Option Investor
Newsletter

Daily Newsletter, Wednesday, 05/14/2003

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Wednesday 05-14-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Light pullback
Futures Wrap: The Wedge
Index Trader Wrap: Choppy Trading Today Ahead of the End-of-Week
Numbers
Weekly Fund Family Profile: Purisima Funds


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
      05-14-2003           High     Low     Volume Advance/Decline
DJIA     8648.52 - 30.73  8728.41  8608.31 1.71 bln   1595/1655
NASDAQ   1545.88 -  4.77  1549.94  1526.14 1.78 bln   1602/1542
S&P 100   473.98 -  1.43   478.56   471.94   Totals   3197/3197
S&P 500   939.28 -  3.02   947.29   935.24
RUS 2000  419.43 +  0.20   420.97   418.23
DJ TRANS 2457.62 - 19.28  2457.62  2455.94
VIX        22.76 +  0.73    23.23    22.26
VXN        33.14 +  0.30    34.23    32.72
TRIN       0.87
PUT/CALL   0.71
*******************************************************************

Light pullback
Jonathan Levinson

The usual inexplicable rally on bad economic news at the preopen
shocked bulls and bears alike when it reversed at 9:45, driving
the indices to their day lows before attempting a weak bounce
that created a trading range for the remainder of the session.
The losses were minimal, no more than a "shake", as Alan likes to
put it, but losses nonetheless.

Despite minimal losses, volume was respectable, with 1.71B shares
traded on the NYSE and 1.78B shares on the Nasdaq.

Daily Chart of the INDU





Weekly Chart of the INDU




As discussed for weeks now, the current pattern is projecting to
strong resistance at current levels, both for the INDU and the
COMPX.  A resolution is due at any time.  The COMPX looks far
more bullish than the INDU, but both indices are printing bearish
formations on their daily charts, and look very toppy on that
timeframe.

Daily Chart of the COMPX




Weekly Chart of the COMPX




Equities shrugged off disappointing retail sales and import numbers at
8:30, with the Commerce Department reporting that retail sales fell
0.1% in April following a revised 2.3% gain in March. Retail sales
excluding automobiles fell -0.9% in April after rising a revised 1.5%
in March.  Expectations had been for retail sales to rise 0.4% and
sales ex autos to rise 0.1%.  The move was attributed to declining
gasoline prices and weak sales at clothing and department stores which
offset a surge in car buying in April.  March import prices, excluding
oil, were up 0.9%, but April brought a decline of -2.7%, the largest
one month drop on record. April imports ex oil were down -0.9%.
Immediately following the reports at 8:30, the US Dollar Index dipped,
bonds rallied, and equity futures reached for their morning lows, but
within minutes the slide was arrested, with equity futures actually
bouncing to new highs and climbing until 9:45AM.

The Energy Department reported drop in crude oil inventories of –
2.7 million barrels for the week ended May 9, surprising analysts
yet again on their expectations of a 2M barrel rise.  Stocks were
down -12.5% from 284.5 million barrels at this time last year.
Gasoline inventories rose by 800,000 barrels to 208.6M barrels in
this past week, bringing supplies to levels 4% lower than at this
time last year.  June crude was up 67 cents to close at $29.17
per barrel.


Chart of the US Dollar Index





The US Dollar Index touched the 95.00 level overnight and failed
again, and got hit after the 8:30AM data.  It sunk to near 2 year
lows against the yen but gained slightly against the euro, as US
treasuries rallied, bringing the thirty year yield to 45 year
lows, a new bear market low.  Traders watched incredulous as
equities treaded water, containing their losses in the face of
recent bear market lows in the US Dollar Index and treasury
yields, both representing substantially larger pools of money
than equities.  My thinking continues to be that the fed's recent
proclamations of its intent to do whatever it deems necessary to
avoid "dis"inflation has resulted in a flood of US dollars
hitting the markets, either from foreign sellers or from the fed
itself.  Either way, this supply is diminishing the price of
dollars while chasing US denominated assets, be they treasury
bonds, equities, commodities, and even precious metals, all of
which have been rallying simultaneously.

Thinking a step further, one might wonder if the weaker dollar is
not an excellent way to mitigate both the ballooning balance of
trades deficit, as well as the national deficit.  With an
estimated 30% of US debt held by foreigners, and domestic savings
at or near record lows, the devaluation of the US Dollar is an
excellent way to reduce the real value of that debt while harming
only the vast minority of Americans who are actually net savers.
In light of Ben "The Terminator" Bernanke's statements about
being able to print dollars out of thin air, it's no wonder that
massive supplies of US Dollars are hitting the forex markets- if
I owned US treasuries in a foreign land, I'd be dumping them too,
which is no doubt the desired effect.  But I digress.  Treasuries
finished the day off their highs but still well within breakout
territory, with the TYX –10.6 basis points at 4.52%, TNX –8.6
basis points to 3.537% and the five year yield down 7.8 basis
points to 2.49%.

Daily chart of the thirty year yield




Is there any fundamental or sentiment-based sign of this trend
reversing?  Apparently not, as this afternoon, Congressman Jim
Saxton, R-N.J., vice chairman of the House-Senate Joint Economic
Committee urged the fed to cut interest rates to hopefully firm
up the economic "soft patch."  He stated: "Given the lack of
inflation, the fed should move soon to ease monetary policy and
improve the economic outlook. By many measures, current domestic
and international economic conditions still appear to be quite
weak. Business investment during this expansion never fully
recovered as many had expected, leaving the economy on a sub-par
growth path. We still seem to be stuck in the 'soft patch'
Chairman Greenspan described last November."

Given all of the foregoing, it's no wonder that big moves have
been occurring over past weeks and months in equities and bonds,
and the financial press was all abuzz today about reports from
brokers and market makers showing a spike in retail investor
activity.  For example, NITE reported a 10.6% increase in equity
trade volume in April.  This data helped the Broker Dealer Index
($XBD) outperform the broader market today.  However, a spike in
retail investor activity hardly looks like a long term bullish
indication to me, except perhaps as may regard this current
quarter's results of XBD components for the profits no doubt
being accumulated.  Just as J.P. Morgan reputedly saved his
fortune from the Great Crash when observing that the market was
being overplayed (upon receiving a stock tip from a shoeshine
boy), the increase of speculative retail activity is generally
associated more with market tops than with bottoms.

Is there any sign of this trend reversing?  Apparently not, as
this afternoon, Congressman Jim Saxton, R-N.J., vice chairman of
the House-Senate Joint Economic Committee urged the fed to cut
interest rates to hopefully firm up the economic "soft patch."
He stated: "Given the lack of inflation, the fed should move soon
to ease monetary policy and improve the economic outlook. By many
measures, current domestic and international economic conditions
still appear to be quite weak. Business investment during this
expansion never fully recovered as many had expected, leaving the
economy on a sub-par growth path. We still seem to be stuck in
the 'soft patch' Chairman Greenspan described last November."

The soft patch manifested itself in this morning's data, but
equity markets were surprising impervious to the news, if the
Teflon Market's disinterest in dismal economic and fundamental
news can still be considered "surprising".

If the move higher in equities has been fueled by a massive
supply of dollars hitting the bond and equity markets, then
there's no fundamental reason why the rally has to end here.  I
personally believe that the top is close, if not already printed,
but that's based on other technical and fundamental factors
discussed in other articles and daily in the Market Monitor.  The
concerted inflation of the money supply, if my thinking here is
correct, makes the bear in me very nervous indeed.

In corporate news, Federated Stores (FD) reported Q1 profits down
44%, with fiscal first-quarter net income of $46 million, or 24
cents a share, down from 43 cents a share in the year-earlier
period, and  beating estimates of 15 cents a share.  Patting
itself on the back, the company attributed the better than
expected results to lower than anticipated store closings and
consolidation costs.  Investors somehow bid the stock up in the
morning on this news, though it did trade lower throughout the
session to close negative.

SIRI showed strength after reporting that the number of Q1
subscribers totaled 68,000, up 127% end-of-2002 figure. Net
income for the Q1 was $51.9 million, or 16 cents per share,
compared with a loss of $1.22 a share in Q1 2002.

GTW announced in its annual report that the SEC was opening a
criminal investigation into its accounting practices, on the
heels of an investigation for accounting irregularities dating
back to the end of 2000.

CSC was up strongly today following its upside surprise announced
yesterday after the bell, reporting Q1 earnings of $162.7 million
or 93 cents per share, on revenue of $3.8B.  The company had said
that it sees "signs of demand stabilization in North America for
consulting and systems integration services".

KDE, of Pokemon fame, was up sharply after announcing Q1 earnings
of $3 million, or 21 cents per share, up from $1.6 million, or 11
cents per share for Q1 2002.

Despite RBC's and Smith Barney's recommendation to "sell it into
strength", MOT was up over 10% on strong volume today as the
company stated that it expects handset sales in India to exceed
already explosive growth in the domestic mobile market over the
next 2 years.

After the bell, BEAS met expectations for earnings and revenue,
with earnings of 7 cents. The stock was slightly lower as of this
writing.  INTU was trading strongly after announcing earnings of
$1.05 vs. estimates of $1.02.  CA was up as well, beating
estimates by 2 cents with earnings of 8 cents per share.

For tomorrow, we have the following data (from Yahoo.com):


                                          Briefing Expected Prior
                                          Forecast
May 15 8:30 AM Business Inventories  Mar - 0.3%     0.2%    0.6%
May 15 8:30 AM Core PPI              Apr - 0.0%    -0.1%    0.7%
May 15 8:30 AM Initial Claims      05/10 - 440K     430K    425K
May 15 8:30 AM PPI                   Apr - -0.9%   -0.7%    1.5%
May 15 9:15 AM Capacity Utilization  Apr - 74.5%   74.5%   74.8%
May 15 9:15 AM Industrial Production Apr - -0.3%   -0.4%   -0.5%
May 15 12:00 PM Philadelphia Fed     May - -4.0    -4.0    -8.8

Given the April data we've seen so far this week, the anticipated
pre-war, intra-war and post-war recoveries have yet to manifest
themselves.  The stage is set for a strong reaction to the
plethora of reports due tomorrow morning.  Given the narrowing of
the ranges permitted by the converging trendlines on the chart
patterns we've been watching in the index and futures wraps
during the past weeks and months, tomorrow could well give us the
anticipated break.  Add to that the steady runup in the indices
since last month with this being option expiration week for May
contracts, and the stage is set for solid action heading into
Friday. See you at the bell!


************
FUTURES WRAP
************

The Wedge
Jonathan Levinson

Daily Pivots (generated with a pivot algorithm and unverified):

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
DJIA      8781   8715   8661   8595   8541
COMPX     1561   1548   1537   1524   1513
ES03M      955    948    941    934    928
YM03M     8773   8711   8652   8590   8531
NQ03M     1177   1164   1153   1140   1128

The markets opened higher, pushed to their highs of the day, and
then dropped from 9:45 until 11AM, after which they meandered
higher in a narrow range to close just above the 38% retrace off
their lows.

Volatility was higher across the indices, but lightly so, with
the VIX finishing +.73 at 22.76, the VXN up .30 to 33.14 and the
QQV +.25 to close at 28.08. Volume was moderate on the NYSE and
COMPX, with 1.77B and 1.78B shares traded respectively.

The CRB Index added 1.08 to close at 241.59, led by platinum
(+1.66%), lean hogs (+1,55%), sugar (+1.47%), cocoa (+1.44%),
cotton (+1.35%), soybeans (+.78%), heating oil (+.12%), and crude
(.07%).  Gold closed at 352.50, touching a two month high
intraday above 354/oz.

The US Dollar Index failed at resistance at the 95.00 level last
night, and failed at 94.60 support in the afternoon before
attempting to retake that level at the end of the afternoon.
This occurred against the backdrop of a breakout in treasuries
discussed in greater detail in tonight's market wrap.


15 minute chart of the US Dollar Index





Daily Chart of the QQQ




Today's closing candle on the Qubes printed yet another picture
of confusion, with the candle body trading between an upper and
lower shadow.  No damage was done to either of the bear wedge
trendlines, as traders were forced to grind their teeth and trade
what was a narrow, boring range through much of the session.

The QQQ:QQV ratio pictured below, which I've been using to
hopefully signal a trend change, dragged out what bears are
hoping is a topping process by another day, as the 5 and 13 day
SMA's converged ever closer in what could be a top.  The
stochastics remain in a downtrend, reversing yesterday's uptick,
while the MacD remains on a sell.  If this carries through, the
QQQ will decline relative to its volatility or "fear" index, the
QQV, signaling a reversal in the bullish trend that the QQQ has
been printing since March.


Chart of the QQQ:QQV ratio





Daily chart of the NQ3M




As noted with the QQQ, the daily NQ3M contract did no damage to
either the upper or lower trendlines delineating the bear wedge.
Other than the 9:45 drop featured in the 60 minute chart below,
little else happened within what proved to be a narrow trading
range.  It remains a scalpers market for the time being.


60 minute chart of the NQ3M



The secondary ascending trendline provided resistance throughout
the afternoon following this morning's drop.  The 10(5)
stochastic relieved its oversold condition and posted a bullish
cross but was unable to break that trendline during the day
session.  The stochastic portends higher prices heading into
tomorrow.

Daily chart of the ES



Once again, the ascending wedge occupied yet another session,
with the pullback from the upper trendline by this time routine.
The daily 10(5) stochastic is signaling lower prices.  Today's
candle printed a bearish harami, and had the upper and lower
trendlines not become elevated to the level of market
institutions by this point in time, the print would appear more
bearish than it actually does.  Today could well have established
that yesterday was a swing high fir this multimonth wave, but
until the lower trendline gets decisively taken out, it will be
impossible to know.


60 minute Chart of the ES




Like the 60 minute NQ contract, today's 60 minute candles on the
ES showed a violation of ascending trendline support early in the
session, followed by an unsuccessful retest throughout the
remainder of the session.  The 10(5) stochastic is on a buy
signal, and should serve to draw out or at least delay the
declining cycle implied by the bearish cross on the daily
stochastic in the previous chart.


Daily Chart of the YM



Will this wedge ever end?  Even the stochastic looks bored,
pinned ever higher as the wedge continues to extend.  A break
below 8600 will get bears excited at this point, a level which is
growing ever closer.  Again, we see the opposing cyclicality
between the daily and hourly chart (below), with the hourly
having begun its so far weak up cycle and the daily attempting to
begin its downphase.  Good traders wait for these cycles to get
in gear either from oversold or overbought.  Until the shorter
cycle completes, it will be impossible to predict the strength of
the hourly upphase, and whether it's sufficient to resist or
reverse the daily downphase.


60 minute chart of the YM



There's little to add, as we've all become familiar with what is
becoming a tiresome, frustrating setup on the equity indices and
futures.  As the daily and weekly stochastics indicate, this
rally and indeed, this entire phase of the market have grown long
in the tooth.  It appears to me that we're squinting at price
action within a broadly forming top.  Of course, I'll defer to
the verdict of the upper trendline if it should get decisively
violated.  In any event, with tomorrow's full compliment of
economic reports scheduled for the morning, we can hope for some
excitement during tomorrow's session.


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

Choppy Trading Today Ahead of the End-of-Week Numbers

Today's trading proved to be choppy ahead of the important
economic numbers to be released tomorrow and Friday.  Jeff returns
tomorrow morning from his vacation, just in time to deal with the
impact of those numbers on market behavior and psychology.  We all
look forward to reading his input.

A demonstration of the day's trading action with respect to pivot
analysis can be found in an examination of the DJI's behavior
surrounding pivot points Jonathan calculated for last night's
Index Wrap. Today, the DJI opened at 8673.20, just below the daily
pivot and just above the weekly R1.  That first five-minute candle
moved the DJI all the way above the daily R1 level to the day's
high of 8728.10, but the next 11 five-minute candles saw the DJI
plummet through the daily pivot, the weekly R1, the daily S1, and
stop just short of the daily S2.  Hitting the S2 bounced the DJI
back up through S1, almost all the way back to the weekly R1,
where it turned around and headed back to the daily S2.  The DJI
again bounced, headed up through S1 again, but once again stopped
short of the weekly R1, posting a lower high and preventing the
DJI from confirming a double-bottom pattern on the intraday chart.
This time, S1 provided a bounce, but it didn't carry the DJI far,
with the closing price ending at 8647.80.  Whew!

Trading on the Nasdaq and S&P's was much like that on the DJI, but
for all that choppiness and testing of support levels, markets
closed flat, barely dropping on the day.  Here's a pivot analysis
matrix for tomorrow, listing daily, weekly, and monthly numbers.
The daily and weekly numbers were computed using Q-charts figures.
As I mentioned this weekend, the monthly values are Jeff's, copied
from his matrix since those monthly numbers have not changed since
he left for vacation.

Pivot Analysis Matrix




As I did this weekend, I thought I'd begin by taking a look at
market internals, then studying the OEX, and broadening the study
to a brief discussion of the other indices.  One study of market
internals must include a look at the bullish percents.  At the
time this article was completed, Stockcharts.com had not yet
updated the bullish percent charts for today, but yesterday's
values showed the $BPOEX at 65, $BPINDU at 66.67, and $BPNDX at
79.  While the $BPNDX had increased by 1 point, the other two
levels had not been increased by the week's trading, nor had the
values reversed into column's of O's. However, viewing the charts
as line charts demonstrated that on both the $BPNDX and $BPOEX,
the RSI and MACD are flattening, echoing the slight flattening
seen in the value line.  While this flattening is not conclusive
evidence of an imminent downturn in the bullish percent values for
the OEX, it does bear watching for bulls who want to manage risk
and refine their plans for taking profits.

Line Chart of the $BPOEX






Other breadth measures include volume patterns.  Today continued
the recent pattern of new highs vastly outnumbering new lows.
This weekend, I posted a chart of the $NYHLR, the NYSE New
High/Low Ratio.  That chart showed overbought levels on the weekly
RSI.  The weekly stochastics demonstrated bearish divergence with
the ratio values.  Although Stockcharts.com has also not updated
this chart today, the chart does include the first two days of the
week, and demonstrates that reversals have begun.  The unannotated
blue arrows pinpoint recent market tops, coinciding with tops in
the $NYHLR.

Weekly Chart of the $NYHLR




As I mentioned in this weekend's wrap, I'm not accustomed to
watching this measure in chart format, but I had been worried by
the recent imbalance seen in new highs and new lows and worried
that the imbalance might be a contrarian indicator.  My study of
the chart showed correlations with peaks in the $NYHLR and recent
peaks in the markets, so the reversal signal shown above, if it
continues to form during the week, also hints that the markets may
be nearing a top.  Two measures, then--bullish percents and
reversal signals in the $NYHLR--warn bullish players that risk may
be shifting onto their shoulders, allowing them to fine tune exit
or profit-taking plans.

A study of the OEX weekly chart shows that although the weekly
oscillators have not yet begun to roll, the upward trend continues
to lose strength.

Weekly Chart of the OEX




The rising wedge is probably moot because prices have now risen
into the apex of this formation.  However, I continue to include
it on my charts because those lines have nevertheless provided
resistance or bounce points on daily or hourly charts.

This weekly OEX chart shows oscillators that are far into
overbought territory, but not yet turning down.  The 10-week still
retains its bullish cross of the 30-week moving average.  However,
ADX continues its strong move down and now barely registers over
20, indicating that the OEX rally continues to lose strength as it
approaches the top of the 385-487 trading band that has contained
its movements since July of last year.

ADX looks different on the daily OEX chart, as it did this
weekend.  Although buying pressure appears to be decreasing,
selling pressure is not yet increasing and will probably require a
move below 470 and perhaps below 465 before it does so.

Daily OEX Chart




As I mentioned this weekend, several factors on this chart led me
to retain that rising wedge formation.  Those factors included the
RSI and 21(3)3 stochastics breaks below their supporting
trendline, hinting at a break of the rising wedge, too.  RSI and
both intervals of stochastics depicted reside in or near
overbought levels, with the RSI appearing to turn down and the
fast lines of both stochastics hinging down.  The RSI makes a
pattern of lower highs while the OEX makes higher highs.  These
oscillators hint at impending weakness, but the signs are
tentative as yet, and the ADX level tells us that rally trend may
still be active.  Oscillators do not give clear sell signals when
a rally is active.

The oscillators and chart formations on the OEX chart hint that
the OEX might take yet one more run at 480 or even 487 if
tomorrow's economic numbers do not swamp bullish sentiment.

Hourly OEX Chart





Hourly ADX shows that buying pressure still decreases, while
selling pressure is not yet increasing, a trend seen across many
charts.  Today's action saw two possible chart formations setting
up.  One is a broadening formation, with a flat top just under 480
and with a broadening lower support line.  The other is a
potential bull-flag pattern.  Both are marked on the chart.  Each
could be an accumulation pattern with a bullish tenor.  The OEX
ended the day with an attempt at an upside breakout of the bull-
flag pattern.  Although the doji that ended the day was just above
the upper trendline of the potential bull-flag formation, I would
not consider the breakout confirmed until a move over the 21-dma,
since the OEX spend most of the afternoon trapped between that 21-
dma and the 50-dma, just below its current position.  Only
extremely aggressive traders using risk capital only should
consider buying an upside breakout of such a pattern anyway, with
opex week upon us, strong resistance at 480, stronger resistance
above that, and bullish percent levels creeping up.  If there is
an upside breakout, traders might consider waiting for tests of
those next resistance levels at which point a bearish position
might be a better bet. A breakout over OEX 480 might usher in a
new wave of buying, but weekly candlestick patterns, growing
bullish percent levels, and oscillator evidence hints that the 487
resistance might hold.

Assuming that the OEX resistance and other index resistance holds
and markets pull back, how deep can we expect the retracement to
be?  That depends.  If we're still in a bear market, the
retracement (down) will be in the direction of the primary trend
(down).  Anyone who has studied physics understands that a wave
can be amplified when new impulses are synchronized with the
wave's movements.  A child will swing higher when the parent
pushes the swing in rhythm with the child's pumping, but the child
will slow if the two impulses are not in synchronization.

However, according to another bit of traditional wisdom, this
retracement might not be so deep.  That's because the March-to-
present movement has already retraced almost all of the December-
to-March movement.  The bigger a reaction movement is, the smaller
the next retracement will be according to Martin Pring, author of
several books on technical analysis.  That would predict a
retracement of the 38.2-50% magnitude rather than a deeper one.

For the OEX, a 38.2% retracement of the current move would bring
the OEX to the 449 level while a 50% retracement would take the
index just below 440. Therefore, traders who elect to enter a
bearish play near 480 or 487, or on a breakdown below a key
support level should keep those levels in mind as possible
targets, always watching the oscillators.  Oscillators that move
down quickly on minimal price movements may be signaling that
consolidation or a light pullback is in store rather than a deeper
pullback, even to the minimal 38.2% retracement level.  The OEX
would find support in roughly 5-point intervals all the way down
to those levels, too.  The 200-ema just above 460 would be a level
that would require a guarding of any accumulated bearish profits.

A study of other indices would not be complete without a mention
of the $SOX (down 3.20 or .90%), the BIX (down 1.05 or .35%), or
the $TRAN (down 19.28 or 0.78%). The SOX dipped below the key 350
level, all the way to 346.44, but managed to reclaim that level by
the day's end, closing at 352.53. Daily MACD remains flat.  RSI
turns down while still remaining above the supporting line of RSI
higher lows.  ADX shows buying pressure decreasing while selling
pressure is not yet increasing.  Stochastics look toppy.

The BIX remains within the recent consolidation range, but now
clings to the bottom supporting line of its ascending recession
channel.  The last three daily candles have printed a large white
candle, a doji, and then today's spinning top candle, all just
below the important 296-297 resistance.  Taken together, these
might be given a bearish connotation, but they may signal nothing
more than a continuation in the recent consolidation.

This weekend, I included a weekly chart of the Dow Jones
Transportation Index, showing that the $TRAN had printed a
potential reversal signal at the 50% retracement of the March,
2002-to-March, 2003 move.  The following chart shows what's
happened this week.

Dow Jones Transportation Index:




This chart shows a flattening in the stochastics as the $TRAN
turns down from that 50% retracement.  ADX flattens, too, showing
a weakening of the upward trend.

A weakening in the $TRAN might portend a weakening in its sister
index, the Dow Jones Industrials, too.

Daily Chart of the DJI




This daily chart shows a continued weakening in the ADX, with
selling pressure and buying pressure both flattening as the DJI
moves within an upward regression channel that's fast approaching
Jim's resistance line near 8700 (not depicted).  Oscillators do
not give give evidence as to the immediacy or depth of any
downturn.  RSI and both stochastics depicted have flattened while
prices continue to climb, indicating bearish divergence, but not
indicating when a downturn might occur.  As I mentioned this
weekend and as others have mentioned, the DJI could fall just
below 8500 and still preserve the bullish outlook.  A deeper fall
might damage investor sentiment and sent the DJI back toward 8100,
where it would next find strong support or toward 8000 on a deeper
pullback.  To gain insight into the expected depth of a move,
watch oscillator behavior as the DJI retraces.  A move above 8700
might indicate that the DJI would see another leg up, first
testing 8850 resistance and then the stronger resistance at 9000.

Jonathan studies the NDX, QQQ, and COMPX and will cover these in
his Market Wrap this evening and this article is becoming chart-
heavy, so I'll touch only on the oscillator evidence on the NDX.
While the NDX appears to have stalled under 1167 resistance, RSI,
a leading indicator, turns down, and stochastics look rather like
those on the OEX, with fast lines hinging but not yet in full
bearish roll.  Daily ADX shows a puzzling degree of strength in
the trend, but buying pressure appears to be dipping while selling
pressure remains minimal.  A pullback to 1100 would still preserve
the bullish cast of this chart, but a deeper pullback might damage
investor sentiment.  Watch oscillator evidence on any pullback to
gauge whether overbought pressure will be thrown off by
consolidation or a minor pullback, or will require a deeper
pullback.

Although this week has already seen the release of economic
numbers, including this morning's worse-than-expected retail sales
figures, the real effect will begin to be seen tomorrow morning.
It's been my opinion that hourly charts show that another swing up
can not be ruled out, and that it's probably too soon to predict
how deep a pullback might be.  Martin Pring's teachings advise
that the pullback might be a minor one.  If pullbacks deepen,
however, along with a reversal in the bullish percents, the recent
bullish sentiment might be damaged. That might bring in more
sellers and affirm the continuation in the bear market.

Linda Piazza


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.
Anything else is too slow!

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


**************************
WEEKLY FUND FAMILY PROFILE
**************************

Purisima Funds

The Purisima Funds is a family of mutual funds managed by Fisher
Investments, Inc. using modern improvements on the same concepts
detailed in Harry Markowitz's 1952 paper, which defined "modern
portfolio theory."  Markowitz's paper, which later earned him a
Nobel Prize, showed that by combining securities, which move at
different times, you could tailor a portfolio that had low risk
relative to expected return.

According to the Purisima Funds' site (www.purisima.com), Fisher
Investments, Inc., located in Woodside, California, manages over
$9 billion for large institutions and high-net-worth individuals.
The Purisima Funds, which includes one domestic, one foreign and
one global fund, are geared to individual investors with $25,000
or more to invest initially.  That's more than a lot of funds in
the retail marketplace, but significantly less than the $500,000
needed to build a customized stock portfolio.

The minimum initial investment to open an IRA account is $2,000.
So, if you don't have $25,000 to open a regular account, you may
wish to considering going the IRA account route.  Purisima Funds
are "no-load" funds and have current expense ratios ranging from
1.07% and 1.50%, reasonable relative to the Morningstar all funds
average (1.44%).

Kenneth Fisher, a 25-year industry veteran, is founder, chairman
and chief investment officer of Fisher Investments, Inc., a firm
that began as a sole proprietorship in 1978 and was incorporated
under the name Fisher Investments, Inc. in 1986.  Fisher manages
the mutual funds investment program and is primarily responsible
for the day-to-day management of the three fund portfolios.  His
biography states that he has written three books about the stock
market, and has been a monthly columnist for Forbes (since 1974).

Fund Overview

Purisima Total Return Fund (PURIX), the firm's first mutual fund,
began operations on October 28, 1996.  It's described as a global
fund, since it contains both domestic and foreign securities.  It
is offered to small investors as the "single best way" to manage
their money since the fund is so broadly (globally) diversified.
The fund's relative percentages of assets invested in equities,
debt securities, and money markets are not fixed, and will vary
depending on Kenneth Fisher's assessment of global economic and
market conditions.

As its name implies, the objective of Purisima Total Return Fund
is to generate a high level of total return.  In pursuit of this
objective, Kenneth Fisher invests in a portfolio allocated among
domestic and foreign stocks, government and corporate bonds, and
short-term money market securities, as well as other equity-type
securities that keep with the prospectus objective.  At April 30,
the fund had 99.1% of net assets invested in common stocks, with
36.9% invested in foreign stocks, per Morningstar's report.  The
fund currently lands in the large-cap growth style box, with 90%
of assets invested in companies with giant- and large-cap market
values.

Through global diversification targeted at securities, this fund
strives for the same high total return and reduced level of risk
that many large investors seek to obtain from Fisher Investments.
Currently, Purisima Total Return Fund holds Morningstar's highest
5-star rating for risk-adjusted performance relative to category.
The relative percentages of assets invested in equity, fixed-
income and money market securities are not fixed and will vary
depending on the Adviser's assessment of global economic and
market conditions.

Purisima Pure American (PURUX) and Purisima Pure Foreign (PURFX)
are designed to be pure plays on the U.S. stock market and non-
U.S. equity markets.  Purisima Pure American Fund contains U.S.
common stocks that are believed to have appreciation potential,
while Purisima Pure Foreign Fund is composed of foreign equity
securities that Fisher believes represent the best investments.
In seeking to find the best opportunities in the market, Fisher
combines a rigorous quantitative screening process with intense
qualitative research.  Fisher's bottom-up investment style uses
various proprietary tools and techniques.

The Pure American Fund is aimed at investors that don't want to
own any foreign stocks.  According to Morningstar, this tiny $2
million U.S. only fund is categorized as a large-cap blend fund,
but currently falls into the large-cap value style box based on
its most recent portfolio.  At $41.6 billion, the fund's median
market capitalization is well into the "large-cap" range.  Fund
investors seeking yield may be attracted to the fund's 12-month
yield of 1.59%.  Dividends reinvested can enhance a fund's long
term potential total return, while adding some income stability
relative to U.S. stock funds where income isn't a consideration.

The Pure Foreign Fund is ideal for investors who are comfortable
building their own U.S. stock portfolio, but are not comfortable
selecting foreign securities, yet want to globally diversify his
or her investment portfolio.  Similar to the Pure American Fund,
Fisher invests in a basket of securities, which he believes will
most likely appreciate.  For the most part, that means stocks of
companies domiciled abroad, but the portfolio may also invest in
government/corporate debt securities, money market vehicles and
other equity-type securities in pursuit of the fund's objective.

In the next section, we see how well the three Purisima mutuals
have performed relative to their Morningstar category peers and
what their Morningstar risk and return ratings are.

Fund Performance

Purisima Total Return Fund owns the longest track record, so we
will begin there.  Per the Purisima Funds website, the Purisima
Total Return Fund sports an inception-to-date annualized return
of 5.8% through March 31, 2003.  A $10k investment on October 31,
1996 would be valued at $14,341 on March 31 (compared to $10,252
if you had invested in the MSCI World Index).  So, this fund has
largely achieved its objective of generating total return, while
controlling risk.

According to Morningstar, the Total Return Fund carries a 5-star
rating (highest) for risk-adjusted performance relative to peers.
In relation to the average world stock manager, Fisher over time
has produced above average returns with a below average level of
risk.  So, all in all, we believe fund has performed well versus
similar funds under Fisher's direction, well enough to receive a
Morningstar 5-star rating overall.




On a year-to-date basis as of May 13, 2003, the Total Return Fund
is up 7.9%, ranking in the top 15% of the Morningstar world stock
category.  Over the trailing 3-year period, the fund lost 5.8% on
average a year, but that was considerably better than the average
world stock fund, ranking in the category's 16th percentile.  For
the same period, the average world stock fund lost 13.1% per year
on average.

For the trailing 5-year period, Fisher produced an average annual
of 1.7%, to rank in the top 14% of the world stock category.  The
average world stock fund lost an average of 3.4% a year over this
same time period.  While the fund isn't immune from volatility as
its 6-month chart shows, over the long term Ken Fisher has gotten
the job done, providing world stock investors with a solid return
to risk tradeoff.

Purisima Pure American Fund and Purisima Pure Foreign Fund do not
sport 5-year track records, but their trailing 3-year returns and
rankings are similar to the Purisima Total Return Fund.  Both are
rated 5 stars (highest) by Morningstar, but only for the trailing
3-year period.  During that time, both funds limited their losses
relative to category peers; similar to what Fisher was able to do
with the Total Return Fund.

On a year-to-date basis through May 13, the Pure American Fund is
up 8.0%, ranking in the 23rd percentile (top quartile) within the
large-blend category and beating the return of the S&P 500 target
index (7.7%).  The Pure Foreign Fund is up 3.1% this year for a
59th percentile ranking in the foreign stock fund category.  It
is rated 5 stars by Morningstar for trailing 3-year performance,
but its YTD total return so far has slightly lagged the average
foreign stock fund group.

Conclusion

While each of the Purisima stock funds has excelled in the past
three years in terms of preserving capital relative to category
peers, only one fund Purisima Total Return has been around long
enough to judge over a full market cycle that includes both ups
and downs.  In that charge, Fisher has done a good job over the
long term of building and preserving wealth for investors; that
bodes well for the long-term prospects of the two Purisima pure
stock funds.  Mutual investors wanting to have their investment
dollars managed by a leading institutional money manager have a
suitable option here.

For more information or to download a fund prospectus, go to the
Purisima Funds website at www.purisima.com.


Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


************************Advertisement*************************
If you trade options online, then you need an online broker that:
offers true direct access to each option exchange
offers stop and stop loss online option orders
offers contingent option orders based on the price of the option or
stock
offers online spread order entry for net debit or credit
offers fast option executions

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

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


*******************
FREE TRIAL READERS
*******************

If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is $49.95. The quarterly
price is $129.95 which is $20 off the monthly rate.

We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


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

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


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

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

Contact Support
The Option Investor Newsletter                   Monday 05-14-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: Note on KSS
Dropped Calls: None
Dropped Puts: None
Play of the Day: Call - AMGN
Premium-Selling Plays: Strategies & Position Selection
Market Posture: Internets, Food, Paper and Drugs

Updated on the site tonight:
Market Posture: Still Waiting


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

Trade instantly with Stop Losses at PreferredTrade Inc.
Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.
Anything else is too slow!

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


*****************
STOP-LOSS UPDATES
*****************

KSS -- no change in stop loss but traders need to remember that
Kohl's is supposed to announce its earnings AFTER the bell on
Thursday.  We're not willing to hold over the announcement and
will close the play at Thursday's close.


*************
DROPPED CALLS
*************

None


************
DROPPED PUTS
************

None


************************Advertisement*************************
If you trade options online, then you need an online broker that:
offers true direct access to each option exchange
offers stop and stop loss online option orders
offers contingent option orders based on the price of the option or
stock
offers online spread order entry for net debit or credit
offers fast option executions

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

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


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

Amgen, Inc. - AMGN - close: 61.85 change: +0.35 stop: 58.75

-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 (Sunday, May 11th)-
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.


- Play of the Day Comments -
AMGN has been taking a breather the last two sessions and trade
sideways giving smaller biotechs like MLNM and OSIP do the heavy
lifting for the BTK biotech index.  The latter two have released
some good news that is bolstering the sector.  We're suggesting
AMGN as the play of the day for tomorrow for two reasons.  If the
market continues to pull back then a dip to $60.00 would look
like a tempting entry point for new bullish plays.  However,
should the bulls wrest control back from the bears then a move
over $62.00 in AMGN might spark a stronger move to the $65.00
level over the next few sessions.

- 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= 2979 at $3.40 SL=1.50
BUY CALL JUN-65 YAA-FM OI= 9831 at $0.95 SL=0.50
BUY CALL JUL-60 YAA-GL OI=41659 at $4.30 SL=2.50
BUY CALL JUL-65 YAA-GM OI=25916 at $1.80 SL=0.80

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


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

"7 Steps to Success – Trading Options Online".

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

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


*********************************************
SPREADS, COMBINATIONS & PREMIUM-SELLING PLAYS
*********************************************

Strategies & Position Selection
By Ray Cummins

The options market is unique because it offers a variety of ways
to profit.

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

NEW POSITIONS

There will be no "New Plays" today as the editor of this section
is away from the market due to a medical emergency.  However, we
have decided to publish one of his most popular articles about
conservative option trading techniques.

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

Strategies and Position Selection

The options market is unique because it offers a variety of ways
to profit.  At the same time, the risk in some strategies can be
substantial and as a trader, your primary goal must always be to
maximize returns and preserve capital.  The easiest way to achieve
this objective is to become familiar with proven strategies and
acquire the knowledge to implement and manage them correctly.


Defining Your Approach

The principal requirement for profitable trading is the ability to
achieve acceptable returns and control risk effectively.  A careful
and deliberate approach to strategy selection is the first step in
the process and, after the primary techniques have been identified,
it is crucial to execute them with discipline and consistency.
Discipline in option trading refers to one's ability to maintain
self-control and implement a pre-determined plan.  Indeed, one of
the most difficult skills that traders must learn is the ability to
overcome human (emotional) impulses.  When "real" money is at stake,
the influences of greed and fear (of loss) will attempt to sway your
judgment, hindering a rational thought process.  If you can not
overcome these effects, the chances of success are slim.  In fact,
that is the main reason it is so important to utilize strategies
that promote a mechanical approach to trading.  These types of
techniques offer little opportunity for indecision and generally
provide more consistent returns as they are exposed to less risk
than those strategies requiring a high level of maintenance.

Using a proven trading system is one of the easiest ways to become
successful in the market.  A "plan of attack" helps novice traders
learn the proper methods of money management and the correct use
of technical analysis in identifying precise entry and exit points.
Trading options in a systematic manner is far more likely to yield
consistent profits than a scheme based on intuition, emotion or the
trend of the day.  The benefits to this approach are many but most
importantly, you can eliminate the guesswork that comes from trying
to manage an active position without realistic goals or loss limits.
Traders who use predefined exit targets and "stop-loss" strategies
have no doubt as to when and how to get out of a position if the
underlying market moves against them.  Potential risk is identified
prior to beginning the trade, with a fixed limit on losses and a
formula for taking profits.  There are no trades initiated without
a complete assessment of the capitalization necessary to carry out
the entire strategy, even in the worst case scenario.  A thorough
study of the issue's historical price data is also used to provide
objective goals for future movement, based on expected volatility
and existing technical indications.  With all of these elements
properly evaluated and arranged, a trader can develop an effective
plan that contains a suitable risk-reward outlook based on a range
of appropriate strategies that are compatible with one's personal
style and experience level.


Choosing A Strategy

A major stage in developing a practical method for participating in
the market is to determine your comfort threshold and stress level.
Think about the unique emotional effects of your trading activities
and managing a complex portfolio.  Are you ordinarily a cautious
person or do you feel comfortable traveling at maximum speed?  How
will a specific type of trading affect you mentally?  Can you handle
the extreme pressure of day-trading options or are you happier with
conservative, longer-term positions.  After you have identified the
appropriate trading attitude, it is important to decide what type
of market activity is most amenable to your personal style.  Some
traders prefer strategies that profit from trending markets such as
those characterized by a sustained advance or decline.  Techniques
that benefit from this type of movement include put or call buying
and highly-leveraged spreads or combinations.  Another tactic might
be to focus on changes in volatility.  Traders using this approach
buy or sell "premium" in an attempt to profit from transitions in
the market's character.  Some utilize neutral-outlook positions such
as calendar or ratio spreads when the technical indications for the
underlying issue suggest a range-bound or static trend.  Regardless
of the method you prefer, each category of price action demands a
unique type of trading system.  The key to success is to specialize
in a specific kind of market activity and utilize trading strategies
that perform well in that particular environment.

One of the most important steps in developing a profitable system
is identifying the appropriate level of complexity when selecting
trading techniques.  The simplest approach is most often the best
but every strategy has risk and it is impossible to classify any
individual technique as the absolute perfect method.  In most cases,
there is more than one favorable technique for a given situation
and even though each strategy has different attributes, the majority
of strategies can be useful in a trader's arsenal at the proper time.
The first step to achieving long-term success is to become completely
knowledgeable of the mechanics of any technique you are using and
construct a group of diverse candidates based on the correct market
outlook.  Of course, you must remember that the individual investment
objectives are far more important than the merits of the technique
itself.  If a specific strategy is not suitable for you (or your
trading style) then it should not be used, no matter how attractive
it appears.  In addition to selecting the proper trading techniques,
you must also identify the appropriate time frame in which to enter
and exit a particular market.  Most investors are best suited to
longer-term plays as they require less attention and are easier to
manage for those who have full-time commitments to work or family.
Traders who have the temperament and resources to follow the markets
at all hours should consider short-term techniques that focus on
intra-day data and momentum-based trends.  In addition, using the
appropriate strategy when the market exhibits a particular character
is a fundamental step in developing the ability to trade in a
disciplined manner.

After you have identified the characteristics of the market and
selected the correct technique to profit from future trends, the
next task is to determine specific entry and exit points for the
underlying instrument.  In most cases, technical analysis should
be used to ascertain the correct parameters for risk and reward.
With this approach, a simple mechanism for money management is
built into the initial position.  Entry timing can be based on a
number of different indicators and the criteria used to identify
a trading opportunity is a personal choice.  The great thing is,
you don't have to open any position until you are satisfied with
the probability of a profitable outcome.  You can search through
charts for the perfect pattern, perform extensive due-diligence,
and wait for the best combination of technical indicators and
favorable market conditions.  With this approach, you forego any
trade until the number of reasons to initiate a position becomes
overwhelming.  Remember, the market does not care whether you play
along or sit on the sidelines and when your trading is devoid of
a system, it's amazing how quickly a simple situation can become
confused.  Once you are committed (without a plan), you are living
by the market's rules, not your own.


Spreads & Combinations: A Conservative Alternative

History suggests that the majority of derivatives traders use
options to speculate on the directional movement of stocks.  The
appealing feature of option ownership is leverage with limited
risk.  If a trader correctly predicts the market direction and
purchases the appropriate (call or put) option, he can expect to
make a profit.  Unfortunately, that technique has a relatively
low probability of success.  As almost every option trader quickly
discovers, owning the correct position when the underlying market
moves in the expected direction will not necessarily be profitable.
The reason is, over short periods of time (while the trader is
waiting for the option to rise in value), the position is at risk
from a variety of unfavorable changes in the market.  One method
that experienced traders use to overcome this problem involves
simple combination positions or "spreads."  Spread trading offers
a way to take advantage of premium disparities, while at the same
time reducing the effects of short-term changes in a market's trend
or character, so that a position can be held to maturity.

Most successful option traders engage in some form of combination,
position, or spread trading.  The basic technique involves buying
and selling simultaneous (but generally opposing) positions in
different option series.  The most common strategies are used to
reduce the cost, and the risk, of a position while providing a
higher probability of a limited return.  More advanced methods of
"spreading" are based on pricing disparities and volatility skews.
Experienced traders know there is an identifiable relationship
between various option series and when the relationship is priced
incorrectly, they will buy the cheap position and sell the expensive
position.  The idea is that, all things being equal, the spread will
achieve a profit as the prices of the individual components return
to a linear relationship.

The wonderful thing about option trading is its diversity.  There
are an incredible number of strategies available; one for every
type of market trend, character and outlook.  Positions involving
combinations of calls and puts, with different strike prices and
expiration months, along with index and futures options offer the
astute trader a variety of ways to participate in the market.  This
assortment provides even the most conservative investor the ability
to construct positions with an acceptable level of risk and reward
in almost any situation.  In addition, students of option pricing
theory can identify combinations with potentially superior returns
when the relationships between the options are theoretically skewed.
While there is no "perfect" position, successful traders learn to
maximize profits and hedge their risk in as many different ways as
possible, limiting the effects of short-term volatility and market
gyrations.  Obviously, there is no way to completely eliminate risk
but you can reduce it much more than that of a inexperienced trader
who does not utilize all of the available strategies.

Regardless of the type of financial issue or commodity, profitable
trading strategies have a number of mutual traits.  They have
precisely defined principles, ease of execution and maintenance,
and flexibility.  However, the most important characteristic of any
strategy used by conservative investors is asset preservation and
in the options market, successful trading techniques are those which
employ effective defensive measures.  Fortunately, the ability to
protect and conserve portfolio capital while achieving consistent
returns is a fundamental quality of spread and combination plays.
As a member of the OIN staff, one of my goals is to help our readers
discover and utilize the most appropriate combination of trading
strategies and provide them with candidates to profit from these
techniques on a regular basis.

Good Luck!

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

SEE DISCLAIMER - SECTION 1

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


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

Internets, Food, Paper and Drugs

Kimberly Clark - KMB - close: 49.96 change: +0.17

Shares of KMB have been in a $2.00 range since late April and all
momentum from its early April rally is lost.  Shares have come to
a dead stop under its descending 200-dma and indicators are all
leaning towards a bearish crossover.  Bears could enter here with
a clearly defined stop loss above the 200-dma or the $51.00 mark.
Traders who prefer to enter positions on a breakdown can look for
a move below the $49.00 level.

Chart=


---

OSI Pharmaceuticals - OSIP - close: 23.65 change: +2.47

OSIP announced its Q2 earnings today and the results beat
analysts estimates for an 89 cent loss by 14 cents.  The stock
rocketed higher today, up 11.6%.  Together OSIP and MLNM really
gave the BTK biotech sector a boost.  We'd keep an eye on OSIP
for a pull back to the $22 level before evaluating any bullish
plays.

Chart=


---

Brinker Intl. - EAT - close: 34.22 change: +1.27

Better known for its franchises Chili's, Macaroni Grill, On The
Border, Maggiano's, Big Bowl Asian Kitchen and the Rockfish chain
of restaurants, shares of EAT have shown great strength today and
rallied 3.85% through resistance at $33.50 on strong volume.
This is great news for shareholders but the stock has longer-term
resistance at the $35.00 level.  Could be one to watch.

Chart=


---

Inamed Corp - IMDC - close: 43.97 change: +1.08

Wow!  Talk about your seller's remorse.  OptionInvestor.com
closed its call play on IMDC when shares rallied $5.00 from
$35.00 to $40.00 and closed near the top of its channel.  The
stock paused for a couple of days and continued right on
climbing.  Bulls have to love the relative strength here but we
would not advise chasing it.

Chart=


---

Sohu.com Inc - SOHU - close: 21.68 change: +1.68

Recent market strength has brought back memories of the bubble-
like frenzy from three or four years ago.  Fueling those
nostalgic ruminations are three Chinese Internet stocks, SOHU and
its rivals SINA and NTES.  All three look terribly overbought and
we all know that nothing goes up in a straight line for very
long.  SOHU has options and eventually this stock is going to see
some profit taking.  Just be careful and avoid picking a top.  It
can be hazardous to your financial health.

Chart=



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

INTU $38.98 - We had INTU on the Monday watch list due to its up
coming earnings announcement.  Earnings are out and INTU turned
in a 29% increase in profits and beat the estimates.  Shares are
trading higher in after hours to around $41.35.  Recent
resistance has been at $41.35 and its simple 50-dma is just a few
cents above that.

GDT $40.92 - Guidant was also on Monday's watch list for its
strong breakout above the $40 level.  Recent market weakness has
seen GDT suffer some profit taking but shares have yet to pull
back to $40.00.


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

Still Waiting

To Read The Rest of The OptionInvestor.com Market Watch Click Here
http://www.OptionInvestor.com/marketposture/mp_051403.asp


*******************
FREE TRIAL READERS
*******************

If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is 39.95. The quarterly
price is 99.95 which is $20 off the monthly rate.


We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


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

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


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

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

Contact Support

DISCLAIMER

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

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives