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Daily Newsletter, Sunday, 05/11/2003

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The Option Investor Newsletter                   Sunday 05-11-2003
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: Holding the Line
Futures Market: Blinked, You Missed It
Index Trader Wrap: If not stocks, what else?
Editor's Plays: Strangling the Dow
Market Sentiment: Keep An Ear Open
Ask the Analyst: Indices End the Week with a Bang . . . or Did They?
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 5-09         WE 5-02         WE 4-25         WE 4-17
DOW     8604.60 + 18.92 8582.68 +276.33 8306.35 - 31.30 +134.24
Nasdaq  1520.15 + 17.27 1502.88 + 68.34 1434.54 -   .96 + 66.65
S&P-100  472.25 +   .38  471.87 + 15.77  456.10 +  2.49 + 12.74
S&P-500  933.41 +  3.33  930.08 + 31.27  898.81 +  5.23 + 25.28
W5000   8883.34 + 49.28 8834.06 +308.17 8525.89 + 59.04 +239.31
RUT      413.53 +  5.86  407.67 + 19.17  388.50 +  4.80 + 12.40
TRAN    2462.18 +  1.38 2460.80 +108.19 2352.61 -  9.58 +131.63
VIX       22.04 -  1.57   23.61 -  0.29   23.90 -   .69 -  3.68
VXN       32.09 -  0.27   32.36 -  1.34   33.70 -  2.18 -  3.74
TRIN       0.83            0.66            1.95            0.50
Put/Call   0.82            0.71            0.87            0.52
******************************************************************


On a slow news day and on light volume the markets eased back up
to close the week where they started and just below the recent
highs. The Dow managed to climb within 36 points of its 8641 high
from Tuesday. The Nasdaq closed within 12 points of its high for
the week. This was pretty bullish for an early summer Friday in
May even if the move was on very light volume.

Dow Chart - 240 min



Nasdaq Chart - 240 min



While the news was good on the surface the Friday sprint only
managed to get the indexes back to where they started the week.
If you added the weekly gains for the top six indexes, DOW,
Compx, SPX, OEX, RUT and $TRAN you would only get a total of +47
points.  That is an average of only an eight-point gain per
index. While the result was bullish it still lacked conviction
but nobody was complaining at the close with the Nasdaq at the
high for the day.

There were no material economic reports on Friday and the only
release was strongly positive. The ECRI Weekly Leading Index rose
to 121.8 and it was the second largest jump in a year. The +2.4
point jump was driven by an improving stock market and new
mortgage applications. The S&P-500 gains helped power the rise as
it gained +3.5% for the week. The six-month growth rate rose to
+0.6 from zero and the highest rate since July-2002. This index
is not a market mover because it is based on a combination of
components, which have been previously released. It is however an
indicator that shows a clearer trend and that trend is rising.
Much of the gains are powered by the recent stock market rally
and any selling can turn it around just as quickly.

Stocks got some help from Treasury Secretary John Snow who came
out against the Fed statement expressing worry about deflation.
Snow said emphatically there was "no danger of significant
deflation" and while the economy was sluggish it was improving.
Clearly the economic reports over the next 30-60 days will be
critical. The next round of reports which begins next week will
be post Iraq reports and continued declines will not set well
with investors. They are writing off the last couple weeks of
data as prewar but that excuse will no longer fly.

The sentiment on the market is changing fast or should I say
changed fast? The Investors Intelligence survey shows that bulls
are firmly in control. According to the survey 56% of newsletter
writers are now bullish with only 24.4% bearish. According to
editor Michael Burke this is extremely bearish for everybody to
be so bullish. I know, it sounds strange but it is true. Burke
points out that at the market top in March 2000 the rankings were
55.7% bullish and 26.4% bearish. He also pointed out that the PE
ratios are higher now than in 1929 and 1987 when valuation
concerns helped tank the markets. He points out that when the
numbers reach these extremes there are no bears left to convert
meaning there is nobody left to buy. Burke claims each time these
numbers have been reached a drop occurred citing 1991, 1992,
1998, 2000 as recent examples. Unless an asteroid hits the planet
soon we will get a chance to see if this historical trend repeats
itself. The key point here is that it may not occur for some
time. There is no magic time element where reaching a specific
level instantly produces a result. It is more of a cycle than an
event.

Speaking of cycles, Hochberg of Elliott Wave has gone on record
saying this is just another bear market rally. A good rally by
his own admission but he is quick to point out that they have
analyzed every financial cycle from the 1600s to the present and
the pattern is the same. Cheerful thought. The thing I like about
the wave guys is they can be wrong more than they are right and
still claim success. They are like weathermen. It may rain or it
may not. If this low pressure system, that high pressure, these
clouds, that wind moves like this then it may rain. If it rains
they say I told you so. If it does not then it is because one of
the conditions did not occur. I still like to analyze the wave
guys and we have two good ones at OptionInvestor. Steve Gould
does wave analysis in his articles and on some of his stock
selections. Herb Keith has been giving us the blow by blow on the
Futures Monitor for the last couple weeks. Unfortunately they are
both echoing the comments from Hochberg. Do you think they are
looking at the same play book?  A week ago Herb predicted a rise
in the S&P to 934 by last Friday. He missed it by four points.  I
will be interested to see his comments for next week. Steve did
an excellent wave article on the Dow last Sunday. Check it out.
http://www.OptionInvestor.com/traderscorner/tc_050403_4.asp

Back to the bullishness. Investors piled a total of $12.9 billion
into stock funds in April according to AMG data. This was the
largest inflow of cash since the $17 billion in April 2002. The
resulting rally has pushed us to new highs. However, the first
week in May has only seen an inflow of $1.1 billion to equities
and taxable bond funds saw inflows of $3.4 billion. Money Market
accounts saw inflows of $13.4 billion. Does anybody see the clue
here? Of the nearly $18 billion of cash flowing into to
investment vehicles only 6% of it actually went into stocks
during the week ending May-7th.  The money is there and available
for instant infusion but the lack of conviction is very apparent.

Part of that lack of conviction came from a Goldman Sachs survey
of CIOs from large corporations that was announced on Friday. The
CIO survey showed they saw no increase in tech spending in 2003
and only a +2-5% increase in 2004. They said the current
overcapacity left over from the tech bubble was preventing any
need to upgrade. The companies overbought during the height of
the tech bubble and the massive layoffs and cutbacks over the
last couple years has idled much of that equipment. With excess
capacity in every area they said it would take a substantial
recovery some time to require new buying.

Countering the Goldman Sachs survey Intel President Paul Otellini
said that they see strong demand in China and they expect a
"slight" recovery in the semiconductor industry this year. He
said the Centrino chip had met full expectations and Chinese
demand remained strong.  This is particularly strange since all
other reports out of China are for a sales slump of from -5% to -
20% due to the SARS panic. Numerous chip/tech companies have
already warned about slower sales and lower earnings. Either
those companies are using the SARS ate my earnings excuse now
that Iraq is over or Otellini has been inhaling chip dust too
long. In predicting a chip recovery he said "the past year has
been so bad that the semiconductor sector can only improve this
year."  I don't know if that is positive or not. If sales were
off -50% last year and they gained a "slight" +1% this year that
would be an improvement but I don't think investors are thinking
in those terms.

With the hysteria over deflation fears since the Fed meeting
there is an entirely new round of rate cut scenarios. The current
consensus is that the Fed will cut rates by 25 points at the June
meeting. The odds of this cut in June are about 52%. The Fed
Funds futures are predicting a 100% chance of a 25 point cut by
September and a 46% chance of another 25 point cut at the
September meeting. An HSBC analyst went out on a limb Friday and
predicted the Fed will take drastic action at the June meeting
and cut a full 50 points. The theory is that the deflation
comment in the FOMC statement was code for we are going to act
immediately and drastically in June if the next 30 days of prewar
economic reports do not show a credible rebound in the economy.
The Fed cannot take the chance that deflation will be a
possibility and they would much rather have the inflation monster
back with rampant demand and rising prices than be stuck in the
quicksand of deflation. Deflation is much harder to stop and
drains jobs, markets, profits, taxes and sentiment more
thoroughly than a plague of leeches. If the coming reports do not
show improvement analysts expect the Fed to act quickly and not
only with rate cuts.  There have been numerous comments about
"other" methods at the Feds disposal including massive infusions
of money and artificial support of bonds to keep real interest
rates lower.

The markets managed a positive close on Friday. They are either
poised to explode next week or poised to crash. The Dow is
marching ever upward and the short pullback last week did not
even come close to uptrend support. Buyers stepped in at 8500 and
market breadth improved again. The Dow closed at 8604, a level
first reached on Monday. The resistance highs around 8635-8640
held all week and a new bullish wedge is forming at 8630. Should
this wedge break to the upside the next real target could be as
high as 8850 with a pause at 8700. The Dow is poised to explode
on good news but the lack of conviction is still a problem and a
problem that could be serious if we get an unexpected event.

The Nasdaq still looks strong but not as strong as the Dow. The
+35% gain off the October lows is finally starting to produce
some drag.  It is still only 12 points off the high for the week
and well above real support at 1435-1450. With AMAT and Dell
earnings next week there is one last chance for improved guidance
that could break to a new high. The close Friday was right at the
December high of 1521 and strong resistance even though it has
traded as high as 1531 during the week. Again, the Nasdaq is
poised for another surge if we can get enough conviction and
AMAT/DELL/SCMR/NTAP/BEAS/BRCD/INTU do not disappoint with
earnings this week. The sentiment is very bullish and broad based
but we are very extended and a change in that sentiment could be
sudden.

The economic highway for next week is full of potholes with a
potential washout late in the week.

Monday: None Scheduled
Tuesday: Chain Store Sales, International Trade
Wednesday: Import/Export Prices, April Retail Sales
Thursday: NY Empire Index, Jobless Claims, PPI, Business Inventories,
          Industrial Production, Capacity Utilization, Philadelphia
          Fed, Semi Book-to-Bill
Friday: Housing Starts, Building Permits, CPI, Michigan Sentiment

Obviously Thursday and Friday are going to be big days with the
potential to either set fire to the rally rocket or watch it
implode on the launching pad. The bullish sentiment may provide a
buy the rumor move on Monday/Tuesday as bulls hoping for signs of
a recovery continue to enter long positions. That could set the
stage for a serious sell the news event if the news is less than
exciting.

There is a bullish case for stocks despite any negative news this
week. (No rocks please) The Fed is poised to pour massive
stimulus into the economy to prevent the "D" monster from getting
a foothold.  Believe it or not the housing bubble is still alive
and well and growing. The falling mortgage rates and the arrival
of spring are going to fuel yet another round of the housing
boom. Auto sales are actually rising due to stronger incentives
and consumers buying cars instead of mutual funds. This is the
third year of a presidential term which is almost always positive
with politicians promising two chickens in every pot. A tax cut
package for $500 billion was passed on Friday and though a long
way from done it will eventually happen.  The government is
spending money at record rates to prop up the economy, provide
security, grow defense and replace billions in supplies used in
Iraq. Oil prices are dropping with a probable glut returning. The
SARS panic is easing with the disease contained in most
countries.

The dollar is trading at four-year lows, which makes our exports
cheaper and imports less attractive. It is still bad for foreign
investment in the stock market but the balance of trade will
benefit from increasing demand for our products. And lastly,
there is a huge amount of money waiting on the sidelines.
Estimates range between $2 and $3 trillion in cash, money
markets, brokerage accounts and bond funds that can be shifted
back to equities on a moments notice. In layman's terms the
pregame has begun. There is a pent up demand not for products but
for good news. The conditions are becoming increasingly positive
but the game has not yet started. The spectators are filing into
the stands and milling around the parking lot while the opposing
teams warm up on the field. There are storm clouds on the horizon
and everyone is patiently waiting to see if they are going to
dump torrential rains which will postpone the game until the end
of summer make up schedule or blow over revealing sunny skies and
the start of the big game.

The bearish case stresses the grossly over valued market based on
a historical PE compared with the average S&P PE today of 33. The
historical PE value for supposedly fairly valued stocks ranges
between 8-20 depending on who you talk to. Between 1990-2000 the
average PE for Dow stocks was 19. The highest PE ever for the Dow
was 1991 and right after the Gulf war at 31.4. The second highest
was September 2001 at 30.7. Bears feel the current lack of
earnings (+6% ex energy) and a high rate of warnings for the 2Q
(58%) makes stocks over valued. They also feel the negative
economic reports like Jobs, ISM, etc are pointing to more
earnings pressure ahead.  They may be right but the bulls claim
the PE ratios are justified based on what the companies will earn
when the recovery appears.  Costs have been cut so far that
profits will soar when demand picks up in the 2H of this year.
Bears remind them that the recovery was supposed to come in the
2H of 2001, then the 2H of 2002, now 2H 2003 is slipping and many
fear it may not appear until the 2H of 2004. Bears point to the
Fed's fear of deflation as confirmation the end is near.

Regardless of your market view there are two charts I want to
leave with you today. The first is the McClellan Summation Index.
This is the ratio adjusted chart and a reading of +1000 or -1000
points indicates an imminent direction change in the markets. It
is basically an indicator of market breadth and displays the
amount of bullish or bearishness in the market. Note the index
closed at an extremely high level of 1077, which indicates
extreme bullishness. This is a contrarian indicator and an
extreme reading of bullish activity is actually bearish because
that trend is due to change. Since July of 1999 the indicator has
touched the -1000 level three times. This is the first time in
four years it has touched the +1000 level. Note the bearish
divergence already forming in the MACD. Note that when the MACD
hit zero in the past the direction change was nearly immediate.

NYSI Chart - Daily



The last chart is a comparison of the DOW/VIX for the last three
years. Note that each time the VIX moved below 20 it represented
a market top. It closed at 22 on Friday and one or two more
positive days should do the trick. Maybe Wednesday afternoon?
Again the effect is not immediate and several days can go by
before the drop. In some cases it can stay under 20 for several
weeks. However, like sunrise in the morning you can always count
on the eventual market turn.



My gut feel is that we will see gains early in the week as
traders take positions hoping for some positive economic reports
on Thr/Fri. Those gains should push us to new highs and well into
extreme overbought territory. If those reports are negative there
could be a quick change in sentiment and a change in direction.
As of Wednesday morning traders may require oxygen and a
parachute to enter the markets. Oxygen for the rarefied
atmosphere we could attain if the reports are favorable. The
parachute may be needed if they disappoint. Buckle your seatbelt
because either way it should be a thrilling ride.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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

Blinked, You Missed It
By Jim Brown

      05-11-2003           High     Low
DJIA     9604.60 +113.38  8612.58  8492.69
NASDAQ   1520.15 + 30.46  1520.15  1500.10
S&P 500   933.41 + 24.79   933.77   920.27
NDX      1143.55 + 24.79  1143.97  1126.13
ES03M     932.25 + 11.75   933.50   919.25
YM03M    8578.00 +100.00  8593.00  8474.00
NQ03M    1143.50 + 25.50  1146.00  1114.50

Daily Pivots (rounded to nearest point)
           R2     R1    Pivot   S1     S2
DJIA      8690   8647   8570   8527   8450
COMPX     1534   1527   1513   1507   1493
ES03M      943    937    928    923    914
YQ03M     8667   8623   8548   8504   8429
NQ03M     1166   1155   1135   1123   1103


If you took a coffee break between 10:15-11:15 you missed the only
major move of the day. The ES rallied off support at 924 to test
the recent highs around 934. Other than a news dip at 2:PM that is
where they stayed the rest of the day.

All the indexes for the week returned to their Monday opening
levels and appeared to be ready for another try at a breakout.
Linda did such a good job in the Index Trader Wrap this weekend I
am not going into elaborate detail about each index/future.
Suffice it to say they all closed at their highs on low volume.
http://www.OptionInvestor.com/itrader/indexes/marketwrap.asp

The Dow has down trend resistance at 8700 and horizontal
resistance at 8850 which is the top from January. With the Dec/Jan
tops presenting significant resistance over 8850 the Dow will have
a tough challenge hitting 9000 again during the summer doldrums.

Dow Chart - Daily




The Nasdaq stalled at the December top at 1520 but appears ready
to try again. The uptrend channel is still intact and resistance
is light until the longer term down trend hit around 1585. The
current support is well below last weeks action at 1435-1465. It
would take a break of 1435 to cause any serious worry and a break
under 1350 to cause a panic.

Nasdaq Chart - Daily




The ES futures are using the longer-term uptrend support currently
at 924 as a bottom as it tries to hit those highs from last week
again. 938-940 should be significant psychological resistance and
the uptrend channel is narrowing. There should be a significant
retest of underlying support soon. We have simply gone too far
without a major dip to continue this pattern. We either need to
consolidate with a sideways pattern until the overbought
conditions ease or we need a significant market event to take out
the momentum buyers and establish a strong base at a higher level.
860-865 was the last base and we have added nearly +80 points
since. We have been trading with a top in the 930s for six days
and the dip back to 920 was quickly bought last week. We had a
higher low on Thursday and lower high on Friday. The opposing
forces are narrowing the battle lines as we approach the critical
economic reports on Thr/Fri.

I look for positive markets early in the week and a potential drop
on negative news on Thursday.

ES03M Chart - 240 min



ES03M Chart - 30 min




The NQ Futures are probably the most clearly defined of the group.
The uptrend channel is uncluttered with clear tops and bottoms.
The resistance is not until 1170 and there are multiple levels of
support at 1135, 1120 and 1100. Any dip that stopped at 1100 or
above would continue the trend.

On Thursday after two days of declines the NQ pierced 1120
slightly followed by a gap open on Friday. This could be a dead
cat bounce and needs to be watched carefully. Another break of the
uptrend line at 1135 could signify a slowing of the rally and a
potential failure ahead. The key number here is 1120 as the most
recent support test. I would look to be short under 1120 with an
exit just above 1100. Conversely a move over Friday's high of 1145
would be a long entry.

NQ03M Chart - 30 min.




The Dow futures have seen a very strong uptrend for the last two
months. There have been very few serious dips and each was quickly
bought. The length and strength of this pattern is stretching the
bounds of reasonableness without a serious market even soon. The
current top at 8600 followed by downtrend resistance at 8700 could
be tough to break. The economic reports on Thursday/Friday could
be too much weight for the Dow to carry without pausing for a
rest. Even good news could prompt a sell the news event after the
many weeks of strong gains. I would be looking for a short entry
at 8700 or a failure below 8450.

YM03M Chart - 60 min





Not to repeat myself any more today but Thr/Friday are going to be
critical to the markets. Any gains early in the week should be
protected on Wednesday night if the Dow is still moving up.  The
potential for bad news outweighs the potential for good and there
is greater risk in the market for bulls than bears after
Wednesday.

Jim Brown


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

If not stocks, what else?
By Leigh Stevens


This is the question to ask in this market if you are scratching
your head as to the sustaining nature of the current rebound.
When looking at competing investments, we see low (and declining)
bond yields of 3.7% and 4.7% in 10 and 30-year government bonds,
respectively.  Real estate, while not in a broad overall decline,
is now longer way outdistancing a low inflation rate. In fact, a
key story this past week was some more noises from the Fed (the
Federal Reserve central bank) about concern about DE-flation.
Deflation, in case you're not familiar with this rare phenomena,
is when prices of goods and services are in a downward spiral.

You would think falling prices are a good thing - however, if
businesses can't raise their prices, their profits gets squeezed
and earnings per share decline - not exactly great for stocks.

If the overall market manages a 2003 gain of 2/3 of its
historical average annual increase of 10%, this potential for
gain can be more attractive than a 3.7% fixed rate and the money
is liquid.  Throw in some dividends that are not taxed or taxed
less according to the tax plan at hand, and you have a case for
stocks that money managers and many savvy individuals find
compelling. So folks don't fight the tape if you can't trade the
indexes the way you're used to doing - and we are habituated to
seeing rallies fall apart at some point, with the larger money
bets paying off in puts or short index futures.

THE BOTTOM LINE –
The tech heavy Nasdaq indices continue to lead the market higher,
as traders and investors overlook the weak jobs data and recent
lackluster retail sales. Continued bullish price action suggest
some further upside for stocks, as business spending on computers
and other tech goodies rebounds, or is expected to, later this
year (and, we're almost in the second half). Investors are
starting to focus on where they think earnings will be at year
end, getting us back to the tendency for stocks to be priced,
relative to earnings, that reflects an outlook about 6 months or
so ahead of today.

In terms of trading, in the Nasdaq Composite (COMPX), 1530 is
near resistance - if this level is pierced, it bodes well for yet
another up leg before COMPX has a deeper correction (at least
look for 1520-1530 to be retested, if not 1500).  Major COMPX
resistance looks to 1575, then 1600. In the S&P 500 there is near
resistance in the 933-938 price zone just under 940, but more
significant is 960 as it looms as major resistance - this area
could still mark the top end of trading range until the next
round of earning reports come in.

FRIDAY'S TRADING ACTIVITY –

Some more bargain hunting type buying came in on Friday after a
prior couple days of weakness - some bullish news from Intel
(INTC) helped out.  By the way, tech bellwether Intel and Cisco
(CSCO), as well as IBM are all acting well. This is the thing in
this latest rally as a number of charts are starting to look
bullish.

The Dow held its early gains, finishing up some 113 points which
is a gain of 1.3%.  The Nasdaq Composite was up an even more
substantial 30 points or 2%, to 1520.

Dow component Intel said it sees strong demand in China and
expects a recovery in the semiconductor industry this year. The
news drove Intel shares up 3.7%, and technology stocks higher
across the board.

Graphics-chip maker Nvidia jumped a whopping 33% after the
company beat analysts' expectations for Q1 and provided the
Street of Dreams with an upbeat outlook for Q2 - love that tech.

In other major news, the House passed a bill reducing taxes by
$550 billion over the next 10 years. GOP legislators said this
would prop up the economy.  Democrats said this measure would
cause a big increase in the federal deficit.

The proposal contains many of the income-tax cuts in President
Bush's economic growth and jobs plan, but stocks showed little
reaction as the bill falls short of the complete dividend-tax cut
that was hoping for.

Traders weren't able to take direction from any economic data
Friday as no government reports were released during the day.

OTHER MARKETS -
The 10-year note was up an 1/8 of a point, to close the day with
a 3.7% yield.  The dollar was up to 117.19 yen, from 116.84 late
Thursday, while the euro closed NY trading at 1.1490, off from
1.1500.  Whew! Is it time to sell my Spanish condo and take the
euros and run?? Na, I'll take the rent money instead and go take
a long vacation in "euroland".

MY INDEX OUTLOOKS –

Longer-term chart view

I've commented at times over prior weeks, that both the Composite
and the S&P (500) had come to their long-term up trendlines.
This is, so to speak, the long-term growth path or rate of
change, for stocks.  The price scale for prolonged big price
moves has to be the semi-logrithmic chart, where equal percentage
moves measure equal distances on the chart; e.g., a move from 200
to 400 (a 100% change) is equal to the distance traveled up the
scale from 400 to 800.

The short-dashed (upper) trendline on the monthly SPX chart is an
"internal" trendline connecting the most number of points.
However, the conventional means of an up trendline construction
of connecting 2-3 extreme lows (preferably 3 at a minimum) shown
by the long-dashed line also is also demonstrating the very-long
term uptrend as it defines where buying interest is coming in to
buoy the index.




There is a common tendency for prices to come down a second time
or a cluster of times to such a major trendline - so, the
bottoming process if that's what it is and it's how I see it, can
take some months.  A transition to such a major bear market is
not typically going to be a turn on a dime "V" type bottom.

Nasdaq Composite Index (COMPX) – Weekly, Daily & Hourly:

Since the Composite is key to the overall market, I'm starting
with this index.  Clearing the prior closing high in the 1480 was
bullish and set up a next target to at least 1520-1521, which was
reached an then some.  The subsequent pullback to 1480 followed
immediately by another strong rebound was quite bullish action as
prior resistance "became" new support.

It's still the case that with the prior top exceeded on a daily
and weekly closing basis, further upside potential is to the 1600
area, which is a "measured move" objective in that it assumes
that the next rally would at least be equal to the first up leg.




In case its not immediately obvious, the left chart above is
daily and right is the 60-minute chart.  Key support noted on the
hourly chart looks to be 1480.  If there was daily close under
1480, the chart turns bearish.  The daily stochastic has gotten
to an overbought reading so it suggests the potential for a sharp
correction on news or some event that is taken bearishly.

For now, COMPX is back in its uptrend channel and looks to be
heading back up to near resistance and the prior peak in the 1530
area.  Resistance implied by the upper end of the channel comes
in at 1570 currently, but this will rise daily.

Sometimes prices will reach the upper trend channel boundary,
sometimes it only gets near it before coming back down.  If there
is a move to 1575 it's a better than even bet that COMPX at least
comes back down to 1530.

My expected maximum price range this month for Nasdaq is 1500 on
the downside, 1600 on the upside. I think we have to see Q2
earnings improve to get a sustained move to above 1600 and we
won't know this for a while.

As someone else said in their OIN commentary, there is
willingness to buy into perceived support areas in the indices,
but not enough bullish enthusiasm to take em above or much above
areas of supply or price areas where sellers are likely to offer
substantial stock for sale.

QQQ charts - Daily & Hourly:

I often will say that a 1-day close under expected support does
not prove a bearish reversal until there is a second consecutive
close at or below the same level again to prove the reversal so
to speak. As we often see, resistance once broken becomes support
and vice versa (support once pierced becomes resistance). The
prior closing price peaks at $28 would be expected to provide
support on pullbacks once the Q's climbed above this level. There
was the 1-day close under 28 on the jobs and retails sales report
of Thursday, but then the rebound as the "buy dips" crowd came
back in on Friday - they're the ones looking ahead.

I still think we got both a narrow and a wider trend channel
going on the hourly chart so I note possible resistance in the 29
area, then again at 30-30.25.  Would like to do scale up shorting
in QQQ - once in the 29 area and again at 30-30.25.  My downside
objective is to the 27.25 area.

Conversely, if prices head down again before again heading higher
to possible resistance, I lean to buying the stock in the $27
area if the hourly trendline appears to define support. Given the
downside momentum showing now on the daily stochastic, we have to
allow for the chance of a move back down to the daily chart (up)
trendline, and to prior lows, in the 25.75-26.00 area.




Summing up - am prepared or predisposed to be a buyer around 27,
but would watch this area if/when reached, as an "ideal" buy
better sets up on a future oversold reading along with an ability
to hold at or above prior lows around $26 - a 3rd. defining
"touch" to the daily trendline on the close-only chart would
build a better bullish case. Stay tuned.


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

As anticipated at least so far, the S&P 500 has not pierced 940,
but it may given this renewed momentum late last week.  There is
room on the upside to get to 960.  Certainly, on a weekly chart
basis, SPX is not overbought, but it would be if there is a more
or less straight line march to 960 which would offer a retest of
a line of resistance there per the weekly and daily charts.




If 950 is reached at the top end of the hourly uptrend channel
currently, then I look for some setback from this area although
maybe not a major one - for example, SPX falls back to the 935-
938 area (from 950). The formation of an hourly bull flag on the
SPX chart suggests that the index will move to a new high soon.
A rally failure at or under recent highs would suggest that SPX
could fall back to the 920 area however.

It seems likely that 960 would be the top end of a June price
range. I am watching for whether a move to whatever new high is
ALSO accompanied by a similar new high in the 14-day RSI. If,
instead, a bearish divergence sets up by RSI failing to "confirm"
(that new high), it will suggest a bearish play in puts is
setting up.

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

The 475 level continues to look like technical resistance based
on the recent rally peak. A new high is also quite possible given
the pattern I see here.  The series of higher relative lows and
higher highs makes for a bullish trend - OEX is stalled at making
a new high however.  This may be just the back and forth movement
needed to "throw off" the overbought condition and fake out the
bearish sellers.

If OEX goes go to that new high, I anticipate the next
significant technical resistance coming in around 483-485, at the
top end of my projected hourly uptrend channel. If so I would at
least take at least partial profits on calls in this area.

465 looks like an area for call purchases if buying interest
again develops in the S&P stocks on a pullback to this area.
Right now I see the hourly chart pattern suggesting a move higher
first, such as to 480 at a minimum.




The most bullish aspect to the indicators I rely on is the fact
that traders have either shown an overall skepticism to playing
equity calls and have NOT gotten overly bullish and heavily into
calls, as suggested by daily call volume levels relative to put
volume as shown by my Call to Put volume indicator (lower left).

Just on a price pattern basis however, index traders may want to
buy puts in the 485 area, if reached, assuming a top appears to
develop at the top of the hourly channel, shorter-term or
otherwise. It seems to me however, that if buying takes the OEX
to 485 and a short squeeze develops into the June expiration,
there may be an attempt to take the index to 500.  There often
seems to be a pull toward a big number like this.  Hard to say
now, but this is my speculation at the moment - stay tuned!

Good trading success!


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


If ever we were poised for a big move this is the week. The
first two days of the week have no material economic reports
and the last two days are killers. There is a good chance of
a rally early in the week and a further rally or crash late
in the week. The challenge is knowing which way the market is
going.  Nobody knows.

With the Dow at three month highs and all the oscillators and
market breadth gauges at severely overbought there is the
potential for a sell the news event on Wed/Thr. Also, with
those indicators so overbought every bear in the woods will
be expecting that and shorting every bounce. A good news
surprise could produce the fabled double whammy and off to
the races we go.

Since the chances for a strong move in either direction have
built to a climax in an expiration week we can attempt to
capture this move with very cheap options.

Normally I would use the DJX options but they cease trading
on Thursday. Instead I am going to use the options on the DIA
which trades until the close on Friday. Thursday could be the
big move day with Friday a continuation of that event. I do
not want to give up that day by trading the DJX.

With the cheap DIA options we can put on an 85/87 strangle on
the Dow for $1.00 or less. The May $87 call closed Friday at
50 cents and the May $85 put closed Friday at 50 cents. On
Monday morning, assuming we do not have a gap open the options
should have decayed some over the weekend. Maybe 40/40?

Either way a $1 cost of entry means any move over 200 points
for the week is profitable. The DJX closed at 86 on Friday.
A move to $84 would make the $85 put worth $1 and a move to
$88 would make the $87 call $1.00. Can we get a directional
move of over 200 points this week? The odds are very good.
If you like the concept but are afraid of the short fuse you
can use June options but the same play will cost you $3.70
to enter.

Personally I am a little more aggressive and instead of holding
the options from Monday morning until Friday's close I would
probably use any gains from Mon/Tue to close the call side on
Wednesday. This will reduce my total risk but also takes me
out on any good news on Thursday. You could also wait until
Thursday morning to sell the calls (assuming we did have an
early week bounce) but 6 of the 7 economic reports are due
out before the open. That means we should have either a gap up
or gap down on Thursday. If you are quick at the open you could
sell the calls on bad news. You must realize that a 100 point
gap down could deflate any premium before the open on the call
side. Same with the puts should we get good news.

So many decisions. When faced on Sunday with which side to close
on Wednesday you simply do not have enough facts. We need to
place our bets on Monday morning and then follow the market
action to decide on how to change those bets as the week
progresses.

Another option would be to watch the open on Monday and buy
only one side. If we are moving up, buy the call only. Sell
it Wednesday afternoon and buy a put for the next strike under
the current market. If the DJX rose to $88 then buy the $87
put for probably around the 50 cents you could have spent for
the 85 put on Monday. Another possibility would be to buy the
put side when the Dow reaches 8700 which is strong resistance.
Add to the position at 8800, which is stronger resistance.

With so many decisions I am going to follow this play in the
Market Monitor all week and make those decisions as the week
progresses. Consider it a learning experience that could be
profitable.

May $87 DIA Call DAV-EI 50 cents (may be less at the open)
May $85 DIA Put  DAV-QG 50 cents (may be less at the open)

DIA 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.

HLTH - Calls - $8.87
5/4/03 ($10.05 when recommended)

Somebody call a doctor. We got the short squeeze all right but it
came a day early. The stock gapped open to $10.50 on Monday and
ran up to $10.71 by the close. The option gapped up to $1.15 at
the open from 90 cents when I wrote it up over the weekend.
Hopefully nobody bought the gap since the target price for an
exit was $1.75 (assuming a 90 cents entry) If you did the high
at the close was $1.45. Lightning struck Monday night when HLTH
announced earnings that although positive were less than expected.
Instead of a gap up short squeeze we got a gap down to 9.50 and
a continued bleed through Thursday to 8.28. The stock is recovering
slightly but this is not the play as diagrammed. The gap up open
should have prevented anyone from entering and the gap down after
earnings eliminated the potential for a short squeeze.

IVX - Calls - $16.20
4/27/03 ($15.28 when recommended)

Still no pullback to $14. We did get a dip to $15.62 but nowhere
near the entry we are looking for on the rest of our contracts.
We will leave the orders open just in case.

http://members.OptionInvestor.com/editorplays/edply_042703_1.asp


QQQ - Put - $28.40
4/20/03 ($26.82 when recommended)

No change on the QQQ put and this is the last week for the option.
We have a cost basis of 15 cents in this May-$25 put and I would
put in a sell order for 15 cents on the hopes we get a sharp dip
sometime this week. Odds are not good.

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


CY - Cypress Semi Call - $10.15 ($11.15 week high)
3/2/03 ($6.41 when recommended)

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


EMC Call from Feb-2nd  $9.47 ($10.44 week high)
($7.70 when recommended)

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


Powerball - no update this week. My quotes are not working today.

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

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

Good Luck

Jim Brown


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

Keep An Ear Open
James Brown

By the looks of it, bulls are feeling pretty confident.  The
markets weathered another pull back on minor selling and buyers
bought the dip again heading into the weekend.  The positive spin
that corporate America was able to put on its Q1 earnings season
combined with extremely low and easy to beat prior year
comparisons is continuing to attract hope.  Hope that corporate
earnings really have turned the corner.  Maybe they have but
we're still not seeing any economic evidence that earnings are
going to surge higher either.  During the excitement of earnings
and the pre-war start to a post-war rally the S&P 500 has risen
some 17 percent since March 11th while the NASDAQ has climbed 20
percent.

You already know that I'm concerned about our short-term future.
The markets have come too far without pausing or pulling back
long enough to digest these gains.  It's common knowledge that
markets cycle through up and down trends and the up trend is
looking too extended.  Does that mean next week we'll crash?  Who
knows.  Equity markets are known for hitting extremes and it may
take climbing to another extreme before the trend reverses.

Believe me, I'm well aware that we've been preaching caution and
a potential market turnaround from this column for the last four
to five weeks (at least).  Yet at the same time I've been clear
that we're to trade what we see and that has been a number of
bullish trends and breakouts.  Hence the preponderance of call
plays on the OI play list (this Thursday excepted).  An average
trader can be successful as long as they limit their losses but
this article isn't about stop losses but investor sentiment.

I've said it before; the crowds tend to be right in the middle of
the trend and wrong at both ends.  I feel that we're approaching
the end of the current rally.  Now whether the markets go
sideways or we get a sizeable pull back is unknown.  Keep in mind
that the VIX and the VXN have been flashing warning signs for
weeks as they drift ever lower.  The VXN is near its all time
lows and the VIX had broken down to new relative lows and is
approaching its more traditional market top signaling range of
20.  However, the VIX is not at 20 yet.  The bulls might be able
to keep the rally alive long enough until the VIX finally reaches
its apparent goal.

Stocks have climbed so high in the past six to eight weeks that
any potentially negative news can cause sharp bouts of profit
taking.  We saw that this week with a number of large gap downs
on earnings news and brokers downgrading stocks.  The VIX may not
be showing fear but these gap downs are.  Another indicator that
has us concerned is the divergence in the put-call ratio.  The
equity pcr is down to 0.66 (there are six puts bought for every
ten equity calls).  Compare this to the index pcr's of 1.56 for
the OEX and 1.62 for the QQQ and you'll see that index option
buyers are buying more puts than calls.  These aren't necessarily
extreme numbers but they are indicators into investor psychology.
The smaller, retail trader is buying call options on stocks
because they believe stocks will continue to go up.  Index option
traders, of which there are many more professional or "smart"
money traders for institutions are buying more puts than calls.
I see this as a bearish divergence and yet another indicator that
a market top may be in the near future.

Contrasting these bearish ruminations are the market internals
from Friday's session.  The advance-decline ratio on the NYSE was
21 to 7 and on the NASDAQ it was nearly 21 to 9.  New 52-week
highs were 386 to 31 new 52-week lows.  Up volume was almost four
times down volume on the NYSE and up volume was more than 3.5
times down volume on the NASDAQ.  Again, these are not extreme
numbers but they are bullish for the market.

Just looking at the charts and the clear bounces at rising
trendlines for the major indices makes it logical to think that
early next week can be bullish.  Traders need to be wary of bad
news and we still have the last full week of earnings with retail
heavy weights like WMT on Tuesday and KSS and TGT on Thursday.
Tech companies AMAT and NTAP also report on Tuesday with DELL
reporting on Thursday.  Plus Wall Street will be waiting for the
Retail Sales report, PPI, CPI and Capacity Utilization economic
reports all out this week.  Also keep an ear open for any news
from the two technology conferences going on this week with
Salomon Smith Barney and USB Piper Jaffray both throwing
conferences on Tuesday-Wednesday of this week.


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

Market Averages

DJIA ($INDU)

52-week High: 10353
52-week Low :  7197
Current     :  8605

Moving Averages:
(Simple)

 10-dma: 8527
 50-dma: 8204
200-dma: 8321



S&P 500 ($SPX)

52-week High: 1107
52-week Low :  768
Current     :  933

Moving Averages:
(Simple)

 10-dma:  924
 50-dma:  876
200-dma:  881



Nasdaq-100 ($NDX)

52-week High: 1351
52-week Low :  795
Current     : 1144

Moving Averages:
(Simple)

 10-dma: 1127
 50-dma: 1060
200-dma: 1000



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


The nearly 7% drop in the VIX volatility index to the 22 mark is
a clear and present danger to traders willing to note the warning.
Investor sentiment is too bullish and a trend change is not far
away although the market may go to extremes before finally reversing
and the VIX may have to hit 20.  Keep those stops tight.

CBOE Market Volatility Index (VIX) = 22.04 -1.65
Nasdaq-100 Volatility Index  (VXN) = 32.09 -1.20

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.82        472,166       387,917
Equity Only    0.66        370,257       244,196
OEX            1.56         21,019        32,750
QQQ            1.62         16,722        27,171


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

Bullish Percent Data

           Current   Change   Status
NYSE          56.4    + 1     Bull Confirmed
NASDAQ-100    78.0    + 1     Bull Confirmed
Dow Indust.   66.7    + 3     Bull Confirmed
S&P 500       64.2    + 1     Bull Confirmed
S&P 100       65.0    + 1     Bull Confirmed

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

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

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

 5-Day Arms Index  1.24
10-Day Arms Index  1.05
21-Day Arms Index  1.04
55-Day Arms Index  1.27


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    2140      2093
Decliners     710       940

New Highs     225       161
New Lows       16        15

Up Volume   1231M     1185M
Down Vol.    363M      324M

Total Vol.  1613M     1526M

M = millions


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


Commitments Of Traders Report: 05/06/03

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 knew it would be a quiet week on Wall Street last week,
aside from the FOMC meeting, and we see little change in
the Commercial's net-long stance.  There has also been little
change in the Small Trader's net long stance either.

Commercials   Long      Short      Net     % Of OI
04/15/03      424,219   409,853    14,366     1.7%
04/22/03      430,758   423,295     7,463     0.9%
04/29/03      432,710   419,245    13,465     1.6%
05/06/03      429,519   419,545     9,974     1.2%

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
04/15/03      148,434   137,680    10,754      3.8%
04/22/03      147,068   140,153     6,915      2.4%
04/29/03      149,616   154,782     5,166      1.7%
05/06/03      150,345   148,681     1,664      0.6%

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

It is the e-mini positions that we are seeing some shifts.
The Commercials have bumped up their longs by more than 30K
while reducing their shorts by about 25K.  Looks like money
is shifting sides here.  Small Traders have also shown a
small reversal with longs decreasing by almost 40K and shorts
jumping by more than 10%, but they remain significantly
net long while Commercials are exceedingly net short.

Commercials   Long      Short      Net     % Of OI
04/15/03      119,316   390,555   (271,239)  (53.2%)
04/22/03      124,200   437,597   (313,397)  (55.7%)
04/29/03      134,751   472,247   (337,496)  (55.6%)
05/06/03      169,388   447,330   (277,942)  (45.1%)

Most bearish reading of the year: (337,496)  - 04/29/03
Most bullish reading of the year: (222,875)  - 04/01/03

Small Traders Long      Short      Net     % of OI
04/15/03      365,876    44,137   321,739    78.5%
04/22/03      395,596    40,480   355,116    81.4%
04/29/03      459,687    50,030   409,657    80.4%
05/06/03      423,918    55,932   367,986    76.7%

Most bearish reading of the year: 283,831   - 04/08/03
Most bullish reading of the year: 409,657   - 04/29/03


NASDAQ-100

It's pretty much dead-even on the Commercials positions
on the NDX.  Meanwhile the Small Trader has increased their
position sizes in both longs and shorts.


Commercials   Long      Short      Net     % of OI
04/15/03       44,976     37,929     7,047    8.5%
04/22/03       45,647     38,531     7,116    8.5%
04/29/03       45,497     37,557     7,940    9.6%
05/06/03       46,327     38,216     8,111    9.6%

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
04/15/03       11,182    17,438   ( 6,256)  (21.9%)
04/22/03       10,929    20,376   ( 9,447)  (30.2%)
04/29/03       11,219    19,760   ( 8,551)  (27.6%)
05/06/03       13,482    21,010   ( 7,528)  (21.8%)

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

DOW JONES INDUSTRIAL

Again we're not seeing any big shifts of money or attitude
in the Commercials or the Small Traders.  The "smart" money
is still net long the Industrials and the small guy is just
barely net short.

Commercials   Long      Short      Net     % of OI
04/15/03       17,881    13,124    4,757      15.3%
04/22/03       16,942    14,750    2,192       6.9%
04/29/03       17,927    14,083    3,844      12.0%
05/06/03       16,772    13,568    3,204      10.6%

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

Small Traders  Long      Short     Net     % of OI
04/15/03        7,748     8,704    (  956)   ( 5.8%)
04/22/03        8,081     8,275    (  194)   ( 1.2%)
04/29/03        7,081     8,604    (1,523)   ( 9.7%)
05/06/03        7,829     8,642    (  813)   ( 4.9%)

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

Indices End the Week with a Bang . . . or Did They?

Unlike Thursday's weak trading, Friday's trading saw most of the
indices touch or exceed their daily R2 levels.  The NDX and COMPX
closed above their respective R2 levels, at or near their day's
highs.  Although the advances occurred on volume that might be
deemed passable rather than strong, some blame for the lower
relative volume should be attributed to the normal Friday volume
slump.

Not only did most indices test their daily R2 levels, but most
also closed above next week's pivots.  For those interested in
following daily, weekly, and monthly pivot analysis figures, I've
included a matrix below.  Note that the monthly numbers are
Jeff's, copied from his matrix as those numbers will not have
changed since he left for vacation.

Pivot Analysis Matrix





Indices that tested or exceeded daily R2 levels and closed above
the next week's pivot levels:  that's bullish.  Friday's action
felt bullish, too, at least for the first portion of the day
before the afternoon ennui set in.  Delving into the charts shows
that the action might not have been as bullish as it appeared on
the surface, however.  I'm trying a top-down approach to this
weekend's study, looking first at market internals, next studying
the OEX's charts, and finally touching on the other indices.

Breadth was positive all day on Friday, with advancers almost
three times decliners on the NYSE and more than twice decliners on
the Nasdaq.  Up/down volume patterns proved even stronger, and new
highs/new lows ratios trumped those in bullishness.  Lately,
however, I've become worried by the imbalance seen in new
highs/new lows figures.  Late in the day on Friday, a reader
inquired about charts on Stockcharts.com that might show new
highs/new lows, piquing my interest.  When I turned to a chart of
the NYSE new highs/new lows ratios, this is what I saw:

NYSE New Highs/New Lows




This chart confirmed some of the worries I've had about the
imbalances seen in the new highs/new lows figures on the NYSE in
particular.  Since I haven't previously studied these figures in
chart format, I wondered whether I could be mistaken about the
import of the spikes seen in the values.  After all, a stock
showing this pattern would have just broken out above resistance
in a bullish pattern.  However, I correlated the most recent value
peaks with recent tops in the indices, and my worries were
confirmed.  The arrows I've placed above the most recent value
peaks on the ratios show times when those peaks have occurred near
or at market tops.  I've also noted that the weekly RSI is the
highest it's been in two years, and that the weekly 5(3)3
stochastics are showing bearish divergence.

Perhaps those values are the highest they've been in two years
because we're coming out of a bear market and stock performances
are improving.  Perhaps my interpretation is 180 degrees wrong.
Still, this chart alerts me that it may be time for a pullback in
these new highs/new lows ratios.  In this case at least, all may
not be as bullish as it appears on the surface.

Most market participants this week were cheered by the steadiness
of the markets after the recent rally.  Is that what the charts
show, too?  Here's the OEX weekly chart.

OEX Weekly Chart:




Although the lines prove somewhat difficult to discern on this
chart, I've included the 10-week and 30-week exponential moving
averages.  According to Martin Pring, a bullish or bearish cross
of these averages can indicate a change in intermediate trend,
although MA crosses sometimes occur late in the movement.  This
week, the 10-week has just completed a bullish cross of the 30-
week.  As Pring warns, this bullish crossover has occurred late in
the movement.  How late?  So late that the movement is almost
concluded?

The weekly ADX shows selling pressure (blue line) decreasing while
buying pressure (orange line) increases, but the main line (pink)
shows a less bullish aspect.  It slopes down toward 20, indicating
a weakening in the recent trend.  The weekly candle, a doji
sitting at the apex of the rising wedge and just above the long-
term descending trendline, also depicts the weakening of the
trend.  The steadiness seen in the markets this week produced that
doji, but a doji indicates something other than steadiness. It
indicates indecision, and is sometimes a reversal signal.  That
reversal signal would need to be confirmed by an OEX move down
next week.  Without that confirmation, the doji shows only a
natural hesitation near important resistance as the index gathers
strength.  The flattening 5(3)3 stochastics and RSI near or in
levels that indicate overbought conditions do hint that a reversal
could be near, however.

Because the ADX level remains above 20, although barely so, it may
be possible that rollovers in the oscillators will accompany
consolidation rather than a pullback.  Oscillators can stay in
overbought territory for a long time, too, but these indicators
hint that the risk is shifting toward those with bullish
positions.  While I think it possible that the OEX might still
push up toward 487, the top of the 385-487 trading range, its
failure to sustain a move over 475 this week makes me more
doubtful of that happening.  That failure to move over 475 gives
more credence to the idea that the OEX may turn down at or ahead
of that 487 number, remaining within its trading range.

As seen on the OEX weekly chart, steadiness may not have been
particularly bullish.  Perhaps the daily chart shows something
different.

OEX Daily Chart:




Although I've begun to question the relevance of the rising wedge
on the daily chart since prices have moved into the apex, a couple
of factors encouraged me to retain it for another week.  One
factor can be found in an examination of the RSI and 21(3)3
stochastics, pinned until late this week in their own triangular
formations.  Just as the OEX broke down out of the rising green
wedge, these oscillators also broke below their own rising support
lines, giving confirmation of the breakdown in the OEX price
chart.  Prices rose today to test the underside of that green
rising wedge, finding support first on the lavender line that a
reader proposed as an alternate lower trendline for the rising
wedge.  A retest of broken support is natural and expected.
Although it's difficult to see on the chart, the RSI rises again,
too, to test its own broken support.  It's possible that the OEX
retest could be successful, but the breakdown confirmation given
by these two indicators hints otherwise.

ADX may tell a different story, although a few hints of impending
weakness may be showing up in that indicator, too.  Selling
pressure declined through mid-April and has since remained steady,
but has not risen.  The ADX number remains firmly above 20,
indicating that the trend is still in place.  Buying pressure
appears to be receding, however, and the ADX line may be
flattening.  Selling pressure could pick up if the OEX breaks
firmly below the lavender line of the rising wedge, and especially
if the OEX breaks 462.75, the site of recent support.  A break
beneath that support would almost certainly mean a retest of the
converging 21-dma and exponential 200-dma at 460.56 and 459.54,
respectively.  A failure there would find next light support near
456, with support layered beneath that in close succession.  It's
difficult to predict now how deep a pullback would be without
first watching the speed with which the oscillators cycle back
down toward oversold levels.  On a P&F measure, at least, no real
damage would be done until a trade beneath 440, and it's
impossible to judge now whether a pullback could take the OEX
below 440.

Stockcharts.com shows the bullish percent level for the OEX
($BPOEX) at 65.  A scan of the P&F chart shows that the OEX
bullish percent has topped out as high as 79 or as low as 59 in
recent years.  This measure, too, then shows that while the OEX
can continue the rally, risk begins to shift toward those in
bullish positions.

Before looking at the chart of the DJI, it might be instructive to
view its sister index, the Dow Jones Transportation Index.

Weekly Chart of the Dow Jones Transportation Index:




The transports have had a great run, with this index leading the
Dow Jones Industrials in crossing above its 200-dma.  I've
included a 40-week MA as an approximation of the 200-dma.  I've
also snapped a Fibonacci retracement tool on the chart.  This
shows that this week's doji formed approximately (because I
snapped the tool and didn't calculate exact amounts) at the 50%
retracement of the March '02 to March '03 move.  Most rallies
retrace 1/3 to 2/3 of the previous decline, according to Pring,
with a 50% retracement being a common amount.  This week's doji
formed at important resistance, then, giving its formation extra
significance.  RSI and 21(3)3 stochastics also have moved into
levels indicating overbought conditions.  Although it's difficult
to see on this chart, RSI has flattened, but has not yet turned
down, and the stochastics still point upward.  The 5(3)3
stochastics (not shown) have made a bearish kiss, however.

Daily ADX has begun to slope down, indicating a weakening in the
trend.  Buying pressure has slightly flattened but selling
pressure still declines, too.  It may be time for the transports
to pull back or consolidate while the recent gains are digested,
and I wouldn't be surprised to see that happen next week.  A
pullback to next support near 2420 or even to the 38.2%
retracement level pictured near 2360 would preserve the bullish
outlook, but I would watch the behavior of the indicators to gauge
whether the overbought pressure is quickly released or requires a
deeper plunge.

The transports often lead the Dow Jones Industrials, but the two
should eventual confirm each other.  Because Q-charts printed
strange candles on my DJI chart, I've substituted a
Stockcharts.com chart for the DJI.

Daily Chart of the DJI:




The daily chart shows that the DJI trades safely within an upward
slanting regression channel, with today's movement bringing the
price right up to the midline of that channel. The DJI could pull
back to 8430 or so and remain safely within that channel.  Bulls
will also consider it a victory that the index closed the week
over 8600 and made a higher high relative to the March 21 high.

The weekly chart (not shown), however, reveals a small-bodied
weekly candle that could also be indicative of indecision.  Daily
ADX (not shown) slopes down, indicating a weakening of the trend.
As shown above, daily RSI, usually one of my favorite indicators,
appears somewhat inconclusive, oscillating between 50 and 70.
However, a trend of lower RSI highs can be pitted against the
DJI's trend of higher highs, showing bearish divergence.
Stochastics also show this bearish divergence.  Although ADX
slopes down, it's not yet below 20, so it's still possible that
oscillator evidence can not be trusted.

Stockcharts.com lists the bullish percent for the industrials
($BPINDU) at 66.67.  $BPINDU has topped out as high as 80 and as
low as 60 in recent years, so risk with this index also shifts
toward those in bullish positions, although the bullish percent
levels can still move higher.

The weekly chart of the NDX shows a doji forming at resistance,
just as was seen with the OEX chart.  Weekly oscillators are at
levels indicating overbought conditions but have not yet turned
down.  Bullish percent for the NDX ($BPNDX) now measures 78, with
$BPNDX levels topping out as high as 82 and as low as 50 in recent
years.  As with the other indices, the bullish percent levels
still have room to rise, but this evidence, coupled with the doji
on the weekly chart, indicate the shift in risk to those with
bullish positions.

The daily chart proves somewhat more difficult to decipher.

Daily chart of the NDX:




A glance at the horizontal red lines drawn across the RSI and
stochastics tops shows possible bearish divergence setting up,
with the NDX making a series of higher highs while those
indicators make equal highs.  Yet, those same indicators show a
pattern of higher lows, a pattern that has not yet been broken. In
fact, RSI appeared to turn back up as it approached that ascending
trendline.

ADX has flattened and buying pressure may have done so, too, but
selling pressure does not appear to have increased and may not as
long as the NDX stays above the 1100 support.  A move below that
level would probably increase selling by disappointed bulls,
however.  Although the oscillators' directions may be difficult to
discern on this small chart, stochastics have turned down,
indicating that it's time to test the consolidation-or-pullback
and how-deep-a-pullback theories.  As with the other indices, it
will be important to watch the speed with which the indicators
move back toward oversold levels as the NDX consolidates or pulls
back.

Other indices of interest are the BIX, perhaps turning down again
from the 296-297 level that has retarded advances since September;
and the SOX, clawing its way back above 350 by the week's close,
although not able to regain the week's high.  The SOX daily chart
shows definite bearish divergence with oscillators making lower
highs while the price made a higher high. The SOX daily RSI shows
that same pattern of higher lows that has shown up on other
charts, and those higher lows have not been violated in the SOX's
case.  The same pattern shows up on the BIX daily chart, but in
this index's case, the RSI violated that ascending trendline
formed from its higher lows.

All the gathered evidence shows that it's time for a pullback or
consolidation.  Across the indices, ADX levels slope down,
indicating a weakening in the recent upward trends.  None of those
ADX levels are yet below 20 however, indicating that it's still
possible that the rounding-over oscillators predict consolidation
or a light pullback rather than deeper pullbacks.  Rolling-over
weekly oscillators hint that added pressure will be given to the
pullbacks, but that's not certain yet.  In my opinion, we'll have
to watch the behavior of the oscillators while price consolidates
or pulls back to gauge what happens next. My study of global
markets gives me an opinion of what might happen, but the charts
themselves do not necessarily back up my opinion.

That's the overview, but what will happen Monday?  Hourly
oscillators all approach overbought levels or have begun turning
down from those levels, but the movements are tentative as yet so
that it's possible that they can be turned back up as indices
consolidate or build on gains for another day or so.  If those
gains bump the indices above important levels, momentum could
carry them even further, as bullish percent levels could still
rise higher.  Much depends on the behavior of the foreign markets
on Monday.  The Nikkei has been volatile, making big percentage
moves, as has the DAX.  Both the Japanese and Germany economies
are fragile, teetering on the edge of or already dipping into
another recession.  Germany's index of leading indicators fell
below 50 this week, indicating that it's headed into a contraction
in its economy.  These and other global bourses have been feeding
off our gains, as we have been theirs, and a blink from any of
these indices could impact them all.

Linda Piazza


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

==========================================
Market Watch for the week of May 12th
==========================================

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

Symbol  Company               Date           Comment      EPS Est

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

BNG    Benetton Group        Mon, May 12  -----N/A-----        N/A
EN     Enel S.p.A.           Mon, May 12  -----N/A-----        N/A
HTG    Heritage Prop Invest  Mon, May 12  -----N/A-----       0.67
MCCC   Mediacom Comm Corp    Mon, May 12  Before the Bell    -0.28
PSUN   Pac Sunwear of Cali   Mon, May 12  After the Bell      0.14
PC     Perez Companc S.A.    Mon, May 12  -----N/A-----       0.17
PBR    Petrobras             Mon, May 12  -----N/A-----       1.48
KPN    Royal Kpn N.V.        Mon, May 12  Before the Bell      N/A
TEM    Telefonica Moviles    Mon, May 12  Before the Bell      N/A
VAL    Valspar               Mon, May 12  Before the Bell     0.62
VE     Veolia Environnement  Mon, May 12  -----N/A-----        N/A
WTW    Weight Watchers Intl  Mon, May 12  After the Bell      0.38


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

ANF    Abercrombie & Fitch   Tue, May 13  After the Bell      0.26
ACAS   Am Capital Strategies Tue, May 13  After the Bell      0.65
AMAT   Applied Materials     Tue, May 13  After the Bell      0.02
ATO    Atmos Energy Corp     Tue, May 13  After the Bell      1.05
AXA    AXA                   Tue, May 13  -----N/A-----        N/A
BRG    BG Group              Tue, May 13  Before the Bell     0.37
BSY    British Sky Broadcast Tue, May 13  Before the Bell      N/A
CVC    Cablevision Systems   Tue, May 13  Before the Bell    -0.44
CPN    Calpine Corporation   Tue, May 13  Before the Bell     0.02
CSC    Comp Sciences Corp    Tue, May 13  After the Bell      0.94
DE     Deere & Company       Tue, May 13  Before the Bell     0.93
DGX.F  Degussa AG            Tue, May 13  Before the Bell      N/A
EP     El Paso Corp.         Tue, May 13  Before the Bell     0.29
FIA    Fiat S.p.A.           Tue, May 13  -----N/A-----        N/A
FOX    Fox Entertainment     Tue, May 13  Before the Bell     0.23
HIG    Hartford Finl Serv    Tue, May 13  After the Bell      1.12
HAVS   Havas Advertising     Tue, May 13  01:30 am ET          N/A
IDCC   InterDig Comm Corp    Tue, May 13  Before the Bell     0.03
IPR    International Power   Tue, May 13  Before the Bell     1.39
JCP    JC Penney             Tue, May 13  Before the Bell     0.18
MAC    Macerich Co           Tue, May 13  -----N/A-----       0.79
NTAP   Network Appliance     Tue, May 13  After the Bell      0.07
PCG    PG&E Corporation      Tue, May 13  -----N/A-----       0.43
PTP    Plat Undwrite Hold    Tue, May 13  After the Bell      0.42
IMI    SanPaolo IMI SpA      Tue, May 13  After the Bell       N/A
SGP    Schering-Plough       Tue, May 13  Before the Bell     0.10
TEF    Telefonica de Espaqa  Tue, May 13  Before the Bell      N/A
MAY    The May Depart Stores Tue, May 13  -----N/A-----       0.19
NWS    The News Corporation  Tue, May 13  Before the Bell     0.20
TJX    The TJX Companies Inc Tue, May 13  Before the Bell     0.22
UBS    UBS AG                Tue, May 13  Before the Bell      N/A
WMT    Wal-Mart Stores Inc.  Tue, May 13  Before the Bell     0.42
WMB    Williams Companies    Tue, May 13  Before the Bell     0.03


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

ACXM   Acxiom                Wed, May 14  After the Bell      0.03
AAP    Advance Auto Parts    Wed, May 14  After the Bell      0.75
ADI    Analog Devices Inc.   Wed, May 14  After the Bell      0.18
ANN    AnnTaylor Stores      Wed, May 14  After the Bell      0.40
BEAS   BEA Systems           Wed, May 14  After the Bell      0.07
BRCD   Brocade Comm Sys      Wed, May 14  After the Bell      0.00
RIO    Companhia Vale do Rio Wed, May 14  -----N/A-----       1.33
CA     Computer Ass Intl     Wed, May 14  After the Bell      0.06
FD     Federated Dept Stores Wed, May 14  -----N/A-----       0.15
GALN   Galen Holdings PLC    Wed, May 14  Before the Bell     0.27
INTU   Intuit                Wed, May 14  After the Bell      1.02
JHX    James Hardie Ind      Wed, May 14  -----N/A-----        N/A
L      Liberty Media Group   Wed, May 14  After the Bell     -0.07
MTA    Matav                 Wed, May 14  Before the Bell      N/A
NAB    Natl Australia Bank   Wed, May 14  -----N/A-----        N/A
PSS    PAYLESS SHOESOURCE    Wed, May 14  Before the Bell     0.25
LQU    Quilmes Industrial    Wed, May 14  After the Bell       N/A
REP    Repsol YPF            Wed, May 14  Before the Bell     0.50
SIRI   Sirius Sat Radio      Wed, May 14  -----N/A-----      -1.79
SCM    Swisscom AG           Wed, May 14  Before the Bell      N/A
THC    Tenet Healthcare      Wed, May 14  -----N/A-----       0.33
TIF    Tiffany & Co.         Wed, May 14  Before the Bell     0.23
UBB    Unibanco              Wed, May 14  -----N/A-----       0.55
UCOMA  UnitedGlobalCom, Inc. Wed, May 14  -----N/A-----      -0.60


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

AEOS   American Eagle Outfit Thu, May 15  Before the Bell     0.09
IRE    Bank of Ireland       Thu, May 15  Before the Bell      N/A
BOX    BOC Group PLC         Thu, May 15  -----N/A-----        N/A
CCH    Coca-Cola Hllnc BottleThu, May 15  Before the Bell      N/A
DELL   Dell Computer Corp    Thu, May 15  After the Bell      0.23
DT     Deutsche Telekom      Thu, May 15  -----N/A-----        N/A
EON    E.ON AG               Thu, May 15  Before the Bell      N/A
ING    ING Groupe NV         Thu, May 15  -----N/A-----        N/A
KSS    Kohl's                Thu, May 15  -----N/A-----       0.35
NAV    Navistar Intl         Thu, May 15  Before the Bell    -0.29
REXMY  REXAM PLC             Thu, May 15  Before the Bell      N/A
TGT    Target Corporation    Thu, May 15  Before the Bell     0.39
WR     Westar Energy, Inc.   Thu, May 15  -----N/A-----        N/A
ZLC    Zale Corporation      Thu, May 15  Before the Bell     0.28

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

AZ     Allianz AG            Fri, May 16  -----N/A-----        N/A


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

Symbol  Company Name              Ratio    Payable     Executable

ESBF    ESB Financial Corp.       6:5      May  15th   Apr  29th
FBC     Flagstar Bancorp          2:1      May  15th   May  16th
NOVB    North Valley Bancorp      3:2      May  15th   May  16th
NYB     NY Bancorp                4:3      May  21st   May  22nd
FNF     Fidelity National         5:4      May  23rd   May  27th


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

The economic calendar starts to pick back up again and we finish
off the last big round of earnings with a number of big retailers
and computer-hardware giant DELL.  The Retail sales report hits
on Tuesday while the PPI and Capacity Utilization numbers come
out on Thursday.  Friday is also full with Housing starts and
the CPI.

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

Monday, 05/12/02
----------------
None


Tuesday, 05/13/02
-----------------
Trade Balance (BB)      Mar  Forecast: -$40.5B  Previous: -$40.3B


Wednesday, 05/14/02
-------------------
Retail Sales (BB)       Apr  Forecast:    0.4%  Previous:    2.1%
Retail Sales Ex-auto(BB)Apr  Forecast:    0.3%  Previous:    1.2%
Export Prices ex-ag.(BB)Apr  Forecast:     N/A  Previous:    0.3%
Import Prices ex-oil(BB)Apr  Forecast:     N/A  Previous:    0.9%


Thursday, 05/15/02
------------------
Initial Claims (BB)   05/10  Forecast:    N/A  Previous:     425K
NY Empire St Index(BB)  May  Forecast:  -11.5  Previous:    -20.4
PPI (BB)                Apr  Forecast:  -0.5%  Previous:     1.5%
Core PPI (BB)           Apr  Forecast:   0.0%  Previous:     0.7%
Business Inventories(BB)Mar  Forecast:   0.2%  Previous:     0.6%
Indstrial Production(DM)Apr  Forecast:  -0.3%  Previous:    -0.5%
Capacity Utilization(DM)Apr  Forecast:  74.6%  Previous:    74.8%
Philadelphia Fed (DM)   May  Forecast:   -6.0  Previous:     -8.8


Friday, 05/16/02
----------------
Housing Starts (BB)     Apr  Forecast: 1.750M  Previous:   1.780M
Building Permits (BB)   Apr  Forecast: 1.700M  Previous:   1.692M
CPI (BB)                Apr  Forecast:  -0.1%  Previous:     0.3%
Core CPI (BB)           Apr  Forecast:   0.1%  Previous:     0.0%
Mich Sentiment-Prel.(DM)May  Forecast:   87.5  Previous:     86.0


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


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The Option Investor Newsletter                   Sunday 05-11-2003
Sunday                                                      2 of 5


In Section Two:

Market Watch: Still Plenty of Tech
Daily Results
Call Play of the Day: AMGN
Dropped Calls: None
Dropped Puts: None


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************
Market Watch
************

Still Plenty of Tech


QUALCOMM - QCOM - close: 31.11 change: +0.72

Shares of QCOM have completely ignored the rally in techs as the
stock has slipped lower on downgrades and growing concerns over
competition, most recently from TXN.  A failed rally at $32 or a
breakdown below $30 might be entry points for bearish plays.



---

Applied Materials - AMAT - close: 15.08 change: +0.49

AMAT is the largest chip wafer equipment manufacturer and shares
have been underperforming the chip sector.  The company is
expected to announce earnings on Tuesday after the bell and we
could see some action in the stock.  Estimates are for 2 cents a
share.



---

Wal-Mart - WMT - close: 55.80 change: +0.79

WMT is the biggest retailer on the planet and the biggest
component in the RLX retail index.  Thankfully shares have been
rising for the last several weeks.  Currently the stock is near
the low end of its ascending channel.  However, we would not
recommend new bullish plays just yet due to its earnings
announcement expected before the bell on Tuesday.



---

Boston Scientific - BSX - close: 46.91 change: +0.80

Medical equipment maker BSX is making its third attempt since
January to break the $47.00 barrier.  Prior to this year shares
have failed at the $47 mark before, back in July of 1999.  A
breakout could spark a big round of short covering but so far
bulls have been unable to push BSX higher.



---

Lexmark - LXK - close: 72.50 change: -1.25

After breaking out above long-term resistance at $70.00 last
month shares of LXK are headed back for a retest.  Traditionally,
broken resistance becomes new support and the $70 level was so
tough for LXK we would expect it as support.  We would watch for
a bounce there and use a tight stop for potential bullish trades.




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


AZO $86.85 - A recent call play on OI, shares of AZO have
continued to climb higher and look dead set on reaching
resistance at $89.  We're not suggesting any plays here now.

IMDC $43.10 - Another recent call play on OI that has also chosen
to keep climbing.  The stock is at new all-time highs and appears
very overbought but we'll keep an eye on it.

VIA $44.44 - Viacom is about to break out above a long-time
multi-year descending trendline.  Or it's about to fail yet again
if you look at the stock's oscillators, which tell us the rally
is tired.

DGX $60.81 - We keep seeing DGX show up on our watch list.  The
recent bounce back over $60 looks tempting.

ITT $61.29 - This conglomerate actually looks pretty strong and
its PnF chart is just now breaking through resistance.  Of course
the PnF breakout just happens to coincide with a breakout above
the 200-dma on its daily chart.


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

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

CALLS    LAST      Mon    Tue    Wed   Thu  Week

ADTN     45.05   0.33  -0.03 -0.08  0.24  1.35 Hitting New Hi's
AMGN     61.24  -0.34  -1.41 -1.11  0.99 -1.81 NEW, at support
IBM      87.55  -0.68   0.99 -0.27 -0.63  0.35 Ready to go
KLAC     42.49   0.15   0.66 -0.55 -0.98  0.20 Entry point
MEDI     33.98  -0.30  -0.29 -0.58 -0.32 -1.99 Updated


PUTS

AIG      56.25  -0.18  -0.08 -0.85 -1.09 -1.04 Not Triggered
GM       35.97  -0.26   0.49  0.08 -0.30 -0.03 Still waiting
GS       75.00  -0.11   0.71  0.78 -3.14 -1.60 Watch the XBD
KSS      52.62  -1.15   1.69  0.65 -3.25 -2.84 Finally slipping


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*******************
THE PLAY OF THE DAY
*******************

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

Amgen, Inc. - AMGN - close: 61.24 change: +0.77 stop: 58.00

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
^^^^^

None


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
**********

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The Option Investor Newsletter                   Sunday 05-11-2003
Sunday                                                      3 of 5


In Section Three:

New Calls: AMGN
Current Calls: ADTN, IBM, KLAC, MEDI
New Puts: None


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

Amgen, Inc. - AMGN - close: 61.24 change: +0.77 stop: 58.00

Company Description:
The biggest of the Biotech big guns, AMGN makes and markets
therapeutic products for hematology, oncology, bone and
inflammatory disorders, as well as neuroendocrine and
neurodegenerative diseases.  Anti-anemia drug Epogen and immune
system stimulator Neupogen account for about 95% of sales.  Its
Infergen has been commercialized as a treatment for hepatitis C,
and Stemgen is approved for stem cell therapy in Australia,
Canada, and New Zealand.  The company has a strong pipeline of
new drugs in various stages of development as well as research
and marketing alliances with Hoffman-La-Roche and Johnson &
Johnson.

Why we like it:
Earlier this year, we successfully played AMGN to the upside, as
the stock muscled through major resistance and moved up to test
its multi-year descending trendline.  After churning against that
trendline for nearly a month, the stock showed its sector
dominance, breaking free and really surging higher following its
impressive earnings report on April 23rd.  Not only did AMGN beat
earnings estimates ($0.42 vs. $0.39 consensus), but guided
significantly higher for the full year.  That resulted in an
upside explosion in the stock that sent it up near the $64 level
and we've been looking for a favorable opportunity to play the
upside once again.

It looks like that opportunity is upon us, as AMGN found solid
support just above $59 in the middle of last week, and rebounded
smartly, pushing up to end the week right at the 20-dma ($61.28).
The PnF chart continues to look impressive, as it hasn't given a
Sell signal since last November.  The bullish vertical count is
$72, which means AMGN could still have some room to run to the
upside.  The recent bout of profit taking has pulled the daily
Stochastics down into oversold territory and the bounce of the
past couple days has them just turning up and emerging from
oversold.  Looking at the chart below, you can see how the strong
the support looks just below where the stock bounced last week.
horizontal resistance-turned support at $59 is backed up by the
rising 50-dma at $58.90 and the ascending trendline from the
September lows, currently at $58.60.

Another pullback into the $59-60 area looks like a gift of an
entry point into the play.  With intraday support near the $60.40
level holding firm throughout most of the past two days, that
looks like a more realistic level to target shoot new entries.
Based on our experience earlier this year, the way AMGN tends to
move is not conducive to momentum entries.  Our best approach is
to catch a dip back to support and then ride it up to the next
near-term top and then harvest gains, looking to repeat the
process again.  So our first target on the upside will be a
return to the recent highs near $64.  Should the bulls get really
frisky, a run to the $68-69 area is certainly a possibility, and
if reached we'd be more than happy to exit the play up there,
which was the site of major resistance throughout most of 2001.
Because of the strong underlying support, we can place our stop
at $58, with a high degree of confidence that it shouldn't be
touched unless a serious bout of selling arises.


Suggested Options:

Shorter Term: The June 65 Call will offer short-term traders the
best return on an immediate move, but this is a higher risk
approach due to AMGN's slow-moving nature.  Traders with less
tolerance for risk will want to use the June 60 Call.

Longer Term: Due to the slow and deliberate price action for
which AMGN is known, traders looking to capitalize on a breakout
move above $64 will want to look to the July 65 Call.  This
option is 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 JUN-60 YAA-FL OI= 2470 at $3.10 SL=1.50
BUY CALL JUN-65 YAA-FM OI= 9163 at $0.95 SL=0.50
BUY CALL JUL-60 YAA-GL OI=41798 at $4.10 SL=2.50
BUY CALL JUL-65 YAA-GM OI=25806 at $1.70 SL=0.75

Annotated Chart of AMGN:





Picked on May 11th at    $61.24
Change since picked:      +0.00
Earnings Date          07/22/03 (unconfirmed)
Average Daily Volume = 10.8 mln


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

ADTRAN, Inc. - ADTN - close: 45.05 change: +1.44 stop: 42.50*new*

Company Description:
ADTRAN, Inc. develops products and services that simplify access
to telecommunications networks.  The company's high-speed,
digital transmission products improve the operation of, and
reduce the costs associated with, building and using
communications networks.  Small and large telephone companies,
long-distance carriers and other network service providers use
the company's products to deliver high-speed data, voice, video
and Internet services to their customers.  Businesses, schools
and government agencies use ADTN's products to connect
facilities, remote offices and mobile workers, enabling corporate
information services, Internet access, telecommuting and
videoconferencing within their organizations.

Why we like it:
Amazing strength is the only way we know to describe our ADTN
play.  After the impressive breakout through the $41.50 level,
the stock surged all the way up to test our first profit target
in the $44-45 area, hitting an intraday high of $45.17 last
Monday.  As expected, the stock needed some time to digest those
gains and gradually pulled back through the middle of the week.
Amazingly, buyers stepped up to grab the bargain at $43 on
Thursday and continued that spending spree on Friday, propelling
ADTN back over the $45 level at the close.  With daily
Stochastics trying to turn a short-cycle bullish reversal, it
looks like this one is going to take a run at our final target in
the $48-50 area.  New entries taken on the dip to $43 on Thursday
look very favorable and a secondary dip to the $43-44 area should
work for new entries as well.  Momentum traders looking to
capitalize on another breakout move can use a move above $45.25
to enter the play, targeting a quick move up to that $48 level.
Given the strong support shown last week, we're raising our stop
to $42.50, which is just below the rising 10-dma.

Suggested Options:

Shorter Term: The June 45 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 towards our $48-50 target zone will want to look to
the August 45 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 JUN-45 RQA-FI OI=264 at $2.60 SL=1.25
BUY CALL AUG-45 RQA-HI OI=373 at $4.10 SL=2.50
BUY CALL AUG-50 RQA-HJ OI=  0 at $1.90 SL=1.00

Annotated Chart of ADTN:





Picked on April 29th at  $40.70
Change since picked:      +4.35
Earnings Date          07/15/03 (unconfirmed)
Average Daily Volume = 799 K

---

Intl Business Mach - IBM - cls: 87.55 chg: +1.50 stop: 85.75*new*

Company Description:
Big Blue is being heralded as the world's largest technology
company.  Considering their massive hardware and software
business across the globe it's not surprising.  However, IBM's
services and consulting business is growing by leaps and bounds
and is a major source of revenues.

Why We Like It:
The tech sector rebound is alive and well.  The NASDAQ is back
over the 1500 level and the GHA hardware index is hitting new
closing 52-week highs.  Shares of IBM weathered the mid-week
weakness and are poised to breakout.  Recent positive comments
from Intel's President about a second half recovery are good news
for IBM's chip business.  Plus, Big Blue is about to introduce
its new mainframe the TREX on May 13th.  The Gartner Group has
already stated that IBM has surpassed BEAS in the sever
application software market.  On top of this positive backdrop
analysts at SoundView met with IBM two weeks ago and came back
very bullish.  The PWC consulting acquisition appears to be
working better than expected and IBM's own consulting business is
very strong.

Shares of IBM continue to climb slowly higher, much like the Dow
Jones Industrials.  Readers looking at a 30-minute interval chart
can easily see how IBM tends to trade in a $2 range before moving
to the next $2 range.  Thus, we're going to raise our stop loss
to $85.75, which should be below the recent support near $86.
Traders who prefer to buy the dip can look for dips to $86 while
momentum traders can look for a move above $88.00.  Yes, it does
look like there is resistance at $88-89-90 but continued strength
in the markets and the hardware sector should help IBM bust
through.

A note of caution...market commentary on OI has been pretty clear
that the recent rally is built on hopes that the bottom is behind
us.  This may be true but a recent IT survey from Goldman Sachs
indicates IT spending could take another dip before it gets
better.  While we expect IBM to do better than its competitors
its stock price is sure to experience plenty of ups and downs.
The moral to this story?  Watch your stops!

Suggested Options:
We listed mostly 90-strike options but that reflects our
expectation of a breakout above the 89-90 level.  It would not
hurt to use the 85 strikes on dips or if you can afford them.

BUY CALL JUN 85 IBM-FQ OI= 7721 at $4.50 SL=2.25
BUY CALL JUN 90 IBM-FR OI=11181 at $1.60 SL=0.80
BUY CALL JUL 90 IBM-GR OI=33334 at $2.70 SL=1.40
BUY CALL OCT 90 IBM-JR OI= 7791 at $5.10 SL=3.00

Annotated chart for IBM:





Picked on May 4th at $87.37
Change since picked:  +0.18
Earnings Date      04/14/03 (confirmed)
Average Daily Volume = 8.2 Million


---

KLA-Tencor - KLAC - close: 42.49 change: +1.43 stop: 40.75*new*

Company Description:
About KLA-Tencor: KLA-Tencor is the world leader in yield
management and process control solutions for semiconductor
manufacturing and related industries. Headquartered in San Jose,
Calif., the company has sales and service offices around the
world. An S&P 500 company, KLA-Tencor is traded on the Nasdaq
National Market under the symbol KLAC. (source: company press
release)

Why We Like It:
The entire premise of this play was to catch any aggressive rally
attempts in the semiconductor sector as it tried to play catch up
to the rest of the tech market.  So far that hasn't happened yet.
The disk drive sector, the hardware sector and the Internet
sector are all at new 52-week closing highs but the SOX keeps
lagging behind.  Granted it was one of the biggest sector movers
on Friday, up 3.82% but this was due to strong earnings guidance
from graphics chip maker NIVIDIA and news that Intel's President
had reaffirmed his belief in a second half recovery.

In reality, the relative weakness Wednesday and Thursday for the
SOX and for KLAC may have offered a better entry point for
bullish traders.  While the SOX pulled back shares of KLAC
followed and dipped toward the $40.80 area before jumping higher
on Friday.  Our short-term goal is $45.00 for KLAC and market
willing it should get there.

We're raising our stop to $40.75, just below Thursday's low.
This is to reduce our risk and apply some action to the belief
that the markets look overbought and need a more significant pull
back.

Suggested Options:
Our perspective is short-term on the chip rally so we're focused
on the June call options.  Traders who like more time can look to
Septembers.  We're not listing the $42.50 strikes but they are
available if you want them.

BUY CALL JUN 40.00 KCQ-FH OI=5152 at $4.00 SL=2.00
BUY CALL JUN 45.00 KCQ-FI OI=9034 at $1.40 SL=0.70
BUY CALL SEP 45.00 KCQ-II OI=2774 at $3.40 SL=1.50

Annotated Chart for KLAC




Picked on May 4th at $42.15
Change since picked:  +0.34
Earnings Date      04/23/03 (confirmed)
Average Daily Volume = 11.4 Million


--- --- --- ---
LONG-TERM CALL
--- --- --- ---

MedImmune Inc - MEDI - close: 33.98 change: -0.20 stop: 31.99*new*

Company Description:
MedImmune is a leading biotechnology company focused on
researching, developing and commercializing products to prevent
or treat infectious disease, autoimmune disease and cancer.
MedImmune currently markets three products, Synagis.
(palivizumab), Ethyol. (amifostine) and CytoGam. (cytomegalovirus
immune globulin intravenous (human)), and has 10 products in
clinical testing. MedImmune employs approximately 1,600 people,
is headquartered in Gaithersburg, Maryland, and has additional
operations in Frederick, Maryland, as well as Pennsylvania,
California, the United Kingdom and the Netherlands (source:
company press release)

Why We Like It:
Strength and resiliency are what investors are looking for in a
longer-term trade.  We're not advocating MEDI as a core portfolio
holding but it does look tempting as a three to six month
speculation with options.  We originally added MEDI to the
OptionInvestor.com play list on April 3rd at $34.31.  The company
is currently working through clinical trials on its up and coming
Flumist drug, the first ever influenza vaccine delivered through
a nasal mist instead of a shot.  Recently the company has
reaffirmed investors that they expect FDA approval for Flumist by
the end of June.

MEDI did report their Q1 earnings on April 24th and the results
were decent.  The headline number beat estimates by two cents
with 44 cents a share.  Last year's Q1 the company lost nearly
$1.1 billion due to its acquisition of the biotech company
Aviron.  This year MEDI earned $110 million.  More importantly
for investors was that MEDI's revenues rocketed 32 percent higher
to $436 million.  Fueling the rise was stronger than expected
sales of its Synagis drug.  The company actually raised its
forecasts for sales of Synagis from 16 to 20 percent growth to 20
to 24 percent growth.  The day after MEDI's earnings announcement
Lazard Freres lowered its rating on MEDI from a "hold" to a
"sell" claiming shares are overvalued.  The stock did not react
and continued to trade sideways above the $35 level.

We like MEDI's strength and how it has been channeling higher.
In the past, dips towards its 50-dma have been profitable entry
points for the bulls and shares are slipping lower towards the
50-dma now.  Given the upcoming FDA approval in June for the
Flumist drug, investors have a reason to hold and speculators
have a reason to buy.  Yet this doesn't absolve an investor's
responsibility to protect their capital.  We're raising the stop
to $31.99, which is just below the bottom of MEDI's rising
channel.  More conservative traders might want to put their stop
under the simple 50-dma currently near 33.12.  The obvious risk
is that the FDA does not approve Flumist and shares react
negatively.  Monitor your stops!

Suggested Options:
As a longer-term play we would suggest the September calls, which
would allow time for any appreciation from a late-June approval
by the FDA.


BUY CALL SEP-32.50 MEQ-IZ OI= 402 at $4.30 SL=2.00
BUY CALL SEP-35.00 MEQ-IG OI=3503 at $2.80 SL=1.40

Annotated Chart for MEDI:




Picked on April 3rd at $34.31
Change since picked:    -0.33
Earnings Date        04/23/03 (confirmed)
Average Daily Volume = 3.9 Million


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

None


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

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


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Contact Support
The Option Investor Newsletter                   Sunday 05-11-2003
Sunday                                                      4 of 5


In Section Four:

Current Put Plays: AIG, GM, GS, KSS
Leaps: Edging Closer To The Precipice
Traders Corner: Being Married Can Be Fun – If You're A Put
Traders Corner: Six Simple Rules
Traders Corner: Where Is The Dow Going?
Futures Corner: Using Futures to determine Market Strength or      
                Weakness


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

American Intl Group - AIG - cls: 56.25 chg: +0.79 stop: $58.00

Company Description:
American International Group, Inc. (AIG) is the world's leading 
international insurance and financial services organization, with 
operations in approximately 130 countries and jurisdictions. AIG 
member companies serve commercial, institutional and individual 
customers through the most extensive worldwide property-casualty 
and life insurance networks of any insurer. In the United States, 
AIG is the largest underwriter of commercial and industrial 
insurance and a top-ranked life insurer through AIG American 
General. AIG's global businesses also include financial services, 
retirement savings and asset management. AIG's financial services 
businesses include aircraft leasing, financial products, trading 
and market making. AIG's growing global consumer finance business 
is led in the United States by American General Finance. AIG also 
has one of the largest U.S. retirement savings businesses through 
AIG SunAmerica and AIG VALIC, and is a leader in asset management 
for the individual and institutional markets, with specialized 
investment management capabilities in equities, fixed income, 
alternative investments and real estate. AIG's common stock is 
listed on the New York Stock Exchange, as well as the stock 
exchanges in London, Paris, Switzerland and Tokyo.
(source: company press release)

Why We Like It: (same update as Thursday, May 8th)
Going short at failed resistance is the most tempting and least 
threatening opportunity for a bear.  Shares of AIG are presenting 
just such an opportunity.  Now that the markets have started to 
pull back a bit in profit taking traders are going to be hunting 
for weak stocks that have room to fall.  AIG could be one of 
them.  The stock had rallied right to its 200-dma ahead of its 
April 24th earnings report and then it came crashing right back 
down after the report, probably due to one of the earliest 
announcements by an American company about how SARS might affect 
business.  Okay, "crashed" maybe an exaggeration but shares did 
drop strongly and have spent the last two weeks in a vain attempt 
to break above its descending 200-dma.  The recent market 
weakness, albeit mild, have seen shares of AIG extend their 
failed rally pull back.  

AIG earns almost 30 percent of its revenues from Asia and the 
ongoing SARS threat will most certainly affect their Q2 earnings.  
Even if the SARS influence is reduced the perception that SARS 
could affect their earnings results is all it takes to have 
investors hitting the sell button.  The company has already 
issued a statement that SARS will prevent its agents from 
visiting prospective customers in the region.  To exacerbate the 
issue AIG already has a small number of agents under quarantine 
and at least one has been confirmed as a SARS patient.

Potentially contributing to AIG's weakness is the IUX insurance 
index.  The IUX has been trading higher in a relatively narrow 
channel since early April.  We did notice it spike up and back 
down on AIG's earnings report but the index kept climbing while 
AIG went sideways after investors digested AIG's earnings 
numbers.  The recent market weakness has pushed the IUX through 
the bottom of its narrow channel and the index rests precariously 
above its simple 200-dma.  We would watch both the IUX and AIG 
for weakness.  A move under the 200-dma for the IUX or a move 
under $55 for AIG might be a precursor for the other.  Chart 
technicians will also note that the daily MACD and stochastics 
for AIG are rolling over from oversold.  We also note that AIG's 
weekly chart is showing the stock at the top of a multi-month 
descending channel (see image below).  More aggressive traders 
can initiate a short position here but we're going to use a 
trigger under $55.00 (actually $54.94) to launch us into the 
play.  Our initial stop will be $58.00, although $58.35 would be 
just above recent highs.  Keep in mind that AIG's chairman will 
be speaking at the Goldman Sachs Financial conference on May 13th 
and any positive comments could affect our play poorly.

Weekend Update:
So far we are NOT TRIGGERED in this short play for AIG.  Only if 
shares trade at $54.94 or less will we open the play.  However, 
that doesn't mean that more aggressive traders can try and target 
shoot a better entry point.  If AIG attempts to bounce from the 
$55 level, then another failed rally at its 200-dma might be a 
low-risk entry with our stop loss at $58.00.  The recent 
disasters with tornados hitting the mid-west should put a damper 
on the insurance index but AIG is not one of the insurers 
expected to pay out significant claims by these storms.

Suggested Options:
Stocks tend to go down faster than they go up so our focus will 
be on short-term options.  June and August puts appear to be our 
best bets.  

BUY PUT JUN 55 AIG-RK OI=4588 at $1.80 SL=0.90
BUY PUT JUN 50 AIG-RJ OI=6314 at $0.65 SL=0.00
BUY PUT AUG 50 AIG-TJ OI=7367 at $1.55 SL=0.75

Annotated Chart:



 

Picked on May Xth at $00.00
Change since picked:  -0.00
Earnings Date      04/24/03 (confirmed)
Average Daily Volume = 7.2 Million

---

General Motors - GM - close: 35.97 change: +0.19 stop: 38.00*new*

Company Description:
General Motors Corporation provides automotive-related products 
and services by primarily designing, manufacturing and marketing 
vehicles, as well as providing communications services and 
financial services.  The company operates in two segments, 
Automotive, Communications Services and Other Operations, and 
Financing and Insurance Operations.  It's automotive business 
segment consists of General Motors Automotive, which encompasses 
four regions: GM Norma America, GM Europe, GM Latin 
America/Africa/Mid-East and GM Asia Pacific.  The communication 
services include digital entertainment, information and 
communications services and satellite-based private business 
networks.  The company's other operations include the design, 
manufacturing and marketing of locomotives and heavy-duty 
transmissions.  GM's Financing and Insurance Operations primarily 
relate to General Motors Acceptance Corporation (GMAC).

Why we like it:
Given what appear to be rather dismal fundamental conditions and 
a lack of a bullish catalyst, we really expected to see GM 
peeling off lower last week.  But it just never came to past, 
with the stock languishing in a very tight range between $35.50-
36.50  Despite the lack of any thrilling action, we still like 
the long term bearish prospects for the stock, with a return to 
the $30 level looking quite achievable.  Failed rallies below the 
formidable $37.50 resistance level will make for the best entries 
ahead of the expected decline.  Those traders looking for 
confirmed weakness before playing can use a drop under $35 as 
their entry signal.  Note that GM is one of the minority of DOW 
stocks that is NOT on a PnF Buy signal, with its bearish price 
target of $18 still being in play.  Rather than continue to 
update this play every day, we're changing it to a longer-term 
play and will only update it when necessary due to significant 
price action or news developments.  We're just fractionally 
tightening our stop to $38 (which is still above the 200-dma), 
and we'll leave it there until the stock authoritatively loses 
the $35 level.

Suggested Options:
Short-term traders will want to focus on the May 35 Put, as it 
will provide the best return for a short-term move.  But note 
that we've shifted our focus on GM to the longer term and are 
recommending using the September strikes to alleviate the concern 
of time decay.  Those traders looking to gain greater leverage 
can utilize the SEP-32 Put, which although it is out of the 
money, should have enough life to get the job done.

BUY PUT JUN-35 GM-RG OI=19538 at $1.45 SL=0.75
BUY PUT SEP-35 GM-UG OI= 1688 at $2.95 SL=1.50
BUY PUT SEP-32 GM-UZ OI= 5201 at $1.95 SL=1.00

Annotated Chart of GM:



 

Picked on May 4th at    $35.80
Change since picked:     +0.17
Earnings Date         07/15/03 (confirmed)
Average Daily Volume = 5.15 mln

---

Goldman Sachs Grp. - GS - close: 75.00 change: +0.94 stop: 78.25

Company Description:
The Goldman Sachs Group is a global investment banking and 
securities firm that provides a wide range of services worldwide 
to a substantial and diversified client base that includes 
corporations, financial institutions, governments and high net-
worth individuals. The company provides investment banking, which 
includes financial advisory and underwriting, and trading and 
principal investments, which includes fixed income, currency and 
commodities, equities and principal investments.  GS recently 
completed the acquisition of Spear, Leeds & Kellog, which is 
engaged in securities clearing, execution and market making, both 
floor-based and off-floor.

Why we like it:
While it would have been nice to see GS follow through to the 
downside on Friday, that would have been too much to hope for in 
light of the bullish action in the broad market.  We can't say 
we're disappointed though, as the rebound was rather anemic and 
looks like it is setting us up for a better entry point into the 
play.  Remember that broken ascending channel?  Well Friday's 
bounce was pretty anemic and it could be the early part of a 
rebound that fails at the bottom of that broken channel.  
Currently, the bottom of that channel is about $76.40, so we'll 
be looking for a failed rally in the $76.00-76.50 area to signal 
an entry into the play.  Of course traders that would prefer to 
see confirmed weakness before entering the play will want to keep 
their eye on the $74 level.  GS found support just above that 
level on both Thursday and Friday and if it breaks, the trip down 
to fill the $70-71 early April gap could be swift.  The one 
potential fly in the ointment is the action of the Brokerage 
sector (XBD.X), which reversed higher on Friday and appears 
intent on another test of the $460-463 area.  Should that test 
fail, it will provide confirmation for those taking new entries 
on a failed rally in GS.  Maintain stops at $78.25.

Suggested Options:
Short-term traders will want to focus on the June 75 Put, as it 
will provide the best return for a short-term play.  Those 
looking for a larger move down towards the early April gap will 
want to utilize the June 70 Put or even the July 70 put, which 
provides greater insulation from the spectre of time decay.  Note 
that we haven't listed any May strikes, with expiration next 
week.

BUY PUT JUN-75 GS-RO OI=1563 at $2.75 SL=1.25
BUY PUT JUN-70 GS-RN OI=2713 at $1.15 SL=0.50
BUY PUT JUL-70 GS-SN OI=4563 at $1.90 SL=1.00

Annotated Chart of GS:



 


 

Picked on May 8th at    $74.06
Change since picked:     +0.94
Earnings Date         06/19/03 (unconfirmed)
Average Daily Volume = 4.28 mln

---

Kohl's Corp. - KSS - close: 52.62 change: -0.63 stop: 55.25*new*

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:
Sure enough, Thursday's breakdown under the $54 level did indeed 
prove to be the straw that broke the bulls' back.  We've been 
saying that when KSS broke that level that it ought to be a quick 
trip down to fill in the $51-52 gap left behind on March 13th.  
Well we didn't have to wait long, as the stock plunged this 
morning, hitting its intraday low of $51.06 during the first hour 
of trading.  That was the opportunity to harvest some quick gains 
in the play, as it then rebounded smartly, consolidated near $52 
for most of the day and then moved higher into the close.  
There's no question that KSS has suffered some technical damage 
over the past couple days, not the least of which is the new PnF 
Sell signal and subsequent break of the bullish support line at 
$53.  Despite the rebound from the lows, KSS still looks quite 
weak and we're sticking with it on the thought that our $50 
target should be in the bag early next week, market permitting.  
You see, the Retail index (RLX.X) rebounded with the rest of the 
market, popping right back to the $307 resistance level for a 1% 
gain on the day.  In light of that performance, KSS' relative 
weakness becomes more clear.  As close as the current price is to 
our eventual target, there is no sense in new entries on further 
price weakness.  No, the best strategy for new entries is to sell 
resistance, which should be firming up in the $54-55 area.  A 
failed rally below $55 looks good to ride for the next wave down.  
Recall that KSS has been rather volatile, so we're trying to 
balance risk control with giving the stock enough room to wiggle 
before hitting our $50 target.  Lower stops to $55.25 this 
weekend, as a close above that level should not occur until after 
the current bearish trend ends.

Suggested Options:
Short-term traders will want to focus on the June 50 Put, as it 
will provide the best return for a move towards our eventual 
target of $50.  More conservative traders can use the June 55 
put, which is currently $2 ITM.  Note that May options expire 
next week.

BUY PUT JUN-55 KSS-RK OI=2306 at $4.20 SL=2.50
BUY PUT JUN-50 KSS-RJ OI=4192 at $1.75 SL=0.75

Annotated Chart of KSS:



 

Picked on April 27th at $55.02
Change since picked:     -2.40
Earnings Date         05/15/03 (confirmed)
Average Daily Volume = 3.90 mln


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*****
LEAPS
*****

Edging Closer To The Precipice
By Mark Phillips


If there was ever in doubt in your mind as to my attitude about 
this market, that title should remove all doubt.  It isn't so much 
a matter of timing, as it is about ultimate direction.  For those 
who remember their Physics, it is a bit like the Heisenberg 
Uncertainty Principle.  Roughly stated, the more accurately the 
position of a particle is known, the less accurately the momentum 
of that particle can be known.  Related to the markets, I'll 
postulate that the more accurately the direction of the next 
market move is known, the less accurately the timing of that move 
can be determined.

We're in a monster of a bear market at the time and nothing other 
than an improving profit picture in Corporate America can change 
that fact.  We may have a series of mini bull and mini bear 
markets over the next several years, but I believe the dominant 
force for the next several years is that of the bear.  I've gone 
into my rationale for this in the past and I won't bore you with a 
repeat of all the same old valuation and macroeconomic issues.  I 
just want to remind you of what my view of the market is.  All the 
major indices are going much lower before the BEAR MARKET BOTTOM 
is at hand.  But between now and then, there will be strong 
rallies and equally precipitous declines.  Anyone will be able to 
look back 10 years from now and see so clearly how they could have 
gotten wealthy during the intervening years.  Sell the rally tops 
and buy the selloff bottoms.  They'll say to themselves, "any fool 
could have seen what had to unfold as the bubble deflated".  But 
as you and I know, the devil is in the details.  We "know" the 
market is headed lower in a series of jagged steps up and down.  
But the more certain we are of what that next move is, the less 
likely we are apt to be able to forecast the time of the turn.  I 
know some students of Elliott Wave analysis will disagree with me, 
but what's life without a few critics?

I am convinced that the next major move in the markets will be 
down, and I feel that it will commence rather soon.  But with 
options, "rather soon" doesn't provide nearly the exactitude 
necessary to profit.  For that, we need some objective, 
quantifiable tools with which to measure sentiment, degree of 
overextension and likelihood for a major reversal.  Hey, that 
sounds an awful lot like Technical Analysis, don't you think?

Over the years, I've used a widely varied group of chart studies, 
technical indicators and trading systems.  I've even tried 
forecasting using fundamental analysis.  What I've arrived at is a 
very simple list of tools that I have found to work reliably time 
and again.  That doesn't mean there aren't other terrific analysis 
tools out there that I don't use.  Just that I've chosen a 
different set.  Analyzing individual stocks is one endeavor, while 
analyzing the broad market is another kettle of fish altogether.  
In some respects, broad market analysis is easier because there 
are indicators we can utilize that tell us the health of the 
overall market -- things that we just can't find an analog of in 
the individual equity world.  VIX/VXN, Bullish Percent, Volume 
Breadth, Advance/Decline line, Put/call ratio, and a host of other 
market-wide sentiment indicators are but a part of the universe of 
ways in which we can take the pulse of the broad market.

As you know by my recent columns, when I'm searching for a 
significant reversal in the broad market, aside from price action, 
I only really watch 3 things.  The first is the VIX, the second is 
Bullish Percent and the third is long-term oscillators.  Very 
simple, very easy.  Just the way I like it.  

As I've covered in my recent series on the MOPO trade setup, I'm 
looking for the VIX to fall into the 19-21 area, and I've actually 
been impressed how it has stubbornly held above the 23 level for 
the past few weeks.  If you've missed that series and are 
interesting in reading the articles, they can be accessed at the 
following links.

MOPO - Remember That Term?
http://www.OptionInvestor.com/traderscorner/tc_042803_1.asp

Setting Up For MOPO
http://members.OptionInvestor.com/options101/opt_043003_1.asp

Further Reflections on MOPO
http://members.OptionInvestor.com/options101/opt_050703_1.asp

Well guess what?  As of Friday's close, the VIX dropped pretty 
sharply, coming to rest at 22.04, its lowest close since May 24th 
of last year.  We're not into the "Total Complacency" zone just 
yet, but getting close.  The VIX could drop to or even below 20 
next week, or it could take another 3-4 weeks.  Or it could 
reverse right here and head back up towards the end of its 
historically "normal" range.  We don't really know.  But what we 
do know is that when it reaches down into the 19-21 area (the 
lower the better), it has always been a good time for purchasing 
long-term puts on the broad market.  Based on what appears to be a 
fairly widespread belief (at least in the financial media) that 
this time is different and we may be entering a more pronounced 
and extended bullish phase for the market, I think it is entirely 
possible we'll see the VIX below 20 before the day of reckoning is 
at hand.

Next up are the bullish percents.  As they approach overbought 
territory (70% or higher), the bulls assume greater and greater 
levels of risk.  Well, let's take a look at the bullish percents 
of the major indices and see where we are.

SPX - Currently 64% and butting up against the PnF bearish 
resistance line at 65%.  The December high was 68% and the high 
last March was 77%.  It is getting elevated here, but still has 
some room to run if the bulls continue to feel frisky.

DOW - Pushing up to 66.67% on Friday, the DOW still has some 
upside room as measured by the Bullish Percent before reaching the 
levels of overbought seen last November (73%) or last March (76%).  
No hurry to get short here either.

NDX - The Bullish Percent for the NASDAQ-100 tends to get the most 
extended, and regularly reaches into the low-80% range.  Last 
December saw a reading of 82%, and April of 2001 saw a reading of 
83%.  Nevertheless, Friday's closing value of 78% should have 
bulls nervously looking over their shoulder.

As you can see, these bullish percent readings are high enough 
that they should start getting our attention for the next high-
odds longer-term put opportunity, but it isn't yet ripe for the 
plucking.  As mentioned in the above-referenced MOPO articles, my 
preferred timing tool for picking the point of reversal is to wait 
for the crossover of the bullish percent lines over their 10-dmas 
on a standard line chart.  I looked at each of these bullish 
percents in that format this weekend and none of them are even 
starting to show the first sign of weakness -- at least not yet.

Next up are the oscillators, and my chosen tool in this arena is 
Stochastics on the weekly chart.  I tend to place the most faith 
in the 10,5,3 setting, as it tends to eliminate much of the 
choppiness found with shorter settings, while still giving good, 
actionable signals.  As of this writing, the weekly Stochastics 
for the DOW, SPX and OEX are all in overbought and just starting 
to show the first signs of flattening out.  They aren't bearish 
yet, but could be in as little as 1-2 weeks.

So as you can see by the title of this week's column and the 
foregoing discussion, my view is that the markets are edging 
closer to the point where they will tip over and we'll head back 
down, just as we have at the end of each bear-market rally for the 
past 3 years.  More than anything, that should explain why the 
bulk of the listed Watch List plays are biased to the downside.  
But the devil is in the details, as they say.  The delicate 
balance is in trying to pick the right targets and the right 
timing.  As you can see by the price developments on some of our 
Watch List plays, I'm having a hard time picking those high-odds 
action points, but isn't that struggle what keeps us coming back 
for more each week?  All right, I know it's really the money and 
you're ready to get to it, so let's go.

Portfolio:

EMC - Once EMC started breaking free of the resistance that had 
held the stock in check for the past year, our focus turned to the 
$10-11 area as a likely area to harvest some gains on the play.  
Ever so slightly, the stock peeked over the $10 level on 
Wednesday, but quickly got pushed back and the consolidation below 
that level continued right into the close on Friday.  On the plus 
side, EMC has been very resistant to drop.  On the negative side, 
I fear the stock is running out of steam with bearish Stochastics 
divergence showing on the daily chart and the weekly Stochastics 
topping out in overbought.  While we've been getting ever more 
aggressive with our stop, it is now time to force EMC to either 
break out or stop us out of the play.  To that end, I'm raising 
the stop this weekend to $9.00.  I know that may seem really tight 
and it is.  But I'm counting on the combined support of the 
ascending trendline ($9.15) and the 20-dma (currently $8.94, but 
rising about 9-cents per day which will put it over $9.00 on 
Monday) to provide for a rebound on any continuation of last 
week's pullback from the recent highs.

AIG - Last week made for a rather exciting ride, with the early 
strength trying mightily to push AIG through the $58 resistance 
and 200-dma.  In the end, it looks like the bulls lost that battle 
and the drop back under $56 on Thursday was critical because it 
represented a break below the 2-month ascending trendline.  It's 
far too early to count the bulls out, but I would view successive 
near-term tests of the 200-dma as entry opportunities.  Note that 
the broken trendline should also provide resistance.  AIG must 
break and close below $54 to generate a fresh PnF Sell signal and 
get this party moving in the right direction.  Until then, we're 
giving AGI plenty of room to gyrate around with our stop set at 
$61.

Watch List:

NEM - I don't think I need to tell you my level of frustration at 
having missed this upward move in NEM.  If it was any other play, 
I'd probably just cut the play loose and go looking for a fresh 
candidate.  But my fundamental reasons for the play are still very 
much intact and NEM continues to trade within the broad neutral 
triangle that has been forming for the past year.  Daily and 
weekly Stochastics are topping out in overbought, and this 
certainly isn't the time to be considering new entries.  But I'm 
going to leave it on the Watch List until such time as it either 
breaks out of the triangle pattern or gives us a technically sound 
entry.  Given the stock's extended nature, I'm backing off and 
putting the play on HOLD so that we can wait and see what 
develops.  Due to the fact that we've got some time to wait, this 
will be the last update on this particular Watch List play until 
the technical pattern becomes more appealing.

GD - Over the past few weeks, GD seems to have stalled near the 
$61-62 level and really isn't going anywhere.  The oscillators 
look extended here and a pullback seems imminent.  The big 
question is how deep or shallow that pullback might be.  I would 
prefer to watch this one from the sidelines, so I'm also going to 
place GD on HOLD this weekend.  I want to see a pullback to at 
least fill the 4/21 gap and preferably test the 50-dma before 
considering new entries.  But with the weekly Stochastics topping 
out in overbought, I think the responsible course of action is to 
wait for a more attractive technical setup.

AMZN - Talk about your relentless rise!  I originally thought we'd 
be doing well to get an entry at the top of the year-long 
ascending channel (currently $29.30).  But the stock barely paused 
to catch its breath as it pushed up through that level and then 
the $30 resistance level following what were deemed to be good 
earnings last month.  Let's just say I remain unconvinced.  
Skepticism aside though, there's no reason to place money on the 
line until we see something in the price action that confirms my 
bias.  That means we continue to wait for price weakness, and 
preferably for the weekly Stochastics to at least start to roll 
over.  I'm raising the entry target again this weekend, but 
remember we aren't selling into strength on this play -- we're 
waiting for price action to confirm my bias before playing.

KO - As I said last week, patience is a key requirement in waiting 
for a solid entry setup in our KO play.  Wow!  Talk about dodging 
a bullet.  Morgan Stanley upgraded the stock Wednesday morning and 
it shot higher right out of the gate, vaulting right through our 
targeted entry zone without so much as a pause.  The buying spree 
continued on Friday, with KO stretching to slightly above the $44 
level, amazingly generating its first PnF Buy signal since last 
March.  So does that make this a busted play?  Not by a long shot 
-- it just means we're going to have to exercise a bit more 
patience.  PnF bearish resistance is at $46, major historical 
resistance is at $45-46 and the 200-dma is at $44.94.  Taken 
altogether that would seem to make the $45 level a very nice entry 
point into the play, with risk easy to manage by placing a stop at 
$47.  So that's the modified game plan.

DJX - There's really nothing more to add to this play than what 
appeared in my commentary above.  The DJX looks on track to 
fulfilling our entry criteria up in the $88-89 area and for now we 
wait for all the pieces to fall into place.  More aggressive 
traders that are worried about missing the play could consider 
starting to average into their position starting near the intraday 
highs from last week, but that's not how I'm going to play it.  
We'll exercise patience and wait for the DJX to give us the trade 
setup we're looking for.

GS - I really considered initiating an entry into the GS play on 
Wednesday on the stock's 2nd failure to touch the $78 level.  In 
the end, I held off, as much due to problems I was having with 
posting to the Market Monitor, as to the fact that I really felt 
the entry was early.  Too bad, because that would have turned out 
to be a very nice entry into the play just before Thursday's more 
than $3 melt down.  That drop broke the stock's 2-month ascending 
channel, but dip-buyers were still active at the $74 level on 
Friday.  That rebound should continue up to test the bottom of the 
broken channel and a rollover from that line (currently $76.50) 
looks like our high-odds entry for the trip back down the charts.  
Modify the entry target to $76.50-77.50.

Closing Thoughts:
I've had a couple of questions over the past weeks regarding my 
opinion that Technology stocks will perform better in 2003 than 
the rest of the market.  Specifically, readers have wondered aloud 
if the reason these technology-related stocks deserve higher 
prices from now on or if this is just a technical bounce.  One 
reader even asked the question of whether we're going to have 
Bubble II?

In short, I would have to say "No, these valuations are not 
warranted".  I think we're looking at a readjustment in the market 
right now and for the remainder of the year, as investors come to 
terms (most have refused to accept the possibility) that we have 
entered a "sustained period of sub-par growth".  See Uncle Alan, I 
can sound important too.  HUGE GRIN  The only reason I feel the 
NASDAQ should perform better this year is that more air was let 
out of that balloon more quickly than the rest of the market.  But 
are these stocks worth the kinds of valuations they are currently 
being assigned?  Not by a long-shot, in my opinion.  Many of these 
stocks are pushing into the triple-digit P/E ratio again and that 
screams lunacy, in my mind.  My advice is to not think so much 
about the absolute valuations when trying to make a decision on a 
trade.  Rather, I think the prudent approach is to trade the 
technically favorable setups, as that is a more certain and 
quantifiable endeavor.

As I said at the beginning, we're getting close to what I think is 
the next direction change to the downside.  I expect non-
Technology stocks to feel the most pain on the next downward leg 
and that more than anything explains my penchant for bearish plays 
in that arena.  The most important point I can make is that until 
the indicators that I detailed above start to give some overt 
bearish signs, we do not want to press the issue with lots of 
bearish entries.  We've got our targets identified, and hopefully 
some reasonable action points.  Now we watch to see if the market 
is feeling in an obliging mood.

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
EMC    03/12/03  '04 $  7  LUE-AU  $ 1.40  $ 2.90  +107.1%  $8.50
                 '05 $  7  ZUE-AU  $ 2.15  $ 3.60  +67.44%  $8.50


Puts:
AIG    04/24/03  '04 $ 55  LAJ-MK  $ 5.60  $ 5.30  - 5.36%  $61.00
                 '05 $ 55  ZAF-MK  $ 8.50  $ 8.60  + 1.18%  $61.00


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
NEM    03/09/03   HOLD         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  $56-57        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  $45-46        JAN-2004 $ 40  LKO-MH
                               JAN-2005 $ 40  ZKO-MH
DJX    05/04/03  $88-89        DEC-2003 $ 84  DJX-XF
                               DEC-2004 $ 84  YDJ-XF
GS     05/04/03  $76.50-77.50  JAN-2004 $ 75  KGS-MO
                               JAN-2005 $ 75  ZSD-MO
GM     05/11/03  $37.00-37.50  JAN-2004 $ 35  LGM-MG
                               JAN-2005 $ 30  ZGM-MF


New Portfolio Plays

None


New Watchlist Plays

GM - General Motors $35.97  **Put Play**

Following more than 18 months of aggressive incentives to keep the consumer buying cars following 9/11 and the continuing economic weakness, automotive manufacturers are running out of tricks to keep the party going.  Sure sales are still respectable, but only because the incentives are still in place.  GM has acknowledged that they'd like to back off on the incentives, but each time they do, there is a resultant drop in sales -- so they keep them in place just to retain market share.  Clearly, GM isn't making its money from selling cars at a huge discount.  In reality, most of the company's profits are now coming from the consumer finance division, GMAC.  And of course they can "pad" their quarterly results using the "assumed" returns from their pension plan.  Working with an assumed rate of return of 9-10% is ridiculous on its face, especially when in recent years, many pension plans have been hit by losses of that magnitude.  But at some point, reality is going to hit fantasy and GM will have to acknowledge the growing shortfall in its pension plan -- at that point the plan will have to be refunded from current income and that will show up as large charges against earnings.  

The stock has been showing the depth of the company's fundamental problems over the past couple months, as it is really unable to show much upside conviction, still laboring well under both its 200-dma ($37.84) and the descending trendline connecting the December and January highs.  Add to that the solid historical resistance at $37.50, and GM looks like it will be hard pressed to sustain any upward action on its own merits.  Turning to the PnF chart, the stock's weakness is confirmed, as we can see it is one of the 10 remaining DOW stocks that are NOT on a PnF Buy signal.  It would require a trade at $42 to accomplish that feat.  The current vertical count gives GM a bearish price target of only $18.  I don't think we're going to see that level over the next year, but I wouldn't rule it out either.  Realistically, I'm looking for a drop back to test the $30 level, which provided solid support a couple months ago.  Once that level is achieved or breached, we can re-evaluate to see whether it looks to have more downside in store.

Daily Stochastics have been looking weak for the past couple weeks and the weekly oscillator (10,5,3) is just starting to flatten out, without having entered overbought territory - a clear bearish sign.  We're looking for a brief surge over the $37 level to give us a favorable entry into the play, as resistance should come into play turning back any attempted advance above that level.  Accordingly, we're playing with a rather tight stop.  While the $38 level should work, given the way we just barely got stopped out on GM last time we played it, I'm setting the stop at $39.

BUY LEAP JAN-2004 $35 LGM-MG
BUY LEAP JAN-2005 $30 ZGM-MF

Drops

None


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

Being Married Can Be Fun – If You're A Put

By Mike Parnos, Investing With Attitude

Don't promise to love, honor and obey unless you're marrying a 
short term put.  No need for a large wedding.  Don't invite your 
friends.  It won't last.  Besides, you'll be getting married over 
and over you can't afford the caterers.   I'll be glad to be your 
best man – no charge.

I'm dedicating this column to those remaining CPTI "unmarried" 
stockowners who spend their lives in the single bars – drowning 
their losses in 80-proof who-knows-what.  They may get lucky with 
a one-night-stand.  But, most of the time, they just get drunk.
______________________________________________________________

Did You Go Nowhere or Make Money?
Take MSFT for example.  If you bought 1,000 shares of a Microsoft 
a year ago, it was trading around $25 (split adjusted).  Today, 
MSFT is still trading around $25.   So, you're about even – after 
an entire year.  It's like a tie game.  It's said a tie is like 
kissing your sister.  That may be an appealing thought, or a daily 
activity, in certain rural parts of the country.  However, we're 
here to make perfectly formed dollars – the spendable kind.

During the past year a lot has happened.  MSFT hasn't traded at 
$25 for the entire year.  It's moved up and down over and over.  A 
buy and hold investor would have nothing to show for the entire 
year.  A trader, with CPTI skills, could have pocketed many 
thousands of dollars on the journey.  How?  

We're going to use married puts.  It's not the "till-death-do-us-
part" married.  These marriages are for two or three months and 
are lot more likely to work than real-life marriages.  Why?  
Short-term commitments, affordable, no mother-in-laws, no baby 
puts, and no property settlement when it's over.
_____________________________________________________________

The Married Put



(Chart Point A) -- A year ago we bought 1,000 shares of MSFT at 
$25.  Our investment is $25,000 – and so is our exposure.  A 
three-month at-the-money put cost approximately $2.25.  So, the 
cost is about $.75 per month to protect our $25,000 investment.

(Chart Point B) – MSFT has moved up to $28, but the move seems to 
have stalled out.  We'll buy a three-month $30 put for $2.25 to 
lock in the $3 profit.  We sell the $25 put for $1.00.  Revised 
cost for $30 put is $1.25.

(Chart Point C) – MSFT moved back down to $25.  So now we sell the 
$30 put for $5.50.  We have pocketed $4.25.  We now buy the $25 
put for $1.50.


(Chart Point D) – MSFT makes another move up to $28, but again 
fails to move through resistance.  Again we buy a $27.50 put for 
$1.50 to protect our gain.  We sell the $25 put and salvage $.50.

(Chart Point E) – MSFT tanks all the way down to $22.  It blew 
right through the support at $25.  When it bottoms, we sell the 
$27.50 put for $5.50 and we pocket the $4,500 of profit from this 
downward move.  We buy a two-month $22.50 put for $1.50.

(Chart Point F) – MSFT makes a quick move up to $28.50.  As it 
begins to fall, we buy a protective $30 put for $2.   We can sell 
the $22.50 put and salvage $.25.  Net cost for $30 put is $1.75.

(Chart Point G) – MSFT declines to $26.  As the move ends, we sell 
the $30 put for $4.25 and put $2.50 more in our pocket.  We now 
buy the $27.50 put for $1.50.

(Chart Point H) – MSFT moves up to $28.25.  We're still protected 
by our $27.50 put.  We buy a $30 put for $2 and sell our $27.50 
put for $1.00.  Net cost for $30 put is $1.

(Chart Point I) – MSFT falls to $22.50.  As it begins to bounce, 
we sell the $30.00 put for $7.50 and put $6.50 in our pocket.  Now 
we buy the $22.50 two-month put for $1.50 to protect our stock.

(Chart Point J) – MSFT moves up to $26.50.  We buy the $27.50 put 
for $1.50 and sell the $22.50 put for $.50.  We've now protected 
the $4 gain from $22.50 to $26.50.

(Chart Point K) – MSFT bounces back down to $24.  We sell the 
$27.50 put for $3.50, pocketing the $2.50.  Now we buy the two-
month $25 put for $1.50.

You get the picture?  Let's add things up.
Put Purchases:	
(A) $2.25 - $25.00 put
(B) $1.25 - $30.00 put
(C) $1.50 - $25.00 put
(D) $1.00 - $27.50 put
(E) $1.50 - $22.50 put
(F) $1.75 - $30.00 put
(G) $1.50 - $27.50 put
(H) $1.00 - $30.00 put
(I) $1.50 - $22.50 put
(J) $1.00 - $27.50 put
Total purchases to Chart Point K = $14,250

Put Sales Proceeds:
(C) $4,250 on sale of $30.00 put
(E) $4,500 on sale of $27.50 put
(G) $2,500 on sale of $30.00 put
(I) $6,500 on sale of $30.00 put
(K) $2,500 on sale of $27.50 put
Total proceeds to Chart Point K = $20,250

Our profit on MSFT – even though it ended up about where it 
started – was $6,000.   That's about a 25% return on your $25,000 
investment – an impressive return compared to the big ZERO for the 
buy-and-hold investor.
AND your $25,000 investment was protected the ENTIRE TIME.

MSFT was a good example because it has volatility.  It also has 
strike prices at $2.50 increments that give us added flexibility 
of choice in puts to buy.  Keep in mind that the above figures are 
approximate, but pretty close.  Each purchase and/or sale may vary 
$.25 one-way or the other.  Time value depends on current 
volatility and when, during the option cycle, the moves are made 
and transactions completed.

I know this seems a little confusing.  It was confusing for me to 
write it, but it's a reality.  I can be, and is, done all the time 
– by wise investors.  Warren Buffet, in addition to selling 
covered calls on his stocks, is reported to also use puts to 
protect stock positions and to generate additional capital.  
_____________________________________________________________

May CPTI Portfolio Positions 

Position #1 -- SMH Baby Condor.  Friday's Close: $27.93
SMH is the Semiconductor Holder Trust.  We feel that semiconductor 
stocks have moved up a little too far and too fast.  We created a 
baby condor by selling the May SMH $25 puts and $27.50 calls.  For 
protection, we bought the May $22.50 puts and $30 calls.  The net 
credit is $1.05

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.

SMH has been bouncing around within the range – but then, that's 
what it's supposed to do.  Our safety range is $23.95 to $28.55.  
It's still within the range.
____________________________________________________________ 

Position #2 – SPX Iron Condor.  Thursday's Close: 933.41
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.

SPX traded up to 934+ earlier this week.  In the last few days the 
market has come down, but Friday bounced up again.  We have a 
16.59-point cushion.  Isn't this exciting?  If you want, the 
spread can be closed now for about $2.35.  That would be an 
acceptable dime loss.  Only a week to go.  Option trading is not 
for the meek.
______________________________________________________________

Position #3 – MSFT Ménage-A-Qua – Thursday's Close: $26.35
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.  We're right at 
our break-even point.  Timid souls can buy back the $25 call for 
$1.40 and take a very acceptable nickel loss.  
_____________________________________________________________

Position #4 – DJX Ménage-A-Qua – Thursday's Close: $86.05
The DJX tracks the DOW.  It looks like the DOW is in a minor 
uptrend with resistance at $86 and support at $82.   We sold 10 
contracts of the May DJX $84 puts and bought the May DJX $80 puts.  
Then sold 10 contracts of the May DJX $84 calls and bought the May 
DJX $88 calls for a credit of $.80

for a total net credit of $2.25.   We'll receive our maximum 
profit if the DOW closes right at 8400.  However, we 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.  There are 
five trading days left.  Remember, the DJX is a European style 
option that expires on Thursday's close.  Unless you buy back the 
option(s), there will be a cash settlement in your account.  There 
is no risk of assignment.  We're within 20 points of breakeven.  
You can buy back the short call for $2.20 and still own the $88 
call in case the market takes off.
______________________________________________________________

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 Master Strategist and HCP


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

Six Simple Rules

Back in my college days, a buddy of mine introduced me to the game 
of backgammon.  He hooked me using the premise that there are just 
a few simple rules and I could learn the game in 5 minutes.  It is 
true.  Backgammon does indeed take 5 minutes to learn as the 
rules, per se, are simple.  What my friend failed to inform me 
(before I became addicted to the game) was that the strategy takes 
a lifetime to master.

I was recently reviewing the rules of Elliott Waves.  I never 
stopped to count them before but there are only 6 rules.  The 
rules themselves are simple.  Let me list them here for you.

1.	Motive waves subdivide into a 5 wave basic pattern and move 
2.	in the direction of the larger trend.
	
3.	The 2 wave always retraces less than 100% of the 1 wave.
	
4.	The 4 wave always retraces less than 100% of the 3 wave.
	
5.	The 3 wave always extends past the end of the 1 wave.
	
6.	Wave 4 never overlaps into the price territory of the 1 
7.	wave
	
8.	The 3 wave is never the shortest of the motive (1, 3 or 5) 
9.	waves.  Wave 3 is usually the longest.

A rule is a rule because it always applies to the wave it is 
describing.  Rules cannot be broken.  If a wave pattern breaks a 
rule, then the numbering is incorrect and the pattern needs to be 
relabeled.

Although there are only 6 rules which always apply, each wave 
pattern has numerous characteristics which may or may not be 
visible.  The rule/characteristic relationship is akin to the 
teacher who says that the test has only 2 questions but each 
question has 25 parts.  The wave characteristic discussion is for 
a different day.

Let's examine each rule in a bit more detail.

Chart: Basic 5 Wave Pattern



 


This is a chart of the Dow from March 2002 until October 2002. 
This is my favorite 5 wave basic pattern because it so exemplifies 
a classic Elliott Wave pattern.  

Wave 1, 3 and 5 are the motive waves.  Note how each of these 
waves moves in the direction of the larger trend in accordance 
with rule one.  If we were looking at a bullish chart, the pattern 
would be inverted.

If we were to take a closer look within each motive wave, we would 
be able to subdivide each 1, 3 and 5 wave into another 5 wave 
basic pattern.  This rule applies recursively down to the smallest 
time frame.

Rule 2 states that wave 2 will always retrace less than 100% of 
wave 1.  In the above chart of the Dow, wave 2 retraced about 62% 
of wave one.  Should wave 2 ever retrace more than 100% of wave 1, 
we would need to step back and re-evaluate the wave count. Take a 
look at this chart.

Chart: Incorrect 2 Wave



 


Although this may seem obvious, this chart is not labeled 
correctly because the 2 wave retraced more than 100% of wave 1 
when it breached the 84.61 level.  The best strategy at this point 
would be to look at the bigger picture of the chart to see where 
the stock is going.  What is the larger trend?  Could this wave 
pattern be more appropriately labeled an A-B-C correction and fit 
much better with the total picture of what the stock is doing?

In the same way that the 2 wave must always retrace less than 100% 
of the 1 wave, wave 4 must always retrace less than 100% of wave 
3.  This rule is rarely broken because before wave 4 retraces 100% 
of wave 3, the wave pattern will violate rule 5 which states that 
wave 4 cannot overlap in the territory of wave 1.  An example will 
show this much more clearly.  Take a look at this chart.

Chart: Pre-Overlap of Wave 1


 


Right now we still have a valid wave count.  If wave 4 were to 
retrace 99.999999% of wave 3, it would have to go to 86.45.  
Before it could do that, it would have to cross the red line at 
81.10 which marks the bottom of wave 1.  Once the wave pierces the 
81.10 level, wave 4 would have entered into the territory of wave 
1 and would violate rule 5. At that point an alternate count would 
have to be found.

Rule 4 states that in the progression of the 5 wave basic pattern, 
wave 3 must extend past the end of wave 1.  If the wave pattern 
violates this rule, then the stock would never be able to progress 
in its movement, either up or down.

Here is a chart with a rule 4 violation.

Chart: Multiple Violations


 


Wave 1 subdivides into a 5 wave basic pattern quite nicely to 
satisfy rule 1.  Wave 2 retraces wave 1 less than 100% to satisfy 
rule 2.  Look at wave 3.  Wave 3 never extended past wave 1 and 
violates rule 4.  Labeling wave 3 in this manner not only violates 
this rule but also rule 6.  At this point we have to relabel the 
wave pattern and get a sad face on our graph from our teacher.

Rule 6 is a rule that many people forget to follow or at the least 
are very lax about.  Rule 6 states that the 3 wave must not be the 
shortest wave of the 5 wave pattern.  Take a look at this chart.

Chart:  Wave 3 Too Short


 


Although this motive wave does have a 5 wave basic pattern within 
it, this labeling is not correct.  Look at how short (in price) 
the 3 wave is compared to either the 1 wave or the 5 wave.  This 
labeling needs to be adjusted so that the 3 wave is longer.

Here is a better labeling.

Chart: Wave 3 Correct


 



OK.  Quiz time.  Below is a wave that can be labeled into a 5 wave 
basic pattern.  Take a moment to study it and apply all the rules 
to label it correctly.

Chart:  Quiz 1


 


Here is how the program labeled it.

Chart: Quiz 1 Program Label


 


If you examine this labeling, you will see two rule violations.  
Take a moment and see if you can discover them.  Hint.  They 
aren't on the labeling of the major waves (numbers in blue 
circles).

Did you find them?  Take a look at the 5 wave basic pattern within 
the blue circle wave 3.  Note how the 4 wave overlaps into the 
territory of the 1 wave.  This is a rule violation and an 
alternate count must be found.  Also, the 3 wave appears to be the 
shortest wave.  Wave 1 and 5 are longer.  

This is a good example of how it is not only necessary to follow 
the rules on the major waves, but the subdivided wave must follow 
the rules as well.  Sometimes this is a big clue as to how to 
label the whole 5 wave pattern correctly.

Take a look at this alternate count.

Chart: Quiz 1 Alternate Answer 


 


This labeling does not violate any rules.

The general labeling strategy is to start with as large a time 
frame as possible to grasp the overall trend.  Once the overall 
trend is determined, the current daily/hourly charts should fall 
in line.  Knowing what to expect in the larger trend helps to 
label the smaller time frames.

The best way to get good at Elliott Wave labeling is to look at as 
many charts as possible.  I find that labeling hourly graphs are a 
great way to practice.  Start with the daily chart to grasp the 
larger trend and then look at the hourly charts to label as many 
subwave patterns as you can.


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

Where Is The Dow Going?

Last week I presented the "big picture" of the Dow.  If you did 
not get a chance to read it, I would suggest that you review it 
now because I am going to be building on that interpretation here.

I remember many moons ago I was "in love" with this one young 
lady.  She had an ardor for soap operas.  She would come home 
during her lunch break to watch her favorite soap. (For some 
unknown reason, recording it on a VCR for later viewing was never 
an option.)  For a while there, I met her at lunchtime and watched 
the soap with her.  After a very short time, I noticed one thing.  
There was a lot of "activity" but nothing really happened.

That is what this market is doing right now.  We have been getting 
100 point swings, but nothing appears to be happening.  The Dow is 
just sitting there.  It is as if someone is winding up a spring 
that is going to be unleash at any moment.  Well?  DO SOMETHING.  
Go up, go down, but do something.  And as Arnold would say, "Do it 
now!"  (Read in a German accent.)

Chart: Dow Daily 5/9/2003


 


Here is a chart of the general trend of the Dow.  If you compare 
this chart to last week's chart, you will not notice much of a 
difference.  That is because, nothing is happening.  But if we 
examine the Dow in a smaller time frame, we might be able to see a 
hint of direction.

Chart: Dow Daily 5/9/2003 close up


 


This is a chart of the last several months.  Here we see that it 
looks like the c wave of the ii wave is topping, or nearly so.  

Let's review briefly.  All motive waves, those in the direction of 
the general trend (1, 3, 5), subdivide into a 5 wave basic 
pattern.  All corrective waves, those in a counter trend (2, 4), 
subdivide into an A-B-C pattern.  A-B-C patterns are numerous, but 
the one this ii wave is tracing out looks to be a zigzag pattern.  
Zigzags subdivide as a 5 wave A, a 3 wave B and a 5 wave C.  (All 
C waves subdivide into a 5 wave basic pattern.)

What this chart is saying is that the A and B waves are in and we 
are waiting for the C wave to complete before the Dow starts the 
iii wave down.  So how much longer will it be before the iii wave 
is complete?  Let's take a look at an hourly chart to see if we 
can find some clues.

Chart: Dow Hourly 5/9/2003


 


Here is an hourly graph that goes back to about mid March.  The A-
B-C wave here labeled in caps is the same A-B-C wave in the 
previous chart that was labeled in small letters.

Remember, C waves always subdivide into a 5 wave basic pattern.  
According to this chart, the C wave has topped and the Dow has 
already started down, completing the i and ii waves of the 1 wave.

Unless, of course, it isn't.  Here is a slightly different 
interpretation.

Chart: Dow Hourly 5/9/2003 alternate


 


In this chart the C wave is not quite complete.  But since this is 
an hourly chart, the C wave should complete within the next day, 
two at the latest, topping at around 8700.  

In either case, it appears as if the top is near and the Dow is 
going to head down.  

Unless, of course, it continues to go up.  Could the Dow still go 
higher?  Of course.  One guru firmly believes that we will get a 
slight pull back and then the Dow is headed much, much higher.  In 
fact, he believes a new bull market has started.  Is he right?  
Time will tell.  In fact, a break above the 9043 level would 
totally invalid the current count.  In that case the Dow will 
indeed be headed to around 9500.  I do not think this is likely, 
but I do have my stops in at that level just in case.

So in my opinion, we have either already topped and have started 
heading down, or we will do so in a day or two after another 100 
point move up.  In either case, until proven otherwise, we are 
starting a major down trend.  


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

Using Futures to determine Market Strength or Weakness
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

Using Futures to determine Market Strength or Weakness

Index futures can be valuable tools for those traders who never 
even trade them for they often can provide an indicator for where 
the overall market (and perhaps the stocks they are trading) are 
going. 

Very often, “Big Money” sets their Buy and Sell Programs pegged to 
the Futures Markets; and this can be a great tool for Stock and 
Option traders of whether the market is Buying Support or Selling 
Resistance.

A stock and option trader may ask themselves at times: 
Time to take profit on these Stock XYZ calls? 
Time to buy Puts on my favorite Nasdaq momentum stock if the 
general market is now going back down? 
Time to wait and just watch the Index Futures a bit first? 
Etc etc.

There’s also a Trade Rule I call: 
“the Futures SHOULD BE but is NOT rule”
(I think the Futures should be going UP based on what just 
happened, but gee, they are going DOWN very hard – what am I 
missing here?) – the SHOULD BE but ISN”T rule [grin]

A good example of this rule occurred about three weeks ago, 
starting on the late afternoon of April 22 involving AMGN, EBAY, 
and NQ (NDX futures). NQ had a large psychological wall at the 
1100 Level, with the next higher trade wall at 1110, and the 
middle pivot of 1105. AMGN and EBAY are both very large cap NDX 
stocks, with both of them in the Top 10 as far as NDX Weight is 
concerned. AMGN is also the largest stock in the BBH bio-tech 
index.

Look at the below NQ chart which was made that day:
IMPORTANT COMMENT: 
All the NQ charts include the overnight sessions, 
so the 02:00 on the chart is 2 AM and 15:00 is 3PM



 


You can see how NQ closed at 4:15pm above the psych 1100 level, 
right at its 1105 pivot. 

AMGN and EBAY shortly after that time, at approx. 4:30pm, came out 
with their earnings and both of them crushed earnings to the 
upside and give positive guidance going forward. 
EBAY quickly moves from 88 to 92; and AMGN busts over its old 60 
wall and is trading at 62.

You the trader form some VERY bullish views for your other stocks, 
and are expecting a large market rally to form based on EBAY and 
AMGN.

It’s now 4:40pm and NQ futures will re-open at 4:45pm and you make 
a guess as to where NQ will re-open at. They closed at 1105 and 
you are guessing they re-open at: 1110? 1115? 1118?

By the way, I want you to notice and remember the NQ 1105 level 
above, for it is going to show up in several charts to follow.

So, when NQ re-opens only a TINY bit higher at 1107 that should 
set off a small flag in your head, and hopefully rein in some of 
that large bullish market tone you had formed just 15 minutes 
earlier listening to the EBAY and AMGN conference calls.

Never get “TOO BULLISH” and never get “TOO BEARISH” !!!

Let the FUTURES tape provide the market tone for you.

And right here that NQ futures tape was NOT sending off mega-
bullish Nasdaq market tone, perhaps stoping you from backing the 
truck up tomorrow and buying Long Calls on all your favorite 
Nasdaq stocks.

So, lets see what actually did happen over the next few days.
Was this “don’t get too bullish” NQ futures indicator a good one 
when it did not bust hugely higher after EBAY and AMGN earnings?

Below chart includes the overnights, and the 10:00 time is the 
Open area the following day, 4-23-03

Remember the NQ 1105 level ? 

That’s where NQ was both before and after EBAY/AMGN. Notice here 
how the next day sucked in some Market Longs right near the open? 
But also notice that after 90 minutes of Longs buying, that around 
12Noon found Sellers.



 

So if you were very nimble and quick, and bought Longs right at 
the open the following day, and were quick to take profits after 
just 1-2 hours, you did ok.

Let’s see how it worked out if you bought Longs and just held 
them.

NOTE: Iraq was over by now, the tape was moving completely free of 
any Iraq good news/bad news.

Below we have the next day, April 24.

Once again, notice the NQ 1105 level.


 

Next Day, April 25.

NQ 1105 is now a memory as the Market has done some hard selling.


 


Below is the chart of NQ over the next several days.

Once again, notice the NQ 1105 line.


 


Hopefully, noticing that NQ did NOT rocket higher immediately 
after AMGN and EBAY reined in some of that mega-bullish tone you 
might have had after reading their earnings. The same would apply 
if it was MSFT and DELL both reporting great earnings the same 
evening and NQ didn’t move up very much (DELL always reports very 
late in the quarter so this isn’t likely in the real world, and 
was just an example). 

By the same token, I can recall times when at 4:30PM there was 
some very serious BAD NEWS on some key NDX/Nasdaq stocks, and NQ 
barely budged lower when it re-opened at 4:45pm nor thru the 
overnights. I can recall some nasty Chip Stocks warning at 4:30pm, 
and NQ only downticked a few points, perhaps telling you the 
stock/option trader it’s “buy the bad news” time or that “the bad 
news is priced in.” In a situation like this, that hopefully reins 
in your desire to trade very bearish.

The point is, watching how Futures react after-hours to either 
very good or very bad news can often be an excellent barometer for 
the overall market and perhaps the stocks and options you might be 
trading.

Naturally, if some bio-tech stock has news of its CEO and CFO 
being hauled off to jail for Fraud, and the FDA is pulling all of 
their patents; Nasdaq futures could be at +100 but that bio-tech 
stock is going to be going down very hard, so what the futures are 
doing is meaningless in a case like this.

They say the market is a Market of 5000 Stocks, and not a Stock 
Market; but most of the time, stocks and their options do 
generally move in the direction of the Index trends.

In a more recent example:

See the below ES (SP500 Index Futures Emini) chart

Notice the line at 935 ES.

EVERY repeat EVERY Index trader in the world knew the importance 
of 935 which very recently hit. (935 was Jan 2003 High, and Year 
High).

You will notice how each time the Broad Market, the S&P 500, rose 
above 935 it met with hard selling.

This should be of help to those of you who do not even trade 
Futures, as knowing that piece of data, and knowing that very 
likely Funds will have SELL programs pegged to that level; may 
indicate it is a good time to take some Profits on some Long Calls 
/ Long Stocks you may have been holding.

Or a good time to enter some Long Puts (or Short Calls, Bearish 
Credit Call Spread, etc).



 


Yes, each and every Stock out there has its own story, and can 
move completely independent of the overall market; however, 
watching Index Futures should always remain one of your Trading 
Tools. Good example this past week was DELL – it could have cared 
less about ES 935 for it traded in a very bullish fashion over $30 
and into its earnings this coming week.

Warmest,

Alan Hewko


PS:
Happy Mothers Day to all those Great Women out there who very 
often have sacrificed so very much for their Children and 
Families.


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The Option Investor Newsletter                   Sunday 05-11-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Another Strategy For Covered-Calls
Naked Puts: Profiting From Changing Trends -- Part II
Spreads/Straddles/Combos: Another Strong Finish For Stocks!

Updated In The Site Tonight:
Market Posture: Bulls Not Giving Up


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offers stop and stop loss online option orders
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*************
COVERED CALLS
*************

Trading Basics: Another Strategy For Covered-Calls
By Mark Wnetrzak

One of the best hedging strategies for conservative investors is
a bullish "collar" combination using stocks and options.

With the current uncertain market outlook, investors are focusing
on ways to limit potential losses in their portfolio holdings.  If
an investor buys a stock and purchases a put option on that issue,
he has created a long position with unlimited upside potential and
reduced downside risk until the option expires.  This is a common
approach to stock ownership for conservative investors because it
includes put options as insurance against short-term declines in
the market.

The bullish collar is strategy which provides downside protection
for stock ownership through the purchase of put options that are
financed with the sale of call options.  In short, an investor
sacrifices upside potential for downside protection with fixed
limits established for risk and reward.  The name of the strategy
stems from the "collared" profit-loss outlook, which is determined
by the cost of the underlying and the respective strike prices of
the long and short options, as well as the net debit (or credit)
for the option portion of the position.  By purchasing (cheap) put
options and selling (inflated) call options, a collar often can be
established for little or no "out-of-pocket" expense.

Here is an example using recent (5/5/03) stock/options data:


PACIFICARE HEALTH SYSTEMS (NASDAQ:PHSY)

STOCK PRICE = 35.05

SELL NOV-40.00 CALL BID = 2.05
BUY  NOV-30.00 PUT  ASK = 2.10

COST BASIS (LESS COMM.) = 35.10

MAXIMUM UPSIDE PROFIT   = 4.90
MAXIMUM DOWNSIDE LOSS   = 5.10


An investor purchasing 100 shares in this position would have to
pay $3,505 (or $1,752 if stock was bought on margin).  The price
of the option portion of the transaction would be $5.00, due to
the small debit for the put option.  Of course, commissions can
have a significant affect on the profit or loss in a combination
position, so the exact prices should always be calculated prior
to initiating any trade.  With regard to the possible outcomes,
a number of things could happen to the stock between now and the
November options expiration:

1) The stock could remain between $30 and $40, which means both
   the call and the put would expire worthless and you would own
   100 shares of PHSY at the current value, with no impact on
   the position from the options.

2) The stock could fall below $30 prior to the expiration of the
   put option, and in that case, your maximum loss would be $500,
   regardless of how much the share value declines.  This is the
   advantage of the "insurance" portion of the collar because in
   a "stock only" position, the losses would continue to increase
   as the price of the issue declined.

3) The stock could continue to rally in the coming months, moving
   to $40 and beyond.  If this occurred, you could adjust the
   position upwards (buying-back the call and selling a higher
   strike option) or you could allow the shares to be assigned at
   $40, which would yield a gain of $490 on $3,510 invested over
   a period of 6 months (28% annualized profit).

As you can see, the advantage of a collar when compared to simply
purchasing a protective put is its lower cost.  Recall that the
premium received from the sale of the "covered" call is used to
pay for the put.  The shortcoming of a collar is the upside limit
it places on the stock's profit potential.  The sold (short) call
establishes a maximum amount of profit that can be earned from an
increase in the stock's price.  For conservative investors, the
put options act as a safety net in the portfolio, protecting its
value against catastrophic declines in individual stocks.  The
sale of call options generates income to offset the cost of the
protective puts, while at the same time, sacrificing a portion of
potential gains.

This strategy is best used when call premiums are higher than the
equivalent put premiums.  This type of premium disparity is often
referred to as a volatility option skew and it tends to occur in
active stocks with upcoming events or announcements that have the
potential to significantly affect share value.  Earnings reports,
FDA reviews and merger/acquisition-related activities are among
the most common reasons for inflated options premiums and traders
can exploit these opportunities by purchasing low volatility and
selling high volatility.  Depending on the stock, the collar can
be a very attractive technique for conservative investors who want
a good risk to reward ratio in all but the worst market conditions.

Trade Wisely!


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

AMR      5.47    6.60  MAY  5.00  0.70    0.23*  10.5%
TER     12.75   13.06  MAY 12.50  0.75    0.50*   9.1%
XICO     5.09    6.13  MAY  5.00  0.45    0.36*   8.4%
OSTE     8.39   10.68  MAY  7.50  1.30    0.41*   8.4%
GRP     12.52   12.99  MAY 12.50  0.45    0.43*   7.7%
IMMU     2.95    4.91  MAY  2.50  0.65    0.20*   7.6%
ASML     7.59    9.25  MAY  7.50  0.55    0.46*   7.1%
CYBX    23.87   23.13  MAY 22.50  2.05    0.68*   6.8%
ABGX    10.77   10.36  MAY 10.00  1.05    0.28*   6.3%
CAL      5.68   11.29  MAY  5.00  1.00    0.32*   5.9%
SEAC     7.80    8.26  MAY  7.50  0.75    0.45*   5.5%
OSIP    21.19   20.24  MAY 17.50  4.10    0.41*   5.2%
CCRD    11.05   13.04  MAY 10.00  1.50    0.45*   5.1%
IGEN    38.90   37.58  MAY 35.00  4.70    0.80*   5.1%
ALTR    15.78   17.14  MAY 15.00  1.45    0.67*   5.1%
IFX      8.17    7.77  MAY  7.50  1.00    0.33*   5.0%
CTLM     5.18    8.67  MAY  5.00  0.45    0.27*   5.0%
NEOL    13.50   15.50  MAY 12.50  1.80    0.80*   5.0%
UNTD    19.23   20.40  MAY 17.50  2.80    1.07*   4.7%
RINO    13.29   14.73  MAY 12.50  1.40    0.61*   4.5%
BMRN    12.06   11.20  MAY 10.00  2.35    0.29*   4.3%
COMS     5.17    5.31  MAY  5.00  0.45    0.28*   4.3%
PDE     15.17   17.35  MAY 15.00  0.60    0.43*   4.3%
MVSN    15.97   18.98  MAY 15.00  1.40    0.43*   4.3%
AAII    11.43   12.20  MAY 10.00  1.80    0.37*   4.2%
PLCE    13.34   14.96  MAY 12.50  1.40    0.56*   4.1%
UNTD    19.67   20.40  MAY 17.50  2.95    0.78*   4.1%
NEOL    13.60   15.50  MAY 12.50  1.65    0.55*   4.0%
TOM      8.01    7.58  MAY  7.50  0.70    0.19*   3.8%
MSCC    11.77   12.18  MAY 10.00  2.25    0.48*   3.7%
OVRL    18.02   17.53  MAY 17.50  0.95    0.43*   3.6%

*   Stock price is above the sold striking price.

Comments:

The bullish euphoria continued for another week with the major
averages moving higher, despite emerging concerns about their
"overbought" status.  Tommy Hilfiger (NYSE:TOM) is the lone
exception in the covered-call portfolio -- the stock dropped
after a warning about the current quarter and year.  Depending
on your outlook, exiting the position or rolling-forward and/or
down may be wise.  We will show the position closed in the name
of prudent money management.  Next week, the May option series
expires.

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

MOSY    7.50  JUN  7.50  QST FU  0.60  8      6.90  42   6.3%
TER    13.06  JUN 12.50  TZY FV  1.40  4191  11.66  42   5.2%
MDR     5.08  JUN  5.00  MDR FA  0.40  75     4.68  42   5.0%
FFIV   15.45  JUN 15.00  FLK FC  1.30  437   14.15  42   4.4%
GNTA    8.78  JUN  7.50  GJU FU  1.70  1197   7.08  42   4.3%
MRVL   26.72  JUN 25.00  UVM FE  3.10  6471  23.62  42   4.2%
GP     17.99  JUN 17.50   GP FW  1.40  2514  16.59  42   4.0%


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).

*****
MOSY - Monolithic  $7.50  *** What's Up? ***

Monolithic System Technology (NASDAQ:MOSY) designs, develops,
licenses and markets memory technologies used by the semiconductor
industry and electronic product manufacturers.  The company has
developed a patented semiconductor memory technology, called 1T-
SRAM (static random access memory), which offers a combination of
high-density, low-power consumption with high speed.  The company
licenses its 1T-SRAM technology on a non-exclusive and worldwide
basis to companies that incorporate or embed memory on complex
integrated circuits.  MOSY licenses its 1T-SRAM technology in the
form of customized memory designs and memory compilers.  They also
sell memory chips based on their 1T-SRAM technology, constituting
substantially all of their memory chip sales.  No recent news to
explain the strong rebound, on heavy volume, off support near $6.
This position offers investors who believe the semiconductor
industry is indeed recovering excellent reward potential at the
risk of owning this issue at a reasonable cost basis.

JUN-7.50 QST FU LB=0.60 OI=8 CB=6.90 DE=42 TY=6.3%


*****
TER - Teradyne  $13.06  *** The Trend Continues... ***

Teradyne (NYSE:TER) is a supplier of automatic test equipment, high-
performance interconnection systems and electronic manufacturing
services.  The company's automatic test equipment products include
Semiconductor Test Systems, Circuit Board Test and Inspection
Systems and Broadband Test Systems.  Teradyne's interconnection
systems products and services (Connection Systems) include high-
bandwidth backplane assemblies and associated connectors used in
electronic systems, and electronic manufacturing services of
assemblies that include Teradyne backplanes and connectors.  TER
has been forming a Stage I base for almost a year and the stock
appears poised to move higher in the coming sessions.  Traders
can profit from the current lateral trend with this position at
the risk of owning Teradyne at a cost basis near $11.70.

JUN-12.50 TZY FV LB=1.40 OI=4191 CB=11.66 DE=42 TY=5.2%


*****
MDR - McDermott  $5.08  *** Earnings Rally ***

McDermott International (NYSE:MDR) is the parent company of the
McDermott group of companies, which includes J. Ray McDermott,
and its consolidated subsidiaries; McDermott Incorporated and its
consolidated subsidiaries; Babcock & Wilcox Investment Company and
its consolidated subsidiaries; BWX Technologies, Inc. and its
consolidated subsidiaries; and The Babcock & Wilcox Company.  The
company operates in 4 business segments: namely Marine Construction
Services, Government Operations, Industrial Operations and Power
Generation Systems.  McDermott surprised investors on Tuesday by
posting a 1st-quarter profit as it reduced the estimated cost of
a bankruptcy settlement and increased sales, on stronger marine
construction businesses.  The company said revenues rose to $523.5
million from $399.2 million last year and also raised its 2003
earnings estimate.  The news was obviously well received and the
issue has vaulted higher on heavy volume.  Traders who believe the
rally will endure can profit from that outcome with this position.

JUN-5.00 MDR FA LB=0.40 OI=75 CB=4.68 DE=42 TY=5.0%


*****
FFIV - F5 Networks  $15.45  *** Trading Range ***

F5 Networks Inc. (NASDAQ:FFIV) provides integrated products and
services to manage, control and optimize Internet traffic.  FFIV's
core products, the BIG-IP Controller, the 3-DNS Controller and the
BIG-IP Link Controller, help manage traffic to servers and network
devices in a way that maximizes availability and throughput.  The
company's iControl Architecture integrates its products and also
allows its customers to integrate them with other third-party
products.  FFIV's solutions address many elements required for
successful Internet and Intranet business applications, including
high availability, high performance, intelligent load balancing,
fault tolerance, security and streamlined manageability.  FFIV
has been stuck in a trading range for almost two years and the
trend appears likely to continue though the technicals suggest
an upside bias.  This position allows investors who retain a
long-term bullish outlook on F5 Networks a method to participate
in the future movement of the issue with relatively low risk.

JUN-15.00 FLK FC LB=1.30 OI=437 CB=14.15 DE=42 TY=4.4%


*****
GNTA - Genta  $8.78  *** Earnings Rally: Part II ***

Genta Incorporated (NASDAQ:GNTA) is a biopharmaceutical company
that is dedicated to developing drugs to treat cancer.  In the
past, the company's research efforts have focused primarily on
the development of "anti-sense" drugs, which are designed to
selectively prevent the production of specific proteins that
contribute to the cause or progression of disease.  Genta has
broadened its research portfolio into other "DNA medicines,"
which, in addition to anti-sense drugs, consist of decoy aptamers
and small molecules, including the its gallium products and
androgenics compounds.  Apparently investors were pleased with
Genta's earnings report at the beginning of the month.  We simply
favor the bullish move above the March and April highs on heavy
volume which suggests further upside potential.  Investors who
agree with the bullish outlook can establish a reasonable cost
basis in the issue with this position.

JUN-7.50 GJU FU LB=1.70 OI=1197 CB=7.08 DE=42 TY=4.3%


*****
MRVL - Marvell  $26.72  *** Breaking-Out ***

Marvell (NASDAQ:MRVL) designs, develops and markets integrated
circuits utilizing proprietary communications mixed-signal and
digital signal processing technology for communications-related
markets.  Marvell offers its customers a wide range of integrated
circuit solutions using proprietary communications mixed-signal
processing and digital signal processing technologies.  Marvell's
product groups include: storage products, consisting of a variety
of read channel, system-on-chip and preamplifier products; and
broadband communications products, consisting of a variety of
transceiver products, switching products, internetworking
products and wireless LAN products.  Marvell appears to have
broken out of its recent trading range and above resistance
near $24.  Investors must be looking forward to "good" news when
Marvell reports earnings on May 22.  The stock appears poised to
move higher in the coming sessions and traders who believe the
issue is destined for a future rally can profit from future
upside movement with this position.

JUN-25.00 UVM FE LB=3.10 OI=6471 CB=23.62 DE=42 TY=4.2%


*****
GP - Georgia-Pacific  $17.99  *** Bottom Fishing ***

Georgia-Pacific (NYSE:GP) is engaged in four principal business
operations: the manufacture of tissue products (including bath
tissue, paper towels and napkins) and disposable tabletop products
(including disposable cups, plates and cutlery); the manufacture
of containerboard and packaging (including linerboard, medium and
corrugated packaging); the manufacture of bleached pulp and paper
(including paper, market and fluff pulp, craft and bleached board),
and the manufacture and distribution of building products (including
plywood, oriented strand board, various industrial wood products and
softwood and hardwood lumber, as well as certain non-wood products,
including gypsum board, chemicals and other products).  GP's four
principal businesses are broken down into six operating segments:
North America consumer products, international consumer products,
packaging, bleached pulp and paper, building products manufacturing
and building products distribution.  Regardless of the recent slump
in share value, Georgia-Pacific is one of the top companies in the
Lumber-wood Production Group and among many institutional investors,
it is also one of the core holdings.  The current technical outlook
is recovering and our position offers excellent reward potential at
the risk of owning this industry-leading issue at a favorable cost
basis.

JUN-17.50 GP FW LB=1.40 OI=2514 CB=16.59 DE=42 TY=4.0%


*****


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

AMR     6.60  JUN  5.00  AMR FA  1.95  5736   4.65  42   5.5%
SFNT   25.77  JUN 25.00  UUI FE  2.50  77    23.27  42   5.4%
CY     10.18  JUN 10.00   CY FB  0.85  1917   9.33  42   5.2%
DRIV   16.95  JUN 15.00  DQI FC  2.90  285   14.05  42   4.9%
USG     8.90  JUN  7.50  USG FU  1.85  311    7.05  42   4.6%
MKSI   15.92  JUN 15.00  QQB FC  1.80  48    14.12  42   4.5%
ZGEN   10.80  JUN 10.00  GZU FB  1.35  200    9.45  42   4.2%
ITMN   23.89  JUN 22.50  IQY FX  2.60  114   21.29  42   4.1%
FEIC   18.17  JUN 17.50  FQE FW  1.60  103   16.57  42   4.1%
MUSE    7.85  JUN  7.50  QUM FU  0.75  3470   7.10  42   4.1%
NTAP   15.71  JUN 15.00  NUL FC  1.45  8301  14.26  42   3.8%


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

Options 101: Profiting From Changing Trends -- Part II
By Ray Cummins

This week's strategy discussion concerns techniques that will
benefit from a long-term recovery in the stock market.

Despite the recent sharp rally in share values, we all know
how difficult it has been to forecast market direction over
the past few months and consistently picking winners during
the volatile activity has been almost impossible.  Considering
the current uncertain outlook, what is the correct course of
action for a conscientious, well-disciplined investor?  Two
weeks ago, we discussed a few alternatives: 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 begin to discuss the second choice: adopt a
bullish, long-term outlook and use conservative strategies that
will benefit from a recovery in stocks.  As with any approach
to the financial markets, the first step in this process is to
examine the various strategies used to profit from a rebound in
share values.  Obviously, the most popular technique that will
profit from an extended economic recovery (and a resultant rise
in equity prices) is stock ownership.  If buying shares of your
favorite (public) corporation is the strategy of choice, there
are a few guiding principles you should be aware of:

1) Do your homework.  Study the company and its major products.
Review the most current financial statements with a focus on
items such as earnings growth, cash flow and the balance sheet.
Favorable companies will have stable or increasing margins as
well as positive cash flow.  Their balance sheet should reflect
a low debt to equity ratio, positive return on equity (this is
a measure of net income relative to stockholder's equity), and
a high current ratio, which is the ratio of current assets to
short-term liabilities.  It's also important to know the number
of common shares outstanding and whether or not dividends are
issued by the company on a regular basis.

2) Learn the basics of technical analysis; a method of research
using historic prices, charts, and computer software to forecast
the future trends of stocks.  Traders who use technical analysis
understand the fundamental values of securities but concentrate
on the past behavior of the market, industry groups or sectors,
and individual stocks.  The goal is to use their price movements,
trends and chart patterns to predict future direction and changes
in character.  Most of this analysis is based on the fact that
the values of stocks reflect what people "think" they are worth,
not what they are really worth on a fundamental basis.  Technical
indicators are also helpful in generating buy or sell signals when
specific parameters are met and the use of stage analysis can be
helpful in initiating new positions.

3) Become familiar with the common methods used to determine the
overall movement of the stock market and apply this knowledge as
a practical element of a proven investing strategy.  After you are
comfortable with the popular indicators, combine them with proven
timing strategies and practice using the various systems until
your "paper" portfolio is profitable on a regular basis.  After
you begin investing "real" money, use proven position management
techniques to maximize gains and limit potential losses.  Most
experts recommend the use of stop-loss orders as they are an
efficient method to follow the movement in a stock while insuring
some profit (or limited loss) if the primary trend changes.  In
addition, trading stops are an excellent way to manage a position
without the emotional or reactive decision-making that often occurs
in the stock market.

Investors who follow these guidelines in a diverse, well balanced
portfolio will increase their probability of profit with stock
ownership and that's an essential step to long-term success in
the financial markets.

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

IMCLE   21.00   19.63  MAY 17.50  0.35    0.35*   4.4%  14.5%
WYNN    17.02   16.90  MAY 15.00  0.50    0.50*   5.0%  13.7%
KOSP    21.97   23.16  MAY 20.00  0.45    0.45*   5.0%  13.5%
APPX    24.30   23.40  MAY 20.00  0.35    0.35*   3.9%  13.2%
RMBS    15.75   15.37  MAY 12.50  0.55    0.55*   3.3%  10.8%
LSCC     8.54    8.80  MAY  7.50  0.25    0.25*   3.7%  10.3%
PHSY    30.20   34.42  MAY 27.50  0.70    0.70*   3.8%  10.1%
MSTR    30.35   27.28  MAY 25.00  0.50    0.50*   3.0%   9.9%
NFLX    19.55   22.62  MAY 15.00  0.60    0.60*   3.0%   9.6%
WYNN    16.22   16.90  MAY 12.50  0.40    0.40*   2.9%   9.5%
CYBX    23.87   23.13  MAY 20.00  0.25    0.25*   2.8%   9.2%
AVID    25.54   27.86  MAY 22.50  0.80    0.80*   3.2%   8.7%
GTRC    23.25   23.22  MAY 22.50  0.50    0.50*   3.3%   8.0%
EYE     11.96   16.33  MAY 10.00  0.35    0.35*   2.6%   8.0%
BOBJ    20.75   22.51  MAY 17.50  0.40    0.40*   2.5%   8.0%
OVTI    25.29   28.64  MAY 20.00  0.40    0.40*   2.2%   8.0%
SEPR    19.00   19.33  MAY 17.50  0.35    0.35*   3.0%   7.9%
JCOM    32.12   28.98  MAY 25.00  0.75    0.75*   2.2%   7.6%
SEPR    15.77   19.33  MAY 12.50  0.30    0.30*   2.1%   7.5%
VRTS    21.20   24.59  MAY 20.00  0.40    0.40*   3.0%   7.5%
XLNX    27.30   28.81  MAY 25.00  0.30    0.30*   2.6%   7.3%
GTRC    21.10   23.22  MAY 20.00  0.65    0.65*   2.9%   7.1%
SEPR    16.35   19.33  MAY 12.50  0.35    0.35*   2.1%   7.0%
BCGI    18.90   17.01  MAY 15.00  0.25    0.25*   1.8%   6.7%
RIMM    14.88   17.22  MAY 12.50  0.35    0.35*   2.1%   6.5%
JCOM    31.96   28.98  MAY 22.50  0.50    0.50*   2.0%   6.3%
ADTN    43.65   45.05  MAY 40.00  0.40    0.40*   2.2%   6.1%
MRVL    23.15   26.72  MAY 20.00  0.35    0.35*   1.9%   5.9%
NFLX    20.77   22.62  MAY 15.00  0.30    0.30*   1.8%   5.9%
BOBJ    18.31   22.51  MAY 15.00  0.35    0.35*   1.7%   5.8%
INTC    18.66   19.58  MAY 17.50  0.35    0.35*   2.2%   5.7%
ADRX    14.71   15.95  MAY 12.50  0.25    0.25*   1.8%   5.5%
CMCSA   31.73   31.11  MAY 30.00  0.40    0.40*   2.0%   5.1%
CMCSK   28.44   29.47  MAY 25.00  0.60    0.60*   1.8%   5.1%

*  Stock price is above the sold striking price.

Comments:

Another week of volatility ended with a positive bias as stocks
closed Friday's session in "rally mode."  At the same time, key
technical resistance levels have yet to be surpassed, thus it is
important for traders to remain cautious in their play selection
and diligent in their position management.  Issues on the "watch"
list include j2 Global (NASDAQ:JCOM), ImClone (NASDAQ:IMCLE),
Boston Communications Group (NASDAQ:BCGI), and Microstrategy
(NASDAQ:MSTR).

Previously Closed Positions: Footstar (NYSE:FTS)


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

ANPI   25.20  JUN 17.50  AUJ RW 0.75 706   16.75  42   3.2%   9.4%
OVTI   28.64  JUN 22.50  UCM RX 0.80 578   21.70  42   2.7%   8.9%
NVDA   21.37  JUN 17.50  UVA RW 0.55 789   16.95  42   2.3%   7.6%
CELG   27.42  JUN 22.50  LQH RX 0.70 632   21.80  42   2.3%   7.5%
ITMN   23.89  JUN 20.00  IQY RD 0.60 34    19.40  42   2.2%   6.9%
ARTI   22.75  JUN 20.00  UAR RD 0.50 51    19.50  42   1.9%   5.3%
APPX   23.40  JUN 15.00  AQO RC 0.35 10045 14.65  42   1.7%   5.0%


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).

*****
ANPI - Angiotech  $25.20  *** Stent-Coating Maker ***

Angiotech Pharmaceuticals (NASDAQ:ANPI) is engaged in the fusion
of medical device technologies and pharmaceutical therapies.  The
company's first product was a drug-coated stent.  Angiotech's goal
is to develop other products to enhance the performance of medical
devices and biomaterials through the use of pharmatherapeutics.  In
September 2002, the company and Cohesion Technologies, Inc. agreed
to a merger in which Cohesion will merge with a wholly owned
subsidiary of Angiotech, with Cohesion continuing as a wholly owned
subsidiary of the company.  Angiotech shares rallied at the end of
February after announcing a strategic alliance with Baxter and a
submission by its partner Boston Scientific, of the first module of
Boston's PMA application for its TAXUS paclitaxel-eluting coronary
stent system.  A 12-month study on a Boston Scientific drug-coated
coronary stent, Taxus II, is expected to bolster already strong
sales of the newly introduced device in Europe.  Friday's rally to
a 52-week high suggests further upside potential and traders can
profit from that outcome with this play.  Earnings are due on 5/13.

JUN-17.50 AUJ RW LB=0.75 OI=706 CB=16.75 DE=42 TY=3.2% MY=9.4%


*****
OVTI - OmniVision  $28.64  *** Next Leg Up? ***

OmniVision Technologies (NASDAQ:OVTI) designs, develops and sells
high performance, high quality and cost efficient semiconductor
imaging devices for computing, telecommunications, industrial,
automotive and consumer electronics applications.  The company's
main product, an image sensing device called a CameraChip, is used
to capture an image in cameras and camera-related products in a
range of imaging applications such as personal computer cameras,
digital still cameras, security and surveillance cameras, personal
digital assistant cameras, mobile phone cameras, and cameras for
automobiles and toys that incorporate both still picture and live
video applications.  OmniVision has been a solid performer in
recent months and on Friday, the issue closed at a new "all-time"
high.  Investors can use this position to speculate on the firm's
near-term share value with the risk of owning the stock at a cost
basis below $22.

JUN-22.50 UCM RX LB=0.80 OI=578 CB=21.70 DE=42 TY=2.7% MY=8.9%


*****
NVDA - Nvidia  $21.37  *** Headline Stock! ***

Nvidia (NASDAQ:NVDA) designs, develops and markets graphics and
media communication processors and related software for personal
computers (PCs), workstations and digital entertainment platforms.
The company provides an architecturally compatible top-to-bottom
family of unique, performance 3-D graphics processors and graphics
processing units that set the standard for performance, quality
and features for a broad range of desktop PCs.  Nvidia's graphics
processors are used for a wide variety of applications, including
games, digital image editing, business productivity, the Internet
and industrial design.  Its graphics processors are designed to be
architecturally compatible backward and forward between computer
generations, giving its original equipment manufacturers (OEMs),
customers and end users a low cost of ownership.  Shares of NVDA
soared Friday amid news that the company expects revenue for its
fiscal second quarter to grow 12% to 18% from the first quarter
on increased Xbox sales.  In addition, Nvidia plans to launch a
new high-end graphic chip for computers (NV35) and investors are
bullish on the company's outlook.  This position offers a low
risk method to profit from the current upside activity in the
issue.

JUN-17.50 UVA RW LB=0.55 OI=789 CB=16.95 DE=42 TY=2.3% MY=7.6%


*****
CELG - Celgene  $27.42  *** Bullish Biotech! ***

Celgene (NASDAQ:CELG) is a commercial-stage biopharmaceutical
company.  The company is primarily engaged in the discovery,
development and commercialization of small molecule drugs that
are designed to treat cancer and immunological diseases through
gene and protein regulation. Small molecule drugs are man-made,
chemically synthesized drugs that, because of their relatively
small size, can typically be administered orally.  The firm's
drugs are designed to modulate multiple disease-related genes,
including cytokines (which are proteins) such as Tumor Necrosis
Factor alpha, or TNF(alpha), growth factor genes such as those
that control angiogenesis, blood vessel formation and apoptosis
genes.  Because the company's drugs can be administered orally,
they have the potential to advance the standard of care beyond
current injectible protein drugs that inhibit TNF (alpha) and
other disease-causing cytokines.  Celgene expects to meet or
exceed 2003 financial targets, as its new cancer drug Thalomid
propels the company to profitability.  Celgene also recently
said it has discovered a new class of anti-cancer compounds and
is in the early stages of developing them in the lab.  Investors
who wouldn't mind owning the stock near a basis of $22 should
consider this position.

JUN-22.50 LQH RX LB=0.70 OI=632 CB=21.80 DE=42 TY=2.3% MY=7.5%


*****
ITMN - Intermune  $23.89  *** Recovery Underway! ***

InterMune (NASDAQ:ITMN) develops and commercializes products for
the treatment of serious pulmonary and infectious diseases and
cancer.  The company has the exclusive license rights in the U.S.
to Actimmune injection for a wide range of indications, including
chronic granulomatous disease, osteopetrosis, idiopathic pulmonary
fibrosis, cancer, mycobacterial and systemic fungal infections,
and cystic fibrosis.  The company has active development programs
underway for these indications, several of which are in mid- or
advanced-stage human testing, known as clinical trials.  InterMune
announced Friday that data from a Phase II trial of pirfenidone
suggests it may be more effective than prednisone, an popular
anti-inflammatory glucocorticoid drug, in patients with idiopathic
pulmonary fibrosis.  Intermune has worldwide rights, excluding
parts of Asia, to develop and commercialize pirfenidone for all
fibrotic diseases and the company plans to discuss the data with
the FDA before formulating a plan for a larger-scale clinical
development program.  Investors who want to participate in the
future performance of ITMN shares should consider this position.

JUN-20.00 IQY RD LB=0.60 OI=34 CB=19.40 DE=42 TY=2.2% MY=6.9%


*****
ARTI - Artisan Components  $22.75  *** Short-Squeeze! ***

Artisan Components (NASDAQ:ARTI) is a developer of high-performance,
high-density and low-power embedded memory, standard cell and
input/output intellectual property components for the design and
manufacture of complex integrated circuits or semiconductors.  The
firm's products are used for the design of integrated circuits used
in complex, high-volume applications, such as portable computing
devices, cellular phones, consumer multimedia products, automotive
electronics, personal computers, workstations and servers.  Artisan
focuses on licensing its products and providing related services to
semiconductor manufacturers and integrated circuit design companies.
Shares of ARTI moved to a 52-week high Friday in conjunction with
the rally in chip stocks, but also due to "short" covering as the
short-interest in the stock represents 18% of the float.  Traders
who favor speculative positions in bullish issues should consider
this position.

JUN-20.00 UAR RD LB=0.50 OI=51 CB=19.50 DE=42 TY=1.9% MY=5.3%


*****
APPX - American Pharmaceutical  $23.40  *** Premium Selling! ***

American Pharmaceutical Partners (NASDAQ:APPX) is a specialty
pharmaceutical company that develops, manufactures and markets
injectable pharmaceutical products.  The firm produces over 100
generic injectable pharmaceutical products in more than 300
dosages and formulations. Its primary focus is in the oncology,
anti-infective and critical care markets.  The company makes
products in all of the three basic forms in which injectable
drugs are sold: liquid, powder and lyophilized (freeze-dried).
American Pharmaceutical Partners continues to be a popular stock
among speculative traders and the inflated option premiums offer
a good opportunity for investors who wouldn't mind owning the
issue at a substantially reduced cost basis.  Due diligence is a
"must" with this issue.

JUN-15.00 AQO RC LB=0.35 OI=10045 CB=14.65 DE=42 TY=1.7% MY=5.0%


*****


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

IDCC   23.92  JUN 20.00  DAQ RD 0.80 1257  19.20  42   3.0%   9.0%
BRCM   18.85  JUN 17.50  RCQ RW 0.85 2848  16.65  42   3.7%   8.7%
SRNA   18.27  JUN 17.50  NHU RW 0.85 63    16.65  42   3.7%   8.3%
CHKP   18.05  JUN 17.50  KEQ RW 0.85 833   16.65  42   3.7%   8.2%
LSS    23.05  JUN 22.50  LSS RX 1.10 20    21.40  42   3.7%   8.2%
DCTM   18.96  JUN 17.50  QDC RW 0.75 18    16.75  42   3.2%   7.9%
MVL    18.75  JUN 17.50  MVL RW 0.75 277   16.75  42   3.2%   7.8%
MINI   17.74  JUN 17.50  UAC RW 0.80 0     16.70  42   3.5%   7.6%
MRVL   26.72  JUN 22.50  UVM RX 0.75 965   21.75  42   2.5%   7.5%
NFLX   22.62  JUN 17.50  QNQ RW 0.45 260   17.05  42   1.9%   6.6%
NSM    21.80  JUN 20.00  NSM RD 0.65 97    19.35  42   2.4%   6.2%
IGEN   37.58  JUN 25.00   GQ RE 0.60 2926  24.40  42   1.8%   5.4%
AMLN   18.51  JUN 15.00  AQM RC 0.30 13    14.70  42   1.5%   5.2%


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


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

Another Strong Finish For Stocks!
By Ray Cummins

The major equity averages closed with a bullish bias Friday as
investor optimism over a recovery in the U.S. economy boosted
share values.

The Dow Jones industrial average ended up 113 points at 8,604,
its highest finish since mid-January.  Eastman Kodak (NYSE:EK),
Citigroup (NYSE:C), and Johnson & Johnson (NYSE:JNJ) were the
only losing components.  The technology-laden NASDAQ Composite
soared 30 points higher to 1,520, capping a fourth consecutive
week of gains as computer hardware, telecom, computer storage,
and electronic manufacturing shares moved higher.  The broader
Standard & Poor's 500 Index climbed 13 points to finish at 933
with selling pressure seen only in gold stocks and department
store shares.  Advances pounded declines 3 to 1 on the New York
Stock Exchange and 2 to 1 on the NASDAQ.  Trading was moderate
with 1.3 billion shares changing hands on the Big Board, and
over 1.5 billion shares traded on the technology exchange.  The
bond market saw higher prices on hopes that interest rates will
remain low in the coming months.  The 10-year note was up 1/32,
taking yields to 3.69%, well below last Friday's close at 3.93%.

*****************
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 or 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  86.85   MAY  65  70   0.55  69.45  $0.55   Open
BSTE    42.33  49.80   MAY  30  35   0.50  34.50  $0.50   Open
GILD    44.15  46.69   MAY  37  40   0.30  39.70  $0.30   Open
OIH     54.58  59.58   MAY  45  50   0.55  49.45  $0.55   Open
MDT     46.90  46.49   MAY  42  45   0.35  44.65  $0.35   Open
NBR     41.11  41.38   MAY  35  37   0.30  37.20  $0.30   Open
BBBY    39.52  40.15   MAY  35  37   0.30  37.20  $0.30   Open
PFCB    42.47  42.56   MAY  35  40   0.55  39.45  $0.55   Open
GENZ    39.82  41.15   MAY  35  37   0.30  37.20  $0.30   Open
IVGN    31.45  33.97   MAY  27  30   0.30  29.70  $0.30   Open
SEE     41.62  42.65   MAY  35  40   0.50  39.50  $0.50   Open
BZH     71.80  74.58   JUN  60  65   0.55  64.45  $0.55   Open
CECO    60.52  60.79   JUN  50  55   0.50  54.50  $0.50   Open
FDC     40.22  41.14   JUN  35  37   0.30  37.20  $0.30   Open
RCII    65.35  64.83   JUN  55  60   0.50  59.50  $0.50   Open

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


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

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

CAM     49.39  51.20   MAY  60  55   0.45  55.45   $0.45   Open
DRYR    67.40  67.00   MAY  75  70   1.10  71.10   $1.10   Open?
HCA     37.70  31.90   MAY  45  42   0.25  42.75   $0.25   Open
VAR     49.04  52.67   MAY  60  55   0.60  55.60   $0.60   Open
OIH     54.58  59.58   MAY  65  60   0.50  60.50   $0.50   Open
BAC     71.34  74.00   MAY  80  75   0.60  75.60   $0.60   Open?
OEX    440.97 472.25   MAY 480 475   0.55 475.55   $0.55   Open
WLP     76.80  77.50   MAY  90  85   0.50  85.50   $0.50   Open
SYK     66.35  64.10   MAY  75  70   0.65  70.65   $0.65   Open
INTU    37.24  39.93   MAY  45  40   0.40  40.40   $0.40   Open?
NVLS    27.21  28.69   MAY  32  30   0.25  30.25   $0.25   Open
PG      90.15  89.50   JUN 100  95   0.40  95.40   $0.40   Open
NBR     39.21  41.38   JUN  45  42   0.30  42.80   $0.30   Open

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

With the recent rally in oil service shares, our new position in
Nabors Industries (NYSE:NBR) joins Bank of America (NYSE:BAC),
Dreyer's (NASDAQ:DRYR), and Intuit (NASDAQ:INTU) on the portfolio
"watch" list.  McKesson (NYSE:MCK), GlaxoSmithKline (NYSE:GSK),
International Game Technology (NYSE:IGT), and L-3 Communications
(NYSE:LLL) have previously been closed to limit potential losses.


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

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

BGEN    35.67  37.81  MAY   30  32   2.20   32.20  0.30   Open
GILD    44.04  46.69  MAY   37  40   2.25   39.75  0.25   Open
SLM    115.05 109.35  MAY  105 110   4.50  109.50 (0.15)  Open?
AXP     38.46  39.80  JUN   32  35   2.20   34.70  0.30   Open
GENZ    41.47  41.15  JUN   35  37   2.20   37.20  0.30   Open

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

On Friday, SLM Corporation (NYSE:SLM) fell below a recent support
area near $111-$112, thus conservative traders should consider
closing the position to limit potential losses.


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

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

WMT     52.98  55.80  MAY   60  55   4.30   55.70 (0.10)  Open?
CCMP    42.68  45.11  MAY   50  45   4.30   45.70  0.59   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 $56-$57 is limiting its upside activity.  We
will continue to monitor the issue closely in the coming sessions.
The position in Boston Scientific (NYSE:BSX) has previously been
closed to limit potential losses.  Cabot Micro (NASDAQ:CCMP) has
substantial upside potential and conservative traders might find
it prudent to close the position on any further bullish activity.


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

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

OVRL    15.99  17.53   MAY     17    15     0.10    1.00    Open?
DCTM    16.09  18.96   MAY     17    15    (0.30)   2.25   No Play
SMH     26.43  27.93   AUG     30    22     0.10    0.90    Open
SLAB    30.17  28.92   JUL     30    22     0.10    0.00    Open

The new position in Silicon Laboratories (NASDAQ:SLAB) has been
very volatile and traders should expect the activity to continue
in the coming sessions.  Documentum (NASDAQ:DCTM) did not offer
the target entry price, but the position was very profitable for
traders who paid a small debit to initiate the play.  The target
entry price was available in the Semiconductor Holdrs (AMEX:SMH)
and the position has already achieved a favorable profit.


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

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

QQQ     25.51  28.41   MAY    24     27     0.10    0.00   Closed

As previously noted, 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  29.45   JUL-30C   MAY-30C  (0.20)   1.00     Open
ESI     29.11  28.87   OCT-30C   MAY-30C   2.00    2.40     Open
OCR     27.07  27.27   JUN-27C   MAY-27C   0.60    0.60     Open
MO      32.13  31.70   JUN-27P   MAY-27P   0.95    0.45     Open
FILE    13.75  15.25   JUL-15C   MAY-15C   0.60    0.65     Open
IBM     87.57  87.55   JUL-90C   MAY-90C   2.15    2.00     Open

Biomet (NASDAQ:BMET) and ITT Educational Services (NYSE:ESI) are
trading near maximum profit.  Positions in Altria Group (NYSE:MO),
which has already offered a small profit, and Omnicare (NYSE:OCR)
were not available at the suggested entry prices, however we are
tracking the plays at the higher initial debits.  The "Reader's
Request" calendar spread in Action Performance (NYSE:ATN) was not
available due to a sharp decline in the stock price prior to the
opening bell on 4/28/03.


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

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

LNC     29.88  32.21   MAY    30    30    3.00     3.70    Open?


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.

*****
ADTN - Adtran  $45.05  *** New Multi-Year High! ***

Adtran (NASDAQ:ADTN) develops, manufactures, markets and services
a broad range of high-speed network access products utilized by
providers of telecommunications services and corporate end users
to implement advanced digital data services over both public and
private networks.  The company's business is arranged with two
divisions, the Carrier Networks Division (CN) and the Enterprise
Networks Division (EN), to enable it to quickly respond to the
needs of the two important market segments that its products
address.  These two market segments are CN products for use in
the service provider's Local Loop, including central office,
remote terminal and customer premises, and EN products for use
at enterprise headquarters, remote offices and telecommuting
locations.  Adtran offers more than 500 products built around a
set of core technologies, and developed to address high-speed
digital communications over the last mile of the Local Loop.

ADTN - Adtran  $45.05

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-35.00  RQA-RG  OI=20   ASK=$0.25
SELL PUT  JUN-40.00  RQA-RH  OI=825  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$39.55


*****
KLAC - KLA Tencor  $42.49  *** Semiconductor-Equipment Leader! ***

KLA-Tencor (NASDAQ:KLAC) is a supplier of process control and
yield management solutions for the semiconductor and related
microelectronics industries.  The company's large portfolio
of products, software, analysis, services and expertise is
designed to help integrated circuit manufacturers manage yield
throughout the entire wafer fabrication process, from research
and development to final mass production yield analysis.  The
company offers a broad spectrum of products and services that
are used by every major semiconductor manufacturer in the world.
These customers turn to the company for in-line wafer defect
monitoring; reticle and photomask defect inspection; CD SEM
metrology; wafer overlay; film and surface measurement; and
overall yield and fab-wide data analysis.

KLAC - KLA Tencor  $42.49

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-35.00  KCQ-RG  OI=5861  ASK=$0.45
SELL PUT  JUN-37.50  KCQ-RU  OI=1581  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$37.20


*****
LLTC - Linear Technology  $36.34  *** Bullish Chip Maker!  ***

Linear Technology (NASDAQ:LLTC) designs, manufactures and sells
a broad line of standard high-performance linear integrated
circuits (ICs).  Applications for the company's products include
telecommunications, cellular telephones, networking products,
optical switches, notebook and desktop computers, computer
peripherals, video/multimedia, industrial instrumentation,
security monitoring devices, high-end consumer products, digital
cameras and MP3 players, complex medical devices, automotive
electronics, factory automation, process control and military and
space systems.

LLTC - Linear Technology  $36.34

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-30.00  LLQ-RF  OI=1390  ASK=$0.50
SELL PUT  JUN-32.50  LLQ-RZ  OI=257   BID=$0.80
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$32.20


*****
ROST - Ross Stores  $40.09  *** Bottom-Fishing In Retail! ***

Ross Stores (NASDAQ:ROST) operates a chain of off-price retail
apparel and home accessories stores that target value-conscious
men and women between the ages of 25 and 54, primarily in middle
income households.  The company offers brand name and designer
merchandise at low everyday prices, generally 20% to 60% below
regular prices of most department and specialty stores.  Ross
operates over 450 stores with a large selection of brand names
within each classification with a wide assortment of vendors,
prices, colors, styles and fabrics within each size or item.
The company's quarterly earnings report is due on 5/19/03.

ROST - Ross Stores  $40.09

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUN-35.00  REQ-RG  OI=20  ASK=$0.45
SELL PUT  JUN-37.50  REQ-RU  OI=2   BID=$0.85
INITIAL NET-CREDIT TARGET=$0.40-$0.45
POTENTIAL PROFIT(max)=17% B/E=$37.10


*****
GS - Goldman Sachs  $75.00  *** Trading Range? ***

The Goldman Sachs Group (NYSE:GS) is a global investment banking
and securities firm that provides a range of services worldwide
to a substantial and diversified client base.  The firm operates
offices in over 20 countries with activities are divided into two
primary segments: Global Capital Markets, and Asset Management
and Securities Services.  The Global Capital Markets segment,
which represented 64% of the firm's 2001 net revenues, consists
of Investment Banking, and Trading and Principal Investments.
Goldman's Asset Management segment offers investment strategies
and advice across all major asset classes: global equity; fixed
income, including money market instruments; currency, as well as
alternative investment products.  The firm's Securities Services
activities include brokerage, financing services and securities
lending.

GS - Goldman Sachs  $75.00

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-85.00  GS-FQ  OI=1309  ASK=$0.15
SELL CALL  JUN-80.00  GS-FP  OI=2633  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$80.60


*****
MMM - 3M Corporation  $122.81  *** Trading-Range Top At $130 ***

3M Company (NYSE:MMM), formerly known as Minnesota Mining and
Manufacturing Company, is an integrated enterprise characterized
by intercompany cooperation in research, manufacturing and sale
of products.  3M's business has developed from its research and
technology in coating and bonding for coated abrasives, the
company's original product.  Coating and bonding is the process
of applying one material to another, such as abrasive granules
to paper or cloth (coated abrasives), adhesives to a backing
(pressure-sensitive tapes), ceramic coating to granular mineral
(roofing granules), glass beads to plastic backing (reflective
sheeting) and low-tack adhesives to paper (repositionable notes).
The company conducts business through six operating segments:
Industrial Markets; Transportation, Graphics and Safety Markets;
Health Care Markets; Consumer and Office Markets; Electro and
Communications Markets, and Specialty Material Markets.

MMM - 3M Corporation  $122.81

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-135.00  MMM-FG  OI=1995  ASK=$0.35
SELL CALL  JUN-130.50  MMM-FF  OI=2190  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$130.50


*************
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.

*****
BSX - Boston Scientific  $46.91  *** Revenge Play! ***

Boston Scientific (NYSE:BSX) is a global developer, manufacturer
and marketer of less-invasive medical devices.  The firm's unique
products are offered by two major business groups, Cardiovascular
and Endosurgery.  The Cardiovascular segment focuses on products
and technologies for use in the firm's interventional cardiology,
interventional radiology, peripheral vascular and neurovascular
procedures.  The Endosurgery organization focuses on products and
technologies for use in oncology, vascular surgery, endoscopy,
urology and gynecology procedures.

BSX - Boston Scientific  $46.91

PLAY (conservative - bullish/debit spread):

BUY  CALL  JUN-37.50  BSX-FU  OI=266  ASK=$10.50
SELL CALL  JUN-40.00  BSX-FH  OI=925  BID=$8.30
INITIAL NET-DEBIT TARGET=$2.20-$2.25
POTENTIAL PROFIT(max)=11% B/E=$39.75


*****
MERQ - Mercury Interactive  $35.75  *** Next Leg Up? ***

Mercury Interactive (NASDAQ:MERQ) offers a variety of solutions
for testing, deployment assurance and application performance
management (APM).  Business technology optimization (BTO) is an
emerging business strategy that enables companies to optimize and
align business and technology performance to meet key business
objectives.  Mercury Interactive is a provider of BTO products
and services, rendering a unique integrated approach to testing,
deployment assurance and APM solutions that enables customers to
optimize the quality of their information technology-delivered
services, align IT execution with business goals and reduce
spending throughout their IT infrastructure.

MERQ - Mercury Interactive  $35.75

PLAY (conservative - bullish/debit spread):

BUY  CALL  JUN-30.00  RQB-FF  OI=10  ASK=$6.30
SELL CALL  JUN-32.50  RQB-FZ  OI=61  BID=$4.10
INITIAL NET-DEBIT TARGET=$2.20-$2.25
POTENTIAL PROFIT(max)=11% B/E=$32.25


****************
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.

*****
CHKP - Check Point Software  $18.05  *** Cheap Speculation! ***

Check Point Software Technologies (NASDAQ:CHKP) develops, markets
and supports Internet security solutions for enterprise networks
and service providers, such as Telcos, Internet service providers,
application service providers as well as managed service providers
including virtual private networks (VPNs), firewalls, intranet and
extranet security.  Check Point has solutions that enable secure,
reliable and manageable business-to-business communications over
Internet protocol networks, including the Internet, intranets and
extranets.  Check Point product offerings also include traffic
control and quality of service and IP address management.  The
company's products are fully integrated as a part of its secure
virtual network architecture, and provide centralized management,
distributed deployment and comprehensive policy administration.

CHKP - Check Point Software  $18.05

PLAY (speculative - bullish/calendar spread):

BUY  CALL  OCT-20.00  KEQ-JD  OI=1472  ASK=$1.55
SELL CALL  JUN-20.00  KEQ-FD  OI=1702  BID=$0.45
INITIAL NET DEBIT TARGET=$1.00-$1.05
INITIAL TARGET PROFIT=$0.50-$0.70


*****
GDT - Guidant  $39.98  *** Reader's Request! ***

Guidant Corporation (NYSE:GDT) pioneers lifesaving technology,
giving an opportunity for a better life today to millions of
cardiac and vascular patients worldwide.  The company, driven by
a strong entrepreneurial culture of 11,000 employees, develops,
manufactures and markets a broad array of products and services,
enabling less invasive care for some of life's most threatening
medical conditions.

GDT - Guidant  $39.98

PLAY (very speculative - bullish/calendar spread):

BUY  CALL  OCT-45.00  GDT-JI  OI=1858  ASK=$1.65
SELL CALL  JUN-45.00  GDT-FI  OI=223   BID=$0.30
INITIAL NET DEBIT TARGET=$1.25-$1.30
INITIAL TARGET PROFIT=$0.65-$0.90


*****
NSM - National Semiconductor  $21.80  *** Favorable Outlook! ***

National Semiconductor (NYSE:NSM) designs, develops, manufactures
and markets a wide array of semiconductor products, including a
broad line of analog, mixed-signal and other integrated circuits.
The company's analog and mixed-signal devices include amplifiers
and regulators, image sensors, power monitors and line drivers,
radio frequency, audio amplifiers, display drivers and signal
processors.  NSM also makes other products with digital-to-analog
or analog-to-digital capability include products for local area
and wireless networking and wireless communications, as well as
products for personal systems and personal communications.  NSM
uses the brand name Super I/O to describe its ICs that handle
system peripheral and input/output functions on the personal
computer motherboard.

NSM - National Semiconductor  $21.80

PLAY (conservative - bullish/calendar spread):

BUY  CALL  JAN04-25.00  LBV-AE  OI=770  ASK=$2.45
SELL CALL  JUN03-25.00  NSM-FE  OI=24   BID=$0.35
INITIAL NET DEBIT TARGET=$2.00-$2.05
INITIAL TARGET PROFIT=$1.10-$1.75


*******************
SYNTHETIC POSITIONS
*******************

These stocks have momentum-based trends and favorable option
premiums.  Traders with a directional outlook on the underlying
issues may find the risk-reward outlook in these plays attractive.

*****
MRVL - Marvell  $26.72  *** Chip Sector Rally! ***

Marvell (NASDAQ:MRVL) designs, develops and markets integrated
circuits utilizing proprietary communications mixed-signal and
digital signal processing technology for communications-related
markets.  Marvell offers its customers a wide range of integrated
circuit solutions using proprietary communications mixed-signal
processing and digital signal processing technologies.  Marvell's
product groups include: storage products, consisting of a variety
of read channel, system-on-chip and preamplifier products; and
broadband communications products, consisting of a variety of
transceiver products, switching products, internetworking
products and wireless LAN products.

MRVL - Marvell  $26.72

PLAY (speculative - bullish/synthetic position):

BUY  CALL  JUN-30.00  UVM-FF  OI=714  ASK=$1.00
SELL PUT   JUN-22.50  UVM-RX  OI=965  BID=$0.70
INITIAL NET DEBIT TARGET=$0.00-$0.10
INITIAL TARGET PROFIT=$0.40-$0.70

Note:  Using options, the position is similar to being long the
stock.  The minimum initial margin/collateral requirement for the
sold option is approximately $725 per contract.  However, do not
open this position if you can not afford to purchase the stock at
the sold put strike price ($22.50).


*****


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MARKET POSTURE
**************

Bulls Not Giving Up


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