover
today.  That bounce attempt looks pretty anemic tonight, as the
stock closed in the lower half of the day's range.  Intraday
resistance appears to be building just above the $53 level, with
much stronger resistance at $54.  The next move for KSS is likely
to be dictated by the action in the overall Retail index (RLX.X),
which continues to look weak with its inability to get back over
the $255 resistance level on Tuesday's bullish move.  Another
failed rally below $54 can be used for initiating new positions,
while a breakdown under yesterday's low ($51.79) will be the key
to watch for momentum traders.  If the recent lows give way,
we're looking for a test of the $49-50 level, the site of
October's closing low.  A drop near that level, followed by
anything approaching a bounce would be a good opportunity to
harvest gains on open positions.  Continue to confirm weakness
in KSS by monitoring the RLX index.  Keep stops set at $54.50.

---

PNRA $31.10 +0.44 (-0.45) Our PNRA play got off to a great start
on Monday, gapping below Friday's low and driving lower throughout
the day.  With the stock off more than 20% from its level of just
a couple weeks ago, PNRA was due for a bit of a bounce, and that's
just what the market delivered today as the stock staged a mild
recovery with the rest of the market.  But don't make the mistake
of confusing today's rebound with an end to the downtrend.
Yesterday's decline solidified the breakdown under the 200-dma
(currently $32.18) and today's inside day didn't do much to
bolster bullish hopes for a rebound.  A failure of this rebound
near yesterday's high ($31.40) can be used for opening new
positions, while a rollover near the 200-dma would provide an
even better entry.  Those traders looking to enter the play on
further weakness will need to wait for a drop under the $30.50
level (the site of yesterday's intraday low) before playing.
With the strong resistance provided by the 200-dma, it seems
safe to lower our stop to $33.

---

TDS $41.92 -0.08 (-0.83) Most sectors of the market ended with
gains on Tuesday, as shorts covered ahead of the State of the
Union speech tonight.  That wasn't the case with Telecom stocks
though, as the North American Telecoms index (XTC.X) slid a bit
lower along the declining 200-dma (currently $435.75).  Sticking
with the program, TDS slid to a fresh 3-year closing low, with
the $40 level looking like the next potential level of support.
Recall that the Pnf Chart paints an even bleaker picture, with a
bearish price target of $30.  That's got to be pretty
discouraging for investors that bought the stock this morning on
the heels of the Legg Mason upgrade from Sell to Hold.  TDS
gapped up to $43.50 this morning following the upgrade, but
sellers quickly erased that early gain, before allowing the
stock to essentially trade flat for the remainder of the session.
Failed rallies below the $44 level continue to look attractive
for new entries, as TDS steadily posts lower lows.  If looking
to enter on further weakness, wait for a break below $41.25 (just
below Monday's intraday low) along with the XTC index taking out
its 200-dma.  Lower stops to $44.50.


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

APD - Air Products - $40.37 +0.40 (-0.65 for the week)

Company Description:
Air Products serves customers in technology, energy, healthcare
and industrial markets worldwide with a unique portfolio of
products, services and solutions, providing atmospheric gases,
process and specialty gases, performance materials and chemical
intermediates. The company is the largest global supplier of
electronic materials, hydrogen, helium and select performance
chemicals. (source: company website)

Why We Like It:
Shares of Air Products spent the latter part of 2002 bouncing
around between $40 and $46.  This range actually tightened in
late December and early January, as APD spent several weeks
trading in the $42-$44 region.  It wasn't until last Wednesday
that the stock finally broke to the downside.  The catalyst for
this decline was the company's earnings report.  Air Products
showed a boosted profit on increased sales, but missed consensus
estimates by once cent.  Investors have had a clear bearish bias
on APD ever since.  Similar selling pressure has been seen in
shares of chemical giants DD and DOW.  DuPont reported their own
quarterly earnings today and rose a paltry 27 cents after it beat
estimates by three pennies.  The recent action in chemical stocks
is a reflection of economic uncertainty on Wall Street.  Is a
dreaded "double-dip" recession just around the corner?  Nobody
knows for sure, but as long as economic data remains sluggish
(i.e. today's weaker-than-expected durable goods orders), the
large institutional buyers will be hesitant to bet on a recovery
in the manufacturing sector.

Technically, we like APD as a bearish play because the stock is
on the verge of breaking through key support in the $40.00
region.  Shares rebounded from this level on multiple pullbacks
in the second half of 2002.  Pulling back to a weekly chart, we
see that the next level of possible support is down at the 2001
lows near $32.00.  For the purposes of this play we'll target a
move to the $33.00 area.  Shorter-term traders could aim for a
test of the p-n-f bearish vertical count of $36.00.  One caveat:
The recent losses have pushed the daily stochastics into oversold
territory.  This indicates that APD might see some short-covering
at current levels.  However, we think the stock will succumb to
another wave of selling once support gives way.  We're placing an
entry trigger at $39.84 (one cent under yesterday's low) in order
to confirm a breakdown.  If the play is activated we'll use at
stop at $43.02, just above the descending 50-dma.  More
conservative traders could a stop slightly above Friday's high of
$42.15.

BUY PUT FEB-45*APD-NI OI=4 at $4.90 SL=2.45
BUY PUT MAR-45 APD-OI OI=15 at $5.20 SL=2.60

Average Daily Volume = 944 K



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**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
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For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support
The Option Investor Newsletter                  Tuesday 01-28-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: PUT - APD
Futures Corner: Half-life


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

APD - Air Products - $40.37 +0.40 (-0.65 for the week)

Company Description:
Air Products serves customers in technology, energy, healthcare
and industrial markets worldwide with a unique portfolio of
products, services and solutions, providing atmospheric gases,
process and specialty gases, performance materials and chemical
intermediates. The company is the largest global supplier of
electronic materials, hydrogen, helium and select performance
chemicals. (source: company website)

Why We Like It:
Shares of Air Products spent the latter part of 2002 bouncing
around between $40 and $46.  This range actually tightened in
late December and early January, as APD spent several weeks
trading in the $42-$44 region.  It wasn't until last Wednesday
that the stock finally broke to the downside.  The catalyst for
this decline was the company's earnings report.  Air Products
showed a boosted profit on increased sales, but missed consensus
estimates by once cent.  Investors have had a clear bearish bias
on APD ever since.  Similar selling pressure has been seen in
shares of chemical giants DD and DOW.  DuPont reported their own
quarterly earnings today and rose a paltry 27 cents after it beat
estimates by three pennies.  The recent action in chemical stocks
is a reflection of economic uncertainty on Wall Street.  Is a
dreaded "double-dip" recession just around the corner?  Nobody
knows for sure, but as long as economic data remains sluggish
(i.e. today's weaker-than-expected durable goods orders), the
large institutional buyers will be hesitant to bet on a recovery
in the manufacturing sector.

Technically, we like APD as a bearish play because the stock is
on the verge of breaking through key support in the $40.00
region.  Shares rebounded from this level on multiple pullbacks
in the second half of 2002.  Pulling back to a weekly chart, we
see that the next level of possible support is down at the 2001
lows near $32.00.  For the purposes of this play we'll target a
move to the $33.00 area.  Shorter-term traders could aim for a
test of the p-n-f bearish vertical count of $36.00.  One caveat:
The recent losses have pushed the daily stochastics into oversold
territory.  This indicates that APD might see some short-covering
at current levels.  However, we think the stock will succumb to
another wave of selling once support gives way.  We're placing an
entry trigger at $39.84 (one cent under yesterday's low) in order
to confirm a breakdown.  If the play is activated we'll use at
stop at $43.02, just above the descending 50-dma.  More
conservative traders could a stop slightly above Friday's high of
$42.15.


BUY PUT FEB-45*APD-NI OI=4 at $4.90 SL=2.45
BUY PUT MAR-45 APD-OI OI=15 at $5.20 SL=2.60

Average Daily Volume = 944 K



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offers true direct access to each option exchange
offers stop and stop loss online option orders
offers contingent option orders based on the price of the option or
stock
offers online spread order entry for net debit or credit
offers fast option executions

PreferredTrade offers these online option trading features and more;
call 1-888-889-9178 or click for more information.

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


**************
FUTURES CORNER
**************

Half-life
By John Seckinger
jseckinger@OptionInvestor.com

In the world of futures trading, every minute counts.  By cutting
certain levels in half, traders can get that much deeper into the
mind of an institutional trader.

The date in question:  Tuesday, January 28, 2003.  A rather quiet
day with not a whole lot going on.  There was resistance at a
retracement level in-between S2 and R2 (856 level), and bulls did
get their test of R1 as the session neared its end.  For the most
part, however, the pivot was center stage and wasn't left behind
until 1 p.m.  Looking at a chart below, it was interesting that
the ES neither CLOSED above the 856 area nor even tested the
38.2% level below (blue line).  This is certainly not a picture
of an ideal trading situation; nevertheless, let us see how we
could make it more manageable for aggressive traders.

Chart of the ES03H, 5-minute




One way to play the ES contract during a session like Tuesday is
to split the ranges above in half.  By taking 50% of the range
from the pivot to the 61.8% area, a trader can then really look
to scalp a move like an institutional trader.  It all comes down
to risk/reward.  Using period closes only, if the ES contract
closes below one of these retracement areas, then a trader should
do an immediate risk assessment.  Am I getting better than a 1:1
risk/reward?  If Yes, then by all means look for the next
retracement area to be hit.  Looking at an example below, the top
example shows a red candle CLOSING back underneath this new 50%
area (853.50) and signaling a move to 851.  The low of this
candle is 853, and the objective is 851.  Two points.  The risk?
Back above 853.50, so the minimum risk is only 0.50.  We have
better than a 1:1 ratio risk/reward; therefore, a scalping
opportunity exists.

On the other hand, the example at the bottom of the chart has the
period closing at 849.75.  Reward?  851.  Risk?  848.25.  Note:
I always round to the nearest 0.25, since the ES contract only
trades in 0.25's.  Getting back to this example, the risk is 1.50
and the reward only 1.25.  No trade.

Counting up all the signals, there were about 16 signals in the
chart below and only half were profitable.  So, how can a trader
better these odds?  I would avoid all signals given around the
DAILY pivot of 851.  Only look at entries from other retracement
areas.  The odds then increase to roughly 5 winners and 2 bad
signals.  If you are a trader that loves to be involved, this
could definitely help.

Chart of ES03H, 5-minute




Ok, let us say that a trader didn't want to get that aggressive.
How else can a trader use these "new 50%" levels?  Well, we did
eventually have a test of R1 very late in the session.  For the
moment, let us imagine that we tested 859 much earlier.
Regardless of the time, there didn't seem to be much resistance
until near the 865 area.  That is some good heat for an
aggressive day trader, and let us see if this "new 50%" level
could help with risk management.

Looking at the chart below, notice how the "new 50%" area could
have been used as a stop level if traders decided to sell short
at or near R1 (859).  I do believe that this tool will end up
being a nice addition to futures traders.  It is also interesting
how the other "new 50%" area at 853.50 acted as support.  This
confirms the fact that I am not the only trader looking at such a
level.

Chart of ES03H, 5-minute




It is definitely my belief that the 50% retracement area is an
extremely valuable tool.  I use it every day on the opening five-
minutes of the Dow, and I do think that taking 50% of most day's
ranges in its entirety can gauge sentiment if the contract is not
trading near its daily pivot.  The pivot, by definition, is 50%
of the range from R2 to S2.  Of course no coincidence.
Therefore, why not split the retracement levels between R2 and S2
in half as well?  Going forward, I will cut the levels in half in
which either R1 or S1 resides in and then evaluate risk from
there.  As long as S1 is above the 50% area, or R1 below this
level, a trader should be able to give themselves an edge.  This
tool may not be relevant every session; however, something to
think about when wondering where a stop should be placed.
Moreover, if we do get more sessions like the one we had today,
using these "new 50%" levels will certainly make it more
interesting.

Good Luck.

Questions are welcomed,

John Seckinger


************************Advertisement*************************
”If you haven’t traded options online – you haven’t really traded
options,” claims author Larry Spears in his new compact guide book:

“7 Steps to Success – Trading Options Online”.

Order today and save 25% (only $15) by clicking on PreferredTrade
and clicking on the link to the book on its home page.

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


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