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Daily Newsletter, Tuesday, 03/25/2003

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The Option Investor Newsletter                 Tuesday 03-25-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Longer and Harder
Futures Markets: Underlying Bullishness
Index Trader Wrap: Correlations abound for institutional buying
Market Sentiment: Buying the Dip
Weekly Manager Microscope: Schwab Select List: Balanced Funds


Updated on the site tonight:
Swing Trader Game Plan: The Cat's Alive!


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      03-25-2003           High     Low     Volume Advance/Decline
DJIA     8280.23 + 65.60  8337.72  8180.72 1.61 bln   2323/ 916
NASDAQ   1391.01 + 21.20  1400.14  1369.32 1.41 bln   2042/1112
S&P 100   444.77 +  5.10   447.56   438.63   Totals   4365/2028
S&P 500   874.74 + 10.51   879.87   862.59
W5000    8279.27 + 98.80  8320.11  8169.61
RUS 2000  371.79 +  4.54   372.22   367.01
DJ TRANS 2202.07 + 18.70  2208.13  2170.38
VIX        32.66 -  2.54    35.14    32.50
VXN        45.00 -  1.36    47.32    43.69
Total Volume 3,313M
Total UpVol  2,727M
Total DnVol    491M
52wk Highs  149
52wk Lows   120
TRIN       0.55
PUT/CALL   0.94
************************************************************

Longer and Harder

Rumsfeld said the war could be much longer and harder than
previously thought and cautioned Americans from expecting a
quick resolution. The markets rallied on the news, which showed
that severe oversold conditions are more important to traders
than heavy resistance slowing the troops. The news of potential
popular support against Saddam in Basra rallied the markets
but news of a revolt in the US Senate tanked them again.

Dow Chart - Daily




Nasdaq Chart - Daily




The morning started off weak with mixed war news causing
volatility in the futures. After moving sideways for an hour
the bargain hunters from Monday's crash begin to surface and
shorts began to cover. This move was delayed because of the
announcement of the Consumer Confidence at 10:AM.

The Consumer Confidence fell to a decade low of 62.5 and down
from 64.8 in February. The cutoff date for this survey was
March 18th so all responses were before the start of the war
and the negative news about prisoners and causalities. This
would indicate that the next reading could be even worse. The
current conditions and future expectations components were
both down. The expectations component fell to 62.5 and was
the lowest level since January 1991. Does that date sound
familiar? This was the first Gulf war. Buying plans for major
appliances and autos fell to the lowest levels since 1996.
47% of the respondents thought the stock market would move
lower over the next 12 months.

Chain Store Sales rose slightly at +0.1% and it was the fourth
consecutive weekly rise. Sales are still at or below plan for
most stores but rising as milder weather for most of the country
brings consumers out of their houses.

Existing Home Sales fell to 5.84 million from the January
pace of 6.10 million units. The war along with unemployment
is offsetting the low interest rates. The housing sales rate
fell -4% from January but is still a very robust rate given
the conflicting economic and sentiment factors. Since mortgage
rates are not likely to go much lower, existing home sales and
new home sales are fighting an uphill battle. An end to the
war could actually bring higher rates and a steeper hill for
sales to climb.

The NYSE terminated the access privileges for Al-Jazeera News
claiming they were limiting access to the exchange due to
security reasons. Unofficially the reasons were thought to
have been due to the network's war coverage. The NYSE said
the number of accredited TV stations needed to be reduced
and they were limiting access to those with responsible
coverage of business issues.

Early in the day there were reports of an uprising in Basra
against Saddam's troops with towns people fighting the Iraq
troops for control. The sudden prospect of a rapid takeover
of this major city spiked the market off its lows. Late news
tonight has the Iraq military shelling Basra civilians with
mortars and artillery.

There was not much news from the war due to a major sandstorm
in the Southern Iraq region. This shut down all low flying air
support and gave the US time to perform maintenance on their
gear and let supply convoys catch up with the main units.
Troops with their vision cut down to mere feet were free to
hunker down under cover and catch up on some sleep. This is
only a temporary situation. With the lead elements only 60
miles from Baghdad there is going to be even stronger fighting
soon. The Republican Guard is between the coalition and
Baghdad and there is repeated intelligence that they have
been authorized to use chemical weapons when the main fight
starts. There are also 25-45,000 Fedayeen hard liners roaming
southern Iraq using a hit and run strategy as well as using
force to keep regular Iraqi army units from surrendering.
The Republican Guard and the Fedayeen are not going to
surrender and they are going to fight like junk yard dogs
when cornered. Logic and overwhelming force is immaterial
as these groups have no place to go when it is over. If
Saddam is not in power their protection to rape and plunder
will be withdrawn and life could take on a new meaning.

This group was formed by Saddam's son after the first Gulf
war to keep the civilians in line. They recently beheaded
200 women for infidelity and put their heads on poles
around the country as warnings to others. These are going
to be wolves nipping at the side of the columns while the
Republican Guard will be bringing the heavy weapons to
bear on the front. Fortunately air power will eventually
eliminate the Republican Guard but the thousands of Fedayeen,
which were recruited from jails and radical factions, will
not be so easy. There is also news that up to 5,000 Iraqis
who had fled Iraq to avoid Saddam's rule are now coming back
into Iraq to fight AGAINST the coalition and for Iraq. They
don't like Saddam but they feel Iraq should not be ruled by
the coalition. Stockpiles of thousands of brand new Iraqi
chemical weapons suits have been found and recent positions
overrun have been stocked with gas masks. Once a chemical
attack begins things are going to get much worse for the
war sentiment.

The market was struggling at the highs of the day and the
opening levels from Monday at Dow 8335 and Nasdaq 1400 when
news of a Senate revolt hit the markets. The Senate voted
to cut the presidents tax cut package to 50% of the requested
amount of $712 billion. The limit of $350 billion was seen
as a significant limit to the economic recovery and a hit
for the stock market. The package as presented was reported
to have the potential for a +15% market bounce if enacted.
Does cutting it in half only mean we will get a +7% bounce?
If so then the market will eventually discount whatever was
already priced in when the House and Senate gave tentative
approval last week. That approval was part of the motive
force for last weeks rally.

The problems for the market are not over. We gained +1100
points in eight days and gave back -242 this week. The
Nasdaq rallied back to 1400 and strong resistance again.
This was the level that has held for a long time before
last Friday's major move. The failure at this resistance
again is crucial and shows that sellers are still there.
The Nasdaq futures are +3.50 tonight despite RHAT missing
estimates by a penny and PLAB cutting its workforce by
10% to 12%. This shows tech bulls are also alive and well.
There is strong support at 1370 and strong resistance at
1400.

The Dow is more fluid. There is strong resistance at 8330
and strong support at 8130-8175. The bulls appear ready
to sit back and nibble when the averages retreat and the
bears have no conviction to press the attack. The recent
rally has taken the fight out of the bears and the potential
for further gains on any unexpected good news remains.
They do not want to step in front of the gun even if they
think it is empty.

This leave us with a stalemate. There is no concrete reason
for a continued rally. Economics are terrible. Earnings are
terrible. The war is likely to get worse before it gets
better but everybody is conditioned to think there is still
going to be a rally in our future. Why or when continues
to be the question and of course how far. Just getting
back to the recent highs at 8500 is going to take a huge
effort and there are no shorts left to squeeze. The bears
may be getting ready to hibernate after a three year run.
However, the bulls are still bloated from their recent feast
and are not ready for another romp. The result is a likely
stalemate until the end of quarter window dressing begins.
That buying could begin at any time. What is it going to be?
War jitters, chemical attacks, hundreds more casualties or
the wrath of fund holders against funds not fully invested.
This is going to be another confusing week governed by news
and greed. Sounds like business as usual to me.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


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

Underlying Bullishness
Tuesday, March 25, 2003
By Vlada Raicevic

Daily Settlement Numbers 4:15pm ET


Contract    Last          Net        High         Low

Dow         8280.23      +65.55      8337.72     8216.85
YM 03M      8252         +62         8312        8122

Nas 100     1066.57      +19.47      1075.43     1047.06
NQ 03M      1065.50      +15.50      1079        1050

S&P 500     874.74       +10.51      879.87      862.59
ES 03M      872.25       +8.75       879.25      856

Daily Pivots

Contract    S2        S1        Pivot      R1        R2
YM 03M      8044      8157      8234       8347      8424
NQ 03M      1036      1051      1065       1080      1094
ES 03M      846       861       870        884       893

As stated yesterday, the selloff was a little extreme on Monday,
and a reaction bounce was to be expected today.  Since we are
keeping an eye on war news these days, the morning did not give us
anything to rally the markets:  mounting resistance from Iraq,
casualties, and the State Department saying that the war hasn't
really begun yet, and so on.  It was not surprising then, that the
markets rallied hard on such downbeat news, since the markets
have, except for Monday, been rallying on any news, good or bad.

Once again we blew through a couple lines of resistance as if they
didn't exist: first through 868, then a slight pause before
blowing through 870, and so on, at one point looking like it would
go through 879-880 area.  However, this is where the run stalled,
and we spent several hours moving in a small sideways range with
875.50 holding as support.  One more attempt at breaking the highs
was met by selling, and we broke below the sideways range to
bounce off a rising trendline at 867, when buying again pushed the
ES back to the 875 area.  The NDX and SPX outperformed the Dow,
and even though the SOX was weak, the BTK took up the slack and
helped the NDX post a 2% gain.

Now we have the setup for getting some answers.  We had an
extremely strong push up by the markets last week, followed by a
strong selloff on Monday, and then today we recovered some of that
selloff, but not enough to completely dismiss the selloff as an
over reaction.  Keep in mind that this week is the end of the
first Quarter.  Fund managers have a strong interest in having
their portfolios remain strong so that all those quarterly
statements sent to their customers can make everything seem rosy.
If they had their way, we would either continue up, or just move
sideways here to hold on to the great gains that stocks have seen
in the past couple weeks.  However, what the fund managers want
could be hard to keep if we get a string of very bad news from the
war front.  Keeping these things in mind, let's look at the
charts.

ES Pivot Chart:
You can see we did break above the Pivot, but R1 held us back.  A
break below the Pivot could not hold and we moved back above it to
be repelled by the Pivot/R1 Centerline.  The big thick red line is
a trendline of the S2 Pivot areas, I'm tracking this to see if
drawing trendlines along the Pivot chart S2 and R2 areas are a
worthwhile task.





ES 270 Minute All Sessions Chart:
The Macd is well below the centerline, and with todays move to the
upside, it has crossed and turned up.  How it acts at the
centerline and the downtrend line will be key.  Short term
Stochastic has turned up but is at the centerline, and needs to
cross it in order to look for more upside, while the longer term
Stochastic has slowed its decline, it hasn't crossed up yet, and
is also below the centerline.  RSI turned up from the lows, but is
still below the recent range.  ADX has crossed over bullish after
crossing bearish, and has moved above the downtrend line for D+,
and while other indicators are still bearish with a slight bullish
leaning, D+ is the one true positive note here, showing us that
buying continues to come into the market.  You can see how 879.50
is resistance, and 857.50, then 852 are support.  Centerline of
regression channel is currently at 849 area.





ES 60 Minute Chart:
You can see how the attempt at yesterday's gap fill failed and
rolled over to the bottom of the regression blue regression
channel where it found support.  Macd is neutral, with the attempt
to cross the centerline failing, but not rolling over; fast
Stochastic is rolling over and slow Stochastic is in bearish
territory.  RSI is also completely neutral at the centerline, and
the CCI moving average has not turned up yet (green line).  So, we
have a neutral state, which is also shown by the price chart where
ES closed roughly halfway between yesterday gap down open, and the
lows from yesterday and today.





ES Daily Chart:
As expected, the rise after yesterday's decline has not done much
to change indicators from their continuing bullish character.  I
drew a new trendline along the tops of the last two peaks, and any
additional rise should first stop at this trendline which is
currently at 892, but dropping each day.





ES Fibonacci:
Looking at the fibonacci retrace, we see that the .382 retrace is
close to horizontal support at 857, so 852-854 is an area to watch
on any additional selling.  A break of this area has .500 at 842
with horizontal support at 840.





NQ 270 Minute All Sessions Chart:
The strong area of support from trendline, regression channel, and
horizontal support was broken but price did not close below this
area.  A bounce took it to horizontal resistance and pulled back.
Even though NQ outperformed the ES/YM today, the indicators look
quite similar to the ES due to NQ having a harder selloff
yesterday, so things look to have evened out.  Indicators trying
to turn back up into bullish stance, but not there yet.





NQ Daily Chart:
The NQ 60 minute chart looks much like the ES.  The daily chart
remains more bearish then the ES, with those lower lows continuing
to be printed.  Macd has crossed over, but the lines are not
diverging yet to show that the downside has momentum.  CCI is
still above its moving average and slow Stochastic is still
pointing up, but is reaching a point where it should turn over
with any more selling.





NQ Fibonacci:
Price bounced near horizontal support which happened to be close
to the .382 point.  With NQ looking a bit heavier, it looks like
any more selling should take it to the actual .382 level which
corressponds well with horizontal support, as does the .500
retrace area.  A break below that .382 area takes it to 1033
support, then the .500 retrace.







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

Renko Charts.
These will be updated when necessary.  Prices are at highs and
lows.

Daily Renko for ES:




Daily Renko for NQ:




Daily Renko for YM:
This one is a little more difficult.  I set the box size to 5
rather than 2, and I don't display the huge climb from the recent
rally (it would take up most of the chart).  With the larger box
size, the absolute numbers have a slightly larger margin of error.






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

Correlations abound for institutional buying

In Friday evening's market monitor at OptionInvestor.com, we
looked at week-to-week pivot matrix comparisons and thought that
institutions might have their computers turned toward buying in
order to replenish some drawn down inventories of stocks after a
bullish run last week.

A war effort that didn't appear as close to an end as some had
perhaps thought found sharp reversals in the indexes on Monday,
but buyers were found today as the major indexes all closed very
close to their weekly pivots.  After reviewing some of our
comments from Friday evening's market monitor, I have the
impression that institutions do have the computers turned on and
accumulating stock on weakness.  Perhaps something an index
trader looks to do this week as market internals continue to
improve.

Here's a quick look at the past two week's pivot matrix, along
with this weeks pivot matrix and levels.  Correlations that used
to be resistance, which were broken to the upside some "overly"
bullish trading, now line up as support.  For those that believe
institutional computer programs are running the pivot analysis
formula, then it might make sense (at least I think it does) for
the computer switches to be more to the "buy side" and today's
action hints that there may indeed be some institutional bulls
nipping away at stocks after yesterday's drubbing.

Recent 2-weeks Pivot Matrix along with current WEEKLY matrix




Friday evening, I wanted to "step back" a bit and look at the
WEEKLY pivot levels to see if any of the levels were duplicated
in this week's matrix.  It "made sense" to me that the powerful
move higher last week (3/17-3/21) that took many of the indexes
past their WEEKLY R2 would have some institutional computers at
least bidding some stocks on a pullback.  The "first" level I
looked for support was this WEEK's (3/24-3/28) WEEKLY pivots,
which correlated closely with last WEEK's R2's.

Yesterday's trade did take the major indexes back below this
WEEK's pivots, but its today's close in the major indexes and
partial recouping of Monday's losses that hints to me there's
some institutional buying taking place as if computers are trying
to get some inventory squared as bullish inventories were most
likely drained after last week's bullish move higher.

In this morning's market monitor, I thought it difficult to be
establishing new bullish positions this morning, especially for
those bulls already holding 1/4 or 1/2 bullish positions.  I
still like 1/4 or 1/2 bullish positions in an account at this
point with 2 or 3 month expiration, but to get me further
interested to add to a position, I'd want to see the indexes pull
back a little further.  Preferably, a bull looking to further leg
into some bullish positions would like to see a "gradual"
decline, and not the torrid drop like that found on Monday.

Let's take a look at tomorrow's DAILY pivot matrix along with the
WEEKLY and MONTHLY levels, but suffice it to say, I'm looking for
some "formidable" support to be present at the WEEKLY S1, with
potential challenges of the WEEKLY R1's.  Make no mistake.  The
markets are moving on just about ever word out of Iraq at this
point, with rumor, fact and anything else driving action.  Still,
there are some very strong "technicals" in play at the WEEKLY
S1's where a bull should find some confidence in entry points.

Pivot Matrix (DAILY-WEEKLY-MONTHLY)




The major indexes show a rather "mixed close" around this WEEK's
pivot levels.  The NASDAQ-100 Index (NDX.X) 1,066 +1.85% had been
the "leadership" index into last week, but as previously noted,
began to stall out with the Dow Industrials (INDU) 8,280 +0.79%,
S&P 500 (SPX.X) 874 +1.2% and S&P 100 Index (OEX.X) 444 +1.15%
playing some "catch up."

It's the "violation" of the 1,069-1,070 level on Monday and
decline to 1,045 yesterday in the NDX, which has me currently
thinking the indexes are vulnerable to a pullback to their WEEKLY
R1s at this point, but I'm carrying a bull's torch as the bullish
% indicators showed no deterioration after Monday's trade and
market internals continue to show sign of improvement.

NASDAQ-100 Index (NDX.X) - Daily Interval




I view the 1,040 level a good "pullback" bullish entry point, as
this is a level that showed up as resistance in week's prior,
that now shows up as support in the WEEKLY matrix.  It was about
three week's ago that the 1,020 level was a level that bears
needed to see hold resistance, which didn't, that saw the NDX
surge to the recent relative highs.  It's "interesting" how the
1,020 level is represented in the WEEKLY retracement and perhaps
become a "pivot" on a much larger scale.  The NDX found some
buyers today and was able to hold above yesterday's low.  If not
for this weekend's developments in Iraq and a more formidable
defense being found by its military, I hadn't ruled out a move to
the 1,151 level should the coalition have been able to take
Baghdad by the end of this week.  However, that doesn't seem to
be a reasonable scenario at this point.  While I really have no
ability to forecast a coalition effort, I would view this week's
"MAX gain" as being 1,120 and a "MAX decline" being 1,020.  This
would have me "comfortable" in holding a 1/2 bullish position at
current levels, but the uncertainty of war and current range
within the levels would have to have cheaper price levels to get
me to further build a position.

Today's action saw a net gain of 1 stock to a reversing upward
point and figure buy signal in the NASDAQ-100 Bullish % ($BPNDX).
This is in addition to Monday's net gain of 1 stock to a
reversing upward point and figure buy signal.  In my minds eye I
can envision several point and figure stocks of charts that
probably saw some columns of O develop on Monday, but no "sell
signal" being given, with some reversing back up into a column of
X today.  Current status is "bull alert" at 49% and we'd need to
see a reading of 68% to achieve "bull confirmed" status.  It was
on March 14th that this indicator turned "bull alert" status,
which I would benchmark to the 1,020 level.  With the bullish %
still showing gains, I'm not currently looking for bearish trades
and would only trade bearish with a very short-term time horizon
at this point.

S&P 500 Index (SPX) - 5-point box




In our March 18 Index Wrap we tried to look back at history and
one thing we noted was a 6% pullback in the OEX (since SPX moves
pretty much the same, using it here too) and while history is no
guarantee as to being a guide to the future, a 6.06% pullback
from 895 on the SPX p/f chart would put risk back near 841, which
is a "zone of support" on the p/f chart.

While the "time line" discussed as it relates to "Operation
Desert Storm" isn't aligning perfectly with the 6% pullback in
the OEX/SPX after US-lead troops had amassed at the Kuwait
border, we could be seeing the 6% decline RIGHT NOW as coalition
forces begin surrounding Baghdad on what could be a "final
assault" on Saddam Hussein's government forces.

I'm looking for formidable support in the SPX from 855-845.
Bulls should trade within their comfort zone to compensate for
volatility and war-related news here, but if bulls are
comfortable with 1/2 bullish position, then I'd hold tough here.

S&P 500 Index Bar Chart - Daily Interval




I showed the above chart of the S&P 500 (SPX.X) in this morning's
market monitor, but wanted to show it here with both the MONTHLY
and WEEKLY retracement overlaid.  The p/f chart shows the
"triple-top buy signal" at 855, and we can perhaps see how the
WEEKLY S1 of 850 comes into play as a past level of resistance
that should now serve technical support on a pullback.

It is the "uncertainty" of war that only has me one-half bullish
positions still so that a bull can "make it through" some
volatility and not succumb to emotions.  Still... every trader
has a comfort level, but as we saw this weekend, a little
difficulty or "bad news" on the war front can have some sudden
impact on the trade.

Today's action saw no net change in the S&P 500 Bullish %
($BPSPX).  Despite Monday's declines, the S&P 500 Bullish %
actually saw a net gain of 1 stock to a reversing upward p/f buy
signal.  No big changes from the internals the last two sessions
and after reversing up into "bull confirmed" status after last
Tuesday's trade at 34.2%, current reading is 41.4% bullish.

S&P 100 Index (OEX.X) - Daily Interval




Current bullish target for bulls would be the WEEKLY R1 of 468.50
and the 19.1% retracement of 466.75 from our WEEKLY retracement
(blue).  Current level of trade is right at the WEEKLY pivot and
gives me somewhat of a 50/50 feel for new bullish entries and a
pullback into the WEEKLY S1 of 432 and MONTHLY 38.2% retracement
of 430.8 puts the OEX in a "zone of support," which was the "zone
of resistance" that bears didn't want to see broken two weeks
ago.  Bears that may have been a bit complacent at the 435 level
and have seen the recent high should be looking to cover on
weakness and that's where I think a good bullish entry point for
new positions can be found.

Today's action saw no net change in the S&P 100 Bullish %
($BPOEX) and current status remains "bull alert" at 43%, which is
the relative high reading for this indicator since achieving 43%
after Friday's session.  When I look back to this bullish %
reaching a recent low of 21% on March 12, when the OEX traded
what is now its WEEKLY S2 of 408, I would view a bullish %
reading back near 70% (if achieved) to have the OEX capable of
480.

Dow Industrials Chart - Daily Interval




The Dow Industrials (INDU) recouped about one-third of
yesterday's losses when it was trading at its best levels of the
session and was a difficult bullish trade for me to make today.
I like the Dow Industrials as bullish, but again prefer just 1/2
position at this time.  I do like a pullback entry point of
8,050, which would be just above the overlapping WEEKLY S1 of
8,026 and 38.2% retracement from our MONTHLY retracement.

At the close of trading Friday, I will recalculate the MONTHLY
pivot analysis levels, so that we can try and get some further
levels of resistance to correlate with.  I've done a "quick"
check and pretended that the current month's high and lows are in
for the Dow and used today's close to get a feel for things.  I
further like a 8,050 entry point as a preliminary MONTHLY pivot
analysis would have the MONTHLY pivot at 8,072.

Today's action saw the very narrow Dow Industrials Bullish %
($BPINDU) unchanged at 40% bullish.  Still "bull alert" status
here.

A stock that Dow Industrials traders may want to keep an eye on
as a "key stock" near term is shares of American Express
(NYSE:AXP) $35.26 -2.99%.  On Friday, this stock traded $37.00
and its point and figure chart generated the "bearish signal
reversed" pattern.  This pattern is characterized by a series of
lower highs and lower lows, which is "quickly" reversed to the
upside.  The supply/demand pattern is that of a systematic series
of lower lows and lower highs, which can create complacency among
bears that systematically have been shorting the stock with
"predictable" success as they work the stock lower, but the
"quick" reversal up can trap complacent bears into a powerful
short-covering rally.

Dorsey/Wright and Associates classifies this stocks as a
"financial," which has this sector bullish % still "bull
correction" status at 45.4% bullish and a reading of 48% would
have the sector reversing back up into "bull confirmed" status.
My reason for mentioning this stock as an observation stock right
now is to perhaps try and get a feel for how some bears are
trading right now in a stock that is very "consumer-related" as
to spending habits.  The stock was a Dow laggard today, but I'd
monitor the stock for another sharp rebound from today's declines
as it pulls back in and tests it trying to flatten out 200-day
SMA of $34.95 (today's low was $34.95).

As an observation stock for index traders, especially Dow, SPX
and OEX, I'd view the holding of the $35.00 level near-term as
bullish, or a rebound from today's decline also bullish.  A more
bearish move would be for the stock to continue to suffer decline
after triggering one of the most bullish point and figure chart
patterns from Professor Davis' study of probabilities.

Jeff Bailey


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

Buying the Dip
by Steven Price

After the disappointment over some weekend military setbacks wore
off, the broader markets made up some of Monday's sell-off and
seemed to indicate that the bullish reversal we saw last week
might have some staying power.  It is hard to rely on the
technical indicators in a news-driven environment, but so far
they have been reliable.

After a Dow gain of 100 points in eight sessions, some pullback
was expected, although Monday's 300 point Dow drop certainly
raised some flags as to just how much conviction the bulls had.
Tuesday's rebound back through some significant barriers that
were broken last week indicates that the conviction is still
strong. Last week we cleared out bearish resistance on the point
and figure charts and today's intraday  rally took us back
through those former resistance levels, indicating that the bears
that might have defended them are no longer trying to pick a top.

Part of the reason behind the rally was an uprising by the Shiite
majority in Basra against Saddam Hussein's forces. Apparently
Hussein's troops are shooting at Iraqi citizens trying to leave
the area, according to Donald Rumsfeld.  It could be a turning
point in the war, as Iraqi citizens take up arms against that
country's military and create more problems for Iraqi troops, as
well as more evidence that Hussein is losing control of the
citizenry. Oil prices spiked again this morning, however fell off
on the news of the Basra uprising, mirroring (inversely) the mid-
day rally in equities.  The May Crude Oil contract finished the
day up only 0.42 at $28.42 per barrel, after jumping as high as
$29.69.

This morning's economic data was better than expected, but not by
much.  The Conference Board's Consumer Confidence Index fell to
yet another 10-year low ahead of the military conflict in Iraq.
It dropped from 64.8 in February to 62.5 in March.   The cutoff
date for the survey was March 18, so it failed to measure the
response to the progress of the war and we may have to wait for
Friday's University of Michigan Consumer Sentiment release to get
a feel for how consumer's feel.  The U of M is smaller, but more
weighted to consumers than businesses and might give us a feel
for how willing consumers are to spend. It is also based on
telephone surveys that include results from this week. The weak
job market no doubt helped lead to the drop in Confidence and the
expectations portion of the report fell to its lowest level since
January 1991. The number of respondents saying jobs are hard to
get rose from 30% to 32.3% and suggests a correlative
unemployment rate of 6.5%. The present situation component fell
to its lowest level since December 1993. Still, it was slightly
better than expected and helped give the markets a boost. The
head of consumer research for the Conference board said a quick
victory , "would certainly ease some of the uncertainties facing
consumers, (but) it is the economic fundamentals that will
determine whether a rebound is sustainable."  The Rasmussen
economic confidence index, which is separate from the Conference
Board's report, showed an impressive increase in confidence in
the past week, with an increase from 89.9 to 108.2.

Existing home sales have also pulled back from January's pace.
While the decline was expected, the sales dropped 4.3% to an
adjusted 5.84 million. The February pace was still higher than it
was a year ago and slightly better than expectations for a drop
to 5.78 million homes.  With mortgage rates expected to increase
throughout the year, the rate may continue to decline. The report
from the National Association of Realtors measures closings, so
it is a lagging indicator of sales.  The Midwest was the
strongest region, with a gain of 4.8%, while sales fell in the
Northeast, West and South.  Although I have yet to personally
hear about anything but a declining market, the national median
home price rose to $161,000, which is 8% higher than a year ago.
Mortgage payments as a percentage of income also dropped to 17.4%
in January - the lowest level in four years. Merrill Lynch cut
its investment rating for several homebuilders, saying,  "Several
economic issues could make things tougher on industry
participants over the next year or two." it didn't cut the entire
group, but said it was time to start differentiating between
homebuilding stocks.  Downgraded were Beazer Homes (BZH), and KB
Home (KBH).

By the end of the day, the rally had faded.  Part of that failure
was likely due to the Senate's vote to cut the President's tax
cut plan in half. Less economic stimulus could mean less spending
and also possibly less of a cut to the dividend tax.

Looking at support and resistance levels, we pulled back to OEX
438, which is in the neighborhood of the 440 level that has been
pivotal in the past on numerous occasions.  The 50% retracement
of the August high to October low also comes in at 437 and that
is exactly where we bounced last week on Wednesday and Thursday.
Keep an eye on a break below OEX 437 for an indication that a
rollover may have further to fall.  However, as long as we remain
above that level, it appears that the market's move over the past
two weeks has left us at higher ground. Of course, the war events
will continue to dictate how we trade from here, but for the
moment, that OEX range appears to be the key technical level to
watch.


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

Market Averages

DJIA ($INDU)

52-week High: 10673
52-week Low :  7197
Current     :  8280

Moving Averages:
(Simple)

 10-dma: 8114
 50-dma: 8049
200-dma: 8427



S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  875

Moving Averages:
(Simple)

 10-dma:  858
 50-dma:  852
200-dma:  891



Nasdaq-100 ($NDX)

52-week High: 1734
52-week Low :  795
Current     : 1067

Moving Averages:
(Simple)

 10-dma: 1055
 50-dma: 1009
200-dma:  992



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

The Semiconductor Index (SOX):  The SOX got a small bounce today,
coming within three points of support at its simple 200-dma at
312.97 beforehand.   More important for traders looking at long
plays may be the exponential 200-dma sitting at 337 that capped
Friday's rally.  A move through either of these averages could
signal continuation in whichever direction the break occurs, but
the highs on Friday and Monday show that the 200-ema is once
again spoiling the party as it did in December, with two failures
at that level before a big rollover. The simple 200-dma hadn't
been tested closely since last year and apparently the break
through it wasn't as significant as the litmus test at the 200-
ema.

52-week High: 393
52-week Low : 214
Current:      322

Moving Averages:
(Simple)

 21-dma: 301
 50-dma: 292
 200-dma: 312

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


The VIX continues to seek out new relative lows, giving us
bullish equity confirmation now that we are below the 34% level.
There is light support at 29-30% that could signal an equity
pullback, but the major support comes in at 26%.  If we approach
that 26% level, tighten your stops on bullish plays, because the
party could end there.


CBOE Market Volatility Index (VIX) = 32.66 -2.54
Nasdaq-100 Volatility Index  (VXN) = 45.00 -1.36

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.94        528,912       497,710
Equity Only    0.84        422,752       354,817
OEX            0.96         16,071        15,497
QQQ            3.43         19,052        65,328


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

Bullish Percent Data

           Current   Change   Status
NYSE          40.4    + 0     Bull Correction
NASDAQ-100    49.0    + 1     Bull Alert
Dow Indust.   40.0    + 0     Bull Alert
S&P 500       41.4    + 0     Bull Confirmed
S&P 100       43.0    + 0     Bear Alert

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

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

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

 5-Day Arms Index  1.53
10-Day Arms Index  1.09
21-Day Arms Index  1.44
55-Day Arms Index  1.35


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       2097            763
NASDAQ     1953           1042

        New Highs      New Lows
NYSE        53               39
NASDAQ      66               40

        Volume (in millions)
NYSE       1,584
NASDAQ     1,401


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

Commitments Of Traders Report: 03/18/02

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 43,000 long contracts, while adding only 5,000
shorts.  Small traders took a reverse approach, adding 15,000
longs and 51,000 shorts.  Small traders, however, came into the
period much longer.

Commercials   Long      Short      Net     % Of OI
02/25/03      424,276   482,476   (58,200)   (6.4%)
03/04/03      426,053   472,492   (46,439)   (5.2%)
03/11/03      440,688   485,938   (45,250)   (4.9%)
03/18/03      483,224   490,582   ( 7,358)   (0.1%)

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year: (  7,358) -  3/21/03

Small Traders Long      Short      Net     % of OI
Small Traders Long      Short      Net     % of OI
02/25/03      157,790    91,083    66,707     26.8%
03/04/03      164,759    98,636    66,123     25.1%
03/11/03      169,450   102,631    66,819     24.6%
03/18/03      184,907   153,400    31,507      9.3%

Most bearish reading of the year:  31,507 - 3/21/03
Most bullish reading of the year: 114,510 - 3/26/02

NASDAQ-100

Commercials mirrored the action in the S&P, adding 15,000 longs,
to only 8,000 shorts.  Small traders also emulated their
counterparts, adding 10,000 longs, but 17,000 shorts.

Commercials   Long      Short      Net     % of OI
02/25/03       38,787     51,745   (12,958) (14.3%)
03/04/03       39,934     52,978   (13,044) (14.0%)
03/11/03       43,641     56,020   (12,379) (12.4%)
03/18/03       58,877     64,302   ( 5,425) ( 4.4%)

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
02/25/03       25,378     7,431    17,947    54.7%
03/04/03       24,240     8,038    16,202    50.2%
03/11/03       27,196     9,674    17,522    47.5%
03/18/03       37,097    26,951    10,146    15.8%

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 5,000 long contracts and 4,000 shorts, staying
relatively unchanged on their net.  Small traders added 1,000 long
contracts and only 600 shorts.

Commercials   Long      Short      Net     % of OI
02/25/03       19,985    11,866    8,119      25.5%
03/04/03       21,326    12,724    8,602      25.3%
03/11/03       21,726    14,370    7,356      20.4%
03/18/03       26,880    18,853    8,027      17.6%

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
02/25/03        4,872     8,723    (3,851)   (28.3%)
03/04/03        5,233     8,075    (2,842)   (21.4%)
03/11/03        5,549     7,727    (2,178)   (16.4%)
03/18/03        6,589     8,343    (1,754)   (11.7%)

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

Schwab Select List: Balanced Funds

Our last installment of the Schwab Select List fund review takes
us to "balanced" funds, which invest in a blend of stocks, bonds
and money market instruments in an effort to achieve the highest
total return consistent with preservation of capital.  Such low-
risk strategy funds may be appropriate for "long-term" investors
who do not wish to put all their eggs in one basket, meaning the
stock market.

Generally, a balanced fund will offer a higher yield than a pure
stock fund and perform better than a 100% stock fund when stocks
are falling (declining market).  However, when stocks are rising,
a balanced fund won't typically keep pace with pure equity funds.
Because they invest in a mix of stocks and bonds, balanced funds
usually land somewhere between a pure bond fund and a pure stock
fund in terms of risk-reward potential.

Many balanced funds follow a "three-part" investment philosophy.
First, they believe that investment in high-quality common stock
and preferred stock represents the best vehicle for accumulating
wealth over the long run.  Second, such funds believe that wealth
preservation and income objectives are best achieved by balancing
common stock and bond investments.  Third, balanced funds believe
that the cyclical nature of financial markets requires the timely
adjustment of the mix of common stock and bond investments.

Since the economy expands more often than it contracts over time,
and stocks rise more than they fall over time, most balanced fund
offerings invest more of the fund's assets in stocks than in bond
investments.  For example, Vanguard Wellington Fund, the nation's
first balanced fund, invests 60% to 70% of assets in common stock
and 30% to 40% of assets in bond investments.  Other funds within
the group are more income-oriented and thus, more conservative in
nature.  Vanguard Wellesley Income Fund, for example, invests 60%
to 65% of its assets in fixed income securities and 35% to 40% of
assets in common stock investments.  Wellesley Income Fund offers
a higher yield than Wellington Fund, but it offers less growth of
capital potential over the long term.  Some may debate that view.

Asset allocation funds are generally more flexible in their asset
mix adjustments, while balanced funds tend to be more "static" in
their asset mix between stocks and bonds.

A common performance benchmark for balanced funds is 60% S&P 500
index and 40% Lehman Brothers Aggregate Bond Index.  You can use
a different equity index, if you like, or a different bond index.
For example, Vanguard Balanced Index Fund seeks a return that is
equal to 60% Wilshire 5000 Total Market Index and 40% Lehman Bro.
Aggregate Bond Index.

Screening/Evaluation Process

The Schwab Select List includes ten balanced funds, which have
met their stringent criterion.  Below is a summary of the funds
by name.  Morningstar categories all of these funds as domestic
hybrid funds for comparison purposes.


 Schwab Select List: Taxable Bond Funds
 Oakmark Equity & Income I (OAKBX)
 Dodge & Cox Balanced (DODBX)
 Janus Balanced (JABAX)
 Transamerica Premier Balanced Inv (TBAIX)
 Eclipse Balanced (EBALX)
 ABN AMRO/Chicago Capital Balanced N (CHTAX)
 Gabelli Westwood Balanced AAA (WEBAX)
 Schwab MarketTrack Conservative Portfolio (SWCGX)
 Atlantic Whitehall Growth & Income (WHGIX)
 Schwab MarketTrack Balanced Portfolio (SWBGX)

As you can see, two Schwab balanced funds meet their own specific
criteria, but the Vanguard Wellington Fund and Vanguard Wellesley
Income Fund are absent from the list.  So, there's no bias in the
Schwab Select List, right?  We'll leave the two Vanguard balanced
funds off of the list for purposes of this week's report, but you
would be well served to give them some consideration.  Both funds
rank among the group's elite.

You'll note the Schwab Select List includes an equity-income fund
(Oakmark Equity & Income) and a growth-and-income fund (Whitehall
Growth & Income).  While these funds' prospectuses may not show a
balanced fund objective, they invest in a mix of common stock and
preferred stock and bond investments as a balanced fund would, so
they are classified as domestic hybrids by Morningstar.  It might
be helpful to keep that in mind when you look at ratings/rankings
since one could argue that they should be compared with same fund
objective funds.

Like in past weeks, we took the above ticker symbols and put them
into Morningstar's system (www.morningstar.com) to obtain current
performance information and to compare the funds based on return,
risk, expenses, investment style/strategy, management, and other
criterion.  The Vanguard Wellington and Vanguard Wellesley Income
Fund were added to have an additional reference point.

Looking first at Morningstar's overall ratings for risk-adjusted
return performance within the domestic hybrid group, we saw that
two funds are only rated three stars (average) overall: Atlantic
Whitehall Growth & Income (WHGIX) and Schwab MarketTrack Balanced
Portfolio (SWBGX).  Three funds carry Morningstar's highest five-
star rating: Dodge & Cox Balanced Fund (DODBX), Gabelli Westwood
Balanced AAA (WEBAX), Janus Balanced (JABAX), and Oakmark Equity
& Income Fund (OAKBX).

Note here that both Vanguard Wellington and Vanguard Wellesley
Income are 5-star highest rated by Morningstar.  In my opinion,
Vanguard Wellington has a superior track record vs. the Schwab
MarketTrack Balanced product, as does Vanguard Wellesley Income
vs. the Schwab MarketTrack Conservative product.  Morningstar's
5-star ratings would appear to support that view.  So, although
we commented earlier that we would leave the two Vanguard funds
off of the list, we feel compelled at this point to add the two
Vanguard funds and to drop the two Schwab MarketTrack funds, so
keep that in mind going forward.

Next, we focused on expenses, identifying those funds that have
expense ratios that are higher than the rest of the Select List
balanced funds.  At 1.39%, Atlantic Whitehall Growth and Income
Fund is the most expensive, and may partly explain why the fund
is just 3-star rated.  It doesn't look as strong overall as some
of the other funds on this list.  The Dodge & Cox Balanced Fund,
by contrast, sports a low 0.50% expense ratio, surpassed only by
the two Vanguard funds.  Vanguard Wellington has an expense ratio
of 0.36% while the expense ratio for Vanguard Wellesley Income is
only 0.33%.

It is not surprising then that we find the Dodge & Cox Balanced
Fund and the two Vanguard funds among the highest performers over
the long term.  The three funds rank among a handful of balanced
funds with trailing 15-year average annual total returns of more
than 10 percent.  Dodge & Cox Balanced Fund has produced an 11.7%
annualized return over the past 15 years.  The Vanguard Wellesley
Income Fund sports an average total return of 10.6%, with sibling
Vanguard Wellington Fund boasting a 10.5% average return over the
most recent 15-year period.  That includes several ups and downs.

The Oakmark Equity & Income Fund, meanwhile, has one of the best
performance records on an ITD basis.  Since its inception on Nov.
1, 1995, the Oakmark fund has earned an average annual return of
12.9% for shareholders.  Janus Balanced Fund is up an average of
11.4% per year since its September 1992 inception date.  So many
of the funds on the list have achieved the creation/accumulation
of wealth objective while at the same time doing a better job of
preserving wealth in down markets and over the long term (versus
pure stock funds).

Because these funds vary in their stock and bond asset allocation
and in their investment style/strategy, they offer different risk
and reward tradeoffs.  If you think that value stocks are the way
to go, then you may lean toward the Dodge & Cox Balanced Fund and
the two Vanguard offerings.  If you believe growth stocks provide
greater capital growth potential than value stocks over time then
you may like the ABN AMRO Balanced Fund or the Atlantic Whitehall
Growth & Income Fund, which both have large-cap growth management
styles.  Some balanced funds stick to large-cap and others on the
list dip down in market capitalization including Eclipse Balanced
Fund and Oakmark Equity & Income Fund.

Still, if we had to pick one or two for the long term, we'd have
to go with either the Dodge and Cox Balanced Fund (DODBX) or the
Vanguard Wellington Fund (VWELX).

Our Favorite Funds

The $7.9 billion Dodge & Cox Balanced Fund (DODBX) seeks regular
income, conservation of principal, and the opportunity for long-
term growth of principal and income.  It invests in a diversified
portfolio of common and preferred stocks, and fixed-income (debt)
securities.  This fund invests no more than 75% of its assets in
stocks.

In equity selection, Dodge & Cox's management team favors stocks
that appear to be temporarily undervalued by the market but have
a favorable outlook for long-term growth.  Bond holdings include
investment-grade securities such as U.S. government obligations,
mortgage-backed and asset-backed securities, corporate bonds and
notes, collateralized mortgage obligations, and others.

The Dodge & Cox Balanced Fund started operations in June of 1931,
so it has a long legacy.  As it was then and as it still is, the
fund represents a simple, low-cost way own a broadly diversified
portfolio of equities and fixed-income securities.  Low expenses
and a true no-load fund structure add to its overall appeal.  It
may, however, occassionally lag other balanced funds when "value"
is temporarily out of favor.  But over the long term, it makes a
compelling case for itself in the balanced class.

The $21.6 billion Vanguard Wellington Fund (VWELX) also sports a
fine track record over many, many years.  It traces its roots to
July 1929 and over the years has helped many investors to create
wealth and preserve it.  It seeks conservation of principal, and
reasonable income and profits without undue risk by investing 60
to 70% of its assets in common stocks and the remainder in bonds
of investment-grade quality.  Like Dodge & Cox Balanced Fund, it
follows a value-conscious approach.

While the youngest member of the Dodge & Cox balanced management
team has been associated with the fund for more than two decades,
the individual who managed the equity allocation of the Vanguard
Wellington Fund for many years, Ernest Von Metzsch, retired from
Vanguard at the end of 2002.  Another seasoned stock manager, Ed
Bousa, took over the equity portfolio in January 2003, following
a similar approach to Von Metzsch.  According to Morningstar, Ed
Bousa plans to continue focusing the equity stake on "moderately
valued" stocks with good dividend yields.  He had a long history
of managing with a similar approach at Putnam Investments before
joining Wellington Management Company, investment sub-advisor to
the Vanguard Wellington Fund.

But, turning our focus back to the "long term," below are average
annual returns over the trailing 5-year, 10-year and 15-year time
periods using data from the Morningstar.com and NYTimes.com
sites:

 Annualized 5-Year Total Return (March 24, 2003):
 +6.0% Dodge and Cox Balanced Fund (DODBX) 2nd Percentile
 +2.4% Vanguard Wellington Fund (VWELX) 18th Percentile

 Annualized 10-Year Total Return (February 28, 2003):
 +11.1% Dodge and Cox Balanced Fund (DODBX) 2nd Percentile
 + 9.7% Vanguard Wellington Fund (VWELX) 8th Percentile

 Annualized 15-Year Total Return (February 28, 2003):
 +11.7% Dodge and Cox Balanced Fund (DODBX) N/a
 +10.5% Vanguard Wellington Fund (VWELX) N/a

While balanced funds will typically not keep pace with pure stock
funds in rising markets, over the long term the better performing
balanced funds can in fact generate equity-like returns for their
shareholders.  These two funds are living proof that well managed
balanced funds can weather the financial storms and protect asset
growth.

As we stated earlier, low operating expenses add to the appeal of
both the Dodge & Cox and Vanguard balanced offerings.  Since they
don't have high cost hurdles to overcome, they can follow a lower
risk strategy and still remain very competitive relative to other
balanced funds out there.

Conclusion

Over the past five weeks, we've looked at various types of mutual
funds using the Charles Schwab Select List as our starting point.
From there, we used various Morningstar screen tools and tools of
other online providers, such as Lipper and NYTimes.com to help us
further skinny down the list of good funds.  Each week, we showed
you two or three funds that we liked the most now based on return
and risk and expense, as well as other factors such as management
style and strategy and tenure.

We did this not to provide you with our top picks but to show you
how one can go about screening for a particular type of fund, and
discuss things to keep in mind as you go along.  We hope that our
weekly fund screens give you food for thought, and ideas that you
can actually use.  For more information on the Schwab Select List
go the www.schwab.com website.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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

The Cat's Alive!

Normally a bounce of 65 Dow points after a 300-point sell-off
might be considered a "dead-cat bounce." But when that 300-point
sell-off follows an 1100-point gain, it appears that the big drop
was just a pullback.


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


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The Option Investor Newsletter                  Tuesday 03-25-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: MME
Dropped Puts: None
Daily Results
Call Play Updates: BCR, BLL, BRL, BVF, MXIM, STN
New Calls Plays: UNH
Put Play Updates: NOC, OTEX
New Put Plays: CB


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

Mid Atlantic Medical - MME - close: 39.50 Gain since picked: +4.70

It has been a rather volatile ride, but our MME play has performed
admirably through the alternating waves of euphoria and despair in
the broad market.  We've been eying the $40 level for some time
now, and after 3 days of being unable to break above that level,
it seems perhaps that breakout is not in the cards.  The play was
triggered when MME traded above the $35.25 level on February 28th,
and with better than a $4 gain from that point, we're going to
close the play as a success while it is still looking strong.
Traders that want to give MME some more room to possibly break out
over the $40 level are welcome to do so, but should have their
stops ratcheted up to no lower than $38.25, just below the
intraday lows of the past two days.  We're dropping coverage of
the play tonight to focus on fresh opportunities.


PUTS:
*****

None


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

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

CALLS              Mon    Tue

BCR      61.87   -1.19  -0.39  Rolled but held
BLL      56.15   -0.08   0.36  Just keeps climbing
BRL      55.92   -2.23   2.47  Made it all up
BVF      40.35   -0.97   1.57  Back over $40
MME      39.50   -0.44   0.46  Drop, Take Profits
MXIM     38.75   -0.89   0.25  Bounce from support
STN      21.08   -0.73   0.41  Successful $20 test
UNH      90.66   -0.61   1.36  New, Above 200-dma


PUTS

CB       45.73   -1.56  -1.62  New, Rlative Weakness
NOC      83.77   -1.83  -0.66  War reactions
OTEX     28.66   -0.78   1.39  Against resistance


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

C. R. Bard, Inc. - BCR - close: 61.87 change: -0.39 stop: 61.40

After the stellar rally last week, we knew our BCR play was due
for some profit taking and the reality that the war wouldn't be as
quick as some hoped provided the perfect catalyst.  By early this
morning, the stock had traded an intraday low of $61, from which
it got a sharp, albeit short-lived bounce.  The remainder of the
day was a story of failed bounce attempts, but the bulls did
managed to defend support, keeping the price above our $61.40
closing stop.  Will the rebound from today's lows prove to be a
buying opportunity or have we seen the end of the rally?
Obviously we don't know, and it will likely be determined by
overseas events.  Aggressive traders can target new entries on
another rebound from above the $61 level, but must remember that a
close below our $61.40 stop will have us dropping the play.  Those
traders looking for confirmation before playing will want to see
BCR propelled back over the $62.50 level before jumping back in.

Picked on March 18th at $61.05
Gain since picked:       +0.82
Earnings Date         04/16/03 (unconfirmed)
Average Daily Volume = 289 K

---

Ball Corporation - BLL - close: 56.15 change: +0.36 stop: 53.50

Just looking at the closing statistics for our BLL play doesn't do
justice to the strength the stock has been exhibiting this week.
After Friday's breakout over the $55 level, the bears have been
thrice thwarted in their attempts to knock the stock back.  Each
morning BLL has been knocked back at the open on the broad market
weakness, only to find concerted buying throughout the day,
pushing it back near the highs by the close.  Those early dips
have served to fill in the majority of Friday's gap higher, and
given the string of higher lows over the past 3 days, it is
looking like that gap will not completely fill in.  Adding to the
bullish picture, BLL has been eking out higher highs over the past
few days as well.  That's a nice contrast from the broad market
action too.  With BLL chalking up new all-time highs, it is
difficult to forecast an upside target, except through the use of
the PnF chart.  The current Buy signal is pointing to an upside
target of $69, but that seems awfully optimistic in the current
volatile environment.  We'll look to harvest partial gains near
the $60 level, and then re-evaluate from there.  Friday's low near
$54.50 now looks like firm support and if the trend of the past
few days continues, a dip into the $54.50-55.00 area looks like a
solid entry point.  Adding further support for the stock is the
sharply rising 10-dma ($53.90), which gives us the freedom to
raise our stop to $53.50 tonight.

Picked on March 21st at $55.87
Gain since picked:       +0.28
Earnings Date         04/24/03 (unconfirmed)
Average Daily Volume = 404 K

---

Barr Labs - BRL - close: 55.92 change: +2.47 stop: 51.75

It didn't take long for BRL to make up for Monday's pullback.  It
made up the loss and more, establishing a new relative closing
high. The stock continues to build on gains following its
approval for three new doses of the generic version for Adderall.
Barr will have the exclusive rights to the generics for those
doses and if past history is any indication, they will make the
most of it.  Apparently that is what investors are betting on,
boosting the stock back above its last area of resistance at $54.
The 4.6% gain today outperformed the broader markets, as well as
Pharmaceutical Index (DRG +2.2%) and Biotech Index (BTK +2.7%).
The DRG bounced off its 200-dma on the Monday pullback, while the
BTK bounced from its 50-dma and back through its 200-dma,
demonstrating sector strength in both areas.  There is little in
the way of roadblocks for BRL between the current levels and the
$59-$60 range, which remains our target.

---

Biovail Corporation - BVF - close: 40.35 change: +1.57 stop: 38.00

Is anyone else wondering if our BVF play is ever going to get
moving?  Well, today's action is certainly encouraging!  While the
stock is only up a nickel on the week so far, today's rebound more
than made up Monday's loss and it came on robust buying volume
(30% above the ADV).  While the $39 support level didn't quite
hold, there were eager buyers just under that level this morning
and BVF rebounded smartly from the $38.75 level to once again
close over $40, just fractionally taking out Friday's closing high
to post a new 10-month high.  On Monday, the broad market weakness
dropped the stock to close right on its 10-dma ($38.78) and it
rebounded smartly from that level on Tuesday, pushing up to close
just below its high of the day on increasing volume.  Tuesday's
intraday low of $38.50 looks like strong support here and another
bounce from that area looks good for new entries.  But given
today's strength, it looks like a breakout is in the cards and
momentum traders can look to enter on a rally through the $40.75
level (just above today's intraday high).

Picked on March 14th at $39.06
Gain since picked:       +1.29
Earnings Date         04/25/03 (unconfirmed)
Average Daily Volume = 1.05 mln

---

Maxim Int. Prod. - MXIM - close: 38.75 change: +0.25 stop: 37.50

If there's one constant in this market, it is uncertainty and that
leads to volatility.  Just as we got a confirmed breakout over the
$40 level on our MXIM play, traders got a dose of reality on
Monday and sold just about everything.  As one would expect, the
Semiconductor index (SOX.X) took it on the chin, falling back
below the $320 level.  But as luck would have it, there were
buyers lurking, looking for a lower-risk entry into this momentum
sector.  At its low this morning, MXIM traded down exactly to our
$37.50 stop before staging a mild rebound throughout the remainder
of the day.  Ending just above the 10-dma ($38.63) is an
encouraging sign, but the stock is now back under its longer-term
descending trendline (now at $39.10).  Bulls will need to stage a
strong (read:volume) push in order to get back over that level,
and then there will be the resistance presented by Friday's
intraday high of $40.66.  Aggressive traders can still use a dip
near the $38 level for new entries, but only if the SOX is able to
hold above the $315 level.  Traders that want to see some
confirmation before entering the fray will need to see a trade at
$41.  Of course, the risk of taking that momentum entry is that a
move to $41 will fill the December 4th gap, and bring the stock
into solid resistance in the $41-43 area.  Buying the dips is
still the safer way to play.

Picked on March 20th at $39.56
Gain since picked:       -0.81
Earnings Date         04/30/03 (unconfirmed)
Average Daily Volume = 7.80 mln

---

Station Casinos - STN - close: 21.08 change: +0.41 stop: 18.75

Most gaming stocks saw a mild pullback in the past couple of
days, including MBG, MGG and IGT. Part of the reason the sector
was hit is that many of these companies run casinos in travel
destinations and most travel related stocks were hit hard after
the war did not come to an end over the weekend.  The pullback
continued briefly this morning, but the sector got a pop and we
got a close look at support for call play STN.  The stock broke
multi-year resistance when it cracked $20 and this morning's
pullback ended with a low of $20.00.  That's quite a show of
support where there was former resistance and it appears we are
now trading over a new plateau in the $20s.  Our target remains
$25 to start, but aggressive traders can target the PnF vertical
count up at $30.  A prolonged war could once again interfere with
destination stocks, but so far STN has not disappointed us.  We
like new entries in the current range, as long as $20 support
holds up.


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

United Health - UNH - close: 90.66 change: +1.36 stop: 85.99

Company Description:
UnitedHealth Group is a diversified health and well-being
enterprise that provides a full spectrum of resources and
services to help people achieve improved health and well-being
through all stages of life. UnitedHealth Group is organized into
five businesses: UnitedHealthcare, Uniprise, Ovations,
Specialized Care Services, and Ingenix (source: company press
release)

Why we like it:
UNH has been on our radar for months.  We have played it a couple
of times, mostly due to its tendency to run once it breaks out
through resistance or down through support.  We watch listed it
over the weekend after last Friday's break above the 200-dma,
looking for a pullback to support at that average for possible
entries, or even a move back through $90.  We got both.  The
stock bounced off that 200-dma to the penny, then climbed all the
way above 90 on Tuesday.  It has not broken either of those
barriers since November, although it has made several
unsuccessful runs at the 200-dma.  Prior to the breakout, it
consolidated in a $10 rectangle pattern between $80 and $90.  The
minimum measuring objective of such a pattern is equivalent to
the size of the consolidation and would signal a possible run at
$100.

The point and figure chart shows a breakthrough of bearish
resistance and a current bullish vertical count of $114.  That
count is an eventual target and not necessarily our target for
the play, which is closer to $100.  It is also based on its
current column of "X," which is still being built and can run
higher.  Longer term players may want to look at options nearer
the summer months if they would like to target a run to that
level, but must bear in mind that those options also contain more
premium and require a greater investment.

UNH recently showed up on Forbes' seventh annual list of top
performing companies, along with other health care businesses
Pfizer and Forest Labs.  The ranking was the result of an
examination of every S&P 500 stock, based primarily on sales and
earnings growth over the most recent 12-month and three-year
periods.  UNH is joining other HMOs in searching out options for
unemployed workers and CEO William McGuire is calling for a
privately run universal health care system. he said what is
needed is "public consensus on the necessary attributes of a
minimum, essential health benefit package made available to all
and funded both by the government and private sources."

The company boasts solid fundamentals, having beat earnings
estimates in January and raising guidance at the same time. UNH's
revenue grew 10% over the year ago quarter and its profits jumped
37%.  it also projected full-year profit growth of around 22%,
implying earnings of $5.19-$5.19 per share.  That was well above
the consensus of $5.05 per share.

We like entries on the move through $90 and the bounce from
support at the 200-dma.  Our short-term target is $100, based on
the rectangle consolidation, but traders should be aware of
possible resistance around $93 and again in the $94-$96 range.
More conservative traders who are reluctant to chase the recent
gains can wait for a possible pullback to the 200-dma if the
broader markets see another sell-off.  Keep in mind, however,
that the last 200-dma test on a day that the Dow was down 300-
points was only a brief one and the stock bounced impressively,
gaining $1.60 intraday from its low, as the market continued to
drop, posting a loss of only $0.60 on Monday.  We are setting a
wide stop at $85.99 to allow for a test of recent lows just
before the breakthrough the 200-dma and still allow for a
risk/reward of more than 2:1.  However, more conservative traders
may want to set a stop at $87.50, just below that average.

Suggested Options:
Shorter Term: The April 90 Call at $3.10 will offer short-term
traders a return on an immediate move, with intermediate premium
risk.  The April 85 call offers more profit on a move higher,
given the smaller amount of extrinsic value, but also offers more
downside risk if the stock pulls back, due to it high level of
intrinsic premium.

Longer Term: Traders looking to capitalize on a move toward the
PnF target of $114 might want to look at the June 90 call for
$5.50.  This provides extra time for the stock to move higher,
but traders will risk losing more premium if the stock does not
trade higher or pulls back.

BUY CALL APR-85  UHB-DQ OI=3998 at $6.80 SL=3.40
BUY CALL APR-90 *UHB-DR OI=3414 at $3.10 SL=1.55
BUY CALL JUN-90  UHB-FR OI=4642 at $5.50 SL=2.75
BUY CALL JUN-95  UHB-FS OI=1465 at $3.00 SL=1.50

Average Daily Volume = 1.98 MIL


Chart of UNH
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-03-25/UNH032503.gif




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

Northrup Grumman - NOC - close: 83.77 change: -0.66 stop: 87.50

Like deer caught in headlights, traders seem unsure of which way
to jump in the Defense sector.  After the sharp selloff in the
group late last week as the war got underway, the constant barrage
of news showing a more difficult picture for the troops moving on
Baghdad has propped up this group.  On Monday, NOC bounced back
from its sharp selloff, but there wasn't enough buying pressure to
challenge Friday's opening high.  That pattern was repeated to a
lesser degree on Tuesday, with NOC once again trading within the
prior day's range.  That presents a picture of two consecutive
inside days, and the direction of the break will likely prove
instructive for the longer-term prospects for the play.  A break
above the $85.10 level (Friday's intraday high) should have the
stock moving up to challenge the descending trendline, currently
$87.  For traders still looking for a lower-risk entry, a rally
failure at that level would be the ticket.  A more aggressive
approach to entry would be to short a failure near the $85 level.
Given that we have support at $83.50, then $81.70 and then just
above $80, entering on a breakdown would not be the preferred
strategy, especially with our downside price target of $79 (the
bearish price target from the PnF chart).  Remember, traders that
took the breakdown entry last week should have their stops set no
higher than $85.50, while our coverage stop remains at $87.50.

Picked on March 20th at $84.95
Gain since picked:       +1.18
Earnings Date         04/17/03 (unconfirmed)
Average Daily Volume = 1.46 mln

---

Open Text - OTEX - close: 28.66 change: +1.39 stop: 30.55

OTEX caught a big bounce with the rest of the broader markets and
also from its 50-dma.  The stock did break down to a new relative
low on Thursday and remains squarely below the most recent
resistance at $30.  While the bounce came from a significant
moving average, there are still a number of recent intraday highs
in the $29-$30 range that the bounce was unable to break through.
OTEX's chart looks similar to that of the GTSI Software Index
(GSO), which bounced from its 200-dma, but was unable to get over
the 50-dma. Traders looking for an entry in this short play can
look for a breakdown in the GSO below that 200-dma at 101.46,
along with a move in OTEX below the 50-dma at $27.17.


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

Chubb Corporation - CB - close 45.73 change: -1.62 stop: 49.00

Company Description:
Chubb Corporation, incorporated in June 1967, is a holding
company with subsidiaries principally engaged in the property and
casualty insurance business. The Company presently underwrites
most forms of property and casualty insurance. The Company's
Property and Casualty Insurance Group writes non-participating
policies. Several members of the Property and Casualty Insurance
Group also write participating policies, particularly in the
workers' compensation class of business, under which dividends
are paid to the policyholders.

Why we like it:
In the market-wide plunge that culminated on March 12th,
Insurance stocks got absolutely pummeled.  It was bad enough that
the fundamentals in the sector were bad, but investors were also
faced with the possibility that the war in Iraq could result in
more terrorist attacks as reprisal.  We all know the impact the
Insurance industry felt after the 9/11 attack, and fear of a
similar event led to a mass exodus from the sector, driving the
Insurance index (IUX.X) to new lows just above the $200 level.
While it is no surprise to see that the IUX has rebounded
substantially from those lows, the index substantially lagged the
rest of the market, topping out last Friday the $248 area, the
site of the early February highs.

On the way down, we managed to garner a decent play on CB, as the
stock continued to Underperform the sector.  CB broke down below
the $50 level in early February and after finding firm resistance
near the $49.50 level, proceeded down to find support first at
$45.75.  The bounce off that level failed, leading to a plunge to
$41.78 on March 12th before the latest oversold bounce.  After
the short-covering ramp last week, CB topped out just below $49
and fell sharply with the rest of the market (and sector) on
Monday.  The divergence showed up on Tuesday though.  While the
broad market advanced, the IUX barely managed to break even on
the day, desperately clinging to the 50-dma ($236.57).  But CB
got pummeled, plunging through both the 10-dma ($46.51) and the
20-dma ($46.37) on its way to a nearly 3.5% loss.  So what we
have is a stock underperforming its sector, which is in turn
underperforming the broad market.  Can you say relative weakness?
So what was the cause of that weakness, you ask?  After the close
on Monday, Standard & Poor's cut its senior long-term debt
ratings on the company by one notch, saying the company's
operating performance and capital strength did not support the
former ratings.  Ouch!  This has been a familiar theme lately, as
insurance companies' financial performance has been seen at
greater risk due to their reliance on investment gains, which
just aren't there.

Today's bounce takes us right back to the $45.75 support level
from late February, so we have a couple ways to play.  A
breakdown below that support can be used for momentum entries,
with an eye towards a retest of the March 12th lows near $42.
More cautious traders will want to wait for an oversold bounce to
enter the play though, looking for a bounce failure near the $47
level (the top of today's candle and the site of the 30-dma at
$47.06).  Depending on the action in the broader market, CB could
even bounce as high as $48, but that should be firm resistance,
making for an even better entry into the play.  Initial stops
will be set at $49, just above recent reaction high.

Suggested Options:
Short-term traders will want to focus on the April option, as it
will provide the best return for a short-term play.  Those
looking for additional staying power to hold through the recent
(and expected future) volatility will want to use the May strike.

BUY PUT APR-45 CB-PI OI=800 at $1.60 SL=0.75
BUY PUT MAY-45 CB-QI OI= 18 at $2.40 SL=1.25


Annotated Chart of CB:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-03-25/CB032503.gif



Picked on March 25th at $45.73
Gain since picked:       +0.00
Earnings Date         04/30/03 (unconfirmed)

Average Daily Volume = 1.30 mln



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

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


**************************************************************
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The Option Investor Newsletter                  Tuesday 03-25-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: CALL - UNH


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

United Health - UNH - close: 90.66 change: +1.36 stop: 85.99

Company Description:
UnitedHealth Group is a diversified health and well-being
enterprise that provides a full spectrum of resources and
services to help people achieve improved health and well-being
through all stages of life. UnitedHealth Group is organized into
five businesses: UnitedHealthcare, Uniprise, Ovations,
Specialized Care Services, and Ingenix (source: company press
release)

Why we like it:
UNH has been on our radar for months.  We have played it a couple
of times, mostly due to its tendency to run once it breaks out
through resistance or down through support.  We watch listed it
over the weekend after last Friday's break above the 200-dma,
looking for a pullback to support at that average for possible
entries, or even a move back through $90.  We got both.  The
stock bounced off that 200-dma to the penny, then climbed all the
way above 90 on Tuesday.  It has not broken either of those
barriers since November, although it has made several
unsuccessful runs at the 200-dma.  Prior to the breakout, it
consolidated in a $10 rectangle pattern between $80 and $90.  The
minimum measuring objective of such a pattern is equivalent to
the size of the consolidation and would signal a possible run at
$100.

The point and figure chart shows a breakthrough of bearish
resistance and a current bullish vertical count of $114.  That
count is an eventual target and not necessarily our target for
the play, which is closer to $100.  It is also based on its
current column of "X," which is still being built and can run
higher.  Longer term players may want to look at options nearer
the summer months if they would like to target a run to that
level, but must bear in mind that those options also contain more
premium and require a greater investment.

UNH recently showed up on Forbes' seventh annual list of top
performing companies, along with other health care businesses
Pfizer and Forest Labs.  The ranking was the result of an
examination of every S&P 500 stock, based primarily on sales and
earnings growth over the most recent 12-month and three-year
periods.  UNH is joining other HMOs in searching out options for
unemployed workers and CEO William McGuire is calling for a
privately run universal health care system. he said what is
needed is "public consensus on the necessary attributes of a
minimum, essential health benefit package made available to all
and funded both by the government and private sources."

The company boasts solid fundamentals, having beat earnings
estimates in January and raising guidance at the same time. UNH's
revenue grew 10% over the year ago quarter and its profits jumped
37%.  it also projected full-year profit growth of around 22%,
implying earnings of $5.19-$5.19 per share.  That was well above
the consensus of $5.05 per share.

We like entries on the move through $90 and the bounce from
support at the 200-dma.  Our short-term target is $100, based on
the rectangle consolidation, but traders should be aware of
possible resistance around $93 and again in the $94-$96 range.
More conservative traders who are reluctant to chase the recent
gains can wait for a possible pullback to the 200-dma if the
broader markets see another sell-off.  Keep in mind, however,
that the last 200-dma test on a day that the Dow was down 300-
points was only a brief one and the stock bounced impressively,
gaining $1.60 intraday from its low, as the market continued to
drop, posting a loss of only $0.60 on Monday.  We are setting a
wide stop at $85.99 to allow for a test of recent lows just
before the breakthrough the 200-dma and still allow for a
risk/reward of more than 2:1.  However, more conservative traders
may want to set a stop at $87.50, just below that average.

Suggested Options:
Shorter Term: The April 90 Call at $3.10 will offer short-term
traders a return on an immediate move, with intermediate premium
risk.  The April 85 call offers more profit on a move higher,
given the smaller amount of extrinsic value, but also offers more
downside risk if the stock pulls back, due to it high level of
intrinsic premium.

Longer Term: Traders looking to capitalize on a move toward the
PnF target of $114 might want to look at the June 90 call for
$5.50.  This provides extra time for the stock to move higher,
but traders will risk losing more premium if the stock does not
trade higher or pulls back.

BUY CALL APR-85  UHB-DQ OI=3998 at $6.80 SL=3.40
BUY CALL APR-90 *UHB-DR OI=3414 at $3.10 SL=1.55
BUY CALL JUN-90  UHB-FR OI=4642 at $5.50 SL=2.75
BUY CALL JUN-95  UHB-FS OI=1465 at $3.00 SL=1.50

Average Daily Volume = 1.98 MIL


Chart of UNH
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-03-25/UNH032503.gif




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options,” claims author Larry Spears in his new compact guide book:

“7 Steps to Success – Trading Options Online”.

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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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Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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