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Daily Newsletter, Tuesday, 04/22/2003

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The Option Investor Newsletter                 Tuesday 04-22-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Surprise Earnings, Surprise Rally
Futures Markets: You Can't Argue With the Buying
Index Trader Wrap: Resolution came to the upside
Market Sentiment: Short and Sweet
Weekly Fund Screen: Recently Upgraded Funds


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      04-22-2003           High     Low     Volume Advance/Decline
DJIA     8484.99 +156.10  8487.51  8263.98 2.00 bln   2403/ 865
NASDAQ   1451.36 + 27.00  1452.34  1414.40 1.55 bln   2143/1049
S&P 100   463.08 + 10.02   463.29   450.35   Totals   4546/1914
S&P 500   911.37 + 19.36   911.74   886.70
W5000    8633.17 +173.50  8636.52  8412.87
RUS 2000  391.16 +  5.86   391.53   383.42
DJ TRANS 2351.96 + 54.10  2352.65  2291.79
VIX        23.51 -  0.76    25.14    23.21
VXN        33.65 -  1.84    35.51    33.60
Total Volume 3,772M
Total UpVol  3,103M
Total DnVol    633M
52wk Highs  406
52wk Lows    69
TRIN       0.53
PUT/CALL   0.88
************************************************************

Surprise Earnings, Surprise Rally

The earnings continued to flow and to everyone's surprise there
have been no disasters. There are no dire predictions and the
majority of companies are beating the lowered estimates. On the
surface it appears the worst is over and traders are celebrating
with a bullish bias. The $64 question is "How far?"

Dow Chart - Daily



Nasdaq Chart - Daily




The Chain Store Sales this morning started traders off on the
right foot in the pre-market but then some conflicting earnings
reports then produced a gap down open. Those Chain Store Sales
were up +1.9% and is was the second consecutive weekly gain. The
Easter shoppers came out in force and helped push most retailers
back into their plan for the week. This does not mean the retail
slump is over. This just means the seasonal Easter buying finally
appeared but traders were ready to celebrate any good economic
news. Helping with the dollar volume was the release of the
second Harry Potter video on April 11th. Amazing what several
million $20 videos can do weak numbers. Future retail sales
are still expected to be weak. This was the only economic report
out on Tuesday.

The lack of negative economic news and the flood of earnings
provided a strong boost to the markets. The morning started off
with Everest RE, which beat estimates by a mile and raised
guidance for 2003 and 2004. They reported $2.02 per share when
analysts were only expecting $1.35. This monster win and strong
guidance raise to $8.25 from $6.92 (2003) and up to $10.50 from
$8.03 for 2004 caused analysts and traders to rethink their
outlook. RE said they had not seen any new catastrophes and
premium pricing in anticipation of problems had been strong.
As a result the insurer was awash in cash and the sector benefited.
Financials in general benefited from this news as evidence that
the worst was over.

Adding to the financial bliss was news from COF that earnings
beat estimates and loan losses were less than expected. COF
added to the positive results from C and JPM and this excitement
was fueled by the RE news. The $NFX.X rose +13 to 541 and is
nearing the strong resistance at 543. It is up over +50 points
since April 1st. When financials rise the markets listen.

Drug companies also added to the rally with strong showings by
PFE, LLY and FRX among others. PFE reported 76 cents with net
income soaring +138%. Without one time gains for sales of units
the income fell to 45 cents but still beat the street by a penny.
LLY posted income below the same period last year but still beat
the street by +3 cents. FRX missed estimates by a penny but said
earnings growth for the next year to be "at least +20%." These
drug earnings added to the positive sentiment about the sector
and the BTK rose +10 to 346. After the close AMGN beat the street
by +3 cents and raised guidance for the year. The company said
they were seeing significant strength in every product in every
geography. Pretty strong words.

After the bell EBAY reported 36 cents a share, which beat
estimates but that is not the real number. There was a jump of
+13% in shares during the quarter, which held down the earnings.
EBAY actually reported revenue that was up +94% to $476 million.
They posted record results and raised guidance for the quarter
and the year. The stock jumped +$3 in after hours to $92. This
news when added to the YHOO earnings have given the entire
Internet sector to new gains.

About the only weak earnings after the close came from PSFT
which beat the street by a penny. The company said the recovery
that began in Q4 was fragile and ended with additional economic
concerns and geopolitical tensions. Revenue fell slightly with
license fees down -39%. If you remember the warnings season there
were more than 15 software companies warning for this quarter.
This sector seems to be the weakest of the techs with even MSFT
warning last week.

A few other earnings highlights included GLW which beat by three
cents and raised guidance. HTCH missed estimates slightly but
raised guidance substantially going forward. AFCI beat the street
by +3 cents. RFMD missed by a penny but showed a revenue gain of
+37%. SIAL beat by 7 cents and raised guidance for the year. CYMI
blew away estimates by +11 cents but revenue was light. They
guided inline for the current quarter. STK beat by two cents and
MXO by +4 cents. PIXL beat by +2 cents, INVN beat by +26 cents
on revenues up +397%. Chip stocks LSCC and VTSS matched or missed
slightly and said revenues would be flat.

The earnings have been nothing short of amazing. Amazing of course
if you remember that 57% of companies warned for this quarter.
It appears the majority of companies "over warned" due to the
impending war and now they are beating those lowered estimates.
Of the 142 companies reporting so far this week 85 have beaten the
estimates, 28 announced inline and only 29 missed estimates. In
any normal market in any normal economic environment this would
be an incredible showing. What it is showing us today is simply
the result of being overly cautious heading into the war. It
appears investors are ignoring the economics and the conditions
that preceded this earnings cycle and are celebrating the earnings
surprises by purchasing stocks.

This rally appears to be fueled by cooling geopolitical tensions
as well. The war in Iraq is over. Talks with North Korea begin
tomorrow and world events are turning back to trade instead of
the potential for some new war. Still the rumor that Saddam had
been captured did result in a +100 point Dow bounce at 10:20
this morning. The consensus is the economy has been bumping along
the bottom for six months as the potential for war grew and now
that the war is over there is nothing to prevent the recovery.
It is obviously only a sentiment change at this point but sentiment
has to change before the economy can change. We will get to see
that sentiment number again on Friday.

The Fed meets on May 6th and the Fed head underwent an operation
on his prostrate this morning. The results were said to have
been successful and he is expected to be back at work next week.
That work could be longer than previously thought. At age 77
Greenspan was given the nod by President Bush today for another
term as the Fed head. It is unclear if Greenspan will accept it
as there were rumors of a pending resignation soon. However, with
Alan making repeated trips to the White House over the last several
weeks I am sure Bush would not have given him the nod without
knowing in advance if he would accept the assignment. Either
way there is little chance (15%) the Fed will cut rates on the
6th. I expect another "risks balanced" statement until the Fed
sees if the current expectations come to pass or dim with time.

Today was a benchmark day in the markets. The Nasdaq closed WELL
ABOVE strong resistance at 1425. This is a strong statement and
very positive in terms of generating continued bullish sentiment.
The S&P closed above 905 and set a new high for April of 911 at
the close. This was the first time since March of 2002 that the
S&P closed over the 200 EMA. This is very bullish. Finally the
Dow closed over the 200 EMA for the first time since May 2002.
Granted it was only ONE POINT but it was a close. The positive
futures tonight and the potential for overseas trading to add
to our gains could push us even higher at the open. The key will
be holding these impressive gains. The Dow has only one more major
resistance area at 8520 before mounting an attack on 9000 again.
The potential exist for a banner week!

Not to dwell on the negatives but they do exist. The VIX closed
at 23.51 and nearing its historical reversal lows around 20. The
VXN closed at an all time low of 33.65. These two indicators are
showing an almost total lack of fear in the markets. Yes, they
can go lower but they are flashing a yellow alert which will soon
turn red. When markets turn completely bullish they can run for
days while these indicators go even deeper into warning territory
but they will eventually come back to haunt us. Until then the
other internals continue to build hope. The 52-week high/lows
hit levels not seen in months with 406 new highs compared to only
69 new lows. The advance/decline ratio was better than 2:1 in
favor of advancers. This is a broad based rally with buying
pressure building. The closer we get to a breakout the more
investors are lured back into stocks. Nasdaq moving over 1425
convincingly was the first key to the sentiment puzzle. The S&P
closing over 905 was the second. If the Dow can close over 8520
on Wednesday the bulls could be turned loose to romp. If this
happens you should keep an eye on the gate. If this turns out
to be yet another bear trap there may not be much warning.

There are many historical precedents that the bottom can fall out
of an earnings rally just when things look the most bullish. You
only need to look back as far as January 15th for an example.
There was a two-week rally into earnings with a prolonged drop
after the excitement waned. There were extenuating circumstances
like the weak 4Q and the impending war but there is always
something coming out of left field that traders use as an excuse
to take profits. With SARS up to 4000 cases now and 230 deaths
and still climbing rapidly that is something to keep on your
radar. Will it take 10,000 cases, 20,000 or ?? before the global
economy shuts down? I am not saying it will happen but keep your
eyes open. There were two false alarms of envelopes with an
unknown powder on Tuesday. The market handled it well which
indicates a disconnect from negative news and that is very
bullish. I said on Sunday to beware of 8500. That warning still
exists. That could be the finish line for this leg of the race.
If we pass it with a higher goal in sight then enjoy the view.
If we stumble at that level then be prepared to watch from the
sidelines.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


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

You Can't Argue With the Buying
By Vlada Raicevic

Daily Settlement Numbers 4:15pm ET

> DOW
Last: 8484.99
Net: +156.09
High: 8487.51
Low:  8263.98

> YM 03M
Last: 8458
Net: +133
High: 8472
Low:  8239

> S&P 500
Last: 911.37
Net: +19.36
High: 911.74
Low:  886.70

> ES 03M
Last: 910
Net: +17
High: 912
Low:  885

> Nas 100
Last: 1102.44
Net: +21.40
High: 1103.81
Low:  1072.13

> NQ 03M
Last: 1105
Net: +20.50
High: 1106.50
Low:  1073.50

DAILY PIVOTS

> YM 03M
R2: 8640
R1: 8574
Pivot: 8406
S1: 8341
S2: 8174

> ES 03M
R2: 931
R1: 924
Pivot: 904
S1: 897
S2: 877

> NQ 03M
R2: 1131
R1: 1122
Pivot: 1098
S1: 1089
S2: 1065

Futures gapped down a few points, and spent half an hour trying to
choose a direction, trying to move up but finding sellers.  Not
enough sellers nor buyers to move price either way until a rumor
hit the markets and huge volume moved the ES to their first high
of 900.75; once the rumor lost some of its luster, they sold off
to 894, but then found buying again which first topped at 907,
above strong resistance in the 905 area.  From there the buying
came in small wavelets which took ES to 911.25, then 911.75, and
finally to a high of day at 912.

The ES daily chart is now in full bullish mode, Macd is moving up
and diverging, stochastics are crossing and turned up, and ADX is
back above the trendline it poked below yesterday.  Price pierced
the upper wedge of the trendline and the upper blue regression
channel, yet closed below them.  So that daily resistance is still
in play, and note that as bullish as the recent rise looks, both
Macd and stochastics aren't nearly as high here as they were a
month ago when price was lower.

ES Daily Chart:




A closer view of the daily chart shows that price broke above all
the downtrend lines that were drawn along recent highs starting
form the December highs.  Price continues to move within the
rising wedge channel.  The ES also closed above the daily 200ema,
something that it has tried to do twice recently and failed; this
third time that key moving average was broken quite decisively.
For many traders, this is a key verification that we have turned
the tide and pushed the chart into bullish territory.  If price
continues to rise, the 915-916 area is next resistance, and a
solid break of that could lead to 926-927.

ES Daily Trendline Chart:




Also, a quick peek at the weekly chart shows that if today's
levels hold, we will have a bullish crossover of the Macd over the
centerline.  However, note that as the very bullish candle is
formed, ADX shows D+ as staying nearly flat, and the fast
stochastic in a near rollover.  This is a little puzzling and
we'll continue to watch those indicators if the week continues to
see rising prices.

ES Weekly Chart:




In looking at the ES 135 minute chart, you can see that there are
a few mixed signals here as well.  On one hand Macd and RSI both
broke above their descending trendlines, just like price has, and
the ADX D+ is looking strong.  On the other hand, price stopped at
the upper channel of the 78 period regression channel (blue), and
Macd histogram and fast stochastics continue to diverge with price
(blue lines).  Also, multi-stochastic is reaching the same area
that it has rolled over the past 3 times it reached here.  Price
is at resistance, and there are bearish divergences, and these
divergences can continue to build, which doesn't mean that price
has to stop moving up, it merely points out that there seems to be
an underlying weakness in the rise.

ES 135 Minute Chart:




The ES 60 minute chart shows that the price march upward stopped
at the upper regression channel.  Now it can do one of two things,
either move sideways to burn off the overbought state, or pull
back to the centerline near the 901 area.  If selling becomes
stronger, it can pull back to the 888-890 area and still remain in
the rising channel.

ES 60 Minute Chart:




The NQ daily chart, like the ES, is very bullish.  Price closed
above the March highs, but are still below the January highs of
1108.50, and most indicators are positive.  Even the fast
stochastic has not topped out yet.  However, just like on the ES,
the fact that price is above March highs but indicators such as
Macd, RSI and stochastic are all at lower levels than their March
highs.

The trendline chart shows price closing above the downtrend line
from the December high, and the trendline from the January to
March high (blue).  Above the December high of 1108.50, there is
additional resistance at 1110 but most likely the number to watch
for further upside are 1125-1127 and then 1136.

NQ Daily Trendline Chart:




The NQ 135 minute charts shows price extended beyond the short
term, upper regression channel, which coincides with stochastics
getting somewhat overbought, and Macd running out of some steam
over the past few bars.  The bearish divergences that were evident
on the ES are here as well, with ADX looking weaker then on the
ES.  This chart looks like it needs a pullback.

NQ 135 Minute Chart:





So we got our move, and it was up.  Whether you are a bear or a
bull, at least the market is doing something.  The underlying
strength of this move seems to be a little suspect, but that could
be a lingering residue from all the sideways nothing we've been
going through lately.  Price is going up, and many indicators are
bullish, but we did this 'jump' from a standstill, rather than a
running start or from a reversal, and we are getting a somewhat
overbought.  Again, we are at a point where we could see a little
more upside, but need to pull back a little bit to take a
breather.  At this point I could say that the pullback will test
the bulls resolve, but from what we've been seeing, that test
should not be difficult, especially with the ADX showing us that
selling has nearly disappeared, all we may see is some brief
profit taking.  Looks like it could turn out to be an interesting
week after all.


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

Resolution came to the upside

Whether you're a bull or a bear, or somewhere in between, anyone
would be hard pressed to try and make sense of today's trade
where both "fact" along with "good rumor" and "bad rumor" seemed
to have little "sensical" impact on how today's trade panned out
as a plethora of rather significant morning upside earnings
reports found early selling, while a late morning rumor that
Saddam Hussein had been captured sparked a rebound.

Bears may have screamed "foul play" with the Saddam Rumor, and
bulls may have countered with a similar accusation of foul play
as reports surfaced that a white powder found at a Tacoma, WA
mail distribution center had initial tests revealing it being
some type of biotoxin.  Suddenly those "tests" that were
supposedly performed had traders further bidding stocks higher
when the Tacoma fire department said that its tests of the
powdery substance showed negative results for biotoxins.

Two triangle patterns we had been monitoring in the major index
point and figure charts both found upside resolution in today's
trade with the S&P 500 Index (SPX.X) 911.37 +2.17% triggering a
"bullish triangle" at the 900.00 level just before the 11:00 AM
EST mark, while the Dow Industrials (INDU) 8,484.99 +1.87%
triggered a "bullish triangle" at the 8,450 level with just 2-
hours left in the trading session.

While Treasury prices held gains for the bulk of their session,
it took a report from the National Journal that President Bush
would reappoint Alan Greenspan as Fed Chairman to get bond bulls
to sell and have Treasuries finishing relatively unchanged on
their session, after a strong round of buying at the open.

As I was typing this morning's 09:00 Update, the pre-market
action made little sense as earnings reports looked to have
upside reports handily outnumbering downside reports (reported
versus consensus).  Other than SARS news, I can't, nor can I at
this hour, figure out just what type of trade was underway in the
first hours of today's session.

While I felt SPX bulls should look to lock in some gains just
prior to the SPX trading hitting its WEEKLY R1 of 904, the
continued strength above that level had me and perhaps other
bulls looking to play the upside found in the Dow as it triggered
its bullish triangle pattern.

To be honest.  The only thing that seems to make any sense to me
is that demand continues to build for stocks, and more and more
supply/demand (point and figure) buy signals are being generated
as market internals continue to improve.  At some point it will
run its course until risk levels become too great, but until that
happens, I'm finding it difficult to hold a bearish thought for
more than a day or two.

Volumes reached their best levels of the month at the NYSE as
shares traded rose to 1.62 billion.  The big board ended the day
with advancers outnumbering decliners by a 3 to 1 margin, while
202 stocks traded new 52-week highs (easily above yesterday's 136
level) compared to 20 stocks trading a new 52-week lows.  Yes...
Dow component AT&T (NYSE:T) $13.81 -0.71% traded a new 52-week
low this morning with a trade at $13.48 and session low of
$13.45.

NASDAQ volumes weren't quite as heavy, but challenged Thursday's
1.58 billion with today's 1.55 billion shares traded.  Advancers
outnumbered decliners by a 2 to 1 margin, with 139 stocks trading
new 52-week highs versus 30 stocks trading new 52-week lows.

Call buyers, put sellers or both were out in droves again today
as the Market Volatility Index (VIX.X) 23.51 -3.13% fell to an
11-month low, while the NASDAQ-100 Volatility Index (VXN.X) 33.65
-5.18%, which has been in existence for just over 2-years fell to
an all-time low.

I thought Jonathan Levinson made an interesting comment in
today's market monitor at 01:25 PM EST when talking about the
VIX.X and the VXN .... "I'm full of doubt currently on today's
market action.  The thing about oscillators, moving averages, and
statistical models, is that the future is still the future.
Nothing stops the VIX from breaking new ground, or the MacD from
diverging to an unprecedented degree, or the NDX:VXN ratio from
setting a new record......"

S&P 500 Index (SPX) - Daily Chart




Today's trade at 900 triggered the "bullish triangle" pattern
while further bullishness at 905 gives the SPX another higher
high.  The apex of the now bullish triangle builds support at the
apex of 875.  Today's trade sends the SPX well above the upper
Bollinger band, which is 903.93 on the bar chart.  The 21-day SMA
(Avg on the p/f chart) is rising at 876.22.

In last night's wrap we noted that the S&P 500 Bullish % ($BPSPX)
had edged higher to a cycle high of 49.8%, so today's action from
the SPX itself confirms the internals and rules out any type of
BEARISH divergence from this indicator.  Bulls are happy with
today's action, which finds an additional 2% gain, or net gain of
10 stocks to new point and figure buy signals as the bullish %
grows to 51.8%.

S&P SPDRS (AMEX:SPY) Chart - Daily Interval




I thought I'd show a p/f chart of the S&P SPDRS (AMEX:SPY) $91.34
+1.88% as it allows us to look at some volume patterns.  Today's
trade has the SPY the 5th most actively traded security in the
market.  The QQQ was the most actively traded security.  I've put
green and red arrows on the cumulative demand (X) columns and
supply (O) columns.  The big move off the bottom from "oversold"
levels of bullish % at 28% saw total volume of more that 5.2
billion shares, with a lighter volume pullback of roughly 1.7
billion shares.  The recent pullback of just 896 million shares
gives the impression that there just wasn't a lot of willing
sellers from $89 to $86 and the recent upward reversal has seen
equal volume of 1.759 billion shares.  True, volume doesn't tell
you EVERYTHING about price action, but bulls at least want to see
the recent reversal higher find as much INTEREST as the reversal
from $86 to $90.

Dow Industrials ($INDU) Chart - 50-point box




The Dow's p/f chart shows a more "symmetrical" triangle than the
SPX chart, but the 5 columns needed with a pattern of higher lows
and lower highs was still in play.  If this were a stock, point
and figure bulls would be all over it with a stop at 8,200.

When comparing the SPX and INDU p/f charts, it's apparent that
the Dow is lagging the SPX bullishness on a technical basis.  The
reason I say this is that the Dow shows two equivalent highs at
8,500, while the SPX has built three consecutive relative highs.
As such, and SPX/OEX trader wants to see bullishness build in the
Dow.  Dow bulls want to see the SPX/OEX continue it pattern of
higher highs and higher lows.  Still, honor the index you trade,
but play each of them "against" each other for signs that demand
continues to build.

It will also be noted later in this Index Wrap that the Dow is
the only equity index that has yet to trade its MONTHLY R1.
Similar to what we've seen in the S&P Banks Index (BIX.X) 288.06
+2.4% when it traded its MONTHLY R1 at 278.30 and managed to
close that level on April 15th and find support there, the SPX,
SPY, OEX, NDX, QQQ have done the same at today's close.  While
the Dow and the DIA don't HAVE to trade their MONTHLY R1s (8,537
: $85.35), I'm thinking there's a pretty good chance they will.

Today's action saw a net gain of 1 stock to a point and figure
buy signal in the very narrow Dow Industrials Bullish %
($BPINDU).  This has the bullish % rising to a cycle high of
46.67%.  Walt Disney (NYSE:DIS) $18.87 +2.27% was today's "new
buy signal" when the stock traded a triple-top buy signal at
$19.00.  This may be a stock for traders to monitor near-term as
the stock hasn't been able to trade $19.00 since late November.

S&P 100 Index Chart - Daily Interval




Did bulls pull a fast one and start the "Saddam rumor" right at
the OEX's WEEKLY pivot of 450.10 to spark a rally?  Boom! That's
just about where the OEX had fallen to in its first 10-minutes of
trade and sideway action for the next 40-minutes before the
"rumors" began circulating.  While fellow analyst Jonathan
Levinson was making some interesting observations regarding the
Oscillators, bears looked to be running for cover as the losses
began to build.  We've seen the indexes trade their WEEKLY R2s,
only to find reversals back lower.  Bulls should look to protect
gains and look to reload (raise some cash) and get ready for
pullback entry.  Short of a nuclear type of disaster, I'd be a
buyer back near the WEEKLY R1 of 444.60 (thick green) for 1/2
positions and 1/4 bullish at the WEEKLY pivot.  When you look at
tomorrow's pivot matrix, make note that the DAILY S2-R2 ranges
are nearly identical in range as the WEEKLY S2-R2 ranges.

Today's action saw the S&P 100 Bullish % ($BPOEX) see a net gain
of 2 stocks to new point and figure buy signals.  This has the
bullish % growing to 50% and a new cycle high.

NASDAQ-100 Tracking Stock (QQQ) - Daily Interval




I'm not certain of what kind of short position there may be in
the QQQ or overall NASDAQ stocks and while Stochastics are
"overbought", MACD has kicked above its Signal and begins to
trend higher from zero.  Today's trade take the QQQ and NDX
firmly above downward trend and I see little reason for a bear to
try and "pick a top."  The apex of the triangle in the bar chart
points to the WEEKLY pivot.  If I were to simply follow the
progression of the QQQ during its advance from the $25.34-$25.50
"zone of support," each time the QQQ violated a level of WEEKLY
retracement (blue) to the upside, it has NOT fallen back below
the next level lower.  As such, a trader playing that type of
"level" observation can trade long $27.35 with a stop below 38.2%
retracement of $26.78.  Risk adverse bulls would follow with a
tighter stop just under the $27.35 level.

Today's trade saw the NASDAQ-100 Bullish % ($BPNDX) see a net
gain of 1 stock to a new point and figure buy signal.  This has
the bullish % growing to 61%.  As a benchmark, the NASDAQ-100
Bullish % reached 82% bullish in December, which is where our
conventional "pink" retracement of $28.79 is anchored from.

Pivot Analysis Matrix




I'm running late on the Index Wrap, but traders should note that
tomorrow's DAILY S2-R2 ranges are similar in range to this WEEKs.
I would have to go back and see if this hints of more extreme
volatility on an intra-day session.

Since the QQQ and NDX look to be breaking above recent
consolidation, I will make quick note that tomorrow's DAILY R2
and WEEKLY R2s are very correlative.  Under a "short-squeeze"
type of scenario that looks to be in play, these might be levels
of "euphoric" short-covering that NASDAQ market makers might
simply keep light offers in place, until these levels are traded.

It sounds a little crazy, but considering today's action, who's
to argue?

Jeff Bailey


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

Short and Sweet

The sentiment game remains focused on earnings and with the steady
stream of positive and not-so-bad announcements, the bears are
running for cover while the bulls dream of a new market.  In reality
the bar for earnings has been set so low that any up-tick has
companies beating expectations.  Most of these earnings results
have been powered by cost-cutting (a.k.a. lay-offs) and not new
business.

There are exceptions and those companies that are showing strength
have seen their shares appreciate sharply.  I'm seeing a number of
strong breakouts across the board and it's hard to maintain a
bearish state of mind with all these new 52-week highs and technical
breakouts.

What should remain a major flag for investors seeking to drop some
money in the markets is the VIX.  Now that it has slid past the 24
level, we can surmise that the more traditional level of 20 will be
the "market top" signal that VIX watchers will be looking for.

Today's internals were very positive with advancing issues beating
decliners 21 to 7 on the NYSE and 20 to 9 on the NASDAQ.  New highs
beat new lows 304 to 45.  Up volume was five times down volume on
the NYSE and it was four times down volume on the NASDAQ.  These
are pretty good numbers folks.

With the strong EBAY announcement tonight, I expect the rally to
continue and those shorts who still have not covered will be
seriously rethinking their strategy tomorrow.


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

Market Averages

DJIA ($INDU)

52-week High: 10673
52-week Low :  7197
Current     :  8485

Moving Averages:
(Simple)

 10-dma: 8308
 50-dma: 8046
200-dma: 8321



S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  911

Moving Averages:
(Simple)

 10-dma:  884
 50-dma:  854
200-dma:  880



Nasdaq-100 ($NDX)

52-week High: 1573
52-week Low :  795
Current     : 1102

Moving Averages:
(Simple)

 10-dma: 1055
 50-dma: 1025
200-dma:  991



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


The volatility indices continue to sink, pushed lower by an
increasingly bullish attitude with strong earnings reports
beating analysts estimates.  This continues to be a big warning
flag for the bulls.

CBOE Market Volatility Index (VIX) = 23.51 -0.76
Nasdaq-100 Volatility Index  (VXN) = 33.65 -1.84

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.88        861,869       758,812
Equity Only    0.77        683,545       524,605
OEX            1.05         26,558        27,827
QQQ            4.41         58,266       256,748


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

Bullish Percent Data

           Current   Change   Status
NYSE          48.4    + 2     Bull Confirmed
NASDAQ-100    61.0    + 2     Bull Alert
Dow Indust.   46.7    + 3     Bull Alert
S&P 500       51.8    + 3     Bull Confirmed
S&P 100       50.0    + 3     Bull Alert

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

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

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

 5-Day Arms Index  0.93
10-Day Arms Index  1.06
21-Day Arms Index  1.31
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       2182            714
NASDAQ     2039            966

        New Highs      New Lows
NYSE       163               22
NASDAQ     143               23

        Volume (in millions)
NYSE       1,984
NASDAQ     1,556


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

Commitments Of Traders Report: 04/15/02

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

It would appear that the Commercials or the "smart money" has
increased their long positions in the S&P 500 futures.  This
is the "most" bullish we've seen them yet in a very, very long
time.  Meanwhile the small traders, or the retail investor,
has increased their bearish positions to the biggest extreme
in a long time.  The small trader remains "net" long but the
increase in bearish positions is not a positive for the little
guy.  This is a bullish sign as the big money tends to be right.

Commercials   Long      Short      Net     % Of OI
03/25/03      424,781   415,258     9,523     1.1%
04/01/03      417,637   409,332     8,305     1.0%
04/08/03      420,084   407,452    12,632     1.5%
04/15/03      424,219   409,853    14,366     1.7%

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year:   14,366  -  4/15/03

Small Traders Long      Short      Net     % of OI
03/25/03      143,402   123,178    20,224      7.6%
04/01/03      143,580   126,594    16,986      6.3%
04/08/03      136,173   122,006    14,167      5.5%
04/15/03      148,434   137,680    10,754      3.8%

Most bearish reading of the year:  10,754 - 4/15/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500

Contrary to the full S&P contracts above, the data below
suggests that the Commercials are strongly net-short the
market with this report being the most bearish.  Just as
expected, the retail investor is on the wrong side with
a strong net-long position.

Commercials   Long      Short      Net     % Of OI
04/01/03       98,460   321,335   (222,875) (53.1%)
04/08/03      114,210   344,961   (230,751) (50.3%)
04/15/03      119,316   390,555   (271,239) (53.2%)

Most bearish reading of the year: (271,239)  - 04/15/03
Most bullish reading of the year: (222,875)  - 04/15/03

Small Traders Long      Short      Net     % of OI
04/01/03        2,296     1,146     1,150    33.4%
04/08/03      319,460    35,629   283,831    79.9%
04/15/03      365,876    44,137   321,739    78.5%

Most bearish reading of the year:   1,150   - 04/01/03
Most bullish reading of the year: 321,739   - 04/15/03


NASDAQ-100

Hmmm.. there appears to be little change among positions
in the NDX future between the commercials or the small
traders.


Commercials   Long      Short      Net     % of OI
03/25/03       44,403     36,436     7,967    9.9%
04/01/03       40,493     36,893     3,600    4.7%
04/08/03       44,257     36,711     7,546    9.3%
04/15/03       44,976     37,929     7,047    8.5%

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
03/25/03       10,313    20,080   ( 9,767)  (32.1%)
04/01/03        9,771    13,306   ( 3,535)  (15.3%)
04/08/03       11,365    17,790   ( 6,425)  (22.0%)
04/15/03       11,182    17,438   ( 6,256)  (21.9%)

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

Other than the drop in overall positions for the commercials
the trend remains the same.  Big money is net-long the
Industrials and retail traders are net-short, although their
long positions did jump significantly as of this report.

Commercials   Long      Short      Net     % of OI
03/25/03       19,752    10,212    9,540      31.8%
04/01/03       19,068    12,672    6,396      20.2%
04/08/03       18,566    12,616    5,950      19.1%
04/15/03       17,881    13,124    4,757      15.3%

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
03/25/03        5,076     7,721    (2,645)   (20.7%)
04/03/01        5,142     7,459    (2,317)   (18.4%)
04/08/03        5,886     7,964    (2,078)   (15.0%)
04/15/03        7,748     8,704    (  956)   ( 5.8%)

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

Recently Upgraded Funds

This week, we screen a universe of equity funds that in the last
month have been upgraded to the top Morningstar return rating in
their category, and now receive 5 stars, Morningstar's best risk-
adjusted performance rating.

To identify the funds with ratings upgrades in the last month, we
used MSN Money's Deluxe Screener tool (moneycentral.msn.com).  It
lets you screen for funds that have recently been upgraded to top
Morningstar return rating and have recently had their star rating
upgraded or downgraded.

Our objective here is to identify funds that have improved their
relative performance in the last month, and may be worth further
consideration now.

Screening/Evaluation Process

We used the Custom Search feature of the MSN Deluxe Screener and
entered the following fund criteria to obtain a list of potential
best-fit matches.

 Field Name/Operator/Value:
 Upgraded To Top Return Rating = Since = In Last Month
 Morningstar Rating Upgraded = Since = In Last Month
 Morningstar Rating = 5 Stars (Highest)
 Closed To New Investors = False
 Institutional = False
 Percent Stocks > 20%
 Minimum Initial Purchase < $5,000

Our simple screen yielded 16 results, including three funds with
more than one share class represented on the list.  Below is the
list of the 11 individual fund strategies, sorted alphabetically.

 Screen Results:
 BlackRock International Opportunities (BRECX & BRESX)
 Eaton Vance Utilities B (EMTMX)
 Federated Kaufmann K (KAUFX)
 Hartford Capital Appreciation HLS IB (HIBCX)
 Hennessy Total Return (HDOGX)
 Lord Abbett All Value B (GILBX)
 Lord Abbett Mid-Cap Value (LMCBX & LMCCX)
 Merrill Lynch Global SmallCap (MAGCX, MBGCX, MCGCX & MDGCX)
 Nations Marsico Focused Equity Inv A (NFEAX)
 Papp America-Pacific Rim (PAPRX)
 SunAmerica Focused Dividend Strategy B (SDWBX)

From there, we took the 16 symbols and loaded them into the Fund
Compare tool on the Morningstar.com website.  Once we had the 16
symbols entered, we viewed the Comparison Results, starting with
the Snapshot View.  These funds land in one of eight Morningstar
categories: world stock, foreign stock, large-value, large-blend,
large-growth, mid-value, mid-growth, and specialty-utilities.

Merrill Lynch Global SmallCap Fund seeks capital appreciation in
the long-term by investing primarily in equity securities issued
in at least three countries by small-cap companies, which may be
in the early stages of business development.  The balance of net
assets may be invested in larger enterprises, or debt securities.
Morningstar has the fund in its world stock category.  BlackRock
International Opportunities Portfolio seeks capital appreciation
by investing primarily in stocks of companies with market values
of $1 billion or less from at least three foreign countries.  It
may invest up to 20% of net assets in emerging-market securities
and is classified as a foreign stock fund by Morningstar.

The remainder of funds are diversified U.S. equity funds, except
for Eaton Vance Utilities Fund, which seeks high total return by
concentrating investments in dividend-paying stocks of utilities
that have potential to increase dividends in the future.  Equity
holdings may include preferred stock and foreign securities, and
the fund may also invest up to 20% of net assets in fixed income
securities.  Its trailing 12-month yield of 2.6% was the highest
on the list of screen results.

Lord Abbett All Value Fund has a large-cap value style according
to Morningstar, while its sibling, the Lord Abbett Mid-Cap Value
Fund, has a mid-cap value style overall.  The former fund favors
undervalued stocks of large, multinational companies; the latter
fund emphasizes undervalued stocks of companies with market caps
ranging from $500 million to $5 billion.  The SunAmerica Focused
Dividend Strategy Portfolio and Hennessy Total Return Fund seek
total return by investing a sizeable portion of assets in the 10
highest yielding stocks in the Dow Jones Industrial Average.

Hartford Capital Appreciation HLS Fund seeks capital growth and
is the only fund on the list to have a "blend" management style.
In other words, the fund uses a blend of value and growth stock
screens in analyzing prospective investments.  The fund invests
primarily in common stocks of small, medium and large companies,
and may invest up to 20% of assets in stocks of foreign issuers.
Morningstar puts the Hartford fund in its large-cap blend group.

Three of the funds on the list have "growth-oriented" investment
styles.  The Nations Marsico Focused Equities Fund seeks growth
of capital over the long-term by investing principally in large
capitalization common stocks but it may also invest in warrants,
preferred stocks, convertible securities, and debt securities of
various credit qualities.  Tom Marsico, formerly with Janus, has
managed the large-cap growth portfolio for five years.  Because
of the negative ramifications on regional growth due to the SARS
virus, the Papp America-Pacific Rim Fund is a potential red flag
(we'll avoid it for now).

Federated Kaufmann Fund seeks long-term capital appreciation by
investing primarily in common stocks of small- and medium-size
companies selected for their growth prospects and other factors.
Morningstar classifies the fund as mid-cap growth but it invests
in both the small-cap and mid-cap sectors of the market.  It has
one of the best long-term records of performance in the business
with long manager tenures to boot.

In the next section, we tell you which funds we like now and why.

Our Favorite Funds

Among U.S. large-cap funds, we like Hartford Capital Appreciation
HLS Fund (HIBCX) but it is offered to qualified investors only so
it is not a viable option for most retail investors.  Eaton Vance
Utilities B Fund (EMTMX) has become more conservative (more value
oriented) in recent years since telecom and growth utility stocks
fell out of favor.  While it focuses more on dividend yields and
relative valuations today, the fund may still be too concentrated
in utility stocks for some people's liking.  So, we won't discuss
it further.

If you believe the economy is bottoming out and growth stocks may
return to favor with investors, you may like the prospects of the
Nations Marsico Focused Equities Fund, Investor Shares (MFEAX), a
no-load NTF fund that invests in classic growth stocks as well as
in beaten-down growth names and non-traditional growth areas, per
Morningstar.  Marsico, a former star manager for the Janus Funds,
is known for his concentrated growth style of investing.  Despite
the limited number of holdings (typically, 25-30 issues), Marsico
has kept volatility on par with other large-cap growth funds over
time, while generating above average to high relative returns for
investors.  If you have a long-term horizon and can stomach large
fluctuations in share price, Marsico's large-cap growth portfolio
offers significant long-term growth potential.






While the fund's portfolio can be volatile in the short term as
evidenced by the chart above, Marsico has produced strong total
returns in the long run relative to his large-growth fund peers.
For the trailing 5-year period ended April 21, 2003, the Nations
Marsico Focused Equities Fund had a positive 1.1% average annual
total return, per Morningstar, ranking in the top 5% of the fund
category.  For comparison purposes, the S&P 500 index fell by an
annual-equivalent rate of 3.2% over the same time period.

In 1998 and 1999, Marsico returned 50.1% and 52.9%, respectively,
so he's already shown that he can keep up in growth-led advances.
But, Marsico has also done a good job of avoiding excessive risk,
receiving a top Morningstar rating of 5 stars.  Morningstar gives
the fund its top return rating and an average risk rating (within
the large-growth category).  The Nations Marsico Focused Equities
Fund is up 3.5% on a YTD basis through April 21, 2003.

Risk-tolerant investors that are comfortable with the additional
risks of small/mid-cap investing may like the long-run prospects
of the Federated Kaufmann K Fund (KAUFX).  Fund co-managers Hans
Utsch and Lawrence Auriana have managed the fund's portfolio for
more than 17 years, delivering high total return with lower than
average risk relative to other small/mid-cap growth equity funds.
Because of its success and asset growth, the fund's approach has
evolved from a racy, small-cap growth fund to a more established,
mid-cap growth offering.





The Kaufmann co-managers have one of the best long-term records
of performance, returning an average of 10.4% per year over the
last 10 years (through March 31, 2003).  That was strong enough
to place the fund in the top 9% of the mid-growth category, per
Morningstar.  It beat the S&P 500 large-cap index by an average
of 1.9% a year and Russell Midcap Growth Index by 3.8% per year
over the same time period.

Like Marsico, Utsch and Auriana have proven that they can build
wealth in good times and control volatility in bad times versus
other growth managers.  In years 2000, 2001, and 2002, the fund
ranked in the top quartile of the mid-cap growth stock category,
producing positive annual total returns in 2000 and 2001, while
other growth managers were falling fast.  The Federated Kaufmann
Fund is up 0.9% since December 31, 2002.

Conclusion

The BlackRock and Merrill Lynch international funds on the list
may be suitable for long-term investors that seek the potential
higher returns that global/international small-cap stocks offer,
and who can tolerate significant risk in pursuit of that growth
objective.  Risk-tolerant investors may want to consider the two
funds for a portion of their equity portfolio.

For more information or to download a fund prospectus go to the
respective fund family website.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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The Option Investor Newsletter                  Tuesday 04-22-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: NOC
Daily Results
Call Play Updates: AZO, BBBY, ERTS, IMDC, MXIM, OMC, WFMI
New Calls Plays: BBOX
Put Play Updates: None
New Put Plays: None


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

Northrop Grumman - NOC - close: 86.60 change: +1.90 stop: 85.26

Saw it coming!  That's what bears are thinking after the strong
moves in the defense sector this week.  We've been paying special
attention to the DFI and DFX indices and both have rebounded
strongly.  Our OptionInvestor.com put play in NOC was stopped out
early Monday morning when shares of NOC traded up through our
stop at 85.26.  This was a $2.00 loss from our picked price.
Fortunately, in our Sunday update we cautioned readers not to
open any new short positions based on our expectation that the
stock could follow through on last week's rally.  The strong
earnings numbers coming from the likes of LMT, LLL and RTN have
reversed the declining defense sector and the general market
bullishness doesn't hurt either.  NOC shareholders are not out of
the woods yet.  The stock still has plenty of resistance at $88
both on its daily chart and its point-and-figure chart.

Picked on April 6th at $83.26
Change since picked:    -2.00
Earnings Date        04/29/03 (unconfirmed)
Average Daily Volume = 1.57 mil


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

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

CALLS              Mon    Tue    Wed   Thu  Week

AZO      78.50   -1.20   2.71   Approaching Target
BBBY     39.12   -0.33  -0.20   Uh-oh, no rally.
ERTS     61.62    0.33   1.11   Triggered, nice close.
IMDC     35.40   -0.62   1.02   Slow but sure.
MEDI     33.99    0.07   0.57   Long-term, no update
MXIM     41.11   -0.07   1.36   Triggered, looks strong.
OMC      62.42   -0.85   1.72   Big move.
WFMI     57.48   -0.74   0.22   Looking Ripe!


PUTS

NOC      86.60    0.89   1.90   DROP, stopped out on Monday.


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

AutoZone, Inc. - AZO - close: 78.50 change: +2.71 stop: 74.75*new*

The triple-digit gain in the Industrials didn't hurt our play-of-
the-day in AZO on Tuesday.  The stock was strong almost all day
long and at $78.50 it's the highest close since early December
2002.  OptionInvestor.com's short-term upside target is $80 and
AZO is getting close.  Active traders need to be preparing their
exit strategy, whether that is to close the whole position at
$80, or only take partial profits.  It looks like AZO is trading
in a channel (from early March onward).  If the channel holds,
then it might give patient traders a run to the $85 level, but we
feel the $80 mark could be a tough barrier to break.  We're going
to raise our stop to $74.75 but more conservative traders can
certainly tighten their stops to whatever makes them comfortable.
We did notice that AZO put out a press release on Sunday, April
20th.  In the release the company gave a sort of "profit warning"
with raised guidance for their third quarter ending May 10th.
Thomson First Call had estimates of $1.19 and AZO is saying
earnings will come in between $1.24 and $1.31 a share.  The same
press release said same store sales rose 3% for the first eight
weeks of the quarter.  AZO is expected to make an appearance at
the Lehman Brothers Sixth Annual Retail Seminar on Monday, April
28th, 2003 at 10:40 a.m. ET.  Due to the stock's strong
performance this is not the best position for new entries on call
options.  A pullback to $76.00-76.50 might be the best bet for
new positions.  We are strongly considering an exit price to
close the play at $80 and will follow up on the play in the
MarketMonitor.

Picked on April 13th at  $75.24
Change since picked:      +3.26
Earnings Date          06/03/03 (unconfirmed)
Average Daily Volume = 1.32 mln

---

Bed Bath & Beyond - BBBY cls: 39.12 change: -0.20 stop: 37.00

Uh-oh!  Shares of BBBY did not reciprocate a big up move in the
markets today.  While the stock has been out-pacing the markets
with great relative strength we're a bit surprised by the
consolidation on Tuesday.  The dreary March weather coupled with
24-hour war coverage really hampered retails sales.  Everyone was
hoping for strong numbers last week ahead of Easter and the U.S.
consumer did not let them down.  However, hopes were a bit higher
than reality and the cool weather had an impact on "warm, weather
items".  Not that I think of BBBY when looking for warm, weather
items, but where the Retail sector goes does affect the stock
price.  They daily chart for BBBY might be concerning but the 30-
minute or the 60-minute interval allows one to see the ascending
channel that BBBY is climbing.  Conservative traders seeking to
reduce risk could try and up their stop to just under $38 but
we're going to leave ours at $37.00 for the moment.  The $40
remains strong psychological resistance but a breakout could have
even more shorts running for cover.  Another dip to $38 might be
a decent entry on new positions.

Picked on April 8th at  $37.18
Change since picked:     +1.94
Earnings Date         07/02/03 (unconfirmed)
Average Daily Volume = 3.22 mln

---

Electronic Arts - ERTS - cls: 61.62 chg: +1.11 stop: 58.00*new*

There's been a lot of talk about video games lately, especially
now that the war is over and how corporate America is going to
try and market some of the terms and ideas from the war.  Whether
or not you believe this is a kosher way to do business, if anyone
can make money on it the video game industry would be the best
bet.  We are not saying that ERTS is trying to market anything
related to Operation Iraqi Freedom but when investors do think
video games the first stock that comes to mind is ERTS.  They are
the big dog in the industry.  No one is even close to them.  The
powerful move in the markets and the software sector today helped
boost shares of ERTS above their resistance at $61 and
OptionInvestor.com was triggered when ERTS traded at $61.25.  Our
short-term target is $65.00 and we're raising our stop to $58.00.
Should the markets or the sector see a pull back a dip to $60.00
might be a good bet on new bullish entries.

Picked on April 22nd at  $61.25
Change since picked:      +0.37
Earnings Date          05/08/03 (unconfirmed)
Average Daily Volume = 3.36 mln

---

Inamed Corp - IMDC - close: 35.40 change: +1.02 stop: 32.86

Well, we don't have a lot of news for IMDC to follow up on and
shares have essentially done what we expected.  The pull back to
$34.13 yesterday was an entry point for anyone brave enough to
take it.  We really like the engulfing bullish candlestick
created on Tuesday and think the close over $35 is also
encouraging.  Keep in mind that given the rate of ascent for this
stock we still suggesting options with a thee to six month time
horizon.

Picked on April 17th at $35.00
Change since picked:     +0.40
Earnings Date         02/25/03 (confirmed)
Average Daily Volume = 215 K

---

Maxim Integrated - MXIM - cls: 41.11 chg: +1.36 stop: 38.00*new*

There you have it!  Monday the markets just stalled and MXIM with
them.  Today's broad-based rally and strength in the tech sectors
was not ignored by chip stocks and MXIM traded through our trigger
to go long at $40.51.  Our stop is now $38.00 and should MXIM
follow through on this upside breakout we'll raise it as soon as
is prudent.  Our profit "target" is between $44 and $45.  Given
our short-term perspective on this rally, which appears to be
fueled by sentiment alone, we'd opt for the exit price at $44.
Keep an eye on the SOX.  It has climbed to 345, which is great
news as it represents a new relative high.  It also means the
sector is approaching tough resistance at 350.  If you're the type
of trader who prefers to enter on a pull back look for MXIM to dip
to the $40 level.

Picked on April 22nd at $40.51
Change since picked:     +0.60
Earnings Date         04/29/03 (confirmed)
Average Daily Volume = 8.30 mil

---

Omnicom Group - OMC - close: 62.42 change: +1.72 stop: 58.00*new*

The rally for advertising stocks continues and OMC hits a new
relative high.  We were encouraged last week with the stock's
close over the $60 level and Monday's consolidation in the
markets did not bring any new selling pressure to OMC.  The move
today provided a nice bounce off the $60 mark again and volume is
improving.  Shares appear to be channeling higher and if this
channel holds then OMC could run up to $64 before pull back to
consolidate gains.  Patient traders might get another chance to
go long on a dip to the $60-61 level.  We still expect potential
resistance at $65, but our longer-term target is $68.  The point-
and-figure chart is showing a spread triple-top breakout for this
stock.  We're raising our stop to $58.00 to reduce risk.

Picked on April 15th at $61.30
Change since picked:     +1.12
Earnings Date         04/29/03 (confirmed)
Average Daily Volume = 2.18 mil

---

Whole Foods - WFMI - close: 57.48 change: +0.22 stop: 56.00

It looks like WFMI is starting to get a little ripe.  Like the
bananas in my kitchen right now, if I let them hang there too
long they turn brown and soft.  That's happening now to WFMI's
technical indicators.  They're all looking soft.  Shares of the
high-end organic food market have been holding up and the trading
range between $56 and $58 isn't necessarily bad.  Many stocks
need time to digest big gains like WFMI saw from $50 to $58 in
such a short time.  However, we don't want to be around if
investors decide to take some money off the table.  Currently our
stop is at $56 and that's a good spot for it.  However, given the
lack of true participation by WFMI in today's broad-market rally
we're not suggesting any new plays until the stock can close
above $58 again.  If we're still stuck in this range on Thursday
we might drop the play before it starts to stink.

Picked on April 1st at $56.42
Change since picked:    +1.06
Earnings Date        05/08/03 (unconfirmed)
Average Daily Volume = 907 K


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

Black Box Corp - BBOX - close: 32.39 change: +0.99 stop: 30.90

Company Description:
Black Box is the world's largest technical services company
dedicated to designing, building and maintaining today's
complicated network infrastructure systems. Black Box services
150,000 clients in 132 countries with 117 offices throughout the
world. (source: company press release)

Why We Like It:
It's back.  BBOX is back on the play list but this time as a call
play.  The stock was hammered on March 12th for a 31% hair cut
when the company warned that its March quarter would be soft and
below estimates.  The usual culprit was to blame - soft IT
spending by corporate America.  While the corporate spending
situation has not changed the perception that a second half
recovery might actually show up is driving tech stocks higher.
Investors might be drawn to BBOX believing that all of the risk
has already been taken out of the stock.  We like how shares have
finally broken out of its month-long consolidation pattern
between $29 and $32.  We expect BBOX to attempt a "fill the gap"
with a couple of caveats.  First, the descending 50-dma
(currently at 34.30) could cause trouble and the $35 level might
be a hurdle as well.  Aggressive traders can target entries now
while more conservative traders might want to look for a possible
pull back to the 31.50-32.00 range before evaluating a long
position.  We are not going to give BBOX a lot of room with our
stop.  If it rolls over we want out and we're going to initiate
the play with a stop at 30.90.  Maybe, just maybe, BBOX can pull
an Intel.  Six weeks prior to their earnings announcement Intel
guided lower, which caused analysts to lower their estimates.
When Intel actually came out with their results suddenly they
magically surprised to the upside (of these lowered earnings
estimates).  BBOX has earnings coming up in about three weeks and
we'll see how far it can climb before the announcement.  Besides,
rival network equipment company, Foundry (FDRY), actually
surprised by a penny recently and maybe investor's short memory
can play to the bulls favor.

Suggested Options:
Given that this is a short-term play with a three week time table
(since earnings are coming up on May 7th) we're leaning towards
the front month options as the best bet.  However, those traders
who prefer more time may be better served with the Septembers.

BUY CALL May 30 QBX-EF at $3.30 OI=297 SL=1.50 premium=0.91
BUY CALL May 35 QBX-EG at $0.75 OI= 85 SL=0.00
BUY CALL JUN 35 QBX-FG at $1.50 OI=234 SL=0.75
BUY CALL SEP 35 QBX-IG at $2.85 OI= 73 SL=1.25

Annotated Chart for BBOX:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-22/BBOX042203.gif



Picked on April 22nd at $32.39
Change since picked:     +0.00
Earnings Date         05/07/03 (confirmed)
Average Daily Volume = 2.8 million


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

None


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

None


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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,
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The Option Investor Newsletter                  Tuesday 04-22-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: CALL - BBOX
Readers Write: It might be a whole new ball game!


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

Black Box Corp - BBOX - close: 32.39 change: +0.99 stop: 30.90

Company Description:
Black Box is the world's largest technical services company
dedicated to designing, building and maintaining today's
complicated network infrastructure systems. Black Box services
150,000 clients in 132 countries with 117 offices throughout the
world. (source: company press release)

Why We Like It:
It's back.  BBOX is back on the play list but this time as a call
play.  The stock was hammered on March 12th for a 31% hair cut
when the company warned that its March quarter would be soft and
below estimates.  The usual culprit was to blame - soft IT
spending by corporate America.  While the corporate spending
situation has not changed the perception that a second half
recovery might actually show up is driving tech stocks higher.
Investors might be drawn to BBOX believing that all of the risk
has already been taken out of the stock.  We like how shares have
finally broken out of its month-long consolidation pattern
between $29 and $32.  We expect BBOX to attempt a "fill the gap"
with a couple of caveats.  First, the descending 50-dma
(currently at 34.30) could cause trouble and the $35 level might
be a hurdle as well.  Aggressive traders can target entries now
while more conservative traders might want to look for a possible
pull back to the 31.50-32.00 range before evaluating a long
position.  We are not going to give BBOX a lot of room with our
stop.  If it rolls over we want out and we're going to initiate
the play with a stop at 30.90.  Maybe, just maybe, BBOX can pull
an Intel.  Six weeks prior to their earnings announcement Intel
guided lower, which caused analysts to lower their estimates.
When Intel actually came out with their results suddenly they
magically surprised to the upside (of these lowered earnings
estimates).  BBOX has earnings coming up in about three weeks and
we'll see how far it can climb before the announcement.  Besides,
rival network equipment company, Foundry (FDRY), actually
surprised by a penny recently and maybe investor's short memory
can play to the bulls favor.

Suggested Options:
Given that this is a short-term play with a three week time table
(since earnings are coming up on May 7th) we're leaning towards
the front month options as the best bet.  However, those traders
who prefer more time may be better served with the Septembers.

BUY CALL May 30 QBX-EF at $3.30 OI=297 SL=1.50 premium=0.91
BUY CALL May 35 QBX-EG at $0.75 OI= 85 SL=0.00
BUY CALL JUN 35 QBX-FG at $1.50 OI=234 SL=0.75
BUY CALL SEP 35 QBX-IG at $2.85 OI= 73 SL=1.25

Annotated Chart for BBOX:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-22/BBOX042203.gif



Picked on April 22nd at $32.39
Change since picked:     +0.00
Earnings Date         05/07/03 (confirmed)
Average Daily Volume = 2.8 million


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If you trade options online, then you need an online broker that:
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.

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*************
READERS WRITE
*************

It might be a whole new ball game!
By Rick Utt

I wrote this over the weekend so the averages on the historical
charts are taken from the end of last week. The daily chart of the
NASDAQ is current. I felt last week the market was turning and
wanted to share this with OptionInvestor readers.




The NASDAQ's failure to drop and it's persistent resistance test,
of which it broke through today, is leading us to believe its
trying to form an upward channel. Coincidentally the top of the
channel will run into December's high at which point it will most
likely be repelled

The problem with the market is it's built on news but doesn't pay
any attention to it. It actually uses it as a diversion to what's
really happening. Kind of like the corner drug dealer who says,
"Hey look over there, it's the police" and then runs off with your
money. Not that that's ever happened to me but I watch "Cops"
enough to know that it happens.

Of course to keep on top of things we read as much as we can get
our hands on. Unfortunately it creates a hidden bias that I preach
against all the time yet find it seeping into my perception. The
stock market is deaf but as long as the participants aren't, there
is always going to be a conflict and that's why it's said, "the
crowd is usually right in the middle but wrong on both ends."

In listening to the news there is no reason to buy stocks with
high unemployment, no business visibility, consumer confidence at
record lows, even the Hirsch Corporation, editors of The Traders
Almanac issued a sell signal based on market internals and
history. The news is the pits! What people forget is, when the
bull market was ending you couldn't find a reason from anybody
against putting money in the market. There was nothing but good
news and great possibilities. Everybody was making it! Now there's
nothing but bad news and everybody has lost money. Is there a
correlation here?

In 1982 the Dow was at 1,000. Today it sits at just under 8,500.
They say the stock market over it's lifetime has achieved in an
annual return of 11%. If you compound that for 20 years from
1982's 1,000, you'll get 7263. In 2002, which was 20 years from
1982, we hit a low of 7197. Only NASA gets closer to it's target
than that.

The industry standard is to use linear charts in tracking the
market. A linear chart of the Dow would look like this.

Dow Jones Industrial Average monthly bar chart (linear)



If you look at it this way we are still WAY over valued and it
looks like the Dow would have to drop to about 4000 to become
reasonable again.


Now lets look at it through a semi-log chart.  Semi-Log scaling
produces a y-axis weighted according to percent change. For
example, a price move from 40 to 50 (25% increase) is given more
space on the scale than a move from 100 to 110 (10% increase).

Dow Jones Industrial Average monthly bar chart (semi-log)


 This semi-log chart shows the roaring 20's to be just that. It
was right around the peak of the market that Alan Greenspan was
born and his first words were "irrational exuberance". You can see
what happened after that. You can also see why investors were
jumping out of windows. They were emulating the stock market's
decline. It was radical to say the least and this was a TRUE
capitulation event. If we draw the line from the first pullback to
the second pullback and then continue to the end, you can see it
takes a final bounce off the trendline, makes it's highest high
but just barely, comes back down on the trendline, holds for a few
months and then falls through. A semi-log trendline seems to work
perfectly right up to and including the fall. You can see in the
middle 50's the market starts to get ahead of itself and slows
down in the early 60's where it starts to move sideways. It takes
the final bounce off the trendline, peaks in 1973, then hangs and
falls through in 1974

Dow Jones Industrial Average monthly bar chart (semi-log)



As you can see, after consolidating, we start after the first
pullback and follow the trend again until the last bounce in
September of 2001. You can also see where the market got away from
itself in the mid 80's ending in the sharp decline, which was the
1987 crash. It's ironic how there was so much pandemonium and
people claimed they were wiped out, some even committing suicide,
yet if they would just read the chart they'd know that prices got
too lofty and the end of the world was only at the top of the
trendline. That again was a true capitulation event. The problem
we're having now is you'll notice the sideways market of the 60's
contained tradable trends for the most part, some lasting two or
three years in the same direction. Compare that with the "noise"
we've seen in the last three years. You can also see we have not
had a sharp, solid bounce to signify the end of this particular
decline. It looks like it will probably have to go up before that
can happen because as it stands we've lost momentum to the
downside.

NASDAQ Composite monthly bar chart (linear)



The NASDAQ got quite carried away in the 90's and still has quite
a ways to fall before it hits the trendline and this is the
thinking of most technical analysts.

Now, are you ready for the shocker???
NASDAQ Composite monthly bar chart (semi-log)



Sometimes we look for support and resistance levels through a
microscope when we ought to back up and look at them through a
telescope. The problem we have is the industry and every
technician I know using linear charts. It seems a little more than
coincidental that it all comes together on a semi-log chart. The
trend line followed perfectly until it broke in the early 90's,
but once the market headed up we used that new low for our
reference and it was that low that gave us our most recent bounce.
Is this a coincidence or are we ready to buy?

Finally, lets take a look the Volatility index everyone, including
me, keeps touting. If you look at intraday charts  the VIX looks
like its hitting levels unknown to man and in a recent time frame
that's true, but lets back up and look through the telescope
again. We'll use a standard linear chart for this because the VIX
only stays within a certain range.

Dow Industrials and Volatility Index weekly bar chart.



Dow at the top VIX at the bottom. We needed to cram a lot of
information in here so its not easy to see, but when we back up
with our telescope the volatility doesn't look that threatening at
all. While we've seen lows not seen since a year ago and lows,
that when reached twice recently have formed to market tops, we've
got a long way to go before we actually hit low levels. Also
notice that in the past few years we've hit market bottoms when
the VIX hits 60 or so. However in the 1987 crash the VIX hit an
astronomical 172. So in the scheme of things and historically
speaking we're more neutral than anything.

I've been as guilty as anyone of trying to dissect this market
with a microscope. We've been in a bear market so long we're
looking for any signs we can as to when we'll emerge, or if we'll
emerge. It may be that we've been staring at the ground so long
checking the moisture level to see when it will quit raining that
we may be failing to notice the blue sky opening right above our
head.

The economy is lousy and unemployment is growing and there's
unrest in the middle east and nuclear threats in North Korea and
CEO's are afraid to comment on what the future may hold and so on
and so on and so on. The crowd says "stay away" but remember the
crowd in 2000 said, "come on in, the water is perfect!" The crowd
is wrong on both ends.

While the NASDAQ and DOW charts don't agree as far as trend lines
go, one has made a perfect bounce and the other has said, "Hey,
you were looking for 11% per year. We're here now!".

In spite of the fact everybody is saying beware of the volatility
index, the volatility index is nowhere near the lows it was for
years during a sustained bull market and if anyone was every ready
for a sustained bull market, we are. When you step back and look,
it's really a non-issue at this point. Bad news is everywhere but
the market won't go down. Everyone thinks this is a trap because
they've been burned so many times before. That in itself is a
market ploy.

The market has no ears and doesn't hear the news. It's a lot older
than any of us and has a mind of its own. To the market, days mean
nothing, weeks mean little and years are what gives it it's
character. Once in a while we need to quit asking it what kind of
day its having and back up and look to see how it's been feeling
lately. My guess is it's starting to get rid of it's crankiness of
the last few years and in the coming months might start to give us
a smile or two.


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


**************************************************************
ADVERTISING INFORMATION

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

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