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Daily Newsletter, Sunday, 04/27/2003

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The Option Investor Newsletter                   Sunday 04-27-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.


Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: Small World
Futures Market: Home In The Range
Index Trader Wrap: A Fifth Term!
Editor’s Plays: Gray Momentum
Market Sentiment: Awash in Red
Ask the Analyst: Is now the time to be bearish?
Coming Events: Earnings, Splits, Economic Events


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 4-25         WE 4-17         WE 4-11         WE 4-04
DOW     8306.35 - 31.30 8337.65 +134.24 8203.41 - 73.74 +131.38
Nasdaq  1434.54 -   .96 1425.50 + 66.65 1358.85 - 24.66 + 13.99
S&P-100  456.10 +  2.49  453.71 + 12.74  440.97 -  5.72 +  8.75
S&P-500  898.81 +  5.23  893.58 + 25.28  868.30 - 10.55 + 15.37
W5000   8525.89 + 59.04 8466.85 +239.31 8227.54 - 92.43 +134.60
RUT      388.50 +  4.80  383.70 + 12.40  371.30 -  1.98 +  4.58
TRAN    2352.61 -  9.58 2326.19 +131.63 2194.56 +  6.28 + 25.47
VIX       23.90 -   .69   24.59 -  3.68   28.27 -  4.53 +  0.62
VXN       33.70 -  2.18   35.88 -  3.74   39.62 -  2.83 -  0.24
TRIN       1.95            0.50            0.88            1.00
Put/Call   0.87            0.52            0.79            0.76
******************************************************************



Small World
by Jim Brown

The global economy sounds huge but it is really a small world with
thousands of interconnecting flights across all countries on a
daily basis. Unfortunately in that small world the SARS virus is
spreading faster than chicken pox in a kindergarten class if you
believe the hype in the news. The impact of this previously unknown
disease is taking a toll on the already weak global economy.

Dow Chart - Daily



Nasdaq Chart - Daily




The U.S. economy grew slower in the first quarter than analysts
previously expected but we should be excited that it grew at all.
The GDP rose +1.6% compared to estimates as high as +2.3%. The
hero sector was residential investment at +12% with nonresidential
investment dropping -4.2%, exports -3.2%, imports -7.9% and
equipment/software -4.4%. Clearly without the residential sector
the numbers would have been substantially different. The difference
between imports/exports added about +0.9% to the headline number
and was helped by the weaker dollar. The headline number may have
been positive but there was nothing to cheer about. If you take
out exports the headline number would have only been +0.7%.
Consumer spending slowed, business investment was down and
inventories continue to fall. Many analysts are discounting this
report as "pre-war" and taking a wait and see approach for the
2Q. Now that the war is over there should not be anything holding
back the economy but SARS and pessimism.

March Existing Home Sales dropped to their lowest level since
last September with an annualized rate of 5.53 million units.
Most analysts had expected a decline but the strong -6% drop
caught everyone off guard. The drop was due to blizzards in the
North East and colder than normal temperatures in the Midwest.
The low mortgage interest rates are losing their luster as
unemployment and job cutbacks are felt. This was the second
monthly decline and inventory levels are rising, up +10% in
the last month. Contradicting the Existing Home Sales was the
New Home Sales, which rose substantially by +7.3% in March. The
surge was attributed to home builders offering stronger incentives
as inventory levels rose and mortgage rates started to climb.
The statistical +7% jump is misleading since the Jan/Feb numbers
had been artificially low due to the bad weather. Confused?
Home builders simply have more incentive to dump inventory and
resort to more freebies and gimmicks to sell homes than John
Doe homeowner. With the Jan/Feb slump the incentives kicked
into high gear. Also the bad weather delayed completion of homes
in Jan/Feb resulting in a wave of houses coming to market all
at once in March.

The biggest indication of post war relief came in the Michigan
Sentiment which bounced from 77.6 in March to 86.0 in April.
This was the final reading for April and slightly above the
83.2 preliminary number. Because the initial estimate had already
telegraphed the change the market was not excited by the release.

Despite the economic reports on Friday investors were more
interested in the impact of SARS and the increasing wave of
downgrades now that the pattern of earnings results is clear.
The SARS impact is increasing. The ACER Computer CEO said
computer sales in Asia were down -20% last week and dropping.
Companies are closing offices, airlines are refusing to fly
to Asia and the convention and trade show business is coming
to a halt. A third hospital was sealed off in Beijing due to
a rapid spread of the disease and widespread contamination.
Doctors, patients, workers and visitors are locked up until
they get control of the contagion unless they hold a special
pass. Over 4000 people are quarantined at home with nearly
1000 confirmed cases in Beijing alone. There are now confirmed
cases in 26 countries.

The CDC in the U.S. said it was "very unrealistic" to
think you can "magically" stop the spread of this disease.
In an effort to stop the spread Beijing has announced that
any building (office/hotel/factory/apt/store) that has a
confirmed case of SARS will become a restricted area and
subject to quarantine. Now that China has ratcheted up their
activity level there is the assumption that control of the
disease will eventually be achieved. However, officials warn
that countries with a less developed medical system like
Vietnam, Cambodia, Thailand or many of the African countries
could become a breeding ground for the disease and infect
hundreds of thousands before any medical cure can be produced.

I am explaining this completely because it is beginning to
impact the global economy in a big way. Whether fear of the
disease is truth or hype, chip companies are starting to
see order cancellations and deferrals because of slowing
sales in Asia. The already suffering airline industry is
being crushed again by the lack of overseas travel. Some are
reporting less than 20% passenger traffic on many flights.
This not only depresses the airlines but the entire tourist
industry and the lack of business travel will eventually
depress profits. This problem has been exploding rapidly.
Toronto, not an Asian city half a world away, was literally
crippled by the "fear" of the disease more than by the disease
itself. If an explosion of cases occurs in a U.S. city then
the illusion we are somehow protected could evaporate in a
week. As long as reported cases continues to climb the impact
on the global economy from the perception of danger will
continue to rise.

The other major factor impacting the markets on Friday was
a high profile downgrade of the entire chip sector by Salomon
Smith Barney. The company cut semiconductors to underweight
citing increased customer inventories, evidence of end market
deterioration, valuation and upcoming seasonal weakness in
chip orders. The SOX dropped -5% and took the Nasdaq with it.
Even the AMZN earnings win with the stock up nearly $4 failed
to hold the Nasdaq in the green. The addition of the SARS
concerns in Asia where most chip and fabrication companies
have their plants is yet another factor. Several chip earnings
announcements warned of the SARS impact. Motorola reported
that they were seeing weakening end user demand and QCOM
said channel inventories were relatively high and rising.

Factors impacting the Dow on Friday included the Intel reaction
to the chip downgrade and the continued MSFT drop from CEO
Ballmer's cautionary comments on Thursday. MO also dropped
after RJR fell -$6 on a profit warning due to slowing sales,
higher litigation costs and steep discounting. They also
suspended share buybacks and said their credit status was in
danger of being reduced to junk. They said higher state taxes
required lower selling prices to remain competitive. Clearly
the tobacco sector is not a safe haven any more. Dow component
MO fell -$2 intraday on the news. MMM also dropped nearly $3
after a downgrade from Banc America which said the good news
was already priced in and the stocks was overvalued based on
the current economic picture. MMM has fallen from $136 to $122
in the last three weeks. Boeing continued to fall on fears the
new crisis in the airline sector from SARS would cause more
bankruptcies and cancellation of orders. GM dropped -$1 on a
downgrade from UBS Warburg on valuation concerns. GM was cut
to neutral and Ford to reduce (sell). IBM was down -1.32 on
worries about a potential profit warning from falling sales
in Asia and slowing orders in its chip business. MRK lost -1.55
on news that it had cancelled trials of a promising drug for
lung disease due to dangerous complications. This was the
second MRK experimental drug this year that MRK has had to
stop trials.

The confusion in the markets is running contrary to the current
S&P estimates for earnings growth for the rest of the year.
According to S&P, with 330 S&P companies already reported for
this quarter, the 1Q earnings growth will be around +5.3%. No
problem there. However, their estimates for the rest of the year
are producing some raised eyebrows. They are projecting earnings
growth for the 2Q of +13%, 3Q +19% and 4Q +22%. Did I lose a
couple of years while I slept last night? Did we revert back
to a bull market just like we turn the clocks back for daylight
savings time? I think S&P has a severe case of irrational
exuberance.

We will see another 90 S&P companies announce earnings next
week along with five more Dow components. (PG, DIS, XOM, MCD,
DD) That brings to 27 the number of Dow components to report,
(420 S&P) and brings to a close the majority of the material
earnings reports. We still have HPQ, CSCO and Dell to report
in May. Our challenge next week will be keeping investors
focused on the market. The old adage of "sell in May before
you go away" still applies. Investors planning family vacations
and kids out of school typically go dormant during the summer
and pick up the activity after kids go back to school in
September. The next four months of summer doldrums in the
tech sector also weigh on the market as sales slow to a crawl
even during normal years. With SARS taking the place of Iraq
as the global concern there is not likely to be a strong urge
to invest.

On Friday the Dow broke its recent uptrend line and came to
rest at 8300 support. This is right in the middle of its recent
range but there was a noticeable lack of buyers. The volume was
moderate but it was decidedly negative with declining volume
beating advancing volume 3:1. This was a far cry from the 5:1
up volume on Tuesday. Current support is 8150.

The Nasdaq also pulled back from its weekly highs with a drop
to 1434 at the close. The chip sector downgrade broke its recent
uptrend as investors took profits. Initial support is in the
1420 range with stronger support at 1375.

Was this a change in trend? There are conflicting viewpoints
with the majority thinking it was just a profit taking dip as
traders took profits off the table from the huge pre earnings
rally. The Nasdaq has risen +215 points since the March 12th
lows. This is a huge amount of profit for investors to risk
while thinking about a slow summer.

Did you follow my suggestion last Sunday? I suggested Dow 8500
would be a good place to close long plays on any weakness. Dow
8526 was the high for the week and +222 points above Friday's
close. Friday's close is still +900 points above the March 12th
lows. While I am not going to step in front of a bullet and
proclaim the rally dead there are significant hurdles to overcome.
The Dow/Nasdaq/S&P all failed exactly at strong and critical
resistance points of 8522/1467/920. They failed on strong volume,
5:1 advancing over declining, 4 billion shares with 446 new
52-week highs to 68 new lows. Tuesday/Wednesday were very bullish
and the bulls could not break the barrier. They were excited and
motivated by the better than expected earnings reports. Now that
earnings are drawing to a close the economic concerns and SARS
will likely captivate investor attention.

There is also some scuttlebutt that the cash flowing into the
market early last week was tax cash. Extra cash that had been
held back to pay taxes and then not needed or cash moving into
retirement accounts. This concept is possible because TrimTabs.com
reported net outflows of $700 million for the week ending April
23rd. That includes the big gains on Tue/Wed. However there were
cash inflows of $6.6 billion for the prior week that included
April 15th. This would lend credence that it was some sort of
tax cash that powered the gains since this week was negative.
If that is true then the tax cash wave has passed and we could
be left in calm seas with no wind at our back.

Without any new cash flowing into the markets, earnings coming
to a close and the summer doldrums ahead of us there may not be
enough excitement to break those resistance barriers in the
coming weeks. There is very strong resistance at S&P 920 and
it will take more than wishful thinking to penetrate that level.





For next week I would continue to advise caution should we retest
those highs. With another 150+ companies reporting earnings the
dip buyers could return but without cash flowing into funds
it will be up to retail investors to hold up the market. May
is not typically a positive month and according to the Stock
Traders Almanac it is the fourth worst month of the year since
1950. The worst months being Feb, Aug and Sept with Sept being
the worst. October is know for huge drops but it also is known
for huge rebounds making it only the 6th worst month and even a
better month than May.

The optimistic view is we are moving into a typically bullish
week with Wed-Fri typically up days. With SARS being an uncharted
external force we will have to wait to see if the historical
uptrend comes true. The market is also reacting to the drop in
oil to $26 and the prospects for a coming glut. Bulls claim the
sluggish economy is priced in and now is the time to buy.

The pessimistic view is a week full of critical economic reports
that could point to another weak quarter in progress. Monday has
Personal Income/Spending, Tuesday Employment Cost Index and
Consumer Confidence again. The confidence number is expected to
be up around 71 from a prior disaster of 62.5. We could see a
market reaction only if the number failed to recover and little
impact if it exceeds estimates slightly. Wednesday we have the
PMI, Thursday Jobless Claims, Productivity, Construction Spending
and the worst report of all, the ISM. The ISM is the current
gauge of the economy and it is expected to rise slightly to 47.1
from last months 46.2. Should this number drop again it would be
taken as negative to the recovery. Conversely a sharp rise could
bring out the bulls again.

Any bounce could be short as Friday reports include Factory Orders
and the Nonfarm Payrolls again. We lost -357,000 jobs in February
and -108,000 jobs in March. With the jobless claims rising well
over 400,000 for the tenth consecutive week the odds are good we
will see another large drop in the payroll number. How investors
will take the 1-2 punch of the ISM and Payrolls remains to be seen.
Since these numbers crossed the end of war boundary they may or
may not be influenced by it. My guess is little or no influence
since jobless claims are still rising and the ISM is not really
a sentiment measure. This means we could continue to see negative
numbers but investor reaction may still be muted.

As traders this could be a volatile week. The uptrend has paused
and we could see another retest of the highs or a complete trend
change which could be a directional change into the summer. It is
a tossup but we do have stronger resistance above us than support
below us. We can move up from here but it is not likely to be on
the backs of huge triple digit gain days. We have yet to digest
completely the gains since March and that should slow any future
up moves now that earnings are over. Should investors decide
those gains are in danger then we could see some backing and
filling until the end of May when the post war economic reports
begin appearing. Add in the threat of an expanded SARS epidemic
and investors could start devoting more time to planning their
summer than trading. Yes, the war is over, now what? Until the
post war economic direction is known the market direction will
remain confused as well.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


**************
FUTURES MARKET
**************

Home In The Range
By Jim Brown

      04-25-2003           High     Low
DJIA     8306.35 -133.69  8439.33  8288.49
NASDAQ   1434.00 - 23.23  1452.17  1432.02
S&P 500   898.81 - 12.62   911.43   897.52
NDX      1082.63 - 25.49  1101.76  1081.34
ES03M     898.50 - 11.25   912.75   896.00
YM03M    8286.00 -123.00  8435.00  8260.00
NQ03M    1085.50 - 22.50  1112.50  1082.00

Daily Pivots (rounded to nearest point)
           R2     R1    Pivot   S1     S2
DJIA      8496   8401   8345   8250   8194
COMPX     1460   1447   1439   1427   1419
ES03M      919    909    902    892    886
YQ03M     8502   8394   8327   8219   8152
NQ03M     1124   1105   1093   1074   1063


After a couple of bullish days this week Friday was anything
but bullish. The indexes opened down and did not pause for
a breath until 11:00. If you missed the initial drop you missed
the entire day. The ES traded in a five point range for the
rest of the session.

Home, home on the range, where the bulls and the bears hate to
play. Unfortunately, we are about to drop back into the trading
range for the past month between 860-900. We closed right on
the uptrend line from March 12th and a break on Monday will
put us back in a range of trading where every five points is
another support level. Special note: The ES is the only major
index that did not break its uptrend line. The Dow, Nasdaq,
NDX all broke through the corresponding levels. This sets up
a potential break for the ES on Monday on any market weakness.

With ES 920 such strong resistance and without any meaningful
potential for bullish news the odds are very good we are going
down instead of up next week. The game plan for me is to go short
under 900 at the open on Monday and stay short under that level
and long above it. I think the potential is good for another
drop back to 860 but it may take a couple weeks. If we do get
another retest of the highs I would short 918 with a stop at
922. I just do not think they can break out with the SARS news
on every channel.

Strong resistance at 920, strong support at 885, 875, 865.

ES Chart - 60 min





The YM futures broke a serious uptrend line at 8313 which dates
back to March 12th. The resistance at 8500 has held for the week
and it appears the YM is headed for a retest of support at 8200
and possibly 8150.

The S1/S2 levels fell right on those support levels for Monday
making them even more likely to attract attention.

YM03M Chart - 60 min




The NDX futures have broken their uptrend line from April 11th
and appears ready to start a new down trend. Strong overhead
resistance at 1120 is well out of reach without a very positive
economic surprise.

The potential for the NQ appears to be a new down trend to the
1045 range which is decent support and near the bottom of the
current trading range. A 50% retracement of the last move would
put it in the 1068 range and not far below our current position.

NQ03M Chart - 30 min




The Dow cash still controls our fate regardless of how much
analysis we do of the individual futures contracts. The Dow
is poised to retest 8250 and eventually 8150 support. This is
the bottom of the current trading range and should hold unless
we have some serious news event over the weekend.

Resistance at 8520 is well overhead and probably out of our
reach for Monday. The Dow showed no buying interest on Friday
afternoon and it appears the earnings excitement has worn off.
Several Dow components were under pressure, IBM, MRK, MO, BA,
INTC and MSFT.

I would look for a dead cat bounce on Monday and then a sell off
into Friday's jobs report.

Dow Chart - 60 min





The MOST critical resistance is the longer term down trend on the
S&P cash that is resistance at 920. The S&P failed at that level
on Thursday and again at 900 on Friday. The bottom of the bearish
wedge is around 895 and very close to the Friday close of 899.

If the S&P breaks 880 which is the first real support then we
should be looking at a drop to 860 and the bottom of our range.

S&P Cash - Daily




The game plan for Monday would be to remain SHORT under ES 900
and stay LONG on any bounce over 920. Anything in the middle is
dangerous chop.

Jim Brown


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

A Fifth Term!
By Leigh Stevens

That's not the President who can only re-up for one more as there
is the matter of the U.S. Constitution's term limits - that would
be 2 or 8 years.  No, that would be Alan (king of the Fed)
Greenspan.  Really quite amazing, especially considering he's of
an age where - well, when I'm that age I hope I am tending my
rose bushes or racing cars at Indy or something else.

Since President Bush indicated that Greenspan would have his
support for his fifth 4-year appointment in June 2004. Chairman
Greenspan, whose life probably consists of making those ponderous
speeches before Congress promptly said "I do" or some such.

Anyway, you got to admire the guy - all this was pretty darn
reassuring to the country's business leaders, who mostly like
Greenspan's fiscal conservatism and fierce independence.  He will
need that fiscal restraint and independence to be a finger in the
dyke as we approach another round of tax cuts bound to cause U.S.
Government debt to increase at an even faster rate. Getting back
to business heads, they are still a pretty pessimistic lot and we
need them to unloose the hounds and spend some bucks, buy
software, new PC's, and especially NEW employees.

THE BOTTOM LINE –
Well, while some "technicians" interviewed by the Wall Street
Journal are getting bullish, more bullish or just less bearish
(this article also means that the Journal probably couldn't find
the fundamentally oriented investment advisors agreeing on much),

Technically, a bullish is case is not indicated UNTIL a prior
significant rally peak is exceeded and this is not the case yet -





The S&P 500 (SPX) needs to get above its prior closing high at
929 (and the cluster of intraday highs in the 928-932 area in
general) and the Nasdaq Composite (COMPX) has to close above 1461
per the right hand chart above.  We got very close to this last
week as you can see - but, until proven otherwise, what we got
here is a potential double top.

Now, I love to short stock and/or buy puts on such patterns,
ESPECIALLY when a double top occurs at an overbought reading on
the 14-day day Stochastic model as shown below the price chart.
Some might say that we even have a bearish price/RSI divergence
on the COMPX.  While the prior RSI peak was from slightly over a
month ago is not as valid a signal so to speak as if it had
happened a week or two ago - still, you like to see a
"confirming" HIGHER high on the oscillator type indicators.

The pattern of higher (down) swing lows and higher (up) swing
highs is what has some market technicians figuring the trend is
looking bullish.  But, it ain't over until the fat lady sings the
song of a new rally high.  Buy puts at the rally peaks that don't
exceed the last one - this strategy is also based on a favorable
risk to reward outlook.

At a prior significant top, you can stop out or exit a trade just
over the prior closing high.  Downside (reward) potential
relative to this is usually quite favorable, such as 3 to 1 or
more. Lets say you bought NDX puts or shorted QQQ when COMPX got
to 1461 again - hold risk to a move of 7-8-10 Composite points
above that - downside potential on a rally failure may be back to
as much as to recent prior lows in the 1360 area in COMPX.

But I digress, as I want to go on to happenings on Friday and for
the week.

FRIDAY'S TRADING ACTIVITY –
First-quarter GDP or our attempt to gauge the output of all the
goods and services produced in the U.S., rose 1.6% (after growing
1.4% during Q4), according to the Commerce Department.

The economy continued to barely maintain growth during the first
3 months of 2003 as the war in Iraq and horrible weather put a
lid on growth. The White House said the weak performance adds
urgency to its tax-cut plan. Now, myself, I am not filled with
confidence on this - a dividend cut will not put money in the
hands of individual consumers although it should allow more
dividend paying corporations to retain some cash.  However, the
problem with business spending is what I've already mentioned -
the LACK of confidence felt by CEO's.  Time will tell.

Though Q1 growth is encouraging for the U.S. not being headed
into a double-dip recession, the growth rate is slower than the
3% rate economists say is needed to help revive the struggling
labor market. This is why the current growth rate is called a
job-LESS recovery.

Since early-2001 when a recession began, there have been cuts of
more than 2 million jobs. While I am not pessimistic on the
economy, I can't yet be optimistic on a growth in jobs.  Hey, if
you have kids graduating soon, send em to grad school!

Back at the Fed - the anemic GDP number probably won't affect the
Federal Reserve's decision on interest rates in a few weeks. Alan
Greenspan has been sounding less than optimistic on an economic
rebound so seems more likely to ease than anything.

At the close, the Dow was down about 133.69 (1.6%) to 8306.35,
while the Nas Composite dropped 22.69 to 1434.54. For the week,
the Industrials were down only 31 points to 8306 and COMPX
finished at 1434, actually up 9 points on the week or a gain of
0.6%.  The S&P 500 (SPX) was also higher week-over-week with a
close just under 899 which put it up 5 points (also a +0.6%).

Earnings reporting slows down next week - last week saw Sony
announce some disappointing figures due to weak demand for TV's
and other core products.  Starbucks fell after indicating that
weak earnings from overseas took its toll although it had an
overall jump of some 60% in its Q2 profits.  Hey, maybe their not
buying American over there.  Amazon, one of my favorite online
retailers rallied another 15% after reporting a lower than
expected Q1 loss.  Is it only in America that you can lose money
and still win big in the market sweepstakes?

OTHER MARKETS -
The 10-year T-Note rose a quarter point as its yield fell 3.88.
The greenback traded at 120.19 yen to the dollar, up slightly
from 119.93 and the euro gained against the buck with a close at
1.1039 versus 1.1034. The euro is holding well above parity or 1
to 1 which, given our trade deficit, is not surprising I guess.

MY INDEX OUTLOOKS –

S&P 500 Index (SPX) – Weekly & Hourly charts:

SPX's daily chart started off my "bottom line" commentary above,
so what is a new view here is of the weekly and daily chart.  The
weekly chart suggests that SPX has come right up to significant
technical resistance at the top of the broad downtrend channel
that it has been in for some time.

The Index could break out above this trendline, but it remains to
be seen.  The market is not that oversold yet on a 13-week basis.
 A weekly close over 900 is what is needed to suggest a bullish
breakout - if this developed the index would need to hold this
area on subsequent pullbacks.

The hourly chart is of interest too.  Looks like a bearish flag
has formed, projecting a further move to around 885 even though
the longer hourly stochastic is oversold.  Pattern trumps
indicator so to speak.





If long puts stay with them with an objective to the 890-885
zone. I would be a call buyer on a further drop to 875.

S&P 100 Index (OEX) – Daily & Hourly charts:

The same hourly bear flag as on the 500 chart is outlined on the
S&P 100 (OEX) hourly chart below (right).  The last extreme in
"sentiment", according to my call/put indicator (see lower left
on the daily chart below) was a bullish one and I think that will
start to have its common contrary bearish effect.  The bear flag
implies possible downside to as low as 450-452.





Oversold on both hourly stochastic models implies normally some
potential to rally, but the bigger picture daily chart RSI which
I discussed earlier on in my Index Trader wrap will work against
the shorter-term oversold.  There is some near support in the
454-455 area suggested by the prior hourly highs - this will be a
key area to watch.  Strong buying interest there would suggest
some rally potential, say to resistance at 460 where I suggest
put purchases again. On balance I think OEX is headed lower
before there is much of a near-term rebound.

Nasdaq Composite Index (COMPX) – Weekly & Hourly:

The weekly chart (the daily chart has already been shown above)
is of interest in terms of the Composite putting in the possible
"V" bottom that is outlined.  This secondary bottom developed of
course after the earlier lower low.

Near-term the Composite maintains a bullish chart if it can find
support and buying interest comes in at the prior highs - if
prior resistance in the 1427-1430 "becomes" support, the bulls
more or less look like they have the control.  The oversold
hourly stochastics would support the idea of some rally potential
from this area.





The chart and technical picture for Nasdaq looks like this sector
continues to outperform the S&P for a while.  If there is another
dip into the 1375 area, I want to look at calls or stock to buy
that are key Nasdaq components. But that's ahead of the game - if
in puts, stay with unless COMPX closes above 1450 again.

QQQ charts - Daily & Hourly:

I suggest buying QQQ on pullbacks to the lower trendline
intersecting around 25.5 currently. However, I don't have major
bullish conviction due to the continued low volume and the fact
that the Q's got pushed back right where anticipated in the mid-
27 area.  Look for lower prices in the short-term on QQQ.





Note that from a daily to hourly time frame, there is downward
momentum showing.  The daily stochastic (left, above) is looking
like it can and will generate a crossover downside sell "signal"
on a further sideways to lower trend.  If short (or long puts)
stay with that - if not in, but wanting to be, I suggest new or
added shorting in the 27.25 area.


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**************
Editor's Plays
**************

Gray Momentum

OK, I give up. Let's just play a simple momentum stock with
great potential and forget about it. It is not a tech stock
and it is not a deep cyclical. It has a guaranteed market
and a list of products that sells for far less than the
competition. Give up?

The company is IVAX (IVX) a generic drug maker. With the
graying of America the generic drug market is going to explode.
Many insurance companies now will not even pay for a drug unless
it is a generic. The company that discovers and patents a new
drug gets sole marketing rights for a set period of time and
we all know how much those drugs cost. Have you tried to buy
Celebrex or Prilosec before? Once a proven drug becomes
generic the prices drop and there is already a proven market.

On Friday IVAX received tentative approval for a generic
form of Permax. This is another in a string of successful
ANDA applications and the company has 38 more in progress
at the FDA. They said they were going to aggressively
continue their filing schedule for new ANDA submissions.

Once the composition of drugs is known the process for
making them generically is very simple and profitable.
On Thursday Bristol Meyers agreed to pay $55 million to
settle a suit on delaying IVAX from making generic copies
of Taxol and BuSpar. BMY had filed false patent applications
trying to extend the initial license for those drugs and
prevent IVAX from selling cheaper generics. IVAX is now
allowed to sell the drugs. Taxol alone produced over
$1 billion a year for BMY.

Investors fled IVAX over the last two years while the Taxol
suit was in progress. They feared BMY would win and take a
significant revenue source from IVAX. The company used the
drop in stock price to repurchase 58 million shares (20% of
the total outstanding) over the last five years, 550,000
shares in the last quarter. It also repurchased $20 million
in convertible debentures in the first quarter.

With 38 Abbreviated New Drug Applications (ANDA) in progress
IVAX is set to add a significant amount of revenue to its
pipeline over the next 12 months. For example IVAX just
received permission to market the cancer drug Tamoxifen in
a generic form ($500 million a year). They recently applied
to produce a generic Flonase in March which GSK saw revenue
of $810 million during the past year.

While nobody can guarantee success I have seen IVAX pop up
on several buy lists recently with price targets in the $35
range which was the pre Taxol suit level. Volume has increased
significantly over the last week and IVX has cleared strong
resistance at $14.50 dating back to last August.

With the strong gains on news this week I would love to buy
this on a pullback instead of jumping in on the breakout.
Unfortunately we could be left at the train station if the
rise continues. There is the potential for a drop on
profit taking which would deflate the premiums if we just
jumped in at the current level.

To combat this problem I considered buying a short term
put to go with a long term call. Unfortunately the June
$15 put at 75 cents was too expensive for me and the June
$12.50 put is too far out of the money to be worthwhile
even at 25 cents. Cancel that idea. I also looked at
selling a short term call against a long term call but
the next strike up ($17.50) had insufficient value to
justify the risk. Nix that.

However there are several different ways to solve this
problem. We can stage into a call position by purchasing
some calls on Monday and at the current price and then
entering an order for more at $14.50 and again at $14.
With strong support around $13 I don't think we will get
much below $14 if at all.

The second method is to use a bull put spread which caps
our upside but limits the downside. The June $15/$20 is priced
at .75/4.50 for a net of $3.75 if the stock moves over $20
by the end of June. You are profitable at anything over $16
and your risk is limited to the 75 cents paid for the long
put. (round numbers)

I like this for a long-term play, we need those applications
to approve, so I would be more interested in a Jan $15/$30
at $1.60/$14.40. This would represent a risk of $1.60 and
a potential profit of $12.80 if IVX is over $30 by January.
The problem with this approach is the lack of open interest
in the Jan-$30 strike. There is none. This would put you at
the mercy of the market maker on the first day. If the sell
stuck overnight you have a good chance of it sticking
permanently. The greatest risk of execution is the first
day when the market maker sees the $1440.00 leave his account.
To get it back he must buy stock and put it to the put holder.
Once past the first day it drops off their radar screen and
you have a much better chance of it sticking. Of course, if
you are put the stock you can resell the stock at the open
and the put at the same time and only be out a few cents for
bid/ask spread. I have had some luck with doing this 2-3 days
in a row until the market maker gives up. He is required to
make a market in those strikes and closing positions daily
is not making a market.

Still the simplest way to play IVX is with a straight call.
The only risk is the premium paid and you are in control.
Since this is a long-term play I like the Jan-$15 call at
$2.10. This should be reasonably close to free money with
only one or two more applications approved. I am going to
suggest a five contract position and we are going to stage
into the play.

Buy 2 contracts Jan-$15 Call KIV-AC $2.10 Monday morning
Buy 1 contract  Jan-$15 Call KIV-AC on a drop to $14.50
Buy 2 contracts Jan-$15 Call KIV-AC on a drop to $14.00

If we get a drop back to $14.50 the price should be in the
$1.60 range.

If we get a drop back to $14.00 the price should be in the
$1.25 range.

Assuming we get a drop to $14.00 the total price for five
contracts should be in the $830 range. ($1.66 avg each)

If we "KNEW" it was going back to $14 the solution would be
simple. Wait and buy then. Unfortunately we do not know that
and we could be waiting indefinitely while the stock moved
up to $20. The 100 EMA on the 30 min chart has held support
since mid March and that EMA is $14 today.

As a betting man I would bet IVX pulls back after the strong
week it had. I would not have a problem with simply waiting
for the pull back for the initial contracts IF you are also
ready to buy at a higher price if the run continues. If the
stock dipped to $15 on Monday and then spurted higher you
would have to set a price where you would buy regardless of
how extended it looked. A buy stop a $15.50, just over the
high of the day on Friday would work, or maybe even $15.75.
Just don't wind up losing dollar while penching pennies.


IVX Chart - Weekly



IVX Chart - Daily





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

Play updates:

I am only listing the current recommendations with a
link to the initial write up and unless the play changed
substantially.

QQQ - Put - $26.93
4/20/03 ($26.82 when recommended)

Still holding our May $25 puts with a cost basis of 15 cents.
Maybe this is the week we will finally get the break.

http://members.OptionInvestor.com/editorplays/edply_042003_1.asp
http://members.OptionInvestor.com/editorplays/edply_041303_1.asp


ORCL - Put - $11.79
4/6/03 ($11.37 when recommended)

http://members.OptionInvestor.com/editorplays/edply_040603_1.asp


CY - Cypress Semi Call - $8.24 ($9.54 week high)
3/2/03 ($6.41 when recommended)

http://members.OptionInvestor.com/editorplays/edply_030203_1.asp


EMC Call from Feb-2nd  $8.82 ($9.50 week high)
($7.70 when recommended)

http://members.OptionInvestor.com/editorplays/edply_020203_1.asp


Powerball - From 12/29/02

FLEX joined RFMD and TLAB on the top losers list.
We still have nine months until expiration.

It would have taken $1,255 to buy one contract of each on
January-2nd. Any bets on what this will be worth on 12/31/03





http://members.OptionInvestor.com/editorplays/edply_122902_1.asp

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

Remember, these are high risk plays and should only be made
with risk capital.

Good Luck

Jim Brown


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

Awash in Red
- James Brown

The markets were awash in red this Friday as investors chose to
focus on weak GDP growth and the ever-increasing media coverage
on the SARS crisis.  U.S. stocks were battered lowered with tech
issues taking most of the heat despite some encouraging economic
news.

It has been interesting to note a small shift in Wall Street's
focus.  Instead of corporate earnings, which have been in the
limelight, all eyes are now on economic news.  Traders need to be
careful.  While two-thirds of the S&P 500 have already reported,
we still have a very full week of earnings announcements to come.
Plus, the economic calendar is busy as well.

Offering some encouragement for the bulls were new home sales
jumping to 7.3%.  This pushed the annualized rate to 1.01
million, which is the highest level since December 2002's 1.08
million.  Another bullish surprise was the University of
Michigan's sentiment readings.  Economists had been forecasting
84.7 but the survey jumped to 86.0.  Consumers are still opening
their wallets but businesses have yet to follow suit.

It is this lack of spending in corporate America that resulted in
a less than exciting GDP growth for the first quarter of 2003.
The estimate was for 2.1% GDP growth and the result was a
discouraging 1.6% growth.  This is the ninth time in the last ten
quarters that business spending has declined.  The impression
many analysts came away with was most of the growth was felt in
January while the economy contracted through February and March.
This is not a bullish set up for the second quarter.

Many traders think that the FOMC will cut rates again to help
speed up the economic turnaround.  So far the Fed has slashed the
overnight lending rate between banks a dozen times since January
2001.  The last cut was 50 basis points to 1.25 percent.  This is
a 41-year low and now the expectation is for another reduction
between June and September. The timing might be on target as
economic activity is slower during the summer months.  Of course
rate reductions normally don't affect the economy until six to
nine months after the fact.

As mentioned earlier the tech sectors felt the brunt of the
profit taking today.  Spurring the decline into the weekend was a
downgrade of the semiconductor sector by a Soloman Smith Barney
analyst.  The $SOX chip index lost nearly five percent, dropping
17 points to 324.95.  Smith Barney's analyst said the reason for
the downgrade was four factors affecting the chip industry.
Rising inventories, high valuations, end-market deterioration in
generic equipment sales, and the start of a three to four month
period of seasonal weakness would hamper the sectors performance.

This combination of factors when painted across a backdrop of a
SARS crisis in Asia and Toronto does not encourage new
investments into the equity markets.  Overseas exchanges continue
to reel from the SARS affect on economic activity and the
Japanese NIKKEI 225 index fell another 155 points, or -1.97% to
7699.  On the mainland, China's Hang Seng index dropped 33 points
to 8409.

Also worth noting was a huge increase in short positions by the
Commercial traders in the e-mini contracts.  That's not a good
sign for the bulls.

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

Market Averages

DJIA ($INDU)

52-week High: 10673
52-week Low :  7197
Current     :  8306

Moving Averages:
(Simple)

 10-dma: 8363
 50-dma: 8081
200-dma: 8311



S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  899

Moving Averages:
(Simple)

 10-dma:  895
 50-dma:  859
200-dma:  879



Nasdaq-100 ($NDX)

52-week High: 1573
52-week Low :  795
Current     : 1083

Moving Averages:
(Simple)

 10-dma: 1075
 50-dma: 1033
200-dma:  993



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

The broader market indices may have seen two days of profit taking
but the general trader outlook is still complacent and lacking in
fear as viewed by the volatility indices.  The VIX and the VXN
remain near their lows with nothing but extremely minor gains to
show for Friday's session.  Our market top warning remains in affect.

CBOE Market Volatility Index (VIX) = 23.90 +0.61
Nasdaq-100 Volatility Index  (VXN) = 33.70 +0.02

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.87        432,699       377,471
Equity Only    0.76        339,644       259,512
OEX            1.15         15,413        17,660
QQQ            1.29         11,713        15,147


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

Bullish Percent Data

           Current   Change   Status
NYSE          50.0    + 0     Bull Confirmed
NASDAQ-100    65.0    + 0     Bull Alert
Dow Indust.   50.0    + 0     Bull Alert
S&P 500       54.6    + 0     Bull Confirmed
S&P 100       53.0    + 1     Bull Alert

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

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

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

 5-Day Arms Index  1.16
10-Day Arms Index  1.04
21-Day Arms Index  1.18
55-Day Arms Index  1.30


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

            -NYSE-   -NASDAQ-
Advancers    1016      1235
Decliners    1828      1761

New Highs      97        88
New Lows       36        24

Up Volume    573M      687M
Down Vol.   1192M      887M

Total Vol.  1622M     1491M

M = millions


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

Commitments Of Traders Report: 04/22/02

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

We see some shuffling here in the Commercials as both short and
long positions rise but new shorts increase by more than 13K
contracts.  Small traders remain net long but the tide of bears
is growing.

Commercials   Long      Short      Net     % Of OI
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%
04/22/03      430,758   423,295     7,463     0.9%

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
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%
04/22/03      147,068   140,153     6,915      2.4%

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

Meanwhile, on the smaller e-mini contracts a wave of new
bearish activity has appeared in the Commercials.  This is
not good news for the markets as the "smart money" is usually
right and we just saw 47,000 new short positions.  Retail
traders remain excessively long with nearly 30K new long
positions and a drop of 3600 short positions.

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%)
04/22/03      124,200   437,597   (313,397)  (55.7%)

Most bearish reading of the year: (313,397)  - 04/22/03
Most bullish reading of the year: (222,875)  - 04/01/03

Small Traders Long      Short      Net     % of OI
04/08/03      319,460    35,629   283,831    79.9%
04/15/03      365,876    44,137   321,739    78.5%
04/22/03      395,596    40,480   355,116    81.4%

Most bearish reading of the year: 283,831   - 04/08/03
Most bullish reading of the year: 355,116   - 04/22/03


NASDAQ-100

Interestingly enough, the Commercials remain net long on
the NDX with the Nasdaq breaking out to the upside this week
and the small traders remain next short (almost 2 to 1).


Commercials   Long      Short      Net     % of OI
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%
04/22/03       45,647     38,531     7,116    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
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%)
04/22/03       10,929    20,376   ( 9,447)  (30.2%)

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

There has not been much change in the futures positions
for either the commercials or the small traders.  The
retail trader is pretty much neutral and the big guy
is slightly bullish.

Commercials   Long      Short      Net     % of OI
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%
04/22/03       16,942    14,750    2,192       6.9%

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
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%)
04/22/03        8,081     8,275    (  194)   ( 1.2%)

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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***************
ASK THE ANALYST
***************

Is now the time to be bearish?

Hi Jeff:  Love your work and I think I almost understand it :-)
Question, I wondered your thoughts on using the Rydex URSA in my
IRA because I can't short in there and use the SPY as a stop-loss
tool. The reason I am thinking this way is as you know you can't
get out of the Rydex fund until the end of the day.  Your
thoughts would be greatly regarded, Thanks

Hey!  This is an interesting question.  Before you stock and
options traders "tune out," you might be interested in what we
"discover" or at least observe as it relates to the Rydex URSA
fund, which is an open-end mutual fund that looks to profit from
a declining market as depicted by the S&P 500.

With an open mind, bulls and bears will be challenged to assess
if now is the time to be trading "bearish" or "bullish."  And if
you're a "perma bear" then this mutual fund might have a place in
your retirement or investment account holdings.  For you bulls
that have seen a major support level give way to further downside
the past couple of years, you might be interested in reading on!

Some investors will turn to a fund manager to do their bearish
trading for them, simply because the investor himself is just
"uncomfortable" trading bearish on their own.

First off, there are investment houses that will allow the use of
options to hedge "like positions," and there are brokers that
will even allow the trader to buy put options.  However, the
subscriber that is interested in establishing a position in a
"bear fund" where the fund manager does the shorting for you,
where YOUR maximum risk is the principle involved, has become a
popular investment the past year or two.

As the subscriber points out, the Rydex URSA Fund (RYURX) $12.28
+1.4% on Friday's session (S&P 500 was down 1.3% on Friday),
which is an open-end fund and is "marked to the market" at the
close of each trading day, allows a retirement account
investor/trader access to a security that seeks to provide
investment results that INVERSELY CORRELATE with the performance
of the S&P 500.  However, since the fund is "marked to the
market" at the close of each day's trade and does not allow for
exit opportunity during the course of the trading day, the
subscriber above is concerned that some type of LARGE intra-day
bullish move in the S&P 500 could cause damage to his retirement
account.

Now, I'm not going to say that I think it necessarily "prudent"
to try and "hedge" a mutual fund trade, based on an intra-day
move.  Especially a broader-based basket of bearish positions
that a "bear-oriented" fund would hold.  Still, with a minimum
investment requirement of $25,000, a nice little 3% daily gain
the SPX could inflict a -3% decline in RYURX, which is
approximately $750.  Now, if a 3% hit on $25K is going to
severely impact an investors retirement status, maybe we should
think about buying a Treasury bond or something?

Still, I thought this question was interesting and would give ALL
OF US bulls and bears a way to look at things as if we were
trying to decide if WE should give our money to a professional
money manager who's main focus EVERY DAY is shorting stocks
REGARDLESS of the market environment.  For the most part, if you
give your money to this fund manager, you WANT him to SHORT or
trade BEARISH in stocks, or select investments that trade INVERSE
the S&P 500, or DECLINE, REGARDLESS of what the S&P 500 does.

Let's take a look at the Rydex Ursa Fund (RYURX) and just look at
it as if it were a stock.  Since the bar charts only show a
closing day "tick," they're somewhat useless when trying to
analyze a mutual fund's performance.  Ahhhhh, but point and
figure charts are just the ticket as they allow the
trader/investor to COMBINE price moves into a more meaningful
display of supply and demand at work.

Since RYURX is trading below $20.00, the conventional box size to
represent MEANINGFUL price action is $0.50.  Today's +1.4% gain
has the RYURX gaining $0.17 per mutual fund share.  The $0.50 box
size is probably going to remove too much noise for what the
subscriber is attempting to do, but lets start with the big
picture and we'll fine tune things as we go along.

You shorter-term stock and option traders pay attention now!

Rydex URSA Fund (RYURX) - $0.50 box size




The longer-term trend for RYURX is bullish (or should I say
bearish) with "risk to trend" of $10 being $2.28 (18.5%), while
the first sign of meaningful weakness would be a trade at $11.50,
which would be a double-bottom sell signal, and negate the
current bullish vertical count of $21.50, which is still in play.

Now, its very difficult to truly say that a bullish or bearish
vertical count on any mutual fund is all that reliable or useful
as the fund manager most likely "turns over" or changes positions
over time.  Still... on a longer-term basis, if this were a
stock's chart, I'd have to say it looks bullish.

Keeping in mind that the RYURX gained 1.4% in today's trade,
while the SPX fell 1.38%, we could also "conclude" that the RYURX
did its job and traded almost DIRECTLY INVERSE the SPX.  However,
we're going to encounter some problems when it comes to the SPDRS
(AMEX:SPY) $90.23 -1.23%, which often times doesn't necessarily
"track" the SPX on a "mark to market" 04:00 PM EST close like the
SPX does.  Still, I think we can get "close."

To figure out a "hedge" type of trade, we need to find the ratio
of movement in the SPX on an intra-day basis, to then equate that
directly to the RYURX, with the assumption that the price action
in the SPY will be a direct 1:1 inverse relationship.  Right?  To
do this, simply take the RYURX's price of $12.28 and divide it by
the SPY's price of $90.23 (using the 04:00 mark would be more
accurate).  This gives us a ratio of 0.136.  The SPY fell $1.13
today, so if I multiply that price movement ($1.13) by my scale
factor of 0.136, I should come close to a 17-cent move in the
RYURX right?  Hmmm... I came up with $0.15. (The SPY 04:00 tick
was $90.15, while the closing tick at 04:15 was $90.23) so I lose
a bit of accuracy.  Remember that mutual funds are marked to
their holding's 04:00 close.

Anyway...once you get your ratio, you can now set whatever type
of "threshold" on an intra-day move in the SPY that would serve
as a hedge against your bearish mutual fund holding.  All you're
doing is setting a "percentage" threshold, then applying that
percentage to the SPY.

Now, I bet you thought that this was going to be a very
simplistic article when the word "mutual fund" was used right?
Wrong!  What we're actually working toward here is HEDGING and
using a bearish fund that tends to trade directly inverse and
index is actually the EASIEST hedge a trader can ever try and put
on.  But hedging is ALL about trying to determine what weight you
apply to the hedge, and why institutional computers are so good
at buying and selling S&P futures contracts as they HEDGE their
stock inventories and use the PIVOT ANALYSIS calculations to
determine levels where the programs need to "kick in."

Anyway... lets get back to the "power of point and figure
charts."  Let's say I'm only willing to take 1% hit in a given
day if I'm holding a long position in the RYURX and I either want
to be ready to protect a gain I'm carrying, or I'm  putting
together a plan to hedge my bearish trade the day BEFORE an
important economic report, or "bellwether" stock is set to
release earnings.

I can do some things with a point and figure chart from
www.stockcharts.com that I can't really do with a bar chart.
Since I "know" that the RYURX and SPY move in a relative 1:1
ratio of opposite direction, can't I (or your) as a trader simply
assign a percentage "stop loss" and figure out a level where I
would need to buy the SPY in order to hedge?  Sure!

Option and stock traders!  Are you tying any of this in with the
term "Beta?"  What is beta?  It's the measure of systematic RISK
of a security.  Beta or beta coefficient is a means of measuring
the volatility of a security or PORTFOLIO of securities in
comparison with the MARKET as a whole.  Hey!  The S&P 500 is a
pretty good MARKET index.

Let me show you how you can set your chart scale on a point and
figure chart, so that it measures supply/demand based on
percentage change.  I'm going to continue to use the conventional
3-box reversal technique of percentage fluctuation, but each box
represents a 1% move in price.

Change to Percentage and box size




After you type in the stock/mutual fund symbol you're interested
in charting, you change the "Scaling" to percentage and use
whatever box size you'd like to measure against.  The smaller you
make the box size, the more "noise" or action you introduce to
the chart.  Always try and keep the box size, so it gives you
good "buy" and "sell" signals that tend to be "profitable" and
accurate.  Here, I'll show you the chart, with the selection made
above.

Rydex URSA Fund (RYURX) - 1% box size




Here's the RYURX fund, plotted on a 1% box size.  Remember, this
is a rather low priced security, so 1-penny may not have each box
being exactly 1% due to rounding, but it's pretty darned close.

If this were a stock, what would you say about it?  I hid the
chart's title from James Brown and I asked him the same question.
You see, he had NO bias, since he didn't know what it was and
simply looked at the technicals.  He said, "if it breaks much
below $11.93 it looks like it could fall to about $11.36.  I'm
not sure if James is bearish on the markets or not, but his
eyebrows seemed to raise a bit when I told him it was a bearish
stock fund.

Anyway, do you see how you can put on a bullish trade at $12.17
and a trader that does so, can count down 1 then 2 boxes (2%) to
$11.93 and see that this chart, on 1% box size would generate a
spread-triple-bottom sell signal?  He could give it a little more
room to $11.83, which would be 3-boxes, or 3%.

So, there you have it!  A trader that placed an order to buy the
fund today could figure out from the above chart, that he might
need to hedge the trade if the SPY gains 3% (assuming a 1:1
INVERSE CORRELATION with the SPY).

Now, I'm going to anticipate a question:  But Jeff, I don't want
to wait until the above chart gives a "buy signal," because right
now, that would be clear up at $13.18 and that's a "BIG" move!

OK.  Do this.  What has been the MINIMUM gain found, if on the
above 1% box size, you at least waited for a 3-box reversal up
(3%) before entering a "bullish" trade in this bearish fund?  Go
ahead!  Back test it.  The smallest one I see is the most recent
column of X, where I might have bought at $12.80 (I don't know
for sure that the RYURX closed exactly at $12.80) and it traded
the $13.05 box (approximately 1.95% gain before a 3% reversal).

Is the Rydex URSA fund manager losing his touch based on the
comparative buy and sell signals?  Was the fund manager a great
shorter between February and August, but suddenly he can't pick
the was from his hears?  Do you see how you can "back test" a
chart and envision how it may have been very simplistically
traded, by letting the supply/demand chart tell you what to do?

Compare the chart above (on % scale) and then go back up and look
at the conventional $0.50 box size chart of the RYURX fund.  It's
still longer-term bullish right?

Do you sense at all, that we, or should I say the MARKET, is at a
pretty interesting juncture right now?

After you're done reading this, go check out the S&P 500 Bullish
% ($BPSPX) chart if you've ever had a tough time "understanding"
or "believing" in it.

Look at the HIGHS in the RYURX.  Since it's a bearish fund, it
should be at its HIGHS when the bullish % is at a low right?  Or
the RYURX might show some type of reversal action taking place at
a high right?

Go ahead!  Do it!  In December (red C) on a point and figure
chart, the S&P 500 Bullish % ($BPSPX) was at 68% and very close
to the "overbought" 70% level.  This was a "higher level of risk
for bulls."  If it was a high level of risk for bulls, then what
might we have been looking for from the RYURX fund?

ONCE the bullish % reversed lower at 62% from 68% (a 3-box
reversal on the bullish % charts) that signaled that a more
meaningful amount of stocks in the S&P 500 were generating point
and figure sell signals and internal weakness was taking place.
This occurred after the completion of trading on Wednesday,
December 18th. "Hello, Rydex URSA?  Yes, I'm interested in
sending you $25,000 and buying your fund at $12.65."  (Then
perhaps you set up an SPY hedge if the SPY rose more than 5.7%
(based on an RYURX trade at $11.93).

When you set up your business/trading plan
http://www.OptionInvestor.com/ask/ask_111702_1.asp
, what was the MAXIMUM percentage loss you were allowed to take
on a full position?  Was it 7% or 10% of the stocks underlying
value?  If so, do you think you could perhaps use the technique
of quickly changing a p/f chart to reflect a 2% box size (then a
3-box reversal would be about 6%) or a 3% box size (then a 3-box
reversal would be about 9%).

For those of you that like to study and use the point and figure
charting technique of relative strength, then a comparison of its
chart versus the SPX may also be useful.
http://www.OptionInvestor.com/ask/ask_122902_1.asp

This was a great question and it really gave me some different
observations, other than just how to try and hedge an open-end
fund on an intra-day basis.

I'm going to do this.  Some of you may think I get a bit crazy
from time to time when I've talked about the Pacholder High Yield
Fund (NYSE:PHF) $8.24 -0.12% in the market monitor.  You'll think
I'm really crazy when some evening, after the market closes and
all the mutual funds turn in their daily tabulations of net asset
value, I post either an "upside" or "downside" alert on the Rydex
URSA Fund!

Jeff Bailey


*************
COMING EVENTS
*************

==========================================
Market Watch for the week of April 28th
==========================================

------------------------
Major Earnings This Week
------------------------

Symbol  Company               Date           Comment      EPS Est

------------------------- MONDAY -------------------------------

ABN    ABN Amro Holdings     Mon, Apr 28  Before the Bell      N/A
ASX    Advanced Semicon Eng  Mon, Apr 28  -----N/A-----       0.02
AGN    Allergan              Mon, Apr 28  Before the Bell     0.53
LNT    Alliant Energy        Mon, Apr 28  Before the Bell     0.32
ALTR   Altera Corporation    Mon, Apr 28  After the Bell      0.07
ARBA   Ariba                 Mon, Apr 28  After the Bell      0.02
AN     AutoNation            Mon, Apr 28  Before the Bell     0.27
STD    Bnco Santander Cent   Mon, Apr 28  Before the Bell      N/A
BOH    Bank Hawaii Corp      Mon, Apr 28  Before the Bell     0.46
ABX    Barrick Gold          Mon, Apr 28  -----N/A-----       0.06
CHK    Chesapeake NRG Corp   Mon, Apr 28  After the Bell      0.17
ETR    Entergy               Mon, Apr 28  -----N/A-----       1.05
FCNCA  First Cit BancShares  Mon, Apr 28  -----N/A-----        N/A
FHCC   First Health Group    Mon, Apr 28  Before the Bell     0.37
FTI    Fmc Technologies, Inc Mon, Apr 28  After the Bell      0.10
GGP    Gen Growth Properties Mon, Apr 28  After the Bell      1.38
GR     Goodrich Corporation  Mon, Apr 28  Before the Bell     0.33
HMY    Harmony Gold Mining   Mon, Apr 28  -----N/A-----       0.22
HUM    Humana Inc.           Mon, Apr 28  Before the Bell     0.31
IFF    Intl Flavors & Frag   Mon, Apr 28  Before the Bell     0.49
JP     Jefferson-Pilot       Mon, Apr 28  After the Bell      0.85
KIM    Kimco Realty          Mon, Apr 28  After the Bell      0.77
LH     Laboratory Corp of Am Mon, Apr 28  After the Bell      0.49
MC     Matsushita Elec Indl  Mon, Apr 28  Before the Bell      N/A
MCD    McDonalds Corp        Mon, Apr 28  -----N/A-----       0.28
WFR    MEMC Elec Materials   Mon, Apr 28  After the Bell      0.09
MCY    Mercury General       Mon, Apr 28  -----N/A-----       0.61
MCL    Moore Corporation Ltd Mon, Apr 28  After the Bell      0.18
NFS    Nationwide Finl Serv  Mon, Apr 28  After the Bell      0.69
NHY    Norsk Hydro           Mon, Apr 28  Before the Bell      N/A
STO    STATOIL ASA           Mon, Apr 28  Before the Bell     0.28
SYY    SYSCO Corporation     Mon, Apr 28  Before the Bell     0.27
TKR    The Timken Company    Mon, Apr 28  After the Bell      0.21
TSN    Tyson Foods           Mon, Apr 28  Before the Bell     0.00
UDR    United Dom Realty     Mon, Apr 28  After the Bell      0.38
VCI    Valassis Comm         Mon, Apr 28  Before the Bell     0.49
VOLVY  Volvo AB              Mon, Apr 28  -----N/A-----        N/A
VMC    Vulcan Materials      Mon, Apr 28  After the Bell     -0.02
WRI    WEINGARTEN RLTY INVS  Mon, Apr 28  Before the Bell     0.84
WEG    Williams Energy Part  Mon, Apr 28  Before the Bell     0.70
XL     XL Capital Ltd        Mon, Apr 28  After the Bell      1.86


------------------------- TUESDAY ------------------------------

ABB    ABB                   Tue, Apr 29  Before the Bell      N/A
ACE    ACE Limited           Tue, Apr 29  After the Bell      0.96
RKY    Adolph Coors, Co.     Tue, Apr 29  Before the Bell     0.27
ALA    Alcatel               Tue, Apr 29  -----N/A-----      -0.37
AC     Alliance Cap Mngmnt   Tue, Apr 29  -----N/A-----       0.44
AW     ALLIED WASTE INDS INC Tue, Apr 29  After the Bell      0.10
AHC    Amerada Hess          Tue, Apr 29  -----N/A-----       1.88
AEP    American Elec Power   Tue, Apr 29  -----N/A-----       0.51
AMKR   Amkor Technology, Inc Tue, Apr 29  -----N/A-----      -0.36
AVZ    AMVESCAP PLC          Tue, Apr 29  Before the Bell     0.20
ADRX   Andrx Corporation     Tue, Apr 29  Before the Bell     0.09
ARI    Arden Realty Inc      Tue, Apr 29  -----N/A-----       0.68
AVB    Avalonbay Communities Tue, Apr 29  After the Bell      0.78
BF     BASF                  Tue, Apr 29  Before the Bell     N/A
BVF    Biovail Corporation   Tue, Apr 29  Before the Bell     0.38
BOW    Bowater Incorporated  Tue, Apr 29  Before the Bell    -0.91
BP     Bp PLC                Tue, Apr 29  Before the Bell     0.94
BNN    BRASCAN CORP          Tue, Apr 29  -----N/A-----        N/A
BMY    Bristol-Myers Squibb  Tue, Apr 29  -----N/A-----       0.38
BTI    British Am Tobacco    Tue, Apr 29  Before the Bell     0.47
BG     Bunge Limited         Tue, Apr 29  Before the Bell     0.33
CMX    CareMark Rx, Inc.     Tue, Apr 29  -----N/A-----       0.23
GIB    CGI Group             Tue, Apr 29  Before the Bell      N/A
CGI    Commerce Group        Tue, Apr 29  After the Bell      0.70
CTC    Compania Telecom Chle Tue, Apr 29  After the Bell      0.04
CE     Concord EFS           Tue, Apr 29  Before the Bell     0.17
CAM    Cooper Cameron        Tue, Apr 29  Before the Bell     0.24
CFC    Countrywide Finl Corp Tue, Apr 29  Before the Bell     2.08
CVH    Coventry Health Care  Tue, Apr 29  Before the Bell     0.70
DD     DuPont                Tue, Apr 29  Before the Bell     0.54
DYN    Dynegy Inc.           Tue, Apr 29  Before the Bell    -0.17
EDMC   Education Mngmnt Corp Tue, Apr 29  Before the Bell     0.50
EC     Engelhard Corporation Tue, Apr 29  Before the Bell     0.31
EOP    Eq Office Prop Trust  Tue, Apr 29  Before the Bell     0.71
ERICY  Ericsson LM Telephone Tue, Apr 29  -----N/A-----      -0.24
FLR    Fluor Corporation     Tue, Apr 29  After the Bell      0.50
FTE    France Telecom        Tue, Apr 29  -----N/A-----        N/A
FDP    Frsh Del Mnte Produce Tue, Apr 29  Before the Bell     1.27
GGB    Gerdau S.A.           Tue, Apr 29  -----N/A-----        N/A
TV     Grupo Televisa, S.A.  Tue, Apr 29  After the Bell      0.16
HAL    Halliburton Company   Tue, Apr 29  Before the Bell     0.19
IM     Ingram Micro          Tue, Apr 29  After the Bell      0.15
IDC    Interactive Data Corp Tue, Apr 29  Before the Bell     0.17
JNS    Janus Capital Group   Tue, Apr 29  Before the Bell     0.17
JDSU   JDS Uniphase Corp     Tue, Apr 29  After the Bell     -0.04
JNY    Jones Apparel Group   Tue, Apr 29  -----N/A-----       0.85
KEG    Key Energy Services   Tue, Apr 29  Before the Bell    -0.01
TVL    LIN TV Corp.          Tue, Apr 29  Before the Bell    -0.07
MLM    Martin Marietta Mat   Tue, Apr 29  Before the Bell    -0.28
MXIM   Mxm Integrated Prod   Tue, Apr 29  -----N/A-----       0.23
MCK    McKesson Corporation  Tue, Apr 29  After the Bell      0.59
MDP    Meredith Corporation  Tue, Apr 29  Before the Bell     0.49
MX     Metso Corporation     Tue, Apr 29  Before the Bell     N/A
MBT    Mobile Telesystems    Tue, Apr 29  Before the Bell      N/A
NBR    Nabors Industries     Tue, Apr 29  -----N/A-----       0.24
NEU    Neuberger Berman      Tue, Apr 29  Before the Bell     0.40
NWL    Newell Rubbermaid     Tue, Apr 29  Before the Bell     0.27
NI     NiSource              Tue, Apr 29  Before the Bell     0.94
NOC    Northrop Grumman      Tue, Apr 29  Before the Bell     0.56
OMC    Omnicom Group         Tue, Apr 29  -----N/A-----       0.70
PFGC   PERFORMANCE FOOD      Tue, Apr 29  -----N/A-----       0.34
PER    Perot Systems         Tue, Apr 29  Before the Bell     0.14
PCZ    Petro-Canada          Tue, Apr 29  -----N/A-----       1.17
PD     Phelps Dodge          Tue, Apr 29  Before the Bell    -0.32
PXD    Pioneer Natl Res Comp Tue, Apr 29  Before the Bell     0.59
PDG    Placer Dome           Tue, Apr 29  Before the Bell     0.08
PPL    PPL Corporation       Tue, Apr 29  Before the Bell     0.99
PCP    Precision Castparts   Tue, Apr 29  -----N/A-----       0.71
PCO    Premcor Inc.          Tue, Apr 29  Before the Bell     0.87
QLGC   QLogic                Tue, Apr 29  After the Bell      0.30
RCI    Renal Care Group      Tue, Apr 29  -----N/A-----       0.49
RSG    Republic Services     Tue, Apr 29  After the Bell      0.33
RHA    Rhodia S.A.           Tue, Apr 29  Before the Bell      N/A
HOT    Starwood Hotels Resrt Tue, Apr 29  Before the Bell    -0.02
SEO    Stora Enso            Tue, Apr 29  Before the Bell     0.11
SWFT   Swift Transportation  Tue, Apr 29  After the Bell      0.09
SBL    Symbol Technologies   Tue, Apr 29  After the Bell      0.04
SYT    Syngenta              Tue, Apr 29  Before the Bell      N/A
TPP    Teppco                Tue, Apr 29  -----N/A-----       0.37
MHP    The McGraw-Hill Comp  Tue, Apr 29  Before the Bell     0.19
PFS    The Provident Bank    Tue, Apr 29  Before the Bell     0.17
RSE    The Rouse Company     Tue, Apr 29  -----N/A-----       0.95
SWK    The Stanley Works     Tue, Apr 29  Before the Bell     0.34
TMPW   TMP Worldwide Inc.    Tue, Apr 29  After the Bell      0.06
RIG    Transocean Inc.       Tue, Apr 29  Before the Bell     0.12
TSM    TSMC                  Tue, Apr 29  Before the Bell     0.02
X      UNITED ST STL CORP    Tue, Apr 29  Before the Bell    -0.28
WMI    Waste Management      Tue, Apr 29  Before the Bell     0.23
WON    Westwood One          Tue, Apr 29  Before the Bell     0.15
XEL    Xcel Energy           Tue, Apr 29  -----N/A-----       0.29


-----------------------  WEDNESDAY -----------------------------

AGU    Agrium, Inc.          Wed, Apr 30  After the Bell     -0.11
AEE    Ameren Corporation    Wed, Apr 30  Before the Bell     0.47
AMT    American Tower Corp.  Wed, Apr 30  Before the Bell    -0.29
AHM    Amersham              Wed, Apr 30  -----N/A-----        N/A
AU     Anglogold Limited     Wed, Apr 30  -----N/A-----       0.38
ATH    Anthem, Inc.          Wed, Apr 30  Before the Bell     1.18
APPB   Applebee's Intl       Wed, Apr 30  After the Bell      0.41
AZN    AstraZeneca PLC       Wed, Apr 30  Before the Bell     0.43
AVE    Aventis               Wed, Apr 30  -----N/A-----        N/A
AVX    AVX Corporation       Wed, Apr 30  Before the Bell    -0.02
BLDP   Ballard Power Systems Wed, Apr 30  -----N/A-----      -0.27
BCE    BCE                   Wed, Apr 30  Before the Bell      N/A
BE     BearingPoint, Inc.    Wed, Apr 30  Before the Bell     0.12
CAJ    Canon                 Wed, Apr 30  -----N/A-----        N/A
CZ     Celanese AG           Wed, Apr 30  -----N/A-----       0.30
CRL    Charles River Lab     Wed, Apr 30  After the Bell      0.40
CB     Chubb Corporation     Wed, Apr 30  After the Bell      1.05
CCU    Clear Channel Comm    Wed, Apr 30  Before the Bell     0.12
KOF    COCA-COLA FEMSA       Wed, Apr 30  Before the Bell      N/A
COP    ConocoPhillips        Wed, Apr 30  Before the Bell     1.72
CEG    Constel Energy Group  Wed, Apr 30  Before the Bell     0.42
COCO   Corinthian Colleges   Wed, Apr 30  Before the Bell     0.34
CSX    CSX                   Wed, Apr 30  Before the Bell     0.17
DB     Deutsche Bank         Wed, Apr 30  Before the Bell     N/A
DUK    Duke Energy Corp      Wed, Apr 30  Before the Bell     0.35
DRE    Duke Realty Corp      Wed, Apr 30  -----N/A-----       0.58
ELN    Elan Corporation, PLC Wed, Apr 30  Before the Bell    -0.30
ELE    Endesa, S.A.          Wed, Apr 30  -----N/A-----        N/A
EPD    Enterprise Prod Part  Wed, Apr 30  Before the Bell     0.23
EQR    Equity Residential    Wed, Apr 30  -----N/A-----       0.56
ESS    Essex Property Trust  Wed, Apr 30  After the Bell      1.08
EXC    Exelon Corporation    Wed, Apr 30  Before the Bell     1.06
FMX    FEMSA                 Wed, Apr 30  Before the Bell      N/A
FE     FirstEnergy           Wed, Apr 30  -----N/A-----       0.47
FSH    Fisher Scient Intl    Wed, Apr 30  After the Bell      0.46
FUJIY  Fuji Photo Film       Wed, Apr 30  -----N/A-----        N/A
GRMN   Garmin Ltd.           Wed, Apr 30  Before the Bell     0.31
GSK    GlaxoSmithKline       Wed, Apr 30  Before the Bell     N/A
HAR    Harman Intl Ind       Wed, Apr 30  -----N/A-----       0.87
HMT    Host Marriott         Wed, Apr 30  Before the Bell     0.15
ICOS   ICOS Corporation      Wed, Apr 30  -----N/A-----      -0.82
NDE    IndyMac Bancorp, Inc. Wed, Apr 30  Before the Bell     0.65
IRM    Iron Mountain Incorp  Wed, Apr 30  Before the Bell     0.20
KMT    Kennametal Inc.       Wed, Apr 30  During the Market   0.34
KMG    Kerr-McGee            Wed, Apr 30  -----N/A-----       1.08
LNC    Lincoln National      Wed, Apr 30  Before the Bell     0.62
MKL    MARKEL CORP           Wed, Apr 30  -----N/A-----       2.54
MON    Monsanto Company      Wed, Apr 30  -----N/A-----       0.22
MRH    Montpelier Re Holding Wed, Apr 30  After the Bell      1.14
MUR    Murphy Oil Corp       Wed, Apr 30  After the Bell      0.75
NXTP   Nextel Partners       Wed, Apr 30  Before the Bell    -0.19
NBL    Noble Energy, Inc.    Wed, Apr 30  -----N/A-----       0.74
NVO    Novo-Nordisk          Wed, Apr 30  Before the Bell      N/A
OGE    OGE Energy            Wed, Apr 30  Before the Bell    -0.06
OKE    ONEOK Inc.            Wed, Apr 30  -----N/A-----       1.11
PHSY   PacifiCare Health Sys Wed, Apr 30  After the Bell      1.23
PTEN   Patterson-UTI Energy  Wed, Apr 30  Before the Bell     0.05
PT     Portugal Telecom SGPS Wed, Apr 30  During the Market    N/A
PL     Protective Life Corp  Wed, Apr 30  Before the Bell     0.67
PFGI   Provident Finl Group  Wed, Apr 30  Before the Bell     0.54
STR    Questar.com           Wed, Apr 30  After the Bell      0.81
SHR    Schering AG           Wed, Apr 30  Before the Bell     N/A
SO     Southern Company      Wed, Apr 30  Before the Bell     0.33
STN    Station Casinos       Wed, Apr 30  -----N/A-----       0.23
TNE    Tele Norte Leste Part Wed, Apr 30  After the Bell      0.00
TU     TELUS                 Wed, Apr 30  -----N/A-----        N/A
EL     The Estie Lauder Comp Wed, Apr 30  Before the Bell     0.28
SPC    The St. Paul Comp     Wed, Apr 30  Before the Bell     0.89
UMC    Un Microelect Corp    Wed, Apr 30  Before the Bell     0.02
VSH    Vishay Intertech Inc. Wed, Apr 30  Before the Bell     0.04
VSH    Vishay Intertech      Wed, Apr 30  -----N/A-----       0.04
WGL    WGL Holdings          Wed, Apr 30  After the Bell      1.63
WEC    Wisconsin NRG Corp    Wed, Apr 30  Before the Bell     0.73


------------------------- THURSDAY -----------------------------

AES    AES Corporation       Thu, May 01  Before the Bell     0.06
AFG    American Financial    Thu, May 01  Before the Bell     0.63
APCC   American Power Conv   Thu, May 01  After the Bell      0.14
ASN    Archstone-Smith Trust Thu, May 01  Before the Bell     0.45
CPT    Camden Property Trust Thu, May 01  After the Bell      0.74
CLU    Canada Life Financial Thu, May 01  -----N/A-----        N/A
CRE    Carramerica Realty Co Thu, May 01  After the Bell      0.81
CTL    CenturyTel, Inc.      Thu, May 01  Before the Bell     0.52
CXR    COX RADIO INC         Thu, May 01  Before the Bell     0.08
DDR    DEVELOPERS DIV RLTY   Thu, May 01  After the Bell      0.63
DTC    Domtar Inc.           Thu, May 01  -----N/A-----       0.15
DQE    DQE                   Thu, May 01  After the Bell      0.25
EXPE   Expedia, Inc          Thu, May 01  Before the Bell     0.23
XOM    Exxon Mobil Corp      Thu, May 01  -----N/A-----       0.70
HPC    Hercules              Thu, May 01  Before the Bell     0.14
ROOM   Hotel Reservations    Thu, May 01  Before the Bell     0.34
ICI    Imperial Chemical Ind Thu, May 01  -----N/A-----        N/A
JHF    John Hancock Finl Ser Thu, May 01  After the Bell      0.72
KSE    KeySpan               Thu, May 01  Before the Bell     1.47
LANC   Lancaster Colony Corp Thu, May 01  Before the Bell     0.52
LIZ    Liz Claiborne         Thu, May 01  Before the Bell     0.57
NST    NSTAR                 Thu, May 01  -----N/A-----       0.70
ORH    Odyssey Re Holdings   Thu, May 01  After the Bell      0.40
OCR    Omnicare              Thu, May 01  -----N/A-----       0.42
PPE    Park Place Enter      Thu, May 01  -----N/A-----       0.14
PDS    Precision Drilling    Thu, May 01  Before the Bell     0.69
O      Realty Income Corp    Thu, May 01  -----N/A-----       0.71
SWY    Safeway, Inc.         Thu, May 01  Before the Bell     0.44
SRE    Sempra Energy         Thu, May 01  Before the Bell     0.68
SHPGY  Shire Pharm Group     Thu, May 01  Before the Bell     0.36
SRCL   Stericycle            Thu, May 01  After the Bell      0.31
SLF  Sun Life Finl Serv Ca   Thu, May 01  -----N/A-----       0.39
TEVA   Teva Pharmaceutical   Thu, May 01  -----N/A-----       0.46
TOC    The Thomson Corp      Thu, May 01  -----N/A-----      -0.03
TKC    Turkcell Iletsim Hizm Thu, May 01  -----N/A-----        N/A
TXU    TXU Corp.             Thu, May 01  Before the Bell     0.21
TYC    Tyco International    Thu, May 01  Before the Bell     0.32
USAI   USA Interactive       Thu, May 01  Before the Bell     0.14
DIS    Walt Disney           Thu, May 01  After the Bell      0.11


------------------------- FRIDAY -------------------------------

AXL    Am Axle & Manu Hold   Fri, May 02  Before the Bell     0.99
CCJ    Cameco                Fri, May 02  -----N/A-----       0.39
FUN    Cedar Fair LP         Fri, May 02  -----N/A-----      -0.59
CVX    ChevronTexaco         Fri, May 02  Before the Bell     1.81
CI     CIGNA                 Fri, May 02  Before the Bell     1.42
DTE    DTE Energy Company    Fri, May 02  -----N/A-----       1.30
GRP    Grant Prideco Inc     Fri, May 02  Before the Bell     0.03
HCN    Health Care REIT, Inc Fri, May 02  -----N/A-----       0.69
HTV    Hearst-Argyle Tele    Fri, May 02  Before the Bell     0.09
PNW    Pinn West Capital     Fri, May 02  Before the Bell     0.44
RD     Royal Dutch Petroleum Fri, May 02  -----N/A-----       1.05
SC     Shell Trans and Trad  Fri, May 02  -----N/A-----       0.90
UL     Unilever PLC          Fri, May 02  Before the Bell     0.51


----------------------------------------------
Upcoming Stock Splits In The Next Two Weeks...
----------------------------------------------

Symbol  Company Name              Ratio    Payable     Executable

SFNCA   Simmons First Nat'l Corp  2:1      May   1st   May   2nd
ZQK     Quicksilver               2:1      May   8th   May   9th


--------------------------
Economic Reports This Week
--------------------------

The last few days appear to have seen a shift in focus from
earnings news to economic news but the Q1 earnings season is
far from over.  Plus, we have a full calendar of economic news
this week as well with the Personal Income and Spending on
Monday.  The ECI report, which can be crucial comes out on
Tuesday.  Plus the PMI and other reports hit later in the week.

==============================================================
                       -For-

Monday, 04/28/02
----------------
Personal Income (BB)    Mar  Forecast:   0.4%  Previous:     0.3%
Personal Spending (BB)  Mar  Forecast:   0.6%  Previous:     0.0%


Tuesday, 04/29/02
-----------------
Employment Cost Index(BB)Q1  Forecast:   0.8%  Previous:     0.7%
Consumer Confidence (DM)Apr  Forecast:   69.4  Previous:     62.5


Wednesday, 04/30/02
-------------------
Chicago PMI (DM)        Apr  Forecast:    48.5  Previous:    48.4


Thursday, 05/01/02
------------------
Initial Claims (BB)   04/26  Forecast:   428K  Previous:     455K
Auto Sales (NA)         Apr  Forecast:   5.9M  Previous:     5.5M
Truck Sales (NA)        Apr  Forecast:   7.3M  Previous:     7.0M
Productivity-Prel (BB)   Q1  Forecast:   2.5%  Previous:     0.8%
ISM Index (DM)          Apr  Forecast:   47.0  Previous:     46.2
Construction Spnding(DM)Mar  Forecast:   0.1%  Previous:    -0.2%


Friday, 05/02/02
----------------
Nonfarm payrolls (BB)   Apr  Forecast:   -50K  Previous:    -108K
Unemployment Rate (BB)  Apr  Forecast:   5.9%  Previous:     5.8%
Hourly Earnings (BB)    Apr  Forecast:   0.2%  Previous:     0.1%
Average Workweek (BB)   Apr  Forecast:   34.2  Previous:     34.3
Factory Orders (DM)     Mar  Forecast:   0.4%  Previous:    -1.5%


Definitions:
DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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Contact Support
The Option Investor Newsletter                   Sunday 04-27-2003
Sunday                                                      2 of 5

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/g06v_2.asp

In Section Two:

Market Watch: A Mixed Bag To Watch
Stock Pick: Where is the Dow Going?
Daily Results
Call Play of the Day: None
Put Play of the Day: INTU
Dropped Calls: BBBY, BBOX
Dropped Puts: None


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************
MARKET WATCH
************

A Mixed Bag To Watch

Bard C R Inc. - BCR - close: 62.43 change: +0.39

We thought the action in BCR was interesting.  Its point-and-
figure (PnF) chart is showing a three-box pull back after its
triple-top breakout pattern.  On the daily chart this is seen as
a dip to the $60 level of support.  What you don't see on the PnF
is shares have been pretty strong the last couple of sessions and
the MACD looks ready to turn bullish.  We'd consider this a long
play on a bounce at $60 or a move above $63.

Chart=
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/BCR042703.gif

---

Mylan Labs - MYL - close: 26.86 change: +0.26

Shares of MYL saw a steep round of profit taking from $30 to $26
and its 100-dma most of April.  The bounce appears to be underway
and while this drug company probably deserves more digging before
committing capital it's worth watching.

Chart=
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/MYL042703.gif

---

EchoStar - DISH - close: 28.60 change: -0.18

DISH has been on the OI watch list recently and it's returning
because of its relative strength and ability to maintain support
at the 50-dma.  Aggressive players could try longs here on the
50-dma with a very tight stop.  Otherwise, the best bet appears
to be a breakout over $30 or $30.50.  Earnings should be on May
6th.

Chart=
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/DISH042703.gif

---

Coca-Cola Co - KO - close: 39.42 change: -0.49

Patient put players might want to consider KO.  The stock has
slowly been trying to hold onto the $40 level and it lost again
on Friday.  Mark Phillips may have added KO to the OI LEAPs put
list, be sure to check out the LEAPS this weekend.  Next support
appears to be $37 but KO's PnF chart looks terrible and it could
easily see new lows.

Chart=
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/KO042703.gif

---

QUALCOMM - QCOM - close: 31.12 change: -1.51

The chart of QCOM is looking pretty ugly these days.  Earnings
were earlier this week and they obviously didn't impress Wall
Street.  One broker actually reiterated their SELL rating on the
stock.  The week-long failure to get back above its 200-dma looks
bad.  We'd be watching a breakdown below the $30 mark as a new
entry point to get short.

Chart=
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/QCOM042703.gif


-----------------------------------
RADAR SCREEN - more stocks to watch
-----------------------------------

COX $32.67 - The pull back to previous resistance may be an entry
point for more aggressive bulls.  Look for a bounce above $32.50


RKY $48.74 - Shares abruptly reversed course and are now under
the $50 level.  Should the stock close under its 50-dma, it might
be a decent short.  Keep in mind that earnings are expected on
April 29th.

MDT $48.08 - MDT is still hanging in there and really hasn't seen
much of a sell-off given the last couple of days.  Look for
earnings on May 14th.

TEVA $46.07 - Shares of TEVA looks incredibly over-extended and a
break below the $45 level might be an aggressive entry point to
try and catch some profit taking.

EK $29.29 - This looks like another put candidate for the bears.
Shares broke the $30 level and next support is near $27.00.
Technical indicators look weak.

PCAR $57.64 - If the recent trend is any indication of future
results then PCAR might pull back to the $56 level before
bouncing into its next leg higher and aiming for the $60 mark.
Keep in mind the $59 level was very strong resistance with plenty
of selling (looks like a wall).  Use a tight stop, shares are
overbought.


**********
Stock Pick
**********

Where is the Dow Going?
By Steve Gould

Last week I presented two alternate paths for the Dow.  Here is
the chart and analysis for the first scenario.

If the Dow continues its present course of unfolding the III wave,
then we would expect the Dow to behave in the following fashion.

Chart: Dow 4/17/2003 weekly





What this chart is saying is that within the III wave, we will see
a 5 wave basic pattern.  So far, wave 1 and wave 2 have traced out
and we are just starting wave 3.  Within wave 3 we will see a 5
wave basic pattern.  It has so far traced out the (1) wave and the
(2) wave and is just started the (3) wave.  If this pattern
continues we will see a downward thrust until the end of wave (5)
of wave 3 and then see a substantial wave 4 retracement.

Here was the chart and analysis for the alternate scenario.

Chart: Dow 4/17/2003 monthly alternate






In the alternative count, the Dow has not yet completed the II
wave up.  The Dow is undergoing a much larger A-B-C correction and
is in the beginnings of a c wave of the C wave (III, C, c).

If this scenario plays out, then the Dow could go as high as 9350
(62% retracement of wave I) before heading back down.  We will
know this scenario is playing out should the Dow breach the top of
the a wave at 8522.

Over the last week, the Dow did breach the 8522 mark.  Not by a
lot, but it did breach it.  Does this mean that we are in the
alternate scenario?  Not yet.  The verdict is still out.  But not
for long.

Here is an updated chart of the Dow.

Chart: Dow 4/25/2003 preferred





I made some subtle changes to the wave count.  Notice how the 2
wave is now over this week's bar.  It has also traced out a nice
A-B-C pattern.  Even though the Dow breached the 8522 mark, the
whole pattern shifted without invalidating the count.  This
slightly longer wave 2 comes in at 38% of wave 1 in terms of time.
Pricewise, the 2 wave retraced a bit more than 62%.  This new
labeling is more in line with what we would expect given this
pattern.

From the new peak of the 2 wave, I drew the anticipated 5 wave
pattern for the coming 3 wave.

The Dow could still go a little bit higher over the next week to
complete the c wave (green) but if this pattern unfolds, we will
soon see a downward thrust.  If we see the Dow below 8145, we can
be rather confident the Dow is headed lower.

Unless of course, it goes up.

Here is an alternate count for the Dow.

Chart: Dow 4/25/2003 alternate






Again, we see the current move up as the C wave of a larger A-B-C
correction.  Since the B wave came so close to the end of the I
wave, the C wave in progress could either peak at around the A
wave (9043) making it a flat correction, or continue on up to a
62% retracement (9351) making it a zig zag correction.  Until we
see a completed 5 wave pattern in the c wave of the C wave, we
should anticipate that the Dow can still go higher.

It is my opinion that the first scenario where the Dow goes down
is the more likely.  However, seeing that we are at a critical
juncture, it is best to wait until the Dow reveals its direction
before committing any capital.


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

For Best Alignment view in Courier Ten Font
*******************************************

CALLS              Mon    Tue    Wed   Thu  Week

AZO      78.13   -1.20   2.71   1.52 -0.69  1.14 Just a pull back
BBBY     37.92   -0.33  -0.20  -0.24 -0.05 -1.73 DROP, broke $38
BBOX     30.69   -0.24   0.98   0.41 -0.70 -0.95 DROP, tight stop
ERTS     59.47    0.33   1.11  -0.71 -1.00 -0.71 Potential Entry
IMDC     36.38   -0.62   1.02   0.90  0.02  1.38 Great Strength
MEDI     34.81    0.07   0.57   0.84  0.55  1.46 Long-term, no update
MXIM     38.39   -0.07   1.36  -0.01 -0.34 -1.42 Very Cautious
OMC      62.14   -0.85   1.72   0.66  0.34  0.59 Hanging tough


PUTS

FITB     48.60   -0.56  -0.40  -0.10 -0.87 -1.18 Not triggered yet
INTU     37.24                             -1.65 NEW, weakness
KSS      55.02                             -1.54 NEW, watch $55


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********************
THE PLAYS OF THE DAY
********************

Call Play of the Day:
*********************

None


Put Play of the Day:
********************

Intuit Inc. - INTU - close: 37.24 change: -1.65 stop: 40.00

See details in play list




**************************
PICKS WE DROPPED THIS WEEK
**************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS
^^^^^

Bed Bath & Beyond - BBBY cls: 37.92 change: -0.80 stop: 37.75

Right through Thursday's session, BBBY's pullback looked like
little more than an orderly pullback for another let higher, but
things changed significantly on Friday.  First the 10-dma failed
to provide support for the stock and then the 6-week ascending
trendline was broken.  These are important measures of support and
their violation presaged the stock's close below the $38 level.
While our stop wasn't violated on Friday, it appears there is very
little to prevent that from happening early next week.  As noted
in the Market Monitor during the day on Friday, we advocated
conservative traders look to close out open positions.  With the
close below $38, we've lost enough confidence in the stock, that
it seems prudent to just close out the play this weekend.  Traders
still holding open positions will want to use any price strength
early next week to exit at a more favorable level.

Picked on April 8th at  $37.18
Change since picked:     +0.74
Earnings Date          07/02/03 (unconfirmed)
Average Daily Volume = 3.31 mln

---

Black Box Corp - BBOX - close: 30.69 change: -1.41 stop: 30.90

The downgrade of the chip sector really hit the rest of the tech
group pretty hard.  Hardware and software sector indices were
both lower and shares of BBOX dropped some 4.4% on Friday.  We
were a bit concerned Thursday night and suggest traders not take
new positions until we saw how the market reacted on Friday.
Especially since we expected more profit taking but didn't know
how severe it would be.  Fortunately, we started this play with a
tight stop at $30.90 because if BBOX broke back below the $31
level we didn't want to ride it all the way down.  Those traders
still wishing to follow the play need to watch the $29.50-30.00
level for support.

Picked on April 22nd at $32.39
Change since picked:     -1.49
Earnings Date         05/07/03 (confirmed)
Average Daily Volume = 2.8 million


PUTS
^^^^

None


***********
DEFINITIONS
***********

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5
Analysts who follow each stock rate it and these rating are
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell"

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


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


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

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


**************************************************************
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Contact Support
The Option Investor Newsletter                   Sunday 04-27-2003
Sunday                                                      3 of 5


In Section Three:

New Calls: None
Current Calls: AZO, ERTS, IMDC, MXIM, OMC
New Puts: INTU, KSS


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call 1-888-889-9178 or click for more information.

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


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

None


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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.

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


******************
CURRENT CALL PLAYS
******************

AutoZone, Inc. - AZO - close: 78.13 change: -1.18 stop: 74.75

Company Description:
AutoZone is a retailer of automotive parts and accessories,
primarily focusing on do-it-yourself customers.  Each of its more
than 2900 stores in 42 states and Mexico carries an extensive
product line for cars, vans and light trucks, including new and
re-manufactured automotive hard parts, maintenance items and
accessories.  Approximately half of its domestic stores also have
a commercial sales program, which provides commercial credit and
prompt delivery of parts and other products to local repair
garages, dealers and service stations.

Why we like it:
While the price action in AZO over the past couple days certainly
can't be termed bullish, we are far from disappointed with the way
the stock is behaving.  Our initial profit target of $80 was
achieved on Wednesday, and traders that took advantage of that
strength to harvest gains should be happy with that decision.
Since the opening bell on Thursday, AZO has seen some orderly
profit taking, with mild support being felt near the $78 level.
Particularly encouraging is the light volume that has accompanied
the price decline over the past couple days, with Friday's tally
of 787K shares just barely over 60% of the ADV.  Support gets a
bit firmer near $77, becoming fairly strong at $76 and (hopefully)
impenetrable just above $75, with additional support provided by
the ascending trendline and 20-dma ($75.02).  Oscillators are
starting to look a bit toppy, but we'll stick with the dominant
trend as long as it lasts.  Judging by the mild pullback so far, a
rebound from the $76-77 area should provide for another solid
entry ahead of a renewed push towards the $80 resistance level.
Provided the bulls can push through that level this time, we'll
look to harvest gains again in the $83-84 area.  Until we see the
depth of the current pullback, maintain stops at $74.75.

Suggested Options:

Shorter Term: The May 75 Call will offer short-term traders the
best return on an immediate move, with manageable risk.

Longer Term: Traders looking to capitalize on a sustained breakout
move over the next few weeks will want to look to the May 80 Call
or even the June 80 Call.  These options are currently out of the
money, but should provide sufficient time for the stock to move
higher without time decay becoming a dominant factor over the
short run.

BUY CALL MAY-75 AZO-EO OI= 689 at $4.40 SL=2.75
BUY CALL MAY-80 AZO-EP OI=1096 at $1.45 SL=0.75
BUY CALL JUN-80 AZO-FP OI= 532 at $3.00 SL=1.50

Annotated Chart of AZO:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/AZO042703.gif


Picked on April 13th at  $75.24
Change since picked:      +2.89
Earnings Date          06/03/03 (unconfirmed)
Average Daily Volume = 1.25 mln

---

Electronic Arts - ERTS - close: 59.47 change: -0.52 stop: 57.00

Company Description:
ERTS creates, markets and distributes interactive entertainment
software for a variety of hardware platforms, including Sony's
PlayStation 2, the PC, Nintendo GameCube and the recently launched
Xbox.  The company's EA.com business segment is engaged in the
creation, marketing and distribution of entertainment software
which can be played or sold online, as well as the ongoing
management of subscriptions of online games and Website
advertising.

Why we like it:
To say our ERTS play is at a critical juncture would be an
understatement.  As noted in the Thursday update, the $59.00-59.50
area should have proved a pivotal support level and that's exactly
how Friday's session played out.  After a brief dip to $58.80, the
stock rebounded ever so slightly to end the day just below $59.50.
So what's so special about this area you ask?  Well, it is the
site of the converged 20-dma ($59.30) and 200-dma ($59.48), which
sit right on top of the descending trendline from the October
highs ($59.30).  That trendline acted as formidable resistance in
early April and now that it has been broken to the upside, it
should provide support.  Only time will tell if this support zone
will hold, but with the rather light volume seen on the pullback
of the past few days (less than two-thirds of the ADV on Friday),
odds favor a continuation of the recent bullish trend.  Traders
that waited for the pullback after last week's break above our
$61.25 trigger level can now look to enter the play on a rebound
from this $59.00-59.50 area, setting stops at $57, which is just
below solid historical support from the past 6 weeks.  Those
looking to enter on strength will now need to wait for a breakout
over the $62 level, just above last Tuesday's intraday high.  Our
first upside target remains the $64 level, the lower edge of the
$64-68 resistance zone that prevailed for most of last Fall.

Suggested Options:

Shorter Term: The May 60 Call will offer short-term traders the
best return on an immediate move, with manageable risk.  Traders
who desire a bit more insulation from time decay, while still
reaping the benefits of using an ITM option will want to use the
June 60 Call.

Longer Term: Traders looking to capitalize on a sustained breakout
move over the $62 level will want to look to the May 65 Call or
even the June 65 Call.  These options are currently out of the
money, but should provide sufficient time for the stock to move
higher without time decay becoming a dominant factor over the
short run.

BUY CALL MAY-60 EZQ-EL OI=3953 at $1.70 SL=0.75
BUY CALL MAY-65 EZQ-EM OI=3296 at $0.30 SL=0.00
BUY CALL JUN-60 EZQ-HH OI=4540 at $3.00 SL=1.50
BUY CALL JUN-65 EZQ-HH OI=8472 at $1.10 SL=0.50

Annotated Chart of ERTS:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/ERTS042703.gif


Picked on April 20th at  $60.04
Change since picked:      -0.52
Earnings Date          05/08/03 (unconfirmed)
Average Daily Volume = 3.13 mln

---

Inamed Corp - IMDC - close: 36.38 change: -0.14 stop: 32.86

Company Description:
Inamed is a global healthcare company with over 25 years of
experience developing, manufacturing, and marketing innovative,
high-quality, science-based products. Current products include
breast implants for aesthetic augmentation and for reconstructive
surgery; a range of dermal products to treat facial wrinkles; and
minimally invasive devices for obesity intervention, including
the LAP-BAND. System for morbid obesity. (source: company press
release)

Why We Like It:
We are very encouraged by IMDC's relative strength this week.
The stock has stood up very well, especially given the recent
weakness in the broader markets.  Readers might remember that
this entire sector of medical device & supply companies has been
out-performing the general market for months.  As one reporter
put it, the healthcare-medical field has a "tailwind" of millions
of baby boomers all approaching their golden years.

Strangely enough, IMDC gets a big chunk of its revenues from its
breast implants business.  Despite a souring economy, demand has
continued to expand.  The company's latest earnings results were
very positive with double-digit growth in all three of its
businesses.  Total sales were up 21% for the quarter.

A recent article by Forbes also shed some bullish light on IMDC.
The drop in the dollar has had a positive affect on the
significant portion of sales that IMDC does overseas.  Industry
analysts believe the company will turn in an annual growth rate
nearing 17% for the next three to five years.  Keen investors
will also note that IMDC is trading at a discount to its peers in
the S&P 500.  Most medical device companies in the S&P 500 have a
P/E of 23 while IMDC's is only 15 (on future 12 months).  The
trend looks good but new entries for call positions are probably
best made on a pull back to $35 or a breakout above $37, which is
possible resistance from a year ago.  We're going to leave our
stop at 32.86 for now but more conservative traders could use the
50-dma near 33.46 as a guide for possible stop placement.

Suggested Options:
While the trend looks strong for IMDC we would not call this one
a "fast" mover. We're going to post one short-term call (May), a
couple of July's (recommended) and one October for traders who
really want some time.

BUY CALL MAY 35 UZI-EG OI=145 at $2.50 SL=1.20
BUY CALL JUL 35*UZI-GG OI=641 at $3.60 SL=1.50
BUY CALL JUL 40 UZI-GH OI= 20 at $1.30 SL=0.00
BUY CALL OCT 40 UZI-JH OI=115 at $2.45 SL=1.00

Annotated Chart of IMDC:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/IMDC042703.gif



Picked on April 17th at $35.00
Change since picked:     +1.38
Earnings Date         02/25/03 (confirmed)
Average Daily Volume = 215 K

---

Maxim Integrated - MXIM - cls: 38.39 chg: -2.42 stop: 38.00

Company Description:
Maxim Integrated Products is a leading international supplier of
quality analog and mixed-signal products for applications that
require real world signal processing. (source: company press
release)

Why We Like It:
There's nothing like the timing on some of these broker
downgrades when they decide to yank the carpet out on some
sector.  Makes you wonder if they have a short-position to
protect.  This time an analyst from Salomon Smith Barney
downgraded the entire semiconductor sector on Friday due to four
factors.  First was rising inventories, second was rising
valuations, third was deterioration at the end-user level for
generic PCs and handset, and fourth was the beginning of a
seasonally slow three to four month period.  Of course the SOX
had risen up toward significant resistance as well.  The
downgrade sent the SOX falling five percent by day's end.  Shares
of MXIM out-performed to the downside with a 5.9% loss.  In
Thursday's update we stated that traders needed to watch the SOX
and the 340 level and that a breakdown below 340 would likely
produce a breakdown below $40 in MXIM.  Now we see similar
reflections in the SOX's 320 level and MXIM's $38 level.  Both
are acting as support and a breakdown in the SOX is likely to
send MXIM lower again.

We did originate this play as an aggressive call play should MXIM
breakout over $40.51.  That happened four sessions ago and we
used a stop loss at $38 to keep our risk at a decent level.  Our
original write also suggested that should the markets pull back
then MXIM could pull back to the $36 level (see the chart below)
and this might make an alternative entry.  Yes, this will violate
our stop and we'll be out but nimble traders can keep this
secondary entry in mind.  Be sure to use a tight stop to keep
risk at a minimum.

Odds are we'll be dropping this play on Tuesday anyway since MXIM
is expected to announce earnings on Tuesday after the close.
Should MXIM close under $38 on Monday, we'll drop it on Monday.
Given the proximity of its earnings announcement and the pull
back in the SOX, it's probably not prudent to consider new
entries despite unless you can handle the event risk.

Suggested Options:
This is a short-term play. We don't expect to hold it more than
seven or eight session. We're listing two short-term options
(May) and one longer-term option for those traders who just have
to have more time.

BUY CALL MAY 40 XIQ-EH OI=7052 at $1.25 SL=0.00
BUY CALL AUG 40 XIQ-HH OI=1920 at $3.90 SL=2.00

Annotated Chart of MXIM:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/MXIM042703.gif



Picked on April 22nd at $40.51
Change since picked:     -2.12
Earnings Date         04/29/03 (confirmed)
Average Daily Volume = 8.30 mil

---

Omnicom Group - OMC - close: 62.14 change: -1.29 stop: 59.50

Company Description:
Omnicom Group Inc. (NYSE-OMC) is a leading global marketing and
corporate communications company. Omnicom's branded networks and
numerous specialty firms provide advertising, strategic media
planning and buying, direct and promotional marketing, public
relations and other specialty communications services to over
5,000 clients in more than 100 countries. (source: company press
release)

Why We Like It:
The steady climb higher for shares of OMC remains intact.  We
initially wrote the long play for OMC on the breakout over $60.
Shares were in rebound mode now that the war was over and the
consumer was found to be alive and well.  The stock's point-and-
figure chart continues to show a spread-triple-top breakout.

We've been expecting some profit taking for a couple of days now
and OMC has surprised us with some resiliency.  Looking at a 30-
minute or 60-minute interval chart, one can see the narrow
ascending channel that OMC is trading in.  By the looks of it OMC
is near the bottom of that channel and should bounce but given
the state of the broader markets it may be better to look for a
dip to the $61-60 area.  Should that occur, our stop at $59.50
would make the risk-reward ratio much more appealing.

We did note that OMC's English rival WPP Group missed the
estimates but shared some optimism that the bottom appeared to be
behind the industry.  However, they did note that SARS was a
concern.

The chart on OMC still shows potential resistance at $65 but if
we're patient we're still aiming for $68.  For more fundamental
comments on OMC, see previous updates on OptionInvestor.com.


Suggested Option:
Short-term traders can still look to the May calls but given the
pace of OMC's advance those July's are looking like the better
bet.  October should give conservative traders plenty of time.

BUY CALL MAY 60 OMC-EL OI=1852 at $3.60 SL=1.50
BUY CALL JUL 60 OMC-GL OI=1400 at $5.70 SL=3.00
BUY CALL JUL 65*OMC-GM OI=1026 at $3.00 SL=1.25
BUY CALL OCT 65 OMC-JM OI= 571 at $5.20 SL=2.75

Annotated Chart of OMC:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/OMC042703.gif



Picked on April 15th at $61.30
Change since picked:     +0.84
Earnings Date         04/29/03 (confirmed)
Average Daily Volume = 2.18 mil


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

Intuit Inc. - INTU - close: 37.24 change: -1.65 stop: 40.00

Company Description:
Intuit Inc. is a leading provider of business and financial
management solutions for small businesses, consumers and
accounting professionals. Its flagship products and services,
including QuickBooks., Quicken. and TurboTax. software, simplify
small business management and payroll processing, personal
finance, and tax preparation and filing. ProSeries. and Lacerte.
are Intuit's leading tax preparation software suites for
professional accountants. Founded in 1983, Intuit has annual
revenue of more than $1 billion. The company has nearly 7,000
employees with major offices in 13 states across the U.S. and
offices in Canada and the United Kingdom. (Source: company
press release)

Why We Like It:
One look at Intuit's chart and you're likely to say "ouch".
Shares were in a very strong recovery mode from its February lows
and the stock had successfully broken back above the $50 level
when management came out with an earnings warning.  Earnings for
fiscal 2003 were going to be about 5% below estimates.  However,
Wall Street tends to overreact and investors hammered the stock
for a 24 percent loss or $12.17 to $38.72 on the news.  There was
a minor bounce back to $40 before failing again.  Investors now
worry that further slowdowns in sales of its TurboTax and
Quickbooks software could be an issue.

Now INTU has tried multiple times to rebound and the stock just
can't seem to break above the bottom of its gap down.  The latest
sell-off from the $41 area started a couple of sessions before
the Thurs-Friday weakness in the broader markets.  We see this
relative weakness as a bad sign for its short-term future.

Here's the plan: Traders have two ways they can try and enter
this play.  First would be a failed rally at $38 or possibly $39.
Second would be a break below its March 31st, 2003 low of 36.72,
but more aggressive traders could just target a move under
$37.00.  The MACD is rolling over again, daily stochastics are
falling and still have farther to drop.  The point-and-figure
chart looks terrible and after $37, the next serious support
looks like $30.  We're going to start the play with a stop at
$40.00 but $39.00 doesn't look too bad either.

There is one caveat.  Earnings are coming up on May 15th, 2003.
This last quarter is probably their strongest of the year given
the April 15th tax deadline.  However, seeing how they have
already pre-warned lower earnings we doubt there will be any pre-
earnings run up.  Keep an eye on the GSO software index as well.
A pull back to the 100 level could certainly weigh on INTU too.

Suggested Options:
Short-term traders are probably better off playing the Mays or he
Junes while longer-term traders can look to July or Octobers.

BUY PUT MAY-40 IQU-QH OI=6596 at $3.50 SL=1.50
BUY PUT MAY-35 IQU-QG OI=3776 at $0.90 SL=0.00
BUY PUT JUL-35 IQU-SG OI=1099 at $2.35 SL=1.00
BUY PUT OCT-35 IQU-VG OI= 878 at $3.70 SL=1.70

Annotated chart of INTU:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/INTU042703a.gif



Picked on April 27th at $37.24
Change since picked:     +0.00
Earnings Date         05/15/03 (confirmed)
Average Daily Volume = 4.53 mil

---

Kohl's Corporation - KSS - close: 55.02 change: -1.54 stop: 58.00

Company Description:
Kohl's Corporation operates family-oriented, specialty department
stores, primarily in the Midwest.  The company's stores sell
moderately priced apparel, shoes, accessories and home products
targeted to middle-income customers shopping for their families
and homes.  Kohl's stores have fewer departments than full-line
department stores, but offer customers assortments of merchandise
displayed in complete selections of styles, colors and sizes.  Of
the 420 stores the company operates, 116 are takeover locations,
which have facilitated the entry into several new markets,
including Chicago, Illinois; Detroit, Michigan; Ohio; Boston,
Massachusetts; Philadelphia, Pennsylvania; St. Louis, Missouri,
and the New York region.

Why we like it:
While the Retail index (RLX.X) finally managed to claw its way
through the $290 resistance level, the constant stream of
negative economic news kept the bears patiently lying in wait.
It appears they were waiting just a bit higher near the $298-300
level, which provided a practical top for the sector last
October.  While the RLX hasn't really weakened appreciably just
yet, a quick search for some relatively weak stocks in the sector
quickly turns up KSS.  While it may have been stronger than the
sector at certain points over the past year, "relative strength"
is definitely not a term we'd use to describe the stock right
now.

After posting a double top near the $60 level earlier this month,
the stock has had a rough five days, losing nearly $5 in the
process.  Even the impressive rally on Tuesday resulted in a red
candle.  The decline is now really starting to pick up steam,
with Friday's 2.7% loss dropping KSS to within striking distance
of a major breakdown.  The stock has had two selloffs prior to
this one during the month of April, the first of which bottomed
at $54.70, just below the current level of the 50-dma ($54.77)
and the second one at $55.65.  That higher low was violated
today, and a break below the April 1st intraday low will have the
stock entering that fast move territory down to the $51 level.
With a corresponding double top in the daily Stochastics, which
are now breaking below their two most recent lows, KSS looks like
fertile playground for the bears over the near term.  We're
setting an entry trigger at $54.70 and looking for a decline to
the $50-51 area as our cue to exit with a healthy gain.
Aggressive traders can use the initial breakdown as their entry
signal, while those with a more cautious approach will want to
wait for a subsequent rebound to test the $56 area as new-found
resistance.  We're initially placing our stop at $58, which is
just above the 10-dma ($57.99) and 20-dma ($57.62), both of which
are just starting to roll over.


Suggested Options:
Short-term traders will want to focus on the May 55 Put, 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 June 50
strike.

BUY PUT MAY-55 KSS-QJ OI=16477 at $2.20 SL=1.00
BUY PUT MAY-50 KSS-QI OI= 6513 at $0.75 SL=0.40
BUY PUT JUN-50 KSS-RI OI=  456 at $1.45 SL=0.75

Annotated Chart of KSS:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/KSS042703.gif


Picked on April 27th at $55.02
Gain since picked:       +0.00
Earnings Date         05/15/03 (confirmed)
Average Daily Volume = 3.54 mln


***********************************************************
DROPS
***********************************************************


http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/WFMI042703.gif


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The Option Investor Newsletter                   Sunday 04-27-2003
Sunday                                                      4 of 5


In Section Four:

Current Put Plays: FITB
Leaps: Inflection Point
Traders Corner: Owning Stocks Can Be Hazardous To Your Health,
Unless ...
Traders Corner: Money Management Part II
Brokers Corner: Choosing which Futures Contract to Trade.


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*****************
CURRENT PUT PLAYS
*****************

Fifth Third Bancorp - FITB - cls: 48.61 change: +0.88 stop: 50.25

Company Description:
Fifth Third Bancorp is a registered financial holding company and
a multi-bank holding company.  At the end of 2001, the company's
wholly owned second tier holding company, Fifth Third Financial
Corporation, had 11 wholly owned direct subsidiaries, consisting
of banks in Florida, Kentucky, Indiana and Michigan, as well as
Fifth Third Community Development Corporation, Fifth Third
Insurance Services, Fifth Third Investment Company, and Heartland
Capital Management.

Why we like it:
When we initiated coverage of FITB on Thursday, one of the key
aspects of the play was the way it had consistently under-
performed the Banking sector (BKX.X) over the past month.  The BKX
had worked its way right up to the critical $800 resistance level,
while at the same time, FITB had worked its way down to the
critical $47 support level.  Our premise was that something
(either resistance or support) had to give way soon.  In reality,
Friday's weak session saw neither event come to pass, with the BKX
retreating from resistance and FITB showing some life and bouncing
nearly 2% from Thursday's close.  The possibility of a rebound in
shares of FITB is precisely why we initiated coverage of the stock
with an entry trigger just below the recent intraday lows.
Despite Friday's bounce, we can't help but feel that we're going
to end up on the right side of the trade.  With the 20-dma now
nearing the $49 level and the descending trendline eclipsing the
$50 level, that's some formidable resistance for the stock to deal
with.  Should the BKX continue to weaken next week, FITB will have
a hard time holding above $47, and should be heading substantially
lower after breaching that level.  While we are waiting for that
breakdown to trigger the play to active status, more aggressive
traders may want to front-run the expected breakdown by opening
partial positions on a failed rally below the 20-dma, waiting to
round out to a full position until after the stock breaks below
support.

Suggested Options:
Short-term traders will want to focus on the May 50 Put, 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 June 45 strike.

BUY PUT MAY-50 FTQ-QJ OI=2628 at $1.95 SL=1.00
BUY PUT MAY-45 FTQ-QI OI=1247 at $0.30 SL=0.00
BUY PUT JUN-45 FTQ-RI OI=  23 at $0.80 SL=0.40

Annotated Chart of FITB:
http://www.OptionInvestor.com/oin/images/commentary/newsletter/2003-04-27/FITB042703.gif



Picked on April 24th at $47.73
Gain since picked:       +0.88
Earnings Date         07/15/03 (unconfirmed)
Average Daily Volume = 2.64 mln


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*****
LEAPS
*****

Inflection Point
By Mark Phillips
mphillips@OptionInvestor.com

When I departed for my vacation last weekend, I had a very clear
picture of what I expected from the broad market -- I was dead
wrong -- but more on that in a bit.  What it reminded me of is the
inherent danger of attempting to force my will on the market.
Without fail, I'm going to lose that battle every time.  There's
certainly plenty of recent evidence to that fact!

Most notably is my extensive analysis and prognostication with
respect to what I expected to see the VIX do over the past month.
After nearly a year without the VIX even dipping as low as 25 (the
middle of its historical range), I finally accepted the theory
that the fear index had moved into a permanently higher range.
When I publicly stated that belief, it was the market's cue to
prove me wrong.  First, I was looking for the VIX to find possible
support at 287-29 (didn't happen), then 26 (didn't happen either)
and finally at just above 24 at the 32% extension below the 200-
dma.  That was the final support level that I was looking at as
evidence that the new, higher range idea had validity.  With all
of those failed tests to my theory (the VIX spent most of last
week testing the 23 level), I'm forced to conclude that the VIX
has once again settled into its normal historical range.  They
don't call the market The Great Humiliator for nothing!  If you
think I have been sitting here feeling like the market is taunting
me with its recent behavior, you're partially correct.  In
actuality, I'm also thankful for the reminder that the market can
do anything it wants.  We have the choice to either accept what it
gives us and trade accordingly, or stubbornly try to argue with
the market.  Given the choice, I'll select the former option every
time.  It is in trying to determine what the market is really
telling us that we learn and grow into more accomplished traders.

Properly chastised by the market, I am forced to acknowledge that
the next likely inflection point will occur with the VIX testing
the historical bottom of its range in the 20-22 area.  Of course,
now that I've said that, the VIX is sure to launch higher with the
market falling apart early next week!  GRIN  Should the VIX
actually dip below the 20 level, then it will be time to load up
on LEAP Puts on the broad indices and hold on for some very nice
gains later in the year.  That is actually my personal fantasy for
the next several weeks, even though I do not have a lot of
confidence that it will in fact play out that way.

I'm not overly sophisticated in my market analysis -- I have a
defined group of technical tools that I rely on.  They aren't
always right, but they do help me to be right more often than
wrong in terms of being on the right side of the market.  Note
that even though I've been consistently proven wrong with respect
to the VIX in recent weeks, that has not translated into losing
trades, because the VIX is only one of those indicators that I use
to build my personal market view.

So let's examine the evidence and see what the market may be
trying to tell us about what to expect in the weeks ahead.  My
proxy for the market as a whole is the S&P 500 (SPX.X) and when
looking for the long-term picture, I fall back to the weekly
chart.  So let's take a look, ok?

S&P 500 Weekly Chart




There are two critical trendlines converging near the $920 level -
- the first and most important is the upper line of the descending
channel that has been in force since the SPX put in its highs in
2000.  But we also have the descending trendline connecting the
highs from August and December of last year, as well as the
January highs earlier this year.  That's going to be a tough nut
to crack, especially with weekly Stochastics nearing overbought
territory again and looking a bit top-heavy.  Isn't it interesting
how the SPX ended the week of 3/16 at $896 and this week (5 weeks
later) has only managed to advance by a paltry 3 points, while
that weekly Stochastics has stretched from near oversold to near
overbought?  In other words, the SPX has used up a tremendous
amount of its potential energy just holding its ground over the
past month.

We can see the same thing in the bullish percent readings as well.
Let's look at the bullish percent for the SPX, which surged
through the 40 level during that week of 3/16 and since then has
continued to climb higher, reaching 54.60% last week, without
being able to generate a breakout in price.  My interpretation is
that internal strength has been building, but without the ability
to drive the index appreciably higher.  That doesn't mean that it
can't happen -- just that it hasn't produced that result yet.
There is still significant POTENTIAL upside available from the
bullish percent readings and a push up towards overbought readings
may be enough to propel the SPX through those two trendlines.  But
in my view, risk is shifting ever more in favor of the bears.
Don't forget to check out the Market Sentiment section this
weekend, as I'm sure James will cover the important shift in the
Commercials' positions.  The "cliff notes" version is that the
Commercials added significantly to their net short position in the
E-mini S&P contracts.  To me, that's a warning sign that the big
boys are starting to shift their weight from one side of the boat
to the other.  Make sure to hang on so you don't get capsized!

While we are nearing that important inflection point, I'm
certainly not convinced that it is upon us yet.  I thought we
could see a pretty sharp drop last week, with a toppy picture on
both the daily and weekly Stochastics in the major indices.  Much
to my surprise, that bearish setup led to the SPX charging to new
3-month highs and then a decline to round out the week.  The bulls
could continue to hold this market up right through the end of
earnings season and there is room to the upside in terms of
bullish percent and downside in terms of the VIX.  Both those
measures could continue their recent trend while at the same time
the SPX grinds along below the 920 level.  Or, this boat could
turn on a dime and head south first thing on Monday morning.  I
don't know which path will prevail, but as noted above, I'm hoping
for a more classic bearish setup with bullish percents in
overbought territory and the VIX dropping near 20.

Until the turn comes, I think our current strategy is serving us
well.  Cautiously playing the upside, but getting more aggressive
with position management and gradually scaling into some bearish
positions for the expected decline ahead.  Hopefully nobody has
lost sight of the fact that this is still a secular bear market
and until there is real evidence of an economic turnaround, the
"new bull market" mantra should be regarded as so much hype.
We'll take a more detailed look at some of the metrics I'm using
to gauge market conditions in my articles next week.

With that, I think it's time to take a quick look at our current
list of plays.  It should come as no surprise that with the
gyrations of last week, we had some excitement in some of our
plays as well!

Portfolio:

ADBE - I've been talking for the past couple weeks about a likely
top for ADBE in the $35-36 area and imagine my surprise to see
that level reached last week.  As expected, that level served as
strong resistance for the stock and Friday's broad market weakness
handed the stock a 3.1% decline.  With my distinct feeling that
the market is getting top-heavy, I only want to focus on exiting
the play with a handsome gain.  For ADBE, weekly Stochastics are
reaching overbought territory and the dailies are just starting to
tip over from overbought with price action finding solid
resistance at the top of the June-2002 gap.  Those of you that
followed my advice to close open positions near the $35-36 area
made the right choice in my opinion, and hopefully the Portfolio
won't be far behind.  I'm getting aggressive with the stop,
raising it to $33, which is just below the 20-dma ($33.24).
Should ADBE get another bounce into the $35-36 area next week,
I'll be manually closing the position for an expected 100% gain.

EMC - Another stellar week for EMC saw a strong breakout over the
$8.50 level, with the stock reaching as high as $9.50 on Wednesday
before the bulls ran out of conviction.  Friday's drop certainly
wasn't encouraging, but we can take heart in noting that the stock
still closed the week with a slight gain.  I see two possibilities
here: either EMC will continue to power higher in the weeks ahead,
or we just witnessed a double top at $9.50 and the stock will fall
back into its consolidation zone.  I tend to think the former is
the correct answer, but at the same time, I'm not willing to risk
all the gains accrued thus far in the play, especially with the
broad market starting to look a bit top heavy.  So our stop is
moving up somewhat aggressively to the $8.00 level.  This locks in
a moderate gain if EMC falls apart, while at the same time putting
it just below some important technical levels that should hold on
any pullback.  The top of the post-earnings gap on 4/16 is $8.10,
and the 20-dma ($8.08) should reinforce this support level.  Ever
the optimist, I'm holding out for a break above the $10 level,
which ought to correspond to the play delivering that 100%+ return
that we're looking for.  We'll re-evaluate when that bridge is
crossed, but it would be foolish to not harvest partial gains at
that point.  Stay tuned!

Watch List:

NEM - We just can't seem to get a break on the NEM play.  While it
hasn't really launched higher just yet, neither has it
demonstrated the weakness necessary to give us a solid entry.  One
thing that I've learned from following this stock is that it is
extremely unforgiving of traders that succumb to the chase urge.
Notice that over the past 6 weeks, NEM has climbed from just above
the $24 level (oh how I wish I had taken that entry in early
March!) to just below $28 last week, the weekly Stochastics have
now worked their way up near the overbought region.  The ascending
trendline (now near $24.50) is still what I view as the best area
for taking new entries into the play and I'm willing to wait for
another test of that trendline to enter the play or else let it
go.  Ideally, the gold futures (GC03M) will make one more trip
down into the mid $320s to give us that entry over the next couple
weeks.  Such a decline in the price of the yellow metal should
give us the entry we want into NEM near the $25 level.

GD - If there is one theme that has run through the LEAPS Watch
List in recent months, it is that I've missed a lot of very nice
entries, being a bit too stingy on my requirements for the
"perfect" entry.  GD is certainly one of those, as the dip to
$52.20 a few weeks back has now shown itself to have been THE
entry I wanted.  The past 2 weeks has seen some serious buying hit
the Defense sector, with the DFI index blasting through the $460
resistance level, taking our GD play along for the ride.  My
analysis on direction following the completion of the Iraq war was
right on target, but I missed the entry.  That said, I think there
still may be significant upside available, both for the DFI index
and GD, if only we can get one more dip back to support over the
next couple weeks.  I think our best shot at a belated entry into
the play will now be on a decline and subsequent rebound near $56.
So we'll ratchet our entry target up one last time to $56-57.  If
the market refuses to give us an entry near that level, then we'll
just have to let it go.  If we do get an entry into the play, our
initial stop will be set at $52, just below the early April low.

AMZN - Should I or shouldn't I?  That was the question that
dominated my thinking on AMZN from the time the stock popped
higher after its earnings announcement until the closing bell on
Friday.  I noted on Friday morning that we'd take an entry into
the play so long as it didn't continue to power higher throughout
the session.  Well, that's precisely what happened, with the stock
closing at its high of the day on volume nearly 6 times the ADV.
No matter how you look at it, that is a very strong performance,
especially with the broad market closing at its lows.  AMZN close
above the top of its 18-month ascending channel, above its upper
Bollinger band (on the daily chart) and ended the session with a
15% gain in response to the better than expected earnings report.
As I've stated, I think this bullishness is completely irrational,
but the thing that finally made my decision was recalling the sage
advice that "the market can remain irrational far longer than I
can remain solvent".  An entry taken at the close on Friday may
turn out to be the "entry that got away", but taking it would go
against the disciplined approach that I've tried to foster in this
column.  So we wait and watch for weakness before entering the
play.  With formidable resistance in the $29-30 area, that
opportunity might not be too far away either.  So I'm raising the
entry target slightly this weekend, looking for a rollover before
playing.

AIG - Here I was all worried about missing out on a decent entry
on AIG last week and we got a runup into earnings.  Wasn't that
nice?  The stock ran right up to major resistance and then
reversed in the wake of earnings.  I'm sure glad we waited.  See
below for full details.

As I see it, the tide is gradually starting to shift from the
bulls favor back into the bearish camp.  That's a big part of why
I finally pulled the plug on our QQQ Watch List play this weekend.
I just can't see sufficient upside to justify keeping it as a
potentially live trade.  On the other hand, I don't see a huge
advantage to playing the downside in the Technology sector of the
market, based on my bias that Tech will outperform the rest of the
market this year.  That brings up the issue of when we start
looking bearish on the DOW again via the DJX index.  If you were
wondering why we didn't get to it this week, fear not as I expect
we'll be listing it as a new bearish Watch List play next weekend.
While I think we're getting close to that inflection point, I
don't think we need to be in a hurry, with what I think is a
fairly well balanced playlist right now.

There are a lot of things lining up that point to down as being
the next intermediate (2-4 month) trend, not the least of which is
the fact that May is looming just around the corner -- ushering in
the bad six months of the year.  Throw in a still struggling
economy, the concerns over the SARS epidemic, things getting
uglier in North Korea, and earnings winding down over the next
couple weeks, and it becomes more and more difficult to see what
could possibly drive this market much higher.  I'm not bearish on
the market just yet, but I'm starting to shift back in that
direction again.  We know that a lot of market participants walk
away from the market this time of year, and I say good for them.
I'm actually looking forward to what I think will be a fairly
active summer -- and I wouldn't rule out a repeat of the fireworks
we saw last July.

In the meantime, manage your open bullish positions aggressively
and step gingerly into those new bearish positions!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
ADBE   02/28/03  '04 $ 30  LAE-AF  $ 4.70  $ 7.90  +68.09%  $33
                 '05 $ 30  ZAE-AF  $ 7.50  $10.70  +42.67%  $33
EMC    03/12/03  '04 $  7  LUE-AU  $ 1.40  $ 2.30  +64.29%  $8.00
                 '05 $  7  ZUE-AU  $ 2.15  $ 3.20  +48.84%  $8.00


Puts:
AIG    04/24/03  '04 $ 55  LAJ-MK  $ 5.60  $ 6.20  +10.54%  $61.00
                 '05 $ 55  ZAF-MK  $ 8.50  $ 9.10  + 7.06%  $61.00


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
NEM    03/09/03  $24.50-25.00  JAN-2004 $ 25  LIE-AE
                            CC JAN-2004 $ 20  LIE-AD
                               JAN-2005 $ 25  ZIE-AE
                            CC JAN-2005 $ 20  ZIE-AD
GD     03/23/03  $54-55        JAN-2004 $ 60  KJD-AL
                            CC JAN-2004 $ 50  KJD-AJ
                               JAN-2005 $ 60  ZZJ-AL
                            CC JAN-2005 $ 50  ZZJ-AJ


PUTS:
AMZN   04/13/03  $29-30        JAN-2004 $ 25  LOH-ME
                               JAN-2005 $ 25  ZWE-ME
KO     04/27/03  $41.50-42.50  JAN-2004 $ 40  LKO-MH
                               JAN-2005 $ 40  ZKO-MH


New Portfolio Plays

AIG - American International Group $55.37  **Put Play**

Well, it looks like my advice to wait for earnings from AIG before
entering the play was a mixed blessing.  While it kept us from
prematurely entering the play and suffering some heat as the stock
ramped higher ahead of earnings, it certainly looks like the
optimum entry would have come at the close the evening before
earnings were released.  The company beat estimates by the
requisite penny, but that wasn't enough to keep the bulls happy,
especially with the forward looking statement that sales could
suffer as a result of the SARS epidemic.  Thursday's session saw
pretty heavy selling volume drive AIG back from the 200-dma (which
capped the rally the day before), with the stock settling just
above $55.  While not the ideal entry I wanted in the $56-57 area,
it looks like the best shot we're likely to get.  AIG hasn't yet
broken its ascending trendline from the March lows (currently
$54), and it still trading within the confines of its ascending
bearish wedge.  I expect that wedge to break to the downside in
the next week or two, and with both daily and weekly Stochastics
tipping over from overbought territory, odds certainly favor that
outcome.  At the same time, I understand that there is significant
bullishness in the market (rational or not) and I don't want to
get stopped out of the play just before the real decline
commences.  So the initial stop will be rather wide at $61.  While
it is well above the 200-dma, it is just fractionally above the
top of the late-January gap, which should act as strong resistance
should AIG make another push higher before breaking down.  For
traders still looking for an entry into the play, I would still
view any failed rally attempt below the $58 level as attractive
for initiating new positions.

BUY LEAP JAN-2004 $55 LAJ-MK $5.60
BUY LEAP JAN-2005 $55 ZAF-MK $8.50


New Watchlist Plays

KO - Coca Cola Company $39.42  **Put Play**

To say that shares of KO are in a pronounced downtrend would be an
understatement of galactic proportions.  Looking at the weekly
chart, the stock hasn't been able to log a higher high since
peaking just below $89 in July of 1998.  I started watching the
stock for a solid rally failure several months ago, but even with
the recent market rebound, KO hasn't been able to get anywhere
near the 4-year descending trendline, currently clear up at
$53.50.  I can't see what is going to propel the stock up near
that area anytime soon, especially in light of what appears to be
a trend of flat revenues and flat earnings.  The company's most
recent earnings report (4/16) is particularly telling, with
operating income only rose 3.5% on a 10% rise in revenue.
Something just doesn't seem right there.  I think the pivotal
technical shift occurred when the stock broke below the $43
support level in January, a support level that had held on several
occasions in the past 3 years.  That gives us an important line in
the sand that should not be broken without a substantial
improvement in the company's business.  So I've lowered my
aspirations as to what would constitute a solid entry, with the
$42.50 area likely defining the latest top in the stock.  The PnF
chart paints the picture pretty clearly, with the big Sell signal
from last July giving a bearish price target of $30.  Weekly
Stochastics have already rolled over, On Balance Volume is at its
lowest level in over a decade, and KO looks to be headed
substantially lower.  Our only challenge is in gaining a favorable
entry that can hold through any near-term volatility.  Any pop up
into the $41.50-42.50 area should make for a very nice entry into
the play, with a breakdown below the $37 level (March lows) giving
the confirmation we're looking for.  In order to give the stock
room to move before breaking down, we'll use a rather wide stop at
$45, which is just above the descending trendline that connects
the July and October lows.  The 200-dma ($45.35) is nearing that
level as well and should reinforce that resistance level if
challenged anytime in the near future.

BUY LEAP JAN-2004 $40 LKO-MH
BUY LEAP JAN-2005 $40 ZKO-MH

Drops

QQQ - $26.93 As I noted a week ago, I was getting a bit nervous
about the QQQ Watch List play, and last week's price action did
nothing to allay my concerns.  The stock continued to waffle in
the $26-27 area, while the NASDAQ-100 Volatility index (VXN.X)
continued to drop to new lows.  Despite my bullish
prognostications for the NASDAQ market (vs. the rest of the
market) for this year, the technicals are looking less favorable
by the day.  Even if the QQQ is able to work higher, I don't see
enough upside potential to justify the risk in taking on the
position.  Rather than take the risk of getting triggered into a
less than desirable position, I'm pulling the plug this weekend to
make room for better candidates.  QQQ will be back on the Call
Watch List in the future, but I'll need to see a much better
technical setup than what appears in the charts this weekend.


**************
TRADERS CORNER
**************

Owning Stocks Can Be Hazardous To Your Health, Unless . . .
By Mike Parnos, Investing With Attitude

Apparently there are still people out there who still own stocks
or who want to own stocks.   Then again, there are people who
still buy Florida swampland, Spam and bell-bottom pants.

Some new OI subscribers haven't gotten the message yet.  We can't
wait for common sense, or even osmosis, to kick in.  We need to
address this subject before they get hurt.  It's my duty, as
CPTI's chief (and only) strategist, to outline for you the only
practical way to own a stock – step by step.

At the Couch Potato Trading Institute we stress that less is more
– especially when it comes to risk.  When you own 1,000 shares of
a $25 stock, you're exposed for the full $25,000.  Let's protect
ourselves.  Here's how.

Pick A Stock – Any Stock
For our example, let's use MSFT.  Perhaps people think that MSFT,
a former market leader, will rise from the ashes and lead the next
bull market.  Maybe it will.  Maybe it won't.  But a hell-of-a-lot
of people own it.   You can apply the method I'm about to explain
to almost any (optionable) stock in your portfolio.

MSFT closed today at $25.21 and the shareholder believes that,
over time, it will move significantly higher.  Let's buy a
hypothetical 1,000 shares of CSCO.  We just spent $25,210 and now
it's at the mercy of the stock market.  Some people spend that for
a car, a new roof on their house or a Russian mail-order bride.
With MSFT, it's at risk.  The mail-order bride, however, might
yield some interesting benefits.

Our Protection
Look at the January, 2005 MSFT $25 LEAPS put.  It can be purchased
for $4.90 and would completely protect the stockholder from any
MSFT transgressions below $25.  Ten contracts will cost $4,900.
The first reaction of a typical stockholder is, "You're bleeping
nuts!  I'm not going to pay that!"

Actually, the real tragedy is that probably 99% of investors
didn't (and still don't) know that it's possible to protect, or
insure, their investments.  The blame for that can be placed in
the laps of financial planners, "full-service" brokers and 401K
account administrators who either didn't know or didn't care
enough to let their clients know of this alternative.  There's no
excuse either way.  Well, that's a subject that we've hashed out
in columns past.

Cheap Insurance
Take a closer look at that "outrageous" $4,900.  There are 21
months left until expiration of the January, 2005 - $25 put.  Do
the math.  It works out to the insurance costing $.23 per share
per month.  Seems a pretty cheap price to pay for peace of mind.

Let's Help Pay For The Insurance
Followers of Microsoft know that, in the good old days, it moved
in large swings – mostly up.  However, still being in the jaws of
a bear market, volatility isn't what it used to be.  MSFT is no
longer as spry as it once was and moves more like an elephant than
a debutant at a frat party.  It seems to bounce up and down and
perhaps moves a buck or two a month.

We own 1,000 shares of MSFT stock.  Perusing the option chain, we
should be able to sell a call a few points out of the money in a
typical four-week option cycle for $.20.  That $.20 call, sold on
a monthly basis, would almost defray the entire cost of the
insurance.

Let's look at the numbers.
10 contracts of Jan. 2005 $25 put @ $4.90      $4,900
21 OTM calls sold at $.20                      $4,200
Net cost of insurance:                         $  700

What Happens If . . .
A strategy analysis wouldn't be complete without a peek into the
future.  If MSFT is trading at $30 in two months what do we do?
We want to lock in some profits.

a)  We sell the insurance Jan. 2005 $25 put for $2.50.  Even
though the $25 put is now $5 out of the money, there are still 19
months of time value remaining and a lot of time premium.

b)  Buy new insurance in the form of the Jan. 2005 $30 put for
$4.20.  The $2.40 we received from the sale of the $25 put now
helps to defray the cost of the new $30 put.  We have now locked
in $5 of profit from the appreciation of the stock.

c)  Don't forget, we've also taken in about $.40 of premium from
selling covered calls twice as MSFT has been moving up.

The numbers:
Profit from stock appreciation - $5                      $5,000
Selling the Jan. 2005 $25 put @ $2.50                $2,500
Selling covered calls twice @ $.20                      $   400
Buying the Jan. 2005 $30 put @ $4.20              ($4,200)

From the $5,000 stock appreciation, we've locked in $3,700 and we
are once again protected against any downward movement for the
next 19 months.

Too Far To Fast?
What happens if MSFT goes up too quickly and violates the covered
call? A simple adjustment of rolling out and up will usually take
care of it.  If it's a gap up situation, you'll still need to roll
the call, plus it may be time to roll up your protective put (as
in the example above).

Going Nowhere?
If MSFT goes nowhere or down, you won't lose any value because of
the protective 2005 put.  The insurance will almost entirely be
paid for by the monthly covered call sales.

Remember, the numbers used in the option prices in above examples
are projections.  They're close, but subject to market movements
and volatility.  The whole point we're trying to make is that
intelligent stock ownership can be done with insurance.

It might be worth doing some calculations before buying a stock
(or fund) – just to make sure that the appropriate options are
available for your insurance.

Can We Insure Mutual Funds?
Absolutely.  If you own an S&P 500 index fund, you can use the SPX
options for insurance.  You'll have to determine how much you have
invested in the fund and use the appropriate number of contracts.
If you own a mid-cap fund, there is likely a mid-cap index option
that can be used for protection.  There are also sector options
for sector funds, etc.

There's No Excuse Anymore
Now you know how.  If you choose to own a stock or a mutual fund,
and you do not insure your investment, don't look in this
direction for sympathy.   Some investors are like cockroaches.
They refuse to evolve, but they somehow manage to survive.  But
mere survival is not the objective – unless you like the cockroach
lifestyle.  Watch out!  Sooner or later someone is going to turn
the lights on.
_____________________________________________________________

CPTI Replacement Position (Replaces BRCM Position)
Position #4 – DJX Minage-A-Qua – Friday's Close: $83.06
The DJX tracks the DOW.  It looks like the DOW is in a minor
uptrend with resistance at $85 and support at $82.
Sell 10 contracts of the May DJX $84 puts and buy the May DJX $80
puts for a credit of $1.45.
Sell 10 contracts of the May DJX $84 calls and buy the May DJX $88
calls for a credit of $.80.
Total credit of $2.25.  Exposure is the $4 difference in the
strikes less the credit ($4.00 - $2.25 = $1.75).   You will be
profitable if the DOW closes anywhere between 8175 to 8625.
That's a 450-point range.  The closer it finishes to 8400, the
greater the profit.  Maximum profit potential: $2,250
_____________________________________________________________

May CPTI Portfolio Positions

Position #1 -- SMH Baby Condor.  Thursday's Close: $25.88
SMH is the Semiconductor Holder Trust.  We feel that semiconductor
baby condor by selling the May SMH $25 calls and $27.50 puts.  For
protection, we bought the May $22.50 puts and $30 calls.  The net
credit is $1.05stocks have moved up a little too far and too fast.
We created a

Our maximum profit range is $25 to $27.50.  We're only exposed for
the 2 1/2 point difference between the strikes ($25/$22.50 or
$27.50/$30) less what we've taken in ($1.05) = $1.45.  Maximum
potential profit is $1,050.
____________________________________________________________

Position #2 – SPX Iron Condor.  Friday's Close: 898.81
We believe the market may be a bit extended so we gave it a big
sandbox to play in.  We sold the SPX May 825 puts and the May 950
calls.  Then we bought the SPX May 800 puts and May 975 calls for
protection.  The net credit was $2.95.  Our exposure is a little
more than usual – 25 points less the $2.95 we took in = $22.05.
That's why we're only doing five contracts. Our maximum potential
profit is $1,475.
______________________________________________________________

Position #3 – MSFT Minage-A-Qua – Friday's Close: $25.21
Microsoft just came out with respectable earnings and
unenthusiastic guidance.  We believe that MSFT will finish at or
around $25.

We sold the May MSFT $25 puts and calls for a credit of $1.80.  We
bought the $27.50 calls and $22.50 puts for protection at a cost
of  $.45 – yielding a net credit of $1.35.  Our maximum profit
occurs if MSFT closes right at $25.  Our profit range is from
$23.65 to $26.35.  Our risk is only $1.15 with the potential to
make $1.35.  Maximum potential profit is $1,350.
_____________________________________________________________

Happy trading! Remember the CPTI credo: May our remote batteries
and self-discipline last forever, but mierde happens. Be prepared!
In trading, as in life, it’s not the cards we’re dealt. It’s how
we play them.

Your questions and comments are always welcome.
Mike Parnos
CPTI Instructor


**************
TRADERS CORNER
**************

Money Management Part II
By Steve Gould

In part I, I presented a mechanical system for managing money.
Overall, it is not a bad system and many people use it.  Many
people also have saved lots of money by using it because
generally, if an option loses about 1/2 it's value, chances are
the trade has gone bad and it is time to get out.

In part II, I am going to present how Elliott Wave analysis allows
you to analyze a trade set up to see if the trade is worth the
risk and if so, where the stop loss is.

Most people place a trade expecting the stock to move in the
chosen direction.  The big question is at what point do you decide
that the trade has moved against you and exit?

If you are like me, the moment you place a trade, the stock moves
the opposite direction.  I have come to accept that fact.  I just
need to know at what point does moving in the opposite direction
represent a trade gone bad.

With Elliott Waves, stop losses are calculated using a different
paradigm.  Instead of exiting a trade when the value of the option
decreases a certain amount, we would use the wave count to
determine if the direction of the stock is still valid.  If so, no
need to exit.  Even if the option decreases substantially in
value.  However, if the stock is behaving differently than
expected, then it is time to exit the trade.  Using Elliott Waves
the stop loss is based on a wave count that changes.  In the
famous words of Obi-Wave-Kenobe, "Use the waves, Luke.  Use the
waves."  (OK, OK, I couldn't help myself.)

In practical terms, if we initiate a trade at the beginning of a
wave 1 (Type II), then we would stop loss the trade once we
realize that wave 5 is still in effect.  If we initiate a trade at
the beginning of a wave 5 (Type I) then we would stop loss the
trade once we realize that wave 4 is still in effect.  The stop
loss triggers when the wave pattern changes and our count is
wrong.

Sometimes we can reduce our risk even more by examining the wave
count and not even initiating the trade because the pattern just
doesn't match up with known Elliott Wave rules and guidelines.
For example, I follow many stock "experts" who make stock
recommendations.  After examining the chart, I do not place a
trade because although the expert says it is going to go up, the
wave pattern says it is going down first (sometimes significantly)
and then up.  I may enter the trade, but I will wait for a more
strategic entry point.

So let's look at a real time example.

Here is a chart of a generic stock that is exhibiting the classic
Type I set up.

Chart: XYZ Type I Setup





Notice the Type I criteria:

1. Wave 4 retracement of almost 38%
2. Oscillator retraced 100%
3. Wave 4 in A-B-C corrective pattern
4. Although not shown, wave 4 ended at 138% of wave 3 in terms of
time.

Currently, the last bar closed at about $65.  The bottom of wave 3
is at about $58.  We could expect at least a 7 point move.

The question now is, where do we place the stop loss?  We have to
think about what could go wrong.  In order to do that, we have to
know how corrective waves behave.

Let's review just a bit.  All impulse waves (waves 1, 3, 5, C and
sometimes A) are 5 wave basic patterns.  All corrective waves
(waves 2, 4, B and sometimes A) are A-B-C patterns.  Many type of
A-B-C patterns exist.  Too many.  But they can be classified into
some basic patterns: ZigZags, Flats, Triangles and Combinations.

Entire chapters are devoted to these corrections.  I could not do
justice to an explanation here in just a few short paragraphs.
Let me just show two patterns here for the purpose of figuring out
a stop loss.

Figure: Zig Zag and Flat





On the left is a zigzag pattern.  This is a simple three wave
pattern.  Defining characteristics of zigzags are

1. The B wave retraces the A wave less than 100%
2. The C wave extends past the A wave
3. The A wave subdivides into a 5 wave basic pattern.

On the right is a flat pattern.  This is another simple three wave
pattern.  Defining characteristics of flats are

1. The B wave retraces the A wave about 100%
2. The C wave extends to the A wave
3. The A wave subdivides into a 3 wave basic pattern.

Knowing these basic corrective patterns, what could go wrong with
our set up?

Well, for one thing, if the A-B-C currently traced out is the
beginning of a 5 wave pattern (1, 2, 3 instead of A-B-C) then we
are at the start of a fairly large zigzag pattern.  Also, look at
the current C wave.  I can only make out an A-B-C pattern in it.
C waves are always 5 wave patterns.

To me this is a red flag.  I do not think the C wave is complete
yet.  Consequently, I would not place this trade. I very much
would like to see a 5 wave basic pattern in the C wave something
like this.

Chart: XYZ Prediction 1





The completion of the v (five) wave would accomplish two things.
One, the retracement would be closer to 38% and two the C wave
rule (must be a 5 wave basic pattern) would be satisfied.

Upon deeper analysis, this is actually a non-ideal set up.  Stay
out of the trade.  (No risk)

A few days later, this is what the stock looked like

Chart: XYZ Type I setup number 2





At first, we could have felt a little more confident as the stock
went up the next two days.  This could have been the completion of
the 5 waves we were looking for in the C wave.  However, the stock
never penetrated the high of the C wave (now labeled A).

Then the stock fell almost $5 and we were kicking ourselves for
not getting in.  This looked like the start of a wave 1 down.
Then during the next four days the stock retraced just like we
would expect it to.  The stock dropped substantially on March 2
and March 3 followed by some consolidation.  Then we see that the
stock gapped up taking out the high on the old C wave.  Since we
breached the top of the old wave A, the wave count relabeled and
we now have the above chart.

This looks like a more accurate labeling of the 4 wave.  Notice
how I labeled in green the most likely wave count for the final C
wave.  However, if you blur your eyes and look cross eyed, you
might be able to hallucinate a 5 wave pattern here.  I know
someone is going to try and place a trade here thinking that the
A-B-C correction is now complete.  I do not think so.  It would be
best to wait a few days to see how the stock plays out.

Three days later the stock looks like this.

Chart: XYZ Progression





It moved higher as expected.  I have moved the iii label to
accurately label the move.  Look carefully. You should be able to
see a 5 wave pattern within the iii wave

We know that from Elliott Wave theory that after a 3 wave we will
get a 4 wave correction.  This iii wave may go a bit higher or it
could correct now.  It would make sense for it to correct very
soon and retrace the iii wave to about $69.

A few days later the stock looks like this.

Chart: XYZ Type I setup number 3





Up until now, I have not discussed anything about stop losses.
However, I have shown you how Elliott Wave analysis has kept you
out of trades that you should not have been in.  This is even
better because you have risked nothing and lost nothing.

But now, the moment to trade has arrived.  We have a very nice
Type I set up.  The salient features are

1. The 4 wave has retraced about 53% of the 2 wave.
2. The 4 wave retraced to the level of the 4 wave in the 3 wave.
3. The 4 wave traces out a very nice A-B-C pattern with all the
proper counts.
4. The oscillator retraced a bit more than 138%.
5. It looks like the 5 wave has started.

The stock closed at 70.85.  If the stock moves above the top of
the C wave (73.21), then the wave count for the C wave could be
incomplete.  The C wave could be extending to the 62% retracement
level at 75.74.  In that case, set your stop at 73.21 and wait for
a confirmation that the 5 wave down has started.  We may reenter
the trade at that point.

A few days later, this is what the stock looks like.

Chart: XYZ Expectation 1





The stock is behaving just like we would expect it to if it is
indeed a 5 wave down.  In red is the 5 wave pattern we would
expect to see for the 5 wave.  Within the 1 wave, we expect a 5
wave pattern and so far the stock has traced out a i, ii, iii, iv
pattern.  Right on schedule.

The next day, the stock did this.

Chart: XYZ Stop Loss 3





This throws our wave count for a loop.  I left the labeling there
from the last chart just to show you that the stock is not
behaving properly.  And even though we have not officially hit our
stop loss, something has gone wrong.  If we exit now, we will have
only lost about $2.00 in the stock price.  I do not know what the
original option cost was.  I do not know what the current value of
the option is.  I do know that the wave count is not what I was
anticipating for a 5 wave down and the trade is going against me.
Time to exit.

Several days later, the stock looks like this.

Chart XYZ Progression 2





The stock went up another $7 and the wave count changed.

You might be thinking that this looks like the end of the 4 wave.
I do not think so.  Here is why.  The C wave as it is currently
labeled has the 5 wave longer than the 3 wave.  This violates an
Elliott Wave rule.  The 3 wave must be the longest.  Here is
another example of where Elliott Wave theory saves you money by
keeping you out of a trade.

At this point, it might be best to take this stock off our watch
list.  At least for a put.  The oscillator is already above the
38% retracement and if it goes higher, the risk in the stock
continuing higher is just too great.  This 4 wave may actually
turn out to be a 5 wave pattern up.

If we use the wave count to determine our entry and stop loss
points, we can reduce our risk by avoiding trades that are high
risk and cutting our losses should the wave count go against us.
We won't have to wonder/hope/pray if the stock will ultimately be
profitable.  We will know by the wave count.


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

Choosing which Futures Contract to Trade.
by Alan Hewko

Abbreviations used in this article:
                                    Ticker $ move per index pt
ES = E-mini SP500   June futures  ES03M    $ 50 per ES pt
YM = E-mini Dow $5  June futures  YM03M    $  5 per YM pt
NQ = E-mini NDX 100 June futures  NQ03M    $ 20 per NQ pt
pt = point
pts= points



There had been some questions received regarding how one selects
which of the above three US Futures contracts make the best trade
vehicle at any one particular moment in time.

Also, perhaps some of you have only traded the ES contract and
have not generated many trades yet with either YM or NQ; and
there are times when YM or NQ do indeed provide a better rate of
return than ES does.

Let's examine each contract a bit closer.

YM of course is the Dow Futures contract, and mirrors the 30
stocks in the Dow.

ES mirrors the 500 stocks in the S&P 500 (SPX) Index.

NQ follows the NDX, which is comprised of the 100 stocks in this
index; however, a handful of stocks provide the majority of this
index's movement. The single most important stock in the NDX is
MSFT with its 11% weight; with the rest being AMGN, CMCSA
(Comcast), CSCO, DELL, EBAY, INTC, ORCL, and QCOM.

MSFT of course is also in the Dow and S&P500; and by example, if
MSFT moved 2 points today, and every other stock did not change
at all (impossible of course but humor me), then due to its
massive weight in the NDX, the NDX index would move the largest
percentage amount vs. the Dow and S&P500 index.

The single most important stock in the Dow based on possible
point movement criteria is MMM.

If the two Dow stocks of MMM ($125) and T ($15) each moved 10%
today (again, not likely but makes for easy math to follow),
     MMM $ 137.50 + $12.50 + 10%
       T $  16.50 + $ 1.50 + 10%
And based on how the Dow is computed, MMM's impact on the Dow
(and therefore the YM Dow futures) is vastly greater than T's
impact.

Let's now discuss rate of return on the three Futures contracts:

It's very common for ES and YM to match almost exactly both on
point movement and your possible money gain.

If ES is +10 points today, it is very likely the Dow (and YM) are
+100 points then as the ratio is usually about 1 in 10. Meaning
that for each 1 ES (S&P 500) point move, there is a 10-point
movement in YM (Dow cash).

Also, the money matches as well.
10 ES pts at $50 per point = $ 500
100 YM pts at $5 per point = $ 500

So then why not just stay with the more liquid ES and ignore the
YM?

One easy answer is those times when ES is closed at 4:15PM and
some news event occurs at 4:30PM when YM is still trading.

But the other answer is this:

Scenerio:
The Dow stock MMM pre-open just had some great news and will be
going higher all day. Its impact is going to be vastly greater in
the Dow 30 than its impact in the S&P 500 (where it only 1 of 500
stocks); so YM would likely provide a better Long trade than ES.

Bringing NQ into the equation:

10 ES pts = 100 YM pts = 25 NQ pts

There are days when the Tech stocks lead the market, either
higher or lower. If you feel that today is one of those days,
when the percentage movement in the COMPX is going to outweigh
the movement in the more sector-balanced S&P 500 and Dow, then
very likely a NQ futures trade will provide a greater monetary
rate of return than either a YM or ES futures trade. Example
might be the day ending at:

DOW    + 89  + 0.9%
SP 500 +  9  + 1.2%
COMPX  + 38  + 2.1%

On such a day as this, a Long NQ most likely provided a better
return than either Long YM or Long ES.


SECTOR DIVERGENCE:

Let's take an example where this scenario occurs:
The Financials (Banks, Brokers and Insurance stocks) have had a
very nice strong up move and very shortly CSCO is due to report
its earnings. CSCO says wonderful things about its forward
guidance, and on the same day, several analysts downgrade the
Financial sector based on valuation after their recent run-up.

You sense that Big Money is going to be taking profits on its
Longs in the Financial sector (therefore selling them) and
rotating those gains into Tech stocks based off CSCO's comments.

So - SELL Financial sector stocks = SELL YM (or ES)
BUY tech stocks = BUY NQ

And you the trader follow along in perhaps this fashion:
1. Long (Buy) NQ
     or perhaps even in this fashion:
2. Short YM and Long (Buy) NQ


SELECTING JUST ONE FUTURES CONTRACT BASED OFF NEWS

The key XYZ stock just warned at 4:05 PM ---
Which Futures contract do I short?

Well, if MSFT just warned, then very likely, Shorting NQ makes
the most sense.

If MMM just warned, then a YM short makes the most sense.

As strange as it may sound, if some event occurs which will move
the entire market, such as something Iraq related which was so
common last month, ES is not always the best choice. Why? Because
it's the most liquid and trades the largest number of contracts.
I know that sounds foolish, but Big Money may be going to buy
1000 full size SP500 Spoos futures contracts right NOW because
that's the only place they can get that type of size liquidity.
So therefore, ES has already moved the first and fastest; and YM
or NQ might (repeat might) be lagging behind a bit offering us
retail-size traders a better fill in YM or NQ simply because the
big-money is chasing the full-size Spoos price.

I appreciate that this article was mostly common sense, but I
felt it was worth a mention.

There are many Futures traders who only trade ES; and there is
nothing wrong with that at all. However, if you have never tried
YM or NQ, they may be worth adding to your trade selection
choices.


Alan Hewko


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The Option Investor Newsletter                   Sunday 04-27-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Option Pricing Basics: Volatility Revisited
Naked Puts: Options 101: Success With Changing Trends
Spreads/Straddles/Combos: Market Bulls Get A Reality Check!

Updated In The Site Tonight:
Market Posture: Techs Take a Tumble


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

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*************
COVERED CALLS
*************

Option Pricing Basics: Volatility Revisited
By Mark Wnetrzak

One of our new readers asked a question about a very important
requirement for successful option trading: Understanding the
fundamentals of volatility.


Attn: Covered-Calls Editor
Subject: Evaluating options for LEAPS and covered-calls

Hi Mark,

I have started doing some of my own research for candidates and
I am having some difficulty determining which options to choose
based on their implied volatility.  I have enjoyed some success
with call/put buying but those were mostly short-term plays and
now I am looking for longer-term stuff -- such as buying LEAPS
and selling 2-3 month out-of-the-money covered-calls.  What time
frame do you normally use in analyzing options for longer-term
plays like LEAPS?  Also, do you compare historic volatility to
implied volatility, or just look at all options for the highest
or lowest implied volatilities, to find out which ones are cheap
or expensive?

Thanks in advance for any help you can provide!

LJ


Regarding volatility and option pricing:

Volatility is the most important variable in valuing an option.
All other factors are known; share value, option strike price,
dividends, interest rates, and time remaining until expiration.
The future volatility of the underlying issue is also the most
difficult value to forecast.  Professional traders use several
different timeframes to assess a stock's potential movement.  In
most cases, the 20-day historical volatility provides a reasonable
projection of the short-term volatility of any instrument.  But,
for longer-term strategies, the 50-day and/or 100-day historical
volatility values should be compared with the near-term numbers to
identify any disparities in the recent character of the issue.  A
significant move in the underlying instrument, due to an earnings
report or other major event, can cause an artificial change in
volatility, thus skewing the short-term data.  In general, 20-day,
50-day, 90-day and 1-year periods are the most common timeframes
used to reflect the magnitude of future movement that can be
expected over the life of an option.

Indeed, comparing historic volatility to implied volatility helps
a trader determine whether an issue's options are currently cheap
or expensive with regard to its past pricing trends.  If that is
your desire, simply view an average of some past period of time,
such as a 100-DMA.  Many traders also use an adverse volatility
estimate, based on historical volatility, in order to provide a
more conservative appraisal of an option's true value.  Another
important quality of an option's price is its implied volatility
relative to other options in the market.  Comparing this data for
stocks in a specific group or industry (or even market-wide) is a
great way to find options that favor a particular strategy such as
buying cheap puts for earnings announcements or selling expensive
calls in covered-call positions.  Regardless of the approach you
use, understand that implied volatility is a mathematical measure
of the relative cost of an option, and it is largely based on the
historical volatility of the underlying issue.  At the same time,
the implied volatility of an option can be significantly affected
by market expectations of the underlying security due to upcoming
events (earnings, FDA reviews) or unique situations such as merger
speculation.

When evaluating historical and implied volatility for specific
option trades, it is best to use the most conservative values in
pricing calculations.  For example, if you are going to sell an
an option, use a high estimate, perhaps the maximum value of the
most common (20, 50 and 100-DMA) short-term volatility data.  With
that approach, the current price of the option will have to be
inflated for the premium to appear "overpriced."  In contrast, if
you plan to engage in a strategy where you expect the underlying
issue to be active, then a low volatility estimate (the minimum of
the 20, 50, or 100 DMA) would be more appropriate.  Using that
technique, the option will look "cheap" only when it is relatively
inexpensive, based on historical stock movement.

For more information, read the appropriate chapters in McMillan's
"Options as a Strategic Investment" and Sheldon Natenburg's "Option
Volatility and Pricing."  These are the bibles of floor traders and
they will help you understand the complex subject of volatility and
derivatives pricing.

Regards,

Mark
OIN


SUMMARY OF PREVIOUS CANDIDATES
*****

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

Note:  Margin not used in calculations.

Stock   Price   Last    Option    Price   Gain  Potential
Symbol  Picked  Price   Series    Sold   /Loss  Mon. Yield

XICO     5.09    5.52  MAY  5.00  0.45    0.36*   8.4%
IMMU     2.95    3.79  MAY  2.50  0.65    0.20*   7.6%
ASML     7.59    7.78  MAY  7.50  0.55    0.46*   7.1%
CAL      5.68    8.40  MAY  5.00  1.00    0.32*   5.9%
SEAC     7.80    7.83  MAY  7.50  0.75    0.45*   5.5%
CCRD    11.05   11.76  MAY 10.00  1.50    0.45*   5.1%
ALTR    15.78   15.86  MAY 15.00  1.45    0.67*   5.1%
IFX      8.17    7.50  MAY  7.50  1.00    0.33    5.0%
CTLM     5.18    5.56  MAY  5.00  0.45    0.27*   5.0%
NEOL    13.50   13.84  MAY 12.50  1.80    0.80*   5.0%
UNTD    19.23   19.78  MAY 17.50  2.80    1.07*   4.7%
RINO    13.29   13.54  MAY 12.50  1.40    0.61*   4.5%
COMS     5.17    5.07  MAY  5.00  0.45    0.28*   4.3%
AAII    11.43   11.50  MAY 10.00  1.80    0.37*   4.2%
PLCE    13.34   15.07  MAY 12.50  1.40    0.56*   4.1%
UNTD    19.67   19.78  MAY 17.50  2.95    0.78*   4.1%
NEOL    13.60   13.84  MAY 12.50  1.65    0.55*   4.0%
MSCC    11.77   11.16  MAY 10.00  2.25    0.48*   3.7%

*   Stock price is above the sold striking price.

Comments:

Positive earnings surprises enticed the bulls to run this week
and helped push the SP-500 and NASDAQ above their March highs,
but not the DJ-30.  Is it time to consolidate already?  Next
week should offer some clues.  Monitor closely your positions
as they correct and be critical of any issues that act weaker
than expected.  The gap-open higher by Xicor (NASDAQ:XICO) on
Monday was nice but would have required a roll-in (buy the
stock -- sell the calls later) to achieve our listed cost basis.
As for early-exit candidates, Microsemi (NASDAQ:MSCC), Infineon
Technologies (NYSE:IFX), and 3Com (NASDAQ:COMS) will make the
non-inclusive watch list for this week.

Positions Previously Closed:  None.


NEW CANDIDATES
*********

Sequenced by Target Yield (monthly basis)
*****
Stock   Last   Option    Option  Last  Open  Cost  Days Target
Symbol Price   Series    Symbol  Bid   Int.  Basis Exp. Yield

OSTE    8.39  MAY  7.50  OQQ EU  1.30  762    7.09  21   8.4%
NOVN   14.45  MAY 12.50  NPQ EV  2.50  1360  11.95  21   6.7%
BMRN   12.06  MAY 10.00  NUR EB  2.35  18     9.71  21   4.3%
PDE    15.17  MAY 15.00  PDE EC  0.60  581   14.57  21   4.3%
MVSN   15.97  MAY 15.00  MVU EC  1.40  5     14.57  21   4.3%
TOM     8.01  MAY  7.50  TOM EU  0.70  1782   7.31  21   3.8%
OVRL   18.02  MAY 17.50  QOJ EW  0.95  249   17.07  21   3.6%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

*****
OSTE - Osteotech  $8.39  *** Trading Range? ***

Osteotech (NASDAQ:OSTE) provides services and products primarily
focused in the repair and healing of the musculoskeletal system.
These products and services are marketed primarily to the spinal,
orthopaedic, neurological, oral/maxillofacial, dental and general
surgery markets in the United States and Europe.  The allograft
bone tissue the company processes is procured by independent
tissue banks or other Tissue Recovery Organizations (TROs), mainly
through the donation of tissue from deceased human donors and is
used for transplantation.  The company has two primary operating
segments: the Grafton Demineralized Bone Matrix (DBM) Segment,
and the Base Allograft Bone Tissue Segment.  Osteotech recently
said that it has reached an agreement in principle with GenSci,
which filed bankruptcy, to settle Osteotech's claim against GenSci
arising out of the patent lawsuit in which GenSci was found to have
infringed certain of Osteotech's patents.  Osteotech is also due to
report earnings before the open on April 29.  We simply favor the
year-long trading range near $7 and this position offers traders
a reasonable way to speculate on the near-term trend.

MAY-7.50 OQQ EU LB=1.30 OI=762 CB=7.09 DE=21 TY=8.4%


*****
NOVN - Noven  $14.45  *** Earnings Rally? ***

Noven Pharmaceuticals (NASDAQ:NOVN) is engaged in the development
and manufacture of advanced transdermal drug delivery products
and technologies and prescription transdermal products.  Noven's
principal commercialized products are transdermal drug delivery
systems for use in hormone replacement therapy.  The company's
first major product was an estrogen patch for the treatment of
menopausal symptoms marketed under the brand name Vivelle in the
United States and Canada, and under the brand name Menorest in
Europe and other markets.  Noven's second-generation estrogen
patch was launched in the United States under the brand name
Vivelle-Dot.  Noven also developed a dual estrogen/progestin
transdermal patch for the treatment of menopausal symptoms,
which is marketed under the brand name CombiPatch in the U.S.
and under the brand name Estalis in Europe and certain other
markets.  Noven rallied strongly in February after the company
announced the dismissal of a lawsuit filed against Noven and
reported strong earnings with revenues, pre-tax income and cash
increasing for the 5th consecutive year.  With this quarter's
earnings due prior to the open on April 30, investors appear to
be grabbing shares in anticipation of continued "good" news.
Our outlook is also bullish, due to the recent technical strength
and this position offers a favorable cost basis in the issue.

MAY-12.50 NPQ EV LB=2.50 OI=1360 CB=11.95 DE=21 TY=6.7%


*****
BMRN - Biomarin  $12.06  *** Hot Sector! ***

Biomarin Pharmaceutical (NASDAQ:BMRN) develops enzyme therapies
to treat serious, life-threatening diseases and conditions. The
company's lead product candidate Aldurazyme, is being developed
for the treatment of Mucopolysaccharidosis I (MPS I) disease.
The company is developing its 2nd product candidate, Neutralase,
for reversal of anticoagulation by heparin in patients undergoing
Coronary Artery Bypass Graft (CABG) surgery and angioplasty.  In
addition to Aldurazyme and Neutralase, Biomarin is developing
other enzyme-based therapeutics for the treatment of a variety
of diseases and conditions.  Genzyme (NASDAQ:GENZ), which is in
a joint venture with Biomarin to produce the enzyme replacement
therapy drug, Aldurazyme, has recently received positive opinion
from a European Union committee, which is the final step prior
to marketing the drug.  As for the U.S., BioMarin said the FDA
would decide by April 30 whether to allow the marketing of its
Aldurazyme drug.  The drug was recently judged safe and effective
by an advisory committee to the FDA.  A short-term speculative
play that offers an entry point closer to technical support.
Due diligence is a "must" with this position.

MAY-10.00 NUR EB LB=2.35 OI=18 CB=9.71 DE=21 TY=4.3%


*****
PDE - Pride  $15.17  *** Oil Sector Hedge ***

Pride International (NYSE:PDE) is an international provider of
contract drilling and related services, operating both offshore
and on land.  The company operates a global fleet of 328 rigs,
including two ultra-deepwater drillships, 12 semisubmersible rigs,
35 jackup rigs, 29 tender-assisted, barge and platform rigs, and
250 land-based drilling and workover rigs.  Pride operates in more
than 30 countries and marine provinces.  The significant diversity
of the company's rig fleet and areas of operation enables it to
provide a broad range of services, and to take advantage of market
upturns while reducing its exposure to sharp downturns in any
market sector or geographic region.  A purely technical play on
the long-term base or trading-range of Pride.  This position,
a hedge to the broader market, offers investors a favorable entry
point on a Stage I stock with a cost basis near technical support.

MAY-15.00 PDE EC LB=0.60 OI=581 CB=14.57 DE=21 TY=4.3%


*****
MVSN - Macrovision  $15.97  *** Own This One! ***

Macrovision (NASDAQ:MVSN) develops and licenses rights management
and copy protection technologies.  The company's customers include
Hollywood studios, independent video producers, enterprise and
consumer software vendors, digital set-top box manufacturers and
digital pay-per-view (PPV) network operators. Macrovision provides
content owners with the means to market, distribute, manage and
protect video, software and audio content.  The company also is
in the business of consumer software copy protection.  Macrovision
offers CD-ROM copy protection and rights management technologies
to a variety of software publishers in the personal computer games,
home education, information publishing and desktop applications
software markets.  Macrovision recently said it reached a licensing
deal with Microsoft (NASDAQ:MSFT) to offer record labels the
capability to design and produce CDs that can play on both
traditional stereos and PCs.  We simply favor the bullish move
above the March high on heavy volume and investors who are
interested in a long-term portfolio stock in the media sector
should consider this position.

MAY-15.00 MVU EC LB=1.40 OI=5 CB=14.57 DE=21 TY=4.3%


*****
TOM - Tommy Hilfiger  $8.01  *** Buy-Out Rumors? ***

Tommy Hilfiger (NYSE:TOM) designs, sources and markets men's and
women's sportswear, jeanswear and childrenswear under the Tommy
Hilfiger trademarks.  Through a range of strategic licensing
agreements, Tommy Hilfiger also offers a broad array of related
apparel, accessories, footwear, fragrance and home furnishings.
The company's products can be found in department and specialty
stores throughout the U.S., Canada, Europe, Mexico, Central and
South America, Japan, Hong Kong and other countries in the Far
East, as well as the company's own network of specialty and outlet
stores in the United States, Canada and Europe.  Tommy Hilfiger
has rallied sharply on news that clothing maker Jones Apparel
(NYSE:JNY) may be interested in a buy-out.  Traders who believe
the upside activity will continue can speculate on that outcome
with this short-term position.

MAY-7.50 TOM EU LB=0.70 OI=1782 CB=7.31 DE=21 TY=3.8%


*****
OVRL - Overland  $18.02  *** Stellar Earnings! ***

Overland Storage (NASDAQ:OVRL) designs, develops, manufactures,
markets and supports magnetic tape data automation solutions.
Businesses use these solutions for backup, archival and data
interchange functions in high-availability network computing
environments.  The company's primary products are automated
tape libraries, minilibraries and loaders that combine electro-
mechanical robotics, electronic hardware and firmware.  Overland
also distributes products manufactured by other OEMs and markets
various other products, including spare parts and tape media.
The company licenses a proprietary tape encoding technology
that it developed and patented under the name Variable Rate
Randomizer (VR2).  For the quarter ended March 31, 2003, OVRL
reported record revenue of $56.2 million compared to revenue of
$42.8 million in the 3rd-quarter of the prior fiscal year.  Net
income reached a record $2.4 million, or $0.20 per diluted share,
compared to $2.1 million, or $0.18 per diluted share, last year.
The solid fundamental outlook has translated into higher share
values and investors who wouldn't mind owning the issue near a
cost basis of $17 can profit from future upside activity with
this position.

MAY-17.50 QOJ EW LB=0.95 OI=249 CB=17.07 DE=21 TY=3.6%


*****


*****************
SUPPLEMENTAL COVERED CALL CANDIDATES
*****************

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Target Yield (monthly basis)
*****
Stock   Last   Option    Option  Last  Open  Cost  Days Target
Symbol Price   Series    Symbol  Bid   Int.  Basis Exp. Yield

FTS    11.12  MAY 10.00  FTS EB  1.70  717    9.42  21   8.9%
DRIV   15.00  MAY 15.00  DQI EC  0.75  619   14.25  21   7.6%
BCGI   18.46  MAY 17.50  QGB EW  1.60  253   16.86  21   5.5%
XICO    5.52  MAY  5.00  UOB EA  0.70  62     4.82  21   5.4%
CYBX   23.08  MAY 22.50  QAJ EX  1.35  153   21.73  21   5.1%
QSFT   10.56  MAY 10.00  QUD EB  0.90  372    9.66  21   5.1%
MCRL   10.19  MAY 10.00  MIQ EB  0.50  264    9.69  21   4.6%
CTEC   10.30  MAY 10.00  UBC EB  0.60  0      9.70  21   4.5%
ICOS   25.13  MAY 22.50  IIQ EX  3.30  599   21.83  21   4.4%
GNSS   16.59  MAY 15.00  QFE EC  2.00  1951  14.59  21   4.1%



*****************
NAKED PUT SECTION
*****************

Options 101: Success With Changing Trends
By Ray Cummins

A number of readers have offered their concerns about the staying
power of the recent rally, however the more important question is
how to profit from the near-term bullish activity with the stock
market in a primary downtrend.

We all know how difficult it has been to forecast market direction
over the past few months and it's no surprise that investors are
leery of any (apparently) unexplainable upside activity in share
values.  At the core of this anxiety are worries that unfavorable
economics and mediocre company fundamentals will soon bring an end
to the current exuberance, probably within days after they have
committed to an optimistic viewpoint for stocks.  So, considering
the current conditions, what is the correct course of action for
a conscientious, well-informed investor?  There are a number of
alternatives, most of which fall into three categories: attempt to
trade the market's short-term gyrations for limited profits, adopt
a bullish, long-term outlook and use conservative strategies that
will benefit from a recovery in stocks, or remain on the sidelines
until the primary directional trend (even if it is a lateral one)
is better defined.

This week, we will focus on the first choice: trading the market's
short-term gyrations for limited profits.  The first step in this
process is to define the risk-reward outlook of the strategy used
to profit in the current bullish trend.  If the strategy is stock
ownership, the reward potential is relatively small, but the risk
in a carefully selected issue is also lower than normal, due to the
oversold condition of most stocks.  This situation exists because
of the extensive selling pressure produced by the collapsing market
over the past three years.  Most stocks fell from grace sharply, in
such a short time there has been little opportunity to build bases
on the way down.  After these stocks finally hit bottom and begin
to recover, there are few resistance levels to impede their climb.
In addition, stocks make larger (percentage) moves in the initial
stages of a rally as opposed to the final few weeks of a bullish
trend when the issue is struggling to maintain its upward momentum.

While stock ownership is the driving force behind market movement,
option traders are better equipped to take advantage of this unique
opportunity with speculative, low cost techniques such as buying
out-of-the-money calls and call-debit spreads.  The key to success
with this approach is to concentrate on option pricing and leverage
(often referred to as delta - a measure of the relative percentage
changes between the stock and the option.  More on that in a future
narrative).  Some traders focus on "percent to double," which is a
relatively ineffective calculation that tells you what percent the
underlying stock must move in order for the price of the option to
double.  Without going into great detail, there are simply too many
variables (time value and implied volatility being the most obvious)
that affect an option's price while it is trading and the only time
the "percent to double" calculation is truly accurate is at option
expiration.  Ok, back to the important stuff.  Option pricing comes
first because you must know the difference between a fairly valued
option; one that has good theoretical opportunity for profit, and a
overpriced option; where the initial cost of the of the position is
artificially inflated, thus reducing its profit potential.  You must
also understand the various ways of measuring leverage, such as the
concept of delta, or you will not know which option (or combination
position) provides the best ratio or risk and reward, based on a
specific magnitude of movement in a given time-frame.

Once you have mastered the fundamentals of option pricing and the
essentials of percentage-related components of an option and its
underlying stock (for a given percentage change in the stock, the
option will increase by a larger percentage, thus magnifying the
profit potential of a given move) you will have an excellent basis
for choosing the correct strategy in a particular market situation.
Of course, you could always choose to stay on the sidelines...but
that wouldn't be much fun at all, would it?

Good Luck!


SUMMARY OF PREVIOUS CANDIDATES
*****

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

Stock   Price   Last    Option    Price   Gain   Simple  Max
Symbol  Picked  Price   Series    Sold   /Loss   Yield  Yield

RMBS    15.75   13.83  MAY 12.50  0.55    0.55*   3.3%  10.8%
LSCC     8.54    8.06  MAY  7.50  0.25    0.25*   3.7%  10.3%
NFLX    19.55   21.15  MAY 15.00  0.60    0.60*   3.0%   9.6%
FTS     10.06   11.12  MAY  7.50  0.25    0.25*   3.0%   9.6%
WYNN    16.22   17.02  MAY 12.50  0.40    0.40*   2.9%   9.5%
AVID    25.54   27.48  MAY 22.50  0.80    0.80*   3.2%   8.7%
EYE     11.96   13.85  MAY 10.00  0.35    0.35*   2.6%   8.0%
BOBJ    20.75   21.52  MAY 17.50  0.40    0.40*   2.5%   8.0%
OVTI    25.29   24.20  MAY 20.00  0.40    0.40*   2.2%   8.0%
JCOM    32.12   28.87  MAY 25.00  0.75    0.75*   2.2%   7.6%
SEPR    15.77   19.00  MAY 12.50  0.30    0.30*   2.1%   7.5%
GTRC    21.10   23.25  MAY 20.00  0.65    0.65*   2.9%   7.1%
SEPR    16.35   19.00  MAY 12.50  0.35    0.35*   2.1%   7.0%
BCGI    18.90   18.46  MAY 15.00  0.25    0.25*   1.8%   6.7%
RIMM    14.88   14.77  MAY 12.50  0.35    0.35*   2.1%   6.5%
JCOM    31.96   28.87  MAY 22.50  0.50    0.50*   2.0%   6.3%
MRVL    23.15   22.35  MAY 20.00  0.35    0.35*   1.9%   5.9%
NFLX    20.77   21.15  MAY 15.00  0.30    0.30*   1.8%   5.9%
BOBJ    18.31   21.52  MAY 15.00  0.35    0.35*   1.7%   5.8%
INTC    18.66   18.28  MAY 17.50  0.35    0.35*   2.2%   5.7%
ADRX    14.71   15.44  MAY 12.50  0.25    0.25*   1.8%   5.5%
CMCSK   28.44   29.96  MAY 25.00  0.60    0.60*   1.8%   5.1%

*  Stock price is above the sold striking price.

Comments:

Friday's retreat brought investors back to reality as the major
equity averages gave up a large portion of their recent gains.
The public's renewed optimism for stocks, which can be clearly
seen in the complacent attitude reflected by popular sentiment
gauges, suggests another downturn may be looming large.  Traders
are cautioned to initiate new bullish positions in only the most
favorable issues and diligently manage any positions with less
than outstanding technical strength.  Issues on the watch-list
include j2 Global (NASDAQ:JCOM), Intel (NASDAQ:INTC), Marvell
Technology (NASDAQ:MRVL), Lattice Semiconductor (NASDAQ:LSCC),
and Rambus (NASDAQ:RMBS).

Previously Closed Positions: None


WARNING: THE RISK IN SELLING NAKED OPTIONS IS SUBSTANTIAL!
*****

The sale of uncovered puts entails considerable financial risk,
far more than the initial margin or collateral required to open
a position.  The maximum financial obligation for the sale of a
naked put is the strike price (of the underlying stock) that is
sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of puts should have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  In addition, there is one very important rule when using
this strategy: Don't sell puts on stocks that you don't want to
own!  Why?  Because stocks occasionally experience catastrophic
declines, exponentially increasing the margin maintenance and
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock's price falls.
Many professional traders suggest closing the position when the
underlying share value moves below the sold strike, or using a
"buy-to-close" stop order at a price that is no more than twice
the original premium received from the sold option.


MARGIN REQUIREMENTS

The Initial Margin is the amount of collateral you must have in
your account to initiate the position.  In specific terms, margin
refers to cash or securities required of an option writer by his
brokerage firm as collateral for the writer's obligation to buy
or sell the underlying interest if assigned through an exercise.
The Maintenance Margin is the amount of cash (or securities)
required to offset the changing collateral requirements of the
written options in your portfolio.  As the price of the option
and the underlying stock changes, so does the maintenance margin.
With (short) put options, the margin requirements can increase
when the underlying stock price declines and also when it rises
significantly.  The reason is the manner in which the collateral
amount is determined (with the formula listed above) and traders
should always consider not only the initial margin requirement,
but also the maximum margin needed for the life of the position.
Option writers occasionally have to meet calls for additional
margin during adverse market movements and even when there is
enough equity in the account to avoid a margin call, the need
for increased collateral will make that equity unavailable for
other purposes.  Please consider these facts carefully before
you initiate any "naked" option positions.

For more information on margin requirements, please refer to:

http://www.cboe.com/LearnCenter/pdf/MarginManual2000.pdf


MONTHLY YIELD: MAXIMUM & SIMPLE

The Maximum Monthly Yield (listed in the summary and with each
new candidate) is the greatest possible profit available in the
position.  This amount, expressed as a percentage, is based on
the initial margin requirement as determined by the Board of
Governors of the Federal Reserve, the U.S. options markets and
other self-regulatory organizations.  Although increased margin
requirements may be imposed either generally or in individual
cases by various brokerage firms, our calculations use the widely
accepted margin formulas from the Chicago Board Options Exchange.
The Simple Monthly Yield is based on the cost of the underlying
issue (in the event of assignment), including the premium from
the sold option, thus it reflects the maximum potential loss in
the position.


NEW CANDIDATES
*********

Sequenced by Maximum Yield (monthly basis - margin)
*****
Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

WYNN   17.02  MAY 15.00  UWY QC 0.50 694  14.50  21   5.0%  13.7%
PHSY   30.20  MAY 27.50  HYQ QY 0.70 314  26.80  21   3.8%  10.1%
MSTR   30.35  MAY 25.00  EOU QE 0.50 205  24.50  21   3.0%   9.9%
GTRC   23.25  MAY 22.50  UGR QX 0.50 70   22.00  21   3.3%   8.0%
SEPR   19.00  MAY 17.50  ERQ QW 0.35 2706 17.15  21   3.0%   7.9%
VRTS   21.20  MAY 20.00  VIV QD 0.40 7399 19.60  21   3.0%   7.5%
CMCSA  31.73  MAY 30.00  CCQ QF 0.40 1192 29.60  21   2.0%   5.1%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, SY-Simple Yield (monthly basis - without
margin), MY-Maximum Yield (monthly basis - using margin).

*****
WYNN - Wynn Resorts  $17.02  *** All-Time High! ***

Wynn Resorts (NASDAQ:WYNN) is constructing and will own and operate
Le Reve, a luxury hotel and destination casino resort in Las Vegas,
Nevada.  Le Reve will be situated on approximately 192 acres at the
site of the former Desert Inn Resort on the Las Vegas Strip.  The
facility will feature approximately 2,700 guest rooms and suites,
a casino featuring an estimated 136 table games and 2,000 slot
machines, a baccarat salon and private, high-limit gaming rooms;
an eight-story man-made mountain enclosing a three-acre lake in
front of the hotel and 18 dining outlets, including six fine-dining
restaurants; an 18-hole championship golf course on the premises; a
water-based entertainment production; on-site Ferrari and Maserati
dealerships and an art gallery.  The facility is scheduled to open
to the public in April 2005.  WYNN is a relatively new issue but it
has quickly become a favorite among Gaming and Entertainment sector
investors.  The company's shares closed at a new "all-time" high on
Friday and traders can speculate conservatively on the near-term
performance of the stock with this position.

MAY-15.00 UWY QC LB=0.50 OI=694 CB=14.50 DE=21 TY=5.0% MY=13.7%


*****
PHSY - PacifiCare Health Systems  $30.20  *** Earnings Due! ***

PacifiCare Health Systems (NASDAQ:PHSY) offers managed care and
other health insurance products to employer groups and Medicare
beneficiaries in eight western states and Guam.  The company's
commercial and senior plans include various health maintenance
organizations (HMOs), preferred provider organizations (PPOs),
and Medicare Supplement products.  The firm also offers a variety
of specialty managed care products and services that employees can
purchase as a supplement to basic commercial and senior medical
plans or as stand-alone products.  These products include pharmacy
benefit management (PBM), behavioral health services, group life
and health insurance, dental and vision benefit plans.  Pacificare
recently said its first-quarter profit may be double the company's
earlier projections because it overestimated prior health-care
costs.  Management said a light flu season and better membership
trends helped reduce health-care expenditures.  Goldman Sachs
backed that outlook, raising its rating on Pacificare's shares to
"in-line" from "under-perform."  The company's quarterly report
is due next week and traders can speculate on the outcome of the
announcement with this position.

MAY-27.50 HYQ QY LB=0.70 OI=314 CB=26.80 DE=21 TY=3.8% MY=10.1%


*****
MSTR - MicroStrategy  $30.35  *** Premium Selling! ***

MicroStrategy (NASDAQ:MSTR) is a global leader in the increasingly
critical business intelligence software market.  Large and small
firms alike are harnessing MicroStrategy's business intelligence
software to gain vital insights from their data to help them
proactively enhance cost-efficiency, productivity and customer
relations and optimize revenue-generating strategies.  The firm's
business intelligence platform offers exceptional capabilities that
provide organizations, in virtually all facets of their operations,
with user-friendly solutions to their data query, reporting, and
advanced analytical needs, and distributes valuable insight on this
data to users via Web, wireless, and voice.  Shares of MSTR have
been in "rally mode" since its lows in mid-2002, up over 500% in
just 9 months.  The issue is testing 52-week highs near $30 and
with earnings due next week, there is lots of speculation in the
May put options.  Traders with a bullish outlook on the issue can
take advantage of the inflated option premiums with this position.

MAY-25.00 EOU QE LB=0.50 OI=205 CB=24.50 DE=21 TY=3.0% MY=9.9%


*****
GTRC - Guitar Center  $23.25  *** Solid Earnings! ***

Guitar Center (NASDAQ:GTRC) is a musical instruments retailer that
operates Guitar Center and American Music stores.  Guitar Center
stores are organized into five departments, each focusing on one
product category.  The American Music stores sell band as well as
orchestral instruments and related accessories, primarily to the
school band market.  In addition to its musical products, Guitar
Center offers, through its retail and direct response operations,
technical product information, confirmation of needs by a live
person and after-sale support from a musician-based staff.  The
company's Musician's Friend unit is an integrated e-commerce and
catalog business that offers an assortment of products and online
promotions throughout the year.  On Thursday, Guitar Center said
its quarterly income rose 53% on strong sales at Guitar Center and
American Music stores.  The firm also said full-year earnings will
be higher than Wall Street estimates and investors can establish a
cost basis near $20 in a unique retail issue with this position.

MAY-22.50 UGR QX LB=0.50 OI=70 CB=22.00 DE=21 TY=3.3% MY=8.0%


*****
SEPR - Sepracor  $19.00  *** New 52-Week High! ***

Sepracor (NASDAQ:SEPR) is a research-based pharmaceutical company
dedicated to treating and preventing human disease through the
discovery, development and commercialization of pharmaceutical
compounds, including product candidates directed toward serving
unmet medical needs.  The firm's proprietary compounds are either
single-isomer or active metabolite forms of existing drugs, which
Sepracor refers to as improved chemical entities, or new chemical
entity compounds, which are unrelated to current products.  In
February, Sepracor was awarded a patent covering the use of Estorra
for the treatment of insomnia.  Earlier this month, Sepracor said
the FDA had filed the company's New Drug Application for Estorra
and Merrill Lynch followed that announcement with a "buy" rating
on the company's shares, saying the drug stock is "attractive."
Last week, Sepracor said its first-quarter loss narrowed on higher
sales of its allergy and asthma drugs, helping revenue rise to $84
million from $56 million a year-ago.  Sepracor also said it was
still conducting clinical trials to support an application for
approval of allergy drug Soltara, which was rejected by U.S.
regulators in March 2002.  Investors who wouldn't mind owning this
popular drug stock near a cost basis of $15 should consider this
position.

MAY-17.50 ERQ QW LB=0.35 OI=2706 CB=17.15 DE=21 TY=3.0% MY=7.9%


*****
VRTS - Veritas Software  $21.20  *** Solid Earnings! ***

Veritas Software (NASDAQ:VRTS) is an independent supplier of
storage software products and services.  The company's storage
software includes storage management and data protection software,
as well as clustering, replication and storage area networking
software.  The company offers solutions to help solve the problems
of data-intensive business environments by providing essential
storage software and storage virtualization solutions that enable
customers to protect and access their business-critical data.  The
company's products operate across computing environments ranging
from the desktop computer to the large enterprise data center,
including storage area networks, to protect critical data, to
provide high availability and to guard against disasters.  Last
week, Veritas reported that first-quarter revenue increased 6.5%
year over year, while income was $0.01 lower than in the year-ago
period.  Both earnings and revenue exceeded consensus estimates
and analysts at Wachovia and Legg Mason upgraded the company on
the news.  Investors who wouldn't mind owning the issue at a cost
basis near $20 should consider this position.

MAY-20.00 VIV QD LB=0.40 OI=7399 CB=19.60 DE=21 TY=3.0% MY=7.5%


*****
CMCSA - Comcast  $31.73  *** Portfolio Issue? ***

Comcast (NASDAQ:CMCSK) is a cable operator involved in three
principal lines of business: cable, through the development,
management and operation of broadband communications networks;
commerce, through QVC, its electronic retailing subsidiary; and
content, through its consolidated subsidiaries Comcast Spectacor,
Comcast SportsNet, Comcast SportsNet Mid-Atlantic, Comcast Sports
Southeast, E! Entertainment Television, The Golf Channel, Outdoor
Life Network, G4 Media, and through other programming investments.
The company has deployed digital cable applications and high-speed
Internet service to most of its cable communications systems.
The media-cable TV sector is "in the news" right now and Comcast
has been one of the best performing issues in the group over the
past few months.  Analysts say Comcast's broadband ownership is
the key to success and earnings growth may be in the double-digits
for 2003.  The stock is also fundamentally cheap, trading at 8.5
times 2003 earnings, and investors who believe the issue is a
"good buy" at a cost basis near $30 should consider this position.

MAY-30.00 CCQ QF LB=0.40 OI=1192 CB=29.60 DE=21 TY=2.0% MY=5.1%


*****


*****************
SUPPLEMENTAL NAKED PUT CANDIDATES
*****************

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Maximum Yield (monthly basis - margin)
*****
Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

XMSR    8.70  MAY  7.50  QSY QU 0.25 2471  7.25  21   5.0%  14.3%
APPX   20.65  MAY 17.40  AQO QW 0.50 2122 16.90  21   4.3%  13.1%
MLNM   10.82  MAY 10.00  QMN QB 0.30 1558  9.70  21   4.5%  11.4%
ILXO   10.91  MAY 10.00  IUE QB 0.25 108   9.75  21   3.7%   9.8%
AVID   27.48  MAY 25.00  AQI QE 0.50 154  24.50  21   3.0%   8.0%
IART   26.30  MAY 25.00  UJI QE 0.50 0    24.50  21   3.0%   7.5%
CVTX   18.91  MAY 17.50  UXC QT 0.30 274  17.20  21   2.5%   6.7%
ERES   30.05  MAY 27.50  UDB QY 0.45 978  27.05  21   2.4%   6.6%
AVCT   30.08  MAY 27.50  QVX QY 0.40 204  27.10  21   2.1%   5.9%
SNDK   23.01  MAY 20.00  SWQ QD 0.25 1057 19.75  21   1.8%   5.6%
BBY    32.80  MAY 30.00  BBY QF 0.40 2710 29.60  21   2.0%   5.4%


SEE DISCLAIMER IN SECTION ONE
*****************************


************************
SPREADS/STRADDLES/COMBOS
************************

Market Bulls Get A Reality Check!
By Ray Cummins

Stocks retreated Friday, giving back much of their recent gains
as uninspiring earnings reports and mediocre economic forecasts
moderated investor optimism for a quick recovery in share values.

The Dow Jones industrials slid 133 points to 8,306 on weakness in
Altria Group (NYSE:MO), General Motors (NYSE:GM), 3M (NYSE:MMM),
Merck (NYSE:MRK), Disney (NYSE:DIS), Johnson & Johnson (NYSE:JNJ),
and Honeywell (NYSE:HON).  The technology-laden NASDAQ Composite
index fell 22 points to 1,434 as semiconductor-equipment shares
sank on a sector downgrade from Smith Barney.  Telecom, computer
storage, disk-drive, and software stocks also drifted lower.  The
S&P 500-stock index lost 12 points to 898 with selling pressure
seen in tobacco, auto manufacturers, oil & gas services, retail,
and financial shares.  Breadth was negative with losers outpacing
winners by roughly 3 to 2 on both the NYSE and the NASDAQ.  About
1.33 billion shares traded on the Big Board, while 1.48 billion
shares changed hands on technology exchange.  In the bond market,
the benchmark 10-year note gained 11/32 to 99-30/32, taking its
yield down to a three-week low of 3.88%.

*****************
PORTFOLIO SUMMARY
*****************

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


PUT CREDIT SPREADS
******************

Symbol  Pick   Last   Month LP  SP  Credit  CB     G/L   Status

AZO     76.38  78.13   MAY  65  70   0.55  69.45  $0.55   Open
BSTE    42.33  41.55   MAY  30  35   0.50  34.50  $0.50   Open
GILD    44.15  46.14   MAY  37  40   0.30  39.70  $0.30   Open
OIH     54.58  56.53   MAY  45  50   0.55  49.45  $0.55   Open
MDT     46.90  48.08   MAY  42  45   0.35  44.65  $0.35   Open
NBR     41.11  41.40   MAY  35  37   0.30  37.20  $0.30   Open
BBBY    39.52  37.92   MAY  35  37   0.30  37.20  $0.30   Open
PFCB    42.47  41.03   MAY  35  40   0.55  39.45  $0.55   Open

LP = Long Put  SP = Short Put  CB = Cost Basis  G/L = Gain/Loss

The bullish position in Bed, Bath and Beyond (NASDAQ:BBBY) is on
the watch-list and conservative traders should consider closing
the spread on any further downside movement.


CALL CREDIT SPREADS
*******************

Symbol  Pick   Last   Month LC  SC  Credit  CB      G/L   Status

CAM     49.39  47.50   MAY  60  55   0.45  55.45   $0.45   Open
DRYR    67.40  63.00   MAY  75  70   1.10  71.10   $1.10   Open
HCA     37.70  31.13   MAY  45  42   0.25  42.75   $0.25   Open
VAR     49.04  54.24   MAY  60  55   0.60  55.60   $0.60   Open
OIH     54.58  56.53   MAY  65  60   0.50  60.50   $0.50   Open
BAC     71.34  72.58   MAY  80  75   0.60  75.60   $0.60   Open
GSK     38.09  39.80   MAY  42  40   0.30  40.30   $0.30   Open
LLL     36.24  44.00   MAY  45  40   0.55  40.55  ($1.55)  Open
OEX    440.97 456.20   MAY 480 475   0.55 475.55   $0.55   Open
WLP     76.80  74.25   MAY  90  85   0.50  85.50   $0.50   Open
SYK     66.35  66.40   MAY  75  70   0.65  70.65   $0.65   Open
IGT     79.55  83.83   MAY  90  85   0.55  85.55   $0.55   Open

LC = Long Call  SC = Short Call  CB = Cost Basis  G/L = Gain/Loss

As noted last week, L-3 Communications (NYSE:LLL) was a candidate
for early exit and the company's bullish earnings report produced
a rally in the issue.  Conservative traders should have exited the
position on Monday when the issue closed above the sold strike at
$40.  The portfolio summary reflects the loss as of the following
morning, after the firm posted quarterly earnings.  Other issues
on the "early exit" watch-list are GlaxoSmithKline (NYSE:GSK) and
International Game Technology (NYSE:IGT) and conservative traders
should consider closing those positions on any additional upside
activity.


CALL DEBIT SPREADS
******************

Symbol  Pick   Last  Month  LC  SC   Debit   B/E   G/L   Status

BGEN    35.67  38.51  MAY   30  32   2.20   32.20  0.30   Open
GILD    44.04  46.14  MAY   38  40   2.25   39.75  0.25   Open
SLM    115.05 113.23  MAY  105 110   4.50  109.50  0.50   Open

LC = Long Call  SC = Short Call  B/E = Break-Even  G/L = Gain/Loss

Traders should monitor the position in SLM Corporation (NYSE:SLM)
closely in the coming sessions as a test of support near $112,
and possibly at $110, appears likely.


PUT DEBIT SPREADS
*****************

Symbol  Pick   Last  Month  LP  SP   Debit   B/E   G/L   Status

WMT     52.98  55.00  MAY   60  55   4.30   55.70  0.29   Open
BSX     42.19  42.91  MAY   47  45   2.10   45.40  0.40   Open

LP = Long Put  SP = Short Put  B/E = Break-Even  G/L = Gain/Loss

Wal-Mart (NYSE:WMT) rallied again this week, however the technical
resistance area near $55 (and again at $57) seems to be limiting
the upside activity.  We will continue to monitor the issue for
signs of a confirmed upside "break-out" in the coming sessions.


SYNTHETIC (BULLISH)
*******************

Stock   Pick   Last   Expir.  Long  Short  Initial  Max.    Play
Symbol  Price  Price  Month   Call   Put   Credit   Value  Status

OVRL    15.99  18.02   MAY     17    15     0.10    1.00    Open
DCTM    16.09  17.30   MAY     17    15    (0.30)   1.20   No Play
SMH     26.43  25.88   AUG     30    22     0.10    0.00    Open

Documentum (NASDAQ:DCTM) did not offer the target entry price, but
the position was profitable for traders who paid a small debit to
initiate the position.  The suggested entry price was available
in the Semiconductor Holdrs (AMEX:SMH) position late in the week,
however it appears the semiconductor group will move lower in the
coming sessions.


SYNTHETIC (BEARISH)
*******************

Stock   Pick   Last   Expir.  Long  Short  Initial  Max.    Play
Symbol  Price  Price  Month   Put   Call   Credit  Value   Status

QQQ     25.51  26.95   MAY    24     27     0.10    0.00   Closed

As noted last week, conservative traders should have exited this
position when the issue closed above recent resistance near $27.


CALENDAR & DIAGONAL SPREADS
***************************

Stock   Pick   Last     Long     Short    Current   Max     Play
Symbol  Price  Price   Option    Option    Debit   Value   Status

BMET    28.52  30.26   JUL-30C   MAY-30C  (0.20)   0.70     Open
ESI     29.11  27.90   OCT-30C   MAY-30C   2.00    2.40     Open
OCR     27.07  25.48   JUN-27C   MAY-27C   0.60    0.40     Open
MO      32.13  32.19   JUN-27P   MAY-27P   0.95    0.45     Open

Biomet (NASDAQ:BMET) ended the April expiration period at maximum
profit and traders were able to transition to May options for a
credit near $1.00, making the position risk-free.  Positions in
Altria Group (NYSE:MO), which has already offered a small profit,
and Omnicare (NYSE:OCR) were not available at the target entry
prices, however we are tracking the plays at the higher initial
debits.


DEBIT STRADDLES
***************

Stock   Pick   Last   Exp.   Long  Long  Initial   Max     Play
Symbol  Price  Price  Month  Call  Put    Debit   Value   Status

LNC     29.88  31.73   MAY    30    30    3.00     3.70    Open?

Lincoln National (NYSE:LNC) rallied early in the week and traders
who closed the bullish portion of the position after the straddle
passed the break-even point were treated to a nice profit on both
sides of the play.


CREDIT STRANGLES
****************

No Open Positions


Questions & comments on spreads/combos to Contact Support
*************
NEW POSITIONS
*************

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.

**************
CREDIT SPREADS
**************

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may be higher than other plays in the same strategy, due to
small disparities in option pricing.  Current news and market
sentiment will have an effect on these issues, so review each
play individually and make your own decision about its outcome.

*****
GENZ - Genzyme General  $39.82  *** Fabrazyme Approved! ***

Genzyme General Division (NASDAQ:GENZ) is a division of Genzyme
Corporation, a biotechnology and human healthcare company that
develops products and provides services for unmet medical needs.
Genzyme General develops and markets therapeutic products and
diagnostic products and services with an emphasis on genetic
disorders and other chronic debilitating diseases with defined
patient populations.  The company is organized into two segments,
Therapeutics, which focuses on developing and marketing products
for genetic diseases and other chronic debilitating diseases,
including a family of diseases known as lysosomal storage
disorders, and specialty therapeutics, and Diagnostic Products,
which develops, markets and distributes in vitro diagnostic
products.  The company also operates a wholly owned subsidiary,
GelTex Pharmaceuticals.

GENZ - Genzyme General  $39.82

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-35.00  GZQ-QG  OI=6357  A=$0.30
SELL PUT  MAY-37.50  GZQ-QO  OI=1669  B=$0.55
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$37.25


*****
IVGN - Invitrogen  $31.45  *** Biotech Bottom-Fishing! ***

Invitrogen (NASDAQ:IVGN) develops, manufactures and markets
research tools in kit form and provides other research products
and services to biotechnology and biopharmaceutical researchers
and companies worldwide.  The company manufactures and markets
thousands of products and services that simplify and improve
gene cloning, gene expression, and gene analysis techniques for
corporate, academic and government entities.  The company also
engages in technology licensing, research services, large-scale
production, and life science technical expertise and support.
Founded in 1987, Invitrogen is headquartered in Carlsbad,
California and has operations in more than 20 countries and
distributor relationships in 50 more.  The company employs
approximately 2,800 people at its worldwide locations.

IVGN - Invitrogen  $31.45

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-27.50  IUV-QY  OI=1818  A=$0.15
SELL PUT  MAY-30.00  IUV-QF  OI=552   B=$0.40
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$29.75


*****
SEE - Sealed Air  $41.62  *** Solid Earnings! ***

Sealed Air (NYSE:SEE), operating through its subsidiaries, is
engaged in the manufacture and sale of a wide range of food,
protective and specialty packaging products.  The firm operates
in two business segments: Food Packaging, which provides a wide
variety of flexible films, bags and associated packaging and
absorbent pads, and Protective and Specialty Packaging, which
include its cushioning and surface protection products and also
certain other products.  Sealed Air conducts substantially all
of its business through two direct wholly owned subsidiaries,
Cryovac and Sealed Air Corporation.  These two subsidiaries
directly and indirectly own substantially all of the assets of
the business and conduct operations themselves and through
subsidiaries around the globe.

SEE - Sealed Air  $41.62

PLAY (less conservative - bullish/credit spread):

BUY  PUT  MAY-35.00  SEE-QG  OI=4749  A=$0.25
SELL PUT  MAY-40.00  SEE-QH  OI=573   B=$0.85
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$39.40


*****
INTU - Intuit  $37.24  *** Next Leg Down? ***

Intuit (NYSE:INTU) is a provider of business tax preparation and
personal finance software products and Web-based services that
simplify complex financial tasks for consumers, small businesses
and accounting professionals.  The company's principal products
and services include Quicken, QuickBooks, Quicken TurboTax,
ProSeries, Lacerte and Quicken Loans. Intuit offers products and
services in five principal business divisions, which include Small
Business, Tax, Personal Finance, Quicken Loans and Global Business.

INTU - Intuit  $37.24

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-45.00  IQU-EI  OI=911   A=$0.15
SELL CALL  APR-40.00  IQU-EH  OI=6065  B=$0.55
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$40.45


*****
MCK - McKesson  $23.94  *** Earnings Speculation Only! ***

McKesson (NYSE:MCK), a healthcare service and technology company,
delivers supply and information management solutions designed to
reduce costs and improve quality for healthcare customers.  The
firm conducts its business through three segments: Pharmaceutical
Solutions, Medical-Surgical Solutions and Information Solutions.
The Pharmaceutical Solutions segment includes the company's U.S.
and Canadian pharmaceutical and healthcare products distribution
businesses and an equity interest in a pharmaceutical distributor
in Mexico.  The Medical-Surgical Solutions segment distributes
medical-surgical supplies and equipment, and provides logistics
and related services within the United States.  The Information
Solutions segment delivers enterprise-wide patient care, clinical,
financial, supply chain, managed care and strategic management
software solutions, as well as outsourcing and other services, to
healthcare organizations throughout the United States and some
foreign countries.

MCK - McKesson  $23.94

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAY-27.50  MCK-EY  OI=1058  A=$0.15
SELL CALL  MAY-25.00  MCK-EE  OI=1703  B=$0.40
INITIAL NET-CREDIT TARGET=$0.25-$0.35
POTENTIAL PROFIT(max)=11% B/E=$25.25


*****
NVLS - Novellus Systems  $27.21  *** Chip Sector Retreat! ***

Novellus Systems (NASDAQ:NVLS) manufactures, sells and services
semiconductor processing equipment.  The company's products are
comprised primarily of advanced systems used to deposit thin
conductive and insulating films on semiconductor devices, as well
as equipment for preparing the device surface prior to these
deposition processes.  Novellus is a supplier of high productivity
deposition and surface preparation systems used in the fabrication
of integrated circuits.  Chemical Vapor Deposition systems employ
a chemical plasma to deposit all of the dielectric (insulating)
layers and certain of the metal (conductive) layers on the surface
of a semiconductor wafer.  Physical Vapor Deposition systems are
used to deposit conductive metal layers by sputtering metallic
atoms from the surface of a target source via high DC power.
Electrofill systems are used for depositing copper conductive
layers in a dual damascene design architecture using an aqueous
solution.

NVLS - Novellus Systems  $27.21

PLAY (very conservative - bearish/credit spread):

BUY  CALL  MAY-32.50  NLQ-EZ  OI=1976  A=$0.10
SELL CALL  MAY-30.00  NLQ-EF  OI=5657  B=$0.30
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$30.25


*************
DEBIT SPREADS
*************

These candidates offer a risk-reward outlook similar to credit
spreads, however there is no margin requirement as the initial
debit for the position is also the maximum loss.  Since these
positions are based primarily on technical indications, traders
should review the current news and market sentiment surrounding
each issue and make their own decision about the outcome of the
position.

*****
CCMP - Cabot Microelectronics  $42.68  *** Margin Concerns? ***

Cabot Microelectronics (NASDAQ:CCMP) is a global supplier of high
performance polishing slurries used in the manufacture of advanced
integrated circuit (IC) devices, within a process called chemical
mechanical planarization (CMP).  CMP is a polishing process used
by IC device manufacturers to planarize or flatten many of the
multiple layers of material that are built upon silicon wafers
and necessary in the production of advanced ICs.  Planarization is
a polishing process that levels, smoothes, and removes the excess
material from the surfaces of these layers.  CMP slurries are
liquid formulations that facilitate and enhance this polishing
process and generally contain engineered abrasives and proprietary
chemicals.  CMP enables IC device manufacturers to produce smaller,
faster and more complex IC devices with fewer defects.

CCMP - Cabot Microelectronics  $42.68

PLAY (less conservative - bearish/debit spread):

BUY  PUT  MAY-50.00  UKR-QJ  OI=321   A=$7.60
SELL PUT  MAY-45.00  UKR-QI  OI=1627  B=$3.20
INITIAL NET-DEBIT TARGET=$4.30-$4.40
POTENTIAL PROFIT(max)=14% B/E=$45.60


****************
CALENDAR SPREADS
****************

A calendar spread (or time spread) consists of the sale of one
option and the simultaneous purchase of an option of the same
type and strike price, but with a future expiration date.  The
premise in a calendar spread is simple: time erodes the value of
the near-term option at a faster rate than the far-term option.
The positions in this section are speculative (out-of-the-money)
spreads with low initial cost and large potential profit.

*****
ATN - Action Performance  $23.73  *** Reader's Request! ***

Action Performance (NYSE:ATN) is a designer and seller of licensed
motorsports products related to the National Association of Stock
Car Auto Racing (NASCAR), including die-cast scaled replicas of
motorsports vehicles, apparel and memorabilia.  NASCAR is a popular
motorsports sanctioning body in the United States and sanctions the
Winston Cup series of stock car races.  The firm designs and sells
products relating to other motorsports including racing sanctioned
by the National Hot Rod Association (NHRA), Formula One, the Indy
Racing League (IRL) and the World of Outlaws.  The firm's quarterly
earnings are due on 4/28/03.

ATN - Action Performance  $23.73

PLAY (very speculative - bullish/calendar spread):

BUY  CALL  JUL-25.00  ATN-GE  OI=573  A=$1.40
SELL CALL  MAY-25.00  ATN-EE  OI=36   B=$0.60
INITIAL NET DEBIT TARGET=$0.70-$0.75
INITIAL TARGET PROFIT=$0.40-$0.75


*****
FILE - FileNet  $13.75  *** Cheap Speculation! ***

FileNet (NASDAQ:FILE) develops, markets, sells and supports a
software platform and framework for enterprise content management
(ECM).  ECM refers to various functions used by organizations of
all types, including businesses and governmental agencies, to
control and track the wide range of information that is important
to the organization's operations.  The content the firm's software
manages includes Web pages, word processing documents, spreadsheets,
HTML, XML, PDF, images, e-mail messages and various other types of
electronic content.  In 2003, the company introduced the FileNet P8
ECM architecture, which is intended to offer customers the ability
to configure, design, build and deploy various enterprise-wide ECM
solutions to meet various content management needs within a single
scalable framework.

FILE - FileNet  $13.75

PLAY (very speculative - bullish/calendar spread):

BUY  CALL  JUL-15.00  ILQ-GC  OI=219  A=$0.85
SELL CALL  MAY-15.00  ILQ-EC  OI=21   B=$0.20
INITIAL NET DEBIT TARGET=$0.55-$0.60
INITIAL TARGET PROFIT=$0.35-$0.60


*****


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MARKET POSTURE
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Techs Take a Tumble


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