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Daily Newsletter, Thursday, 06/12/2003

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The Option Investor Newsletter               Thursday 06-12-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Indecision
Futures Markets: Gap, Crap and Bounce
Index Trader Wrap: See Note
Market Sentiment: Dull Market Indecision
Weekly Manager Microscope: Management Team: Bjurman All-Cap Growth
Fund (BACFX)


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      06-12-2003           High     Low     Volume   Adv/Dcl
DJIA     9196.55 + 13.33  9236.11  9116.86 1.86 bln 1649/1233
NASDAQ   1653.62 +  7.60  1661.12  1640.12 1.75 bln 1612/1470
S&P 100   502.84 +  0.89   504.65   499.00   Totals 3261/2703
S&P 500   998.51 +  1.03  1002.74   991.27
W5000    9552.55 + 14.61  9587.33  9488.08
RUS 2000  456.74 +  1.24   458.01   454.77
DJ TRANS 2505.29 + 22.12  2510.74  2475.09
VIX        22.33 +  0.21    23.11    22.05
VXN        34.01 +  0.27    34.94    33.77
52wk Highs  581
52wk Lows     9
PUT/CALL   0.86
************************************************************

Indecision
Jonathan Levinson

Today was a low-volume, indecisive session, with the expected
early morning pop setting the high of the day, but an end of day
bounce attempting to retake it.  We've seen so many spike highs
that it's impossible to get excited about the prospect of a
possible reversal, particularly with the uptrend so firmly in
place.


Daily Chart of the INDU




Today's Dow and Nasdaq closing prints are just stars, with an
upper and lower spike, reflecting the lack of commitment to
either direction.  The indices closed nearer to their highs,
leaving the markets with a bullish bias going into tomorrow.

Daily Chart of the COMPX





Daily chart of the Ten Year Treasury Yield




The ten year note printed a higher high today, with the ten year
yield setting a new low but closing at 3.168%, near the middle of
its intraday range.

The number of Americans filing new unemployment claims dropped
17,000 for the week ended June 7 to 430,000, meeting expectations.
The 4 week moving average of initial claims rose 2,250 to
433,750.  The total number of unemployed Americans rose to 3.8
million, which was reported to be the highest level since April
of 1983.

HRB reported late yesterday that Q4 earnings came in light at
2.71 per share, less than 2.83 expected, which the company
attributed to a reduction in tax filers due to the weak job
market.  The stock was down more than 2 percent in premarket
trading, despite its concurrent announcement of a 20 million
share buyback, equivalent to 11% of the outstanding stock.

The unemployment data failed to impact the market upon its
release, presumably as it failed to diverge from analyst
expectations.  Initial claims remain well above the benchmark
400,000 level that most use to gauge the job market.  As
discussed in last night's market wrap, the persistent
unemployment looks to me like a serious wrench in the Federal
Reverve's aggressive inflation campaign.  If the new liquidity it
was creating were being reflected in falling unemployment, a case
could be made for the success of that venture.  So far, the fed
has been harping on the absence of inflation risk, which is good,
because as we saw in the early 1970s, unemployment + inflation =
stagflation, as it was called, with its disastrous impact on the
markets and the economy.

US import prices dropped .3% for the month of May, with non-
petroleum prices falling .2%, which is the largest drop since
December 2001.  Capital goods prices dropped .4%, while import
prices for the past year are up 1.5% .  Non-agricultural export
prices dropped .1% last month, while overall export prices rose
1%, the fourth increase in 5 months.  This points to rising
commodity export prices.

US retail sales roles .1% in May, following the downwardly
revised .3% drop in April.  The paltry rise was attributed to the
sharp drop in gasoline prices, with gas station sales dropping
4.3% in May.  Excluding gasoline sales, sales rose .4%.  Auto
sales were down .2%.  Retail sales are up 5.1% for the past year.

At 10AM it was announced that inventories at automobile dealers
rose by 1.2% in April, raising total inventories at U.S. firms by
0.1%.  Inventories increased .3% in March. Sales at U.S.
retailers, wholesalers and manufacturers dropped by 1.5% in
April, which was the biggest decline since the September 2001
attacks. The inventory-to-sales ratio rose to 1.40, matching a
14-month high.

Crude and natural-gas futures were weaker today, with crude
falling on news that Iraq was making its first oil shipment to
the U.S. since the war. Natural-gas price was weaker following
news that inventories had expanded by 125 million cubic feet last
week, and closed lower by nearly 10% for the session.

In "international" news for those Canadians among us, the Bank of
Canada's Governor David Dodge woke up and smelled the coffee this
morning, following what I've referred to in the Market Monitor
over months past as the most inexplicable rate hikes ever,
executed by the BOC earlier this spring. "The magnitude and speed
of the Canadian dollar's rise has been greater than anyone had
anticipated, and will have a dampening influence on aggregate
demand later this year and next.  In setting monetary policy, we
have to take this influence into account."  This after
unemployment has reached 7.8% on the heels of the said rate
hikes and the consequent dollar rally which impeded the
purchasing power of Canada's biggest export target, the US.

In corporate news, Steve Ballmer, MSFT's CEO and soon-to-become
my new favorite market timer, filed with the SEC on Wednesday to
sell almost 6.6M shares of MSFT.  This will bring his reported
sales of his company's stock to over $1B, as in billion US
dollars, during the past month.  No doubt trying to free up some
cash for home renos, and maybe to pick up some IMCLE, ORCL for
the personal port

Big MO was weak today following a legal setback.  The company
announced that Illinois' highest court refused to accept a direct
appeal of a $10.1 billion verdict against the company handed down
in March.  The company said it would present its arguments to the
appellate court.

The perp show was in full effect, with Terry Davis, former vice
president and controller of NET, pleading guilty to charges of
securities fraud.  Guidant (GDT) was halted on news that its
subsidiary, EndoVascular Technologies, agreed to plead guilty to
10 felony counts related to problems with one of its aortic
aneurysm products. There were nine charges for "shipping
misbranded products" and one charge arising from a former
employee making false statements to the government.  The stock
was smoked for more than 5% in today's session.  Three former
employees of DYN were charged with securities fraud by the SEC in
connection with the company's "Project Alpha", and off-the-books
entity allegedly used to the disguise the company's true
financial condition.  Bryan Williams, a former Mobil Oil Corp.
senior executive, pleaded guilty to two felony counts in
connection with evading taxes on more than $7 million in
unreported income.

After the bell, the much anticipated earnings report from ORCL
was released. The company announced Q4 earnings of $0.16 per
share, beating expectations by 2 cents.  Revenues rose 2.1% y-o-y
to $2.83B from $2.74B, and the company announced Q4 margin of
45%, its best ever.  The stock was up 30 cents to 13.58 as of
this writing.

For tomorrow, we have the following economic data due:

               Report                     Briefing  Market  Prior
                                          Expects   Expects
Jun 13 8:30 AM Core PPI May -             0.1%      0.1%    -.9%
Jun 13 8:30 AM PPI      May -            -0.5%     -0.2%    -1.9%
Jun 13 8:30 AM Trade Balance Apr -       -$41.5B  -$42.0B -$43.5B
Jun 13 9:45 AM Mich Sentiment-Prel. Jun  -92.0      93.1    92.1


Once again, particularly following today's light volume session,
the stage is set for a big move, and the indices are again within
gapping distance of a breakout.  With indices so near the rally
high and the bullish percents at the very high end of their
ranges, there is great risk in going long from current levels.
By the same token, picking a top is risky business for bears,
particularly within a solid uptrend.  Once again, let caution and
conservative account management be your guide.  See you at the
bell!


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

Gap, Crap and Bounce
Jonathan Levinson

The session opened at its highs, dropped to its lows, bounced
back up, faded back to the lows, and then bounced without making
it back to the opening highs.  It was a quiet, low volume
session. Futures traders began rolling front month contracts into
the Septembers.


Intraday QQQ 5 minute candles




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

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U     1012   1005    997    991    983
YM03U     9303   9247   9171   9115   9039
NQ03U     1255   1246   1233   1224   1211


10 minute chart of the US Dollar Index




The US Dollar Index continued its pattern of volatile swings,
winding up in the middle of its day range at 92.88. Despite
this, the commodity futures index, the CRB, dropped 2.05 points
to close at 235.93, led lower by natural gas on news of an upside
surprise in inventories last week, and crude oil on news of the
first shipment from Iraq since the war.

In the futures charts below, I have covered the June contracts as
they have more available data.  This will change next week and I
will move to the August gold and September equity futures.

Daily chart of June gold




June gold held steady today closing lower but holding above its
50% retracement support at 353.


Daily NQ candles




The Nasdaq futures continued its push higher today, but with low
volume on the Nasdaq and an indecisive session near the top.  The
failure to break down was certainly bullish, but the upper and
lower candle spikes on today's print showed a lack of commitment
in either direction.  The oscillators show an interruption of the
downtrend that kicked off last Friday, and it will take a push to
the rally highs to give a fresh sell signal on these longer
cycles.


30 minute 20 day chart of the NQ




The end of day push gave the bulls a stochastic buy signal and a
bullish kiss on the MacD.  Support is at 1225 NQ, with first
resistance is at 1240.


Daily ES candles




Once again, the ES had a great day, and closed right beneath the
1000 resistance level.  It's much closer to a buy signal on its
10 day stochastic, and the MacD is further from a sell signal
than on the NQ contract.


20 day 30 minute chart of the ES




Trendline support is at 994 for the ES, with first resistance
1003 and more substantial resistance at the rally high.  We have
a stochastic buy signal and the MacD bullish kiss seen on the NQ
contract.  The ES and YM contracts are within gap distance of a
breakout to new rally highs.


Daily YM candles




The YM contract is the most bullish for another day, with the 10
day stochastic actually at a bullish kiss and ready for that buy
signal that's pending on the other two equity future contracts.


20 day 30 minute chart of the YM




Trendline support is at 9130, with 9240 the next
resistance of any consequence.

For tomorrow, the short cycle oscillators are pointing
to strength at the open, just as they were yesterday.
Whether it holds or not is the only question.  With
market moving economic data due at 8:30AM, the bias
could well be decided by the cash open.  See you at
the bell!


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_061203_1.asp


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

Dull Market Indecision
By Jonathan Levinson

Never short a dull market is a well-worn maxim, but traders who
shorted ADBE got rewarded as the stock was dumped by more than
10% in afterhours trading following a profit warning after the
bell.

Today's session was indecisive, both price-wise and breadth-wise,
with the Nasdaq  showing 1669 advancers to 1512 decliners and
advancing volume slightly ahead of declining volume.  1944
advancers beat 1365 decliners on the NYSE, with advancing volume
in an almost dead-heat with declining volume.

Despite today's indecision, the uptrends remain solidly in place,
with many indicators in nosebleed territory.  NYSE advancing
issues-declining issues ($NYAD on Stockcharts) remains near
alltime highs, with the Summation ratio ($NYSI) also in nosebleed
territory but no even hinting at a reversal.  Bullish percents
remain also buried at extreme highs, but until they reverse, it's
hazardous to attempt to pick a top.  Just remember the bottom
pickers in 2002, and the maxim about catching falling knives.

With price near the top of a firm uptrend, traders need to be
very cautious, regardless of whether attempting to trade long or
short.  Limiting your exposure with tight stops as well as
smaller trade size will allow you to survive what is proving to
be a dangerous period in the markets.


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

Market Averages

DJIA ($INDU)

52-week High:  9733
52-week Low :  7197
Current     :  9197

Moving Averages:
(Simple)

 10-dma: 9023
 50-dma: 8587
200-dma: 8340



S&P 500 ($SPX)

52-week High: 1041
52-week Low :  768
Current     :  999

Moving Averages:
(Simple)

 10-dma:  978
 50-dma:  924
200-dma:  887



Nasdaq-100 ($NDX)

52-week High: 1266
52-week Low :  795
Current     : 1229

Moving Averages:
(Simple)

 10-dma: 1212
 50-dma: 1128
200-dma: 1025



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

Much like the major averages, the two volatility indices remained
indecisive and failed to show any direction.

CBOE Market Volatility Index (VIX) = 22.33 +0.21
Nasdaq-100 Volatility Index  (VXN) = 34.01 +0.27

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.86        637,746       542,562
Equity Only    0.72        500,997       360,148
OEX            1.26         25,075        31,567
QQQ            4.25         20,306        86,255


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

Bullish Percent Data

           Current   Change   Status
NYSE          70.6    + 1     Bull Confirmed
NASDAQ-100    89.0    - 2     Bull Confirmed
Dow Indust.   80.0    + 0     Bull Confirmed
S&P 500       82.0    + 0     Bull Confirmed
S&P 100       79.0    + 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  1.30
10-Day Arms Index  1.10
21-Day Arms Index  1.15
55-Day Arms Index  1.13


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    1651      1612
Decliners    1235      1470

New Highs     275       234
New Lows       11         4

Up Volume    925M     1020M
Down Vol.    887M      698M

Total Vol.  1863M     1748M

M = millions


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


Commitments Of Traders Report: 06/03/03

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

Ah...now we're seeing some action in the big S&P futures
contracts.  After weeks of slowly creeping higher, the
commercials have reached their most bullish reading of the year
with a net long of 15,500 contracts.  Small traders are also
net long but this is reversing a small net short position from
the previous week.

Commercials   Long      Short      Net     % Of OI
05/16/03      429,028   419,553     9,475     1.1%
05/20/03      438,238   426,569    11,669     1.3%
05/27/03      435,195   423,474    11,721     1.4%
06/03/03      438,228   422,722    15,506     1.8%

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year:   15,506  -   6/3/03

Small Traders Long      Short      Net     % of OI
05/16/03      151,883   148,479     3,404      1.1%
05/20/03      157,034   154,980     2,054      0.7%
05/27/03      147,687   149,344    (1,657)    (0.6%)
06/03/03      169,650   167,172     2,478      6.8

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02


E-MINI S&P 500

Continuing the contrary trend we've seen between the
e-minis and the full S&P contracts above, the commercial
traders have increased their long positions but they've
also increased their short positions, which boosted their
net short posture overall.  Running true to form, the
small trader's net position is opposite of the commercials.
The small trader has significantly increased their long
positions while simultaneously closing some shorts to
give us the most bullish reading of the year.

Commercials   Long      Short      Net     % Of OI
05/16/03      178,679   452,727   (274,048)  (43.4%)
05/20/03      232,184   468,006   (235,822)  (33.7%)
05/27/03      252,655   485,962   (233,307)  (31.6%)
06/03/03      267,680   512,648   (244,968)  (31.4%)

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
05/16/03      421,540    57,483   364,057    75.9%
05/20/03      422,555    62,580   359,975    74.2%
05/27/03      427,412    66,031   361,381    73.3%
06/03/03      470,655    58,420   412,235    77.9%

Most bearish reading of the year: 283,831   - 04/08/03
Most bullish reading of the year: 412,235   - 06/03/03


NASDAQ-100

Big money (the commercials) remain completely undecided
for the third week in a row with almost a dead heat between
long and short positions.  Small traders are also flip
flopping around and have reversed a small net short to
a small net long.

Commercials   Long      Short      Net     % of OI
05/16/03       43,539     39,046     4,493    5.4%
05/20/03       42,864     42,040       824    1.0%
05/27/03       40,999     41,491      (492)  (0.6%)
06/03/03       42,232     43,217      (985)  (1.2%)

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
05/16/03       11,706    16,104   ( 4,398)  (15.8%)
05/20/03       11,024     9,965     1,059     5.0%
05/27/03       12,194    13,339   ( 1,145)  ( 4.5%)
06/03/03       11,407     9,092     2,315    11.3%

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

We see little change in sentiment for either the smart money
or the retail trader.  Commercials are net long while small
traders are net short.

Commercials   Long      Short      Net     % of OI
05/16/03       18,265    14,396    3,869      11.8%
05/20/03       18,028    14,108    3,920      12.2%
05/27/03       18,660    15,537    3,123       9.1%
06/03/03       19,480    15,282    4,198      12.1%

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
05/16/03        7,873     9,058    (1,185)   ( 6.9%)
05/20/03        8,378     9,922    (1,544)   ( 8.4%)
05/27/03        8,225     9,316    (1,091)   ( 6.2%)
06/03/03        7,948     9,353    (1,405)   ( 8.1%)

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   1,909  -  1/16/01

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


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*************************
WEEKLY MANAGER MICROSCOPE
*************************

Management Team: Bjurman All-Cap Growth Fund (BACFX)

This week's manager microscope report looks at the Bjurman All-
Cap Growth Fund (BACFX), a relatively new offering from Bjurman,
Barry & Associates, a growth-oriented equity manager located in
Los Angeles, California.  In managing institutional assets, the
firm employs a pro-growth investment approach, which emphasizes
high quality companies with strong earnings and dividend growth
prospects.

The Bjurman Micro-Cap Growth Fund (BMCFX), a Morningstar 5-star
rated righteous rocket, closed to new investors on May 30, 2003.
It invests in rapidly growing companies with market caps of $30
million to $300 million at time of purchase.  The newer All-Cap
Growth Fund (BACFX), which we're looking at this week, launched
on June 6, 2001 and invests at least 80% of its assets in growth
companies with market capitalizations of $300 million or greater
at time of investment.

Tom Barry is chief investment officer and senior executive VP of
investments with Bjurman, Barry & Associates, and the portfolio
manager of Bjurman Micro-Cap Growth Fund (BMCFX).  Barry is one
of the members of the management team that runs the Bjurman All
Cap Growth Fund (BACFX).  Barry is a Chartered Financial Analyst
(CFA) and a Chartered Investment Counselor and has over 27 years
of investment experience.  Before joining the firm in 1978, the
former Navy lieutenant, pilot and engineering officer spent six
years as a senior investment officer and portfolio manager with
Security Pacific National Bank.

Another senior portfolio manager with the firm is Andrew Bjurman,
president and chief executive officer of the Bjurman, Barry firm.
He's one of three senior members on the firm's investment policy
committee.  Stephen Shipman is the third senior member of Bjurman
Barry's investment policy committee.  He is an executive VP with
the firm, and is director of research and a portfolio manager as
well.  Patrick Bradford, an assistant VP with the firm, is a non-
senior member of the investment policy committee and co-portfolio
manager of the Bjurman All Cap Growth Fund.

The no-load Bjurman All Cap Growth Fund requires a $5000 minimum
initial investment for regular accounts ($2000 for IRA accounts),
and may be purchased directly or through one of many no-load NTF
networks, including Charles Schwab OneSource and Fidelity Retail
FundsNetwork.  The fund has an expense ratio of 2.00%, more than
most stock mutual funds.  That number should come down as assets
increase.  Today, the fund has only $10 million in total assets.
For more information or to download a fund prospectus, go to the
Bjurman, Barry website at www.bjurmanbarry.com.

Investment Style/Strategy

Bjurman, Barry's all-cap growth equity strategy seeks long-term
growth.  It utilizes five models to screen a universe of 2,500
common stocks of principally U.S. companies with large, mid and
small market capitalizations (in excess of $300 million at time
of investment).

Computer-assisted models screen the all-cap universe for growth
characteristics (EPS growth, EPS strength, EPS revision) and on
the basis of value measures (P/E to growth ratio and cash flows
to price), coming up with 200-250 best ranked stocks.  The firm
then performs industry analysis, reducing the best-ranked stock
list to 100-150 names (in the most promising industries).  From
there, the firm members perform fundamental analysis company-by-
company until they have arrived at a model portfolio of some 50
to 60 stocks.

According to Morningstar, the All Cap Growth Fund has a mid-cap
growth style overall, sporting a $3.8 billion median market cap
at May 31, 2003.  The fund is true to its all-cap name, however,
with more than 25% of assets invested in large-caps and over 25%
of assets invested in small/micro-cap stocks.  Compared with its
mid-growth category peers, the fund has above-average valuations
and growth rates, trademarks of a growth-oriented style/strategy.

In the next section, we look at how well the All Cap Growth Fund
has performed relative to similar funds.

Investment Performance

In the past three months (through June 11), the Bjurman All Cap
Growth Fund has produced a total return of 27.6%, outperforming
the S&P 500 (large-cap) index by 2.5%.  The Russell 2000 Growth
Index is up 23.9% in price performance terms for the past three
months.




On a year-to-date basis (through June 11), the fund is up 19.3%,
ranking in the top one-third of the mid-cap growth category per
Morningstar.  In doing so the Bjurman Barry management team has
outpaced the S&P 500 index by 5.0% and is just slightly lagging
the Russell Midcap Growth Index, which is up 20.4% so far in '03.

The pro-growth style of the Bjurman All-Cap Growth Fund means it
has potential to lead in market advances and to outperform other
styles and strategies over the long haul.  But, this offering is
almost guaranteed to be volatile due to the higher average price
valuations of its holdings.

If you can stand the heat in the kitchen, there is reason to be
optimistic about the all-cap fund's chances over a long horizon.
The Bjurman Micro-Cap Growth Fund sports an average annual total
return of 22.0% over the trailing 5-year period through June 11,
2003.  It generated positive returns of 11.8% in 1998, 53.3% in
1999, 45.6% in 2000, and 19.6% in 2001, before succumbing to its
first annual period loss in 2002 (-17.5%).

Conclusion

While the Bjurman Barry All-Cap Growth Fund is relatively new at
two years old, the growth-oriented approach employed by the firm
is not.  Long-term success in other products bodes well for this
one, but keep in mind that Bjurman, Barry & Associates is a true
growth manager.  Higher potential return means greater potential
risk (volatility).

To understand the fund's "risk factors" better, you are advised
to read the prospectus carefully before investing, available at
(www.bjurmanbarry.com).

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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The Option Investor Newsletter                 Thursday 06-12-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: DISH
Dropped Puts: None
Daily Results
Call Play Updates: GENZ, IGT, MERQ
New Calls Plays: None
Put Play Updates: HCA, LLL
New Put Plays: None


****************
PICKS WE DROPPED
****************

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

EchoStar Comm. - DISH - cls: 36.01 chg: +0.67 stop: 35.00

Our patience paid off as the positive press from the Florida
court ruling on Wednesday fueled another day for the bulls.
Shares trade up to $36.32 intraday on strong volume of 4.2
million.  Our official exit price was $36.00 and that's why we're
exiting the play.  Should you choose to hang on, we highly
suggest you diligently follow up with tight stops as the stock is
battling its long-term trend.

Annotated Chart for DISH:



Picked on May 21st at $31.10
Change since picked:   +4.91
Earnings Date       05/06/03 (confirmed)
Average Daily Volume = 3.3 million
Chart link:



PUTS:
*****

None


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

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

CALLS    LAST      Mon    Tue   Wed   Thu

DISH     36.01    0.00   0.27  2.04  0.67  Drop, Target Hit
GENZ     46.31    0.00   1.19  1.72 -1.69  Possible Entry Point
IGT      95.73   -1.14   1.26  2.50  1.36  Very STRONG
MERQ     43.07    0.00   1.71  0.88 -0.43  Buy the dip?


PUTS

HCA      31.90    0.69   0.38 -0.36 -0.19  Relative Weakness
LLL      43.91   -1.14   0.10  0.30  1.00  Very Cautious!


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

Genzyme Corp. - GENZ - close: 46.31 change: -1.69 stop: 43.50

Making a perfect round trip over the past 2 days, shares of GENZ
have certainly seen their share of volatility in that span of
time.  As expected, the Biotechnology index (BTK.X) caught a nice
bounce on Wednesday and that was enough to propel GENZ right back
up to the $48 resistance level at the close.  Of course, it
didn't hurt that Merrill Lynch was out before the open saying the
Biotechs were poised to move higher.  This bullishness was
reinforced by CSFB raising their price targets on a basket of
Biotechs, among them GENZ.  Alas, the sellers ruled the day on
Thursday, pushing the stock back to end just a few pennies above
Tuesday's close.  Despite today's price weakness, GENZ is still
well within its 6-week ascending channel, the bottom of which is
now at $45.40.  A dip and rebound from that area on Friday should
provide yet another solid entry point for the bulls.  The one
issue of concern right here is that for the first time in several
weeks, GENZ rolled over from the middle of that channel, rather
than the upper edge.  That could be hinting at weakness in the
current trend.  We'll want to see renewed strength from the BTK
index tomorrow before contemplating new positions.  On a deeper
pullback, solid support should still remain near $44, so our
$43.50 stop still makes sense

Picked on June 8th at    $46.61
Change since picked:      -0.30
Earnings Date          07/16/03 (unconfirmed)
Average Daily Volume = 3.62 mln
Chart link:


---

Intl Game Technology - IGT - cls: 95.73 chg: +1.36 stop: 90.00

Up, Up and Away.....!  The stock-split, dividend momentum run
appears to be well underway.  There has been no new news for the
company but that hasn't stopped the buying pressure.  If we could
ask for anything it would be for more volume on the moves but
we're not complaining.  Right now looks like a tough spot to
gauge new entry points.  Shares have extended the bounce from
$90.00 by almost $6.00.  If we were looking to initiate new plays
we'd prefer a dip, maybe to $93 or $94.  Yet looking at the
intraday chart it appears IGT, closing near its high for the day,
is set to continue this trend tomorrow.  Short-term traders may
want to consider taking some profits before the closing bell on
Friday if this up trend continues.  Our expectation for a move to
$100.00 is certainly looking a lot stronger!  This is a tough
choice but we're going to leave our stop loss at $90.00 for the
moment.  Conservative traders should raise theirs to meet their
comfort level.

Picked on June 10th at $91.87
Change since picked:    +3.86
Earnings Date        07/22/03 (unconfirmed)
Average Daily Volume =   1.22 million
Chart link:


---

Mercury Interactive - MERQ - cls: 43.07 change: -0.43 stop: 39.95

Breaking out to new highs for the year frequently requires a
couple attempts to get the job done right, and that's certainly
been the case for MERQ.  Last Friday's breakout managed to get
all the way to $44.15 before being knocked back by the sellers.
The bulls regrouped and bought support near $40 and took another
run yesterday, managing a new yearly closing high of $43.50.
Continuing higher from there would have just been too easy and
after an early pop today, the stock got pushed back from above
the $44 level again.  It is encouraging though to see a slightly
higher intraday high ($44.20) and another close over $43.  The
stock seems to be finding higher support and looks to have the
potential to continue higher.  New entries look attractive on a
dip and bounce in the $41-42 area now, while those looking for a
momentum type entry can use a break above $44.25.  Keep in mind
though that breakouts recently have not had much follow-through,
so the safer strategy is to buy the dips.  Maintain stops at
$39.95, just below Monday's reaction low.

Picked on June 10th at   $42.62
Change since picked:      +0.45
Earnings Date          07/16/03 (unconfirmed)
Average Daily Volume = 4.45 mln
Chart link:



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

None


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

HCA, Inc. - HCA - close: 31.90 change: -0.19 stop: 34.00

After surging higher on Tuesday, we were getting just a bit
nervous about HCA, but the trend of lower highs over the past
couple days is starting to look more constructive.  Add in the
fact that the 20-dma ($32.67) is starting roll over after capping
Tuesday's rally attempt and the falling 50-dma (now at $32.87),
and it looks like resistance should win this skirmish.  While
daily Stochastics have pushed higher over the past few days,
they're starting to look weak again and we're looking for a
continuation of the pattern of lower highs on that indicator as
well.  Another positive factor for our play is that selling
volume appears to be on the rise again, hinting at underlying
weakness.  Failed intraday rallies below the 20-dma still look
like the best setup for initiating new positions until the stock
firmly loses the $31 support level.  Until we get that breakdown,
maintain stops at $34.

Picked on June 3rd at   $31.45
Change since picked:     +0.45
Earnings Date         07/22/03 (unconfirmed)
Average Daily Volume = 5.84 mln
Chart link:


---

L-3 Communications -LLL - close: 43.91 change: +1.00 stop: 44.70

Will this incessant range never come to an end?  This makes three
times LLL has successfully bounced from its 50-dma (now at
$42.26) and with a 2.33% gain on Thursday, the stock looks
destined to once again test the top of its range near the 200-dma
(currently $44.38).  If the stock rolls over below that moving
average again, it just might make for an aggressive entry point,
but there are some troubling signs for the bears.  Ending right
at the high of the day is one problem, and further concerns are
raised by the stronger volume that has accompanied this latest
rebound.  After being muddled for the past couple weeks, daily
Stochastics are starting to hinge upwards again and if the DFI
index continues with its current breakout move, then LLL will
likely go along for the ride, despite its recent trend of
relative weakness.  We're advising not to initiate new bearish
positions in LLL unless the DFI shows solid signs of weakness.
The 200-dma has been a solid ceiling for LLL over the past month,
so we're going to stick it out with our stop remaining just above
that level.  More conservative traders may just want to cut their
losses here, especially if the stock moves convincingly through
$44 tomorrow morning.

Picked on May 20th at   $41.94
Change since picked:     +1.97
Earnings Date         07/22/03 (unconfirmed)
Average Daily Volume = 1.32 mln
Chart link:



*************
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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The Option Investor Newsletter                 Thursday 06-12-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: CALL - MERQ
Traders Corner: A Bad Month?  A Good Month?  It All Depends On Your
Perspective


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

Mercury Interactive - MERQ - cls: 43.07 change: -0.43 stop: 39.95

-Company Description-
As a provider of integrated performance management solutions that
enable businesses to test and monitor their Internet
applications, MERQ is looking for growing e-commerce demand to
continue to fuel its business.  The company's products perform
such tasks as analyzing and eliminating Web site performance
bottlenecks and automating quality assurance testing.  MERQ's
client base spans a wide range of industries including Internet
companies such as Amazon.com and America Online, infrastructure
companies Ariba and Oracle, as well as Apple Computer, Cisco
Systems and Ford Motor Company.

- Most Recent Update (Tuesday, June 10, 2003)-
Breaking out to new highs for the year frequently requires a
couple attempts to get the job done right, and that's certainly
been the case for MERQ.  Last Friday's breakout managed to get
all the way to $44.15 before being knocked back by the sellers.
The bulls regrouped and bought support near $40 and took another
run yesterday, managing a new yearly closing high of $43.50.
Continuing higher from there would have just been too easy and
after an early pop today, the stock got pushed back from above
the $44 level again.  It is encouraging though to see a slightly
higher intraday high ($44.20) and another close over $43.  The
stock seems to be finding higher support and looks to have the
potential to continue higher.  New entries look attractive on a
dip and bounce in the $41-42 area now, while those looking for a
momentum type entry can use a break above $44.25.  Keep in mind
though that breakouts recently have not had much follow-through,
so the safer strategy is to buy the dips.  Maintain stops at
$39.95, just below Monday's reaction low.

- Play of the Day Comments -
We're suggesting MERQ as the play-of-the-day for Friday because
ORCL's better than expected earnings news after the bell tonight
should have a positive affect on the entire software sector.  The
intraday chart of MERQ shows what looks like a decent bounce off
the $42.00 level and traders might want to use that as an entry
point.

- Suggested Options -
We'd probably suggest the July 42.50's or the July 45's but the
July 40's offer decent bet as well, especially if you can get an
entry on a dip.

BUY CALL JUL-40 RQB-GH OI=7568 at $5.10 SL=3.25 premium = 2.03
BUY CALL JUL-42 RQB-GS OI=3930 at $3.50 SL=1.75
BUY CALL JUL-45 RQB-GI OI=4287 at $2.25 SL=1.00
BUY CALL OCT-45 RQB-JI OI=1344 at $4.40 SL=2.20

Picked on June 10th at   $42.62
Change since picked:      +0.45
Earnings Date          07/16/03 (unconfirmed)
Average Daily Volume = 4.45 mln
Chart link:



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

A Bad Month?  A Good Month?  It All Depends On Your Perspective
By Mike Parnos, Investing With Attitude

It's been one of those months – the kind we'd like to forget.
We're not alone, though.  Martha Stewart hasn't had a particularly
good month either.  Imclone's founder, Sam Waksal's prize for
being Martha's friend was a seven year three month prison
sentence.  Let's not forget his $3 million fine and $1.26 million
in restitution. (Hmmm. I wonder where that money ends up).

I'll lose no sleep over the fact that Sammy will probably be
passed around the cellblock like a peace pipe and will probably
sing soprano for the prison glee club.  Though Waksal will likely
serve his time at some "country club" prison, he may be involved
another kind of insider trading -- being swapped for two cartons
of cigarettes.   At least he'll make some new friends.  They'll be
as close as Velveeta and trailer trash.

So, putting that all into perspective, our month may not seem so
bad after all.  In the meantime, while we wait for our month to
play out, a new audience of CPTI readers have found the QQQ ITM
Baby Strangle rather enticing.   Let's explore a few of the
questions that came up.
_____________________________________________________________

Mike
What are the disadvantages of owning the at-the-money strangles,
instead of in-the-money strangles?  You can cut down your cost to
half.  If QQQ is to move three points, you can more than double on
any side move, plus get the other side free.

Response:
Check out the cost of the at-the-money puts and calls.  Let’s say
a $29 straddle would have cost only $2.55 – as opposed to the
$3.85 we paid for the ITM strangle.  The $2.55 is all time value
at the time of purchase.  If the QQQs do not move, you can lose
the entire time premium.  By using the strangle, your risk is just
the $1.85 time value.  It ties up a little bit more money, but not
enough to offset the positive of having a smaller amount at risk.

Also, when the QQQs begin a move in a particular direction, the
delta of the option is about 50%.  An option, even one point in-
the-money, will normally have a delta of about 60%. The extra 10%
may not seem like a lot, but it adds up and, in this craziness we
call option trading, we need every edge we can get.
______________________________________________________________

Mike
I bought 5 July 28 calls and 5 July $30 for a total of $3.75.  I
have also put in contingent sell orders - to sell the puts if QQQs
hit $26.00 and to sell the calls if QQQs hit $32.00.  The QQQs
were about $29.00 at the time of purchase.  Is this a good exit
strategy?

Response:
It depends on your ability to watch the market (some people
actually have to work for a living).  When the QQQs hit $26,
instead of selling immediately, consider putting on a mental
trailing stop 1/4 point away.  You never know if this is going to
be the dramatic move we're looking for.  If it's tanking, it's
probably moving quickly and we don't want to be out of the long
$30 put when the stock is tanking.  Obviously, the same holds true
for the upside.

The three/four-point move is what we anticipate, but we should be
prepared for pleasant surprises.  We're so used to trying to bail
our butts out of trouble, we don't always prepare for a good
lightning strike.
______________________________________________________________

Mike,
I read and executed your strategy on the QQQ strangle and was
wondering if
the strategy would work as well on DJX with the larger spreads in
the options?

Response:
I priced them out on the DJX, but there is substantially more
premium in the options. The more time premium, the higher the
risk.  The higher the risk, the larger the move of the underlying
has to be to cover the cost of the strangle. Has the Dow
consistently made sufficient size moves to comfortably predict
that large of a move?  I suppose I just like dealing with little
numbers and little risk.
______________________________________________________________

Since CPTI students have found this QQQ strangle strategy so
intriguing, and have been so responsive, we’ll devote additional
columns to answering more questions about this strategy.  If you
have more, send them along.
______________________________________________________________

CPTI JUNE POSITION UPDATE
June Position #1 – SPX Iron Condor – Currently at 998.51
We sold 5 contracts of SPX June 995 calls and 5 contracts of SPX
June 895 puts.  For protection we bought 5 contracts of SPX June
1010 calls and 5 contracts of SPX June 880 puts.  Total net credit
of $2.90.

We gave the S&P 500 a 100-point range.  We'll get our maximum
profit of $1,450 if SPX closes within a huge 895 to 995 range.
Our exposure is $12.10 ($15 points less the $2.90 credit).  If it
works, it's about a 24% return on risk.

We're right up at the top of the range.  Last week, when the SPX
traded down to about 975, the timid had a chance to bail out.
_____________________________________________________________

June Position #2 – BBH Iron Condor – Aborted
_____________________________________________________________

June Position #3 – TOL – Bear Call Spread Plus – Currently at
$30.99
Sell 10 contracts of June TOL $25 calls @ $1.40
Buy 20 contracts of June TOL $30 calls @ $.15
Net credit of $1.10
We're slightly bearish on the housing market and believe TOL will
finish below $25.  But, just in case we're wrong, we're buying 10
additional contracts of the $30 calls to protect ourselves.  The
market has gone against us.  We have two weeks for TOL to move
back down to $25 or up to $35.  Maximum potential profit is
$1,100.

This morning (Thursday), when TOL popped up to $31.68, I used the
opportunity to sell our extra 10 $30 calls for $1.80.  With the
market trending up, I may live to regret that move.  However, by
taking in the $1.80, if TOL finishes above $30, I have reduced my
worst-case scenario loss to only $2.10 – a figure I can live with.
Hopefully, it won't come to that, but I have further defined the
maximum loss.
______________________________________________________________

June Position #4 – COF Iron Condor – Currently at $53.73.
Sell 10 contracts of June COF $47.50 calls @ $1.55
Buy 10 contracts of June COF $50 calls @ $.95
Net credit of $.60
Sell 10 contracts of June COF $40 puts @ $1.05
Buy 10 contracts of June COF $37.50 puts @ $.65
Net credit of $.40
Total credit of $1.00.   We gave COF a $7.50 range.  This is a
credit card stock that appears to have topped out and there's
support around $40.  We'll get our maximum profit of $1,000 if COF
closes between $40 and $47.50.  The nice part is that our exposure
is only $1.50 ($2.50 less our $1.00 credit).  If it works, it's an
80% return on risk.

COF has gotten a bit carried away.  We have another week for it to
come to its senses.  Our max loss could be only $1.50, but a lot
can happen in a week.
______________________________________________________________

June Position #5 – QQQ ITM Baby Strangle – Currently at $30.65
Buy 10 contracts of the July QQQ $30 puts @ $2.05
Buy 10 contracts of the July QQQ $28 calls @ $1.80
Total debit of $3.85.
The QQQs have made a big move up.  It's either going to break
through resistance or bounce of and head back down.  Our objective
is for a $3-4 move in the next month.  One of our long options
will hopefully pay for almost the entire position.  That will
leave our other long option, which is now practically free, poised
for the bounce back as the QQQs reverse.

Our exposure is only $1.85 because we have $2.00 of intrinsic
value.  This worked quite well in the past for us.  It will take
some time to play out so be a little patient.   With the move up,
we find ourselves in a profitable position.
____________________________________________________________

Unofficial CPTI Replacement PositionQQQ Strangle - $30.65
We bought 10 contracts of the QQQ June $31 calls @ $.10 and 10
contracts of the QQQ June $25 calls @ $.10.  Total debit: $200.
We're playing for a big move in the QQQs.  If the QQQs move $3-4,
our long put or call could easily be worth $.75 - $1.25.  We're
only risking $.20.

Greater risk takers (speculators) could have bought closer
strikes.  The $26 put and the $30 call would cost $.20 each or a
total of $.40 ($400 for 10 contracts.  The benefit is that the
delta is slightly higher and a smaller move would be necessary to
get into the profit zone.

Last week we had a great opportunity, if you were awake. The QQQs
traded up to $31.47.  Our $200 bet was worth $1,000.  A $400 bet
was worth $1,700.  We're still in positive territory, but time
value is eroding quickly.
_____________________________________________________________

New To The CPTI?
Are you a new Couch Potato Trading Institute student?  Do you have
questions about our plays or our strategies?  Feel free to email
me your questions.  An excellent source for new students is the
OptionInvestor archives where we've been discussing strategies and
answering questions since last July.  To find past CPTI (Mike
Parnos) articles, look under
"Education" and click on "Traders Corner."  They're waiting for
you 24/7
______________________________________________________________

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


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