Option Investor

Daily Newsletter, Sunday, 07/06/2003

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The Option Investor Newsletter                   Sunday 07-06-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: Fat Finger Fireworks
Futures Market: Not for the faint of heart!
Index Trader Wrap: Some fireworks of their own!
Editor's Plays: So Far So Good
Market Sentiment: The Weekly View
Ask the Analyst: Fibonacci retracement.  Fit it or stack it!
Weekly Manager Microscope: Heidi Soumerai & Bill Apfel: The Women's
Equity Fund (FEMMX)
Coming Events: Earnings, Splits, Economic Events

Posted online for subscribers at http://www.OptionInvestor.com
MARKET WRAP  (view in courier font for table alignment)
        WE 7-04         WE 6-27         WE 6-13         WE 6-06
DOW     9070.21 + 81.16 8989.05 -211.70 9200.75 + 83.63 + 54.33 
Nasdaq  1663.45 + 38.19 1625.26 - 19.46 1644.72 + 18.23 -  0.93 
S&P-100  496.08 +  4.47  491.61 - 10.78  502.39 +  4.57 +  2.15 
S&P-500  985.70 +  9.48  976.22 - 19.47  995.69 +  7.08 +  0.85 
W5000   9462.51 +104.02 9358.49 -153.14 9511.63 + 57.47 +  1.72 
RUT      456.35 +  7.60  448.75 -  0.81  449.56 -  0.15 -  4.23 
TRAN    2415.31 -  1.72 2417.03 - 25.25 2442.28 - 13.28 - 25.98 
VIX       21.61 -  0.10   21.71 +  0.62   21.09 -  1.79 -  0.55 
VXN       32.47 +  1.54   30.93 -  1.41   32.34 -  2.12 -  1.67 
TRIN       1.98            1.93            1.00            1.23    
Put/Call   1.07            0.99            0.51            0.73

Fat Finger Fireworks
by Jim Brown

The Jobs data was not that bad! At least not bad enough to prompt
a drop in the Dow futures to 8478 at 10:40 AM on Thursday. It
was a fat finger order error that shocked the markets and killed
any hope of a patriotic rally to end the week. Although the error
occurred at 10:38 the market never recovered from the blow and
traded very tentatively the rest of the day.

Dow Chart - Daily

Nasdaq Chart - Daily

The leading economic disaster for the day was the Jobs Report,
which painted a much bleaker picture than the last report for
May. In May numbers were revised up for the past couple months
and led investors to believe the economy was improving. In June
the country lost -30,000 jobs which was below the consensus
estimates of zero. As if this was not bad enough the numbers
for May were revised downward to -70,000 from -17,000 and April
numbers were revised down to -22,000 from zero. Essentially we
went from a -17,000 job loss over the last 90 days to -129,000.
This was a significant change in the employment picture and
emphasized the point that the governments numbers are not to be
trusted. What would June's numbers be revised to in July?
The unemployment number soared to 6.4% and the highest level
in nine years. This was also the fifth consecutive month of job
losses. The shock to the markets was substantial.

The current jobs data continued to decline with the current
Jobless Claims rising to 430,000, an increase of +21,000 from
the prior weeks numbers. This reversal of the four week down
trend also sent shivers through traders and worries that the
economic recovery was slowing or even declining. This was the
20th week over 400,000.

Helping offset the negative employment numbers was a huge
increase in the ISM Services number to 60.6 from last months
54.5% This was the best month since Sept-2000 and the markets
quickly pulled out of their nose dive and rallied back to break
Wednesday's high on the Dow by one point. The new orders and
employment components rose substantially. This was seen as a
leading indicator for the general economy as services tend to
improve before manufacturing. The substantial amount of the
increase surprised traders and replaced some bullish sentiment
lost by the jobs data.

All this conflicting economic data and up and down moves in the
market were making traders motion sick by 10:30AM but the worst
was yet to come. About 10:40 the CBOT received an order to sell
10,000 contracts of Dow Emini futures contracts. With the average
daily volume of 48,000 in June this was a huge order that sent
the Dow futures plunging to a low of 8474. This triggered buy
and sell stops across all the futures products including the
S&P, NDX, ES and NQ contracts. The cash markets dropped from
Dow 9105 to 9035 in just a few seconds as traders pulled the
plug on buys and stop losses were triggered across the board.
The problem was a fat finger order which according to the CBOT
was supposed to be for a sell of 100 Dow contracts instead of
10,000. Amazing what a couple extra zeros can do to the market.

The rebound from the depths was almost instantaneous but the
after effects were still lingering at the close. When errors like
this are entered they are quickly cancelled and the exchanges
try to right the wrongs by busting the real orders that were
triggered by the error. Busting the trades is not always instant
and not always fun. First the exchange has to research the problem
and then decide what to do. In the case of the Dow futures do
they bust the trades or not? Where do they bust them from? At
what point do they decide a triggered trade was too far away
from the market to be material or close enough to the market
to be considered fair game? Do they bust trades in just the
Dow futures or in the S&P and NDX as well? Considering the very
interdependent markets an error in the Dow futures creates instant
errors in the others as well. Where do you draw the line? The
markets wandered all morning while they waited on the decision.

Traders were unsure if the gains or losses in their accounts
would be reversed or not. If you were short when the error
occurred and sold at the bottom you could have made thousands
on the move. If you reversed your position and went long on the
dip you could be holding longs worth thousands. Even if you sold
the longs the outcome was still in doubt. If they busted the
trades you could be put back into your short at 9100 as though
nothing happened. All the gains, losses and positions simply
cancelled. If you are a trader what do you do? You can't spend
the money on new trades. That money could disappear in an instant
and put you into a serious margin bind. Traders were handcuffed
to the clock and were forced to wait for the decision.

The CBOT finally announced just before 1:PM that all YM03U trades
(September Dow Futures) below 9017 were in error and would be
busted. The December YM contract would be busted on any trade
at 8985 and below. They limited the bust to trades between 10:38
and 10:40:04. S&P and NDX trades were left on the books. With
only minutes to go before the close the indexes dived on the
news as traders raced to square positions in reaction to what
was about to happen to their morning trades. Confusion was
rampant. My inbox is full of Futures Monitor reader emails with
horror stories and relief messages from the implosion. Readers
who were long with stops in place were filled handfuls of points
below their stops. Traders without stops could not enter orders
because their broker platform crash under the weight of the
order flow. Anyone long or short any futures contract was
immediately impacted and had to wait until the close to see
where they stood. I have readers with $10,000 paper gains
cussing the bust of their trades and readers with thousands in
losses gushing relief that the trades were busted.

The broader market wandered about dazed between 11:00 and 1:PM
while the cobwebs from the sucker punch cleared. Adding to the
confusion was what seemed like a constant stream of news
relating to potential terrorist events. A car with a potential
bomb was rumored to be found at LaGuardia and the entrances to
the airport shutdown. Explosions later attributed to natural gas
leaks were reported as potential terrorist events. Warnings about
a potential Internet shutdown by hackers over the weekend were
also making the rounds. The early close at 1:pm was a blessing
in disguise.

Despite all the confusion above AND the negative employment
numbers the Dow still managed to close near 9100. The Nasdaq
dropped -15 but still closed well above 1650 at 1664 after
bouncing off strong resistance at 1685 for the third time in
a month. We are well above the 8871 Dow low set on Tuesday and
the best five days of July are still ahead of us. If today was
next Friday my outlook would be entirely different.

Not only did the market shake off the economic news to set a
new high for the week but it did so on a flurry of high profile
earnings warnings. The end of week rush to confess included
among others. DAL warned that passenger traffic fell -5.5% in
June. Traders did not seem to care that the warnings are
increasing. They are looking forward to the beginning of major
earnings next week. This is what it all boils down to and with
the economic pot barely simmering it could be a cold meal ahead.

The gains for the week were fueled by the retirement cash flowing
into funds and by the movement of funds out of money markets.
ICI reported that money market funds saw outflows of -$8.56
billion for the week ended July-2nd. Also, despite the worst
jobs numbers in nine years bonds continued to sell off and that
money is finding its way into the equity markets. Yields closed
at levels not seen since May-9th. What is a bond junkie to do?
The bonds are dropping from 45-year highs despite a Fed commitment
to keep interest rates low. The problem is appears is the stock
market. With 37 million retirees hitting the rolls in the next
five years all basing their retirement income on 10% annual
returns a 3.5% bond is losing ground. They are seeing the stock
market back over 9000 and thinking the worst is over and double
digit returns in stocks are here to stay. I am not going to get
into that argument this week but this is what is powering the
markets. It is purely sentiment based on feeling not on facts.

That brings us back to next week. Despite the morning bombshell
on Thursday and the flood of earnings warnings the markets only
pulled back to support. Despite the worst jobs news in nine years
they set a new weekly high. The sentiment and cash flow is rampant.
That means the historical July trend appears to be intact and we
still have a week of upside left. That assumes of course the
retirement cash that piles up in mail boxes over the weekend is
put to work and the mutual funds don't front run the historical
July decline before next Friday. I would bet on the funds hitting
the market and I would bet on the front running. The only question
for me is when will the selling start?

The SPX hit 995 on Thursday and well above the 962 dip low on
Tuesday. Without the order implosion on Thursday I was projecting
1010-1015 as the high for next week. I am not as convinced today
that we will see those numbers. It all depends on the spin. There
are no major economic reports early next week and that could be
good or bad. The last time we had no economic news the market
tanked. Next week I would hope for a different result. With the
bullish sentiment running high and cash flowing from bonds and
retirement funds we should see several more days of gains. The
earnings accelerate from five on Monday to 32 on Thursday and
include such notables as AA, first Dow component to report on
Tuesday, to YHOO on Wed and GE on Friday. The following week we
get the big three, INTC on Tue, IBM Wed, MSFT Thr. It would
stretch my belief system to think the market will hang around
over 9000 until Microsoft announces on Thursday the 17th. That
means I am expecting a top somewhere between 7/10 and 7/17.

It is not that I think the fundamentals have changed. It does
not mean I think the market will crash. It only means the normal
second half of July dip should start in the next 5-7 trading days.
I know this is going out on a limb by suggesting a turning point
in the market, especially when the market is so bullish. However
that is what the charts tell us if you take the time to research
the last few years. You can see my past analysis here:

As traders you do not have to believe me. I do not have to believe
what I see. We only have to trade with an eye on the possibility
of it coming true. Currently in the Editors Play section we are
accumulating an August put position on the DJX. We are hedging
that position with calls we bought on the dip below 8950. If
everything continues to play out as expected we will be selling
those calls next week as we near the potential sell on the news
earnings events. If you are long the market I strongly suggest
you prepare for that chance as well.

The bullish news is strong. There is every indication the market
is poised to go up. Cash is flowing and the term "new bull market"
is becoming more popular than "new economy" was a couple years
ago. That alone should cause some conservative thought. At the
risk of sounding too clichid I was waiting for somebody at the
airport last week and two people who did not know me, a shoe
shine boy and an airport worker, both brought up the stock market
rally in normal conversation. That made the hairs on my neck
stand up. While I do not believe their interest is relative
it does show that the market is coming back around again into
investor consciousness. Perennial bears would say this was just
in time for the retail investor to get clipped again. I would
rather not make any market calls and just trade what the market
gives us but that is even more clichid than the pervious statement.
I do not believe you can trade without having a bias and that
bias had better include an exit plan in case you are wrong. Do
you have a plan for the eventual end of this rally?

Enter Very Passively, Exit Very Aggressively!

Jim Brown


Not for the faint of heart!
Jonathan Levinson

On Wednesday, I opined that Thursday would be an action-packed
session, but I was still shocked by the market's action during
the abbreviated holiday session. Terrible employment data was
followed by a positive ISM report, the indices hit new highs,
pulled back, and then the bottom dropped out, allegedly on an
erroneous futures trade.  The indices bounced back up, put in
lower highs, and faded for the remainder of the session.

Toward the end of the session, the following was put out by Interactive Brokers:

"To ACE traders
Thu Jul 3 12:49:24 2003 EST

We have been contacted by A/C/E regarding a number of out of
range executions in the YM SEP 03 and the YM DEC 03 futures

A/C/E compliance department has stated that all executed trades
in the YM SEP 03 which executed at 9017 and below during the time
beginning 10:38:00 EST through 10:40:04 EST, has been ruled as
erroneous and has been busted.

Additionally, all trades in the YM DEC 03 contract which
executed at 8985 and below during the time beginning 10:38:00 EST
through 10:40:04 EST, has been ruled as erroneous and has been

3 minute chart of ES

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

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U     1003    993    984    973    964
YM03U     9534   9279   8877   8622   8220
NQ03U     1262   1245   1237   1220   1212

***WARNING: The data for ES and YM are skewed by the stray sell
orders noted above, and for this reason, the reported lows of
974.50 ES and 8474 YM are unreliable.  The pivot matrix for these
contracts is based on those lows.

10 minute chart of the US Dollar Index

The strongest selling on the US Dollar Index came from the dismal
employment data, with a brief ramp on the ISM data before it sold
off again, closing at 94.39.

Daily chart of August gold

August gold managed to eke out another 60 cent gain to close at
352.20, but the precious metals equities weren't so lucky, HUI
losing .03 to close at 154.65, XAU -.89 to 79.81.  The CRB
dropped 40 cents to close at 234.99.

Daily chart of the ten year note yield

Treasuries got bashed again, with yields rallying strongly.
While the Fed drained a net 2.75B in liquidity via its open
market operations, the selling was deeper than that would imply.
The five year note yield gained 8.3 basis points to close at
2.487%, TNX +11.4 bps to close at 3.65%, and TYX gained 11.1 bps
to close at 4.687%.

Daily NQ candles

The NQ had a bad day Thursday, closing lower by 19.50,1 point
above its low of the day at 1228.  It printed a marginally higher
high, but not a lower low, and so the daily trend remains up.
However, as the shorter cycle oscillators on the 30 minute candle
chart indicate below, the downphase that brought this low close
are still in effect, possibly portending follow-through downside
on Monday.

30 minute 20 day chart of the NQ

The oscillators are in clear downphases, but the real test will
come in the 1211 area, where Fibonacci support and trendline
support coincide.

Daily ES candles

The midmorning spike to the downside stopped dead at the
ascending trendline on the daily.  I find it fascinating that the
chart could predict that reversal point, but it's not
particularly mysterious considering the number of trading robots
and charts with that trendline on their radar.  The daily
stochastic is trying to turn up, while the slower macd remains in
a downphase, though the histogram is showing a bullish divergence
below the zero line.

20 day 30 minute chart of the ES

As with the NQ, the short cycle oscillators tell us that there's
further downside to come.

Daily YM candles

Ignoring that stray downside spike, the YM daily candles show a
lower higher today and a higher low, and the oscillators are
sending the same message as for the ES and NQ:  short term
downside to come, with the longer oscillators on the daily
candles giving preliminary bullish signals.

20 day 30 minute chart of the YM

For the week, we've seen treasuries get sold, and equities and
gold get modestly bought.  There has been no strong trend
evident, with dojis printing on the weekly candles, indicating
indecision for the most part.  The US Dollar Index treaded water
following the previous week's rally, which was unsurprising as
the Fed hit us with some large repos this week, adding dollars to
the system and depressing their price in consequence.  The
indecision in the overall price trends this week leads me to
follow the oscillators posted above as we wait for the various
markets to show us a more discernable pattern.

All my best wishes for a happy and safe holiday weekend!


Some fireworks of their own!
By Leigh Stevens

An apparent mistaken sell order in Chicago Board of Trade (CBOT)
e-mini Dow futures created pre-4th firework havoc and wild price
swings at both the CBOT and the Chicago Mercantile Exchange (CME)
Index futures pits in a short session Thursday.

There is no news about what the CBOE might do, if anything,
relating to traders who (because of the sharp down swing in
futures) were forced out or hit the panic button in the DJX
options or in the S&P index options contracts. I would not assume
that the CBOE would do anything as it was not something they had
any control over.

CBOT traders reported the exchange announced all trades below
9018 in the Dow futures market would be canceled, although CBOT
officials told the business press they were still investigating
the situation and didn't have an official comment yet. Well,
there is one spoiled long weekend for a bunch of exchange

Floor traders said an apparent order to sell about 10,000
contracts instead of 100 was put in by a member firm by mistake
in the e-mini Dow futures market. Some mistake!

The e-mini Dow futures trades electronically alongside the open-
outcry market, and are half the size of the standard contract.
The minis are priced at $5 times the index per contract,
representing approximately  $45,000 in value with the Dow at

The CME also offers trading in e-mini stock index futures
products of course, such as in the S&P 500 and Nasdaq 100
indices. At the time of the massive CBOT Dow futures sell order,
stock index markets at both the CBOT and CME futures exchanges
were in an upswing, after a stronger-than expected Institute of
Supply Management's (ISM) non-manufacturing index. Very suddenly,
the market took a sharp down turn as the heavy selling in the e-
mini futures hit over on the CBOT.

This selling threw participants in trading pits at both the CBOT
and CME into major confusion and caused them to cancel bids and,
of course, turning to the sell side in some cases. Trader's
speculated for example, that there could have been a terrorist
incident that wasn't on the newswires yet.

The sell mistake created a ripple effect in the CME's S&P 500 and
S&P e-mini contracts as well, as many of the same traders are
active in both markets and also arbitrage between S&P and Dow
futures markets. Fast markets were briefly posted at the CME
during the chaos, and even interest-rate markets reacted by
pulling off their lows when the equity-futures markets started to
melt down at both exchanges.

Needless to say, traders long, with stops in which is common,
were highly upset to get stopped out for no real reason. CME
officials said they aren't going to cancel any trades in their
markets, saying the market made some erratic moves but not enough
to create a widespread impact on traders. Well, you can probably
count on the CBOE not doing anything to help bail out trader
losses as stops are not "build in" to trading in options the way
they are in the futures markets.

With the final downdraft in the NDX, all the indexes have met my
short-term downside objectives, but I am not ready to suggest
buying much ahead of earnings season and in the typical summer
doldrums. I think this recent whip saw action suggests that
stocks are more or less where they have at least temporary
equilibrium.  Buyers don't appear ready to bid aggressively in
the face of weak economic news, but neither are sellers coming in
heavily as pricing reflects a better second half and the reality
of this is still a ways off.

OEX and SPX dipped briefly below their uptrend channels, but this
seemed due the Thursday gyrations only.  DJX held above the low
end of its channel by holding the 89 (Dow 8900) area. The
Composite (COMPX) held its 1600 support. If anything these lows
were areas to do some buying, but only for quick short-term
intraday trades.  I envision more of an overall sideways drift.
The charts below will tell more of a story as far as support and
resistance areas.


The S&P 500-stock index fell 8 points to 985.70, the Dow was off
72.6 points to close at 9070.2, while the Nasdaq (COMPX)
Composite dropped 15.3 points to close at 1663.

Those hoping to see improvement in the economy received
discouraging news as the unemployment rate ran up to a 9 year
high. Improvement was seen in service-sector activity however.

Total U.S. Unemployment stood at 6.4% in June, up substantially
from 6.1% in May according to the Labor Department. Non-farm
payrolls declined by 30,000, bigger than anticipated, after
falling by a revised 70,000 jobs in May. The May figure had
originally been reported as a decline of 17,000. Dismal.

The economists consensus had forecasted an increase to 6.2% in
the unemployment rate and no change in the payrolls figure.

This all calls into serious question that the anticipated
economic acceleration in the second half may not happen. The 5th
consecutive month of declining job total cuts suggests that tax
and interest-rate cuts have yet to revive the struggling economy.
Moreover, the numbers highlight and justify businesses' tendency
to continue to reduce costs in order to deal with disappointing
economic growth.

Meanwhile, 1st-time claims for unemployment insurance in the week
ended June 28 rose by 21,000 to 430,000, after falling 22,000 a
week earlier to a three-month low versus expectations for an
increase of 6,000 claims.  The only positive seemed to be that
the 4-week average, which smoothes out weekly fluctuations,
declined to a 3-month low of 425,000.

The latest report non-manufacturing sector activity gave the
market some hope - the ISM's latest non-manufacturing index,
which measures service-sector activity, increased to 60.7 in
June, the best reading since September 2000. These results were
way above estimates of an increase to 55 (from 54.5 in May).

The 10-year Treasury note lost about 1 point to end up yielding
3.656%. The dollar was stronger again the Yen, trading at 118.26,
up from 118.04 on Wednesday in New York, while the euro also fell
against the dollar to $1.1489 from $1.1542.


S&P 500 (SPX) - Hourly chart:

As I said last week, I thought SPX would get to or near 960, if
the low end of the channel got pierced - I'm not sure about the
whole thing looking like a complex Head and Shoulder's top
however, as this last rally hasn't carried high enough.

There was completion of a 50% retracement, another thing I was
looking for as technically significant.  The way retracements
tend to work, if 950 (a 62% retracement) gives way I think we're
then seeing a reversal of the current uptrend.

My expectations are for another decline in the early part of the
week. I suggested buying calls in at 950-960 area and we got to
the 960 area. After this, the rally was into the 990-1000
resistance zone.

I'm basically buying into the support and selling into resistance
- expecting a trading range for a while.  The market only trends
about a third of the time, and trades in more of range bound
fashion for the other half to two thirds of the time. That's the
situation this index seems to be in for now.

I mentioned to look at put buys on rally failures to the 990 area
and if you're in em, exit on a close above 1000. It would take
the ability to trade and stay above 1000 to resume the bull

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

While the OEX is holding on to its uptrend on the daily chart and
is staying above the 50-day average so far, momentum is slipping
on balance.  My sentiment indicator is showing a build up in put
volume in individual stocks, which, in a contrarian fashion, is
becoming mildly bullish.  However, the chart suggests more
downside and the price pattern is my primary focus when the
market seems to be in a consolidation or correction.

490, then 485 are the near technical supports. A close under 485
would suggest the short-trend was turning down - confirmed by OEX
then piercing 480. The typical correction is a down move, a
rally, then another decline to a lower low - that's more my
expectation than any other, especially as the S&P has already had
a good run to the upside.  Without more bullish fundamental news
on the earnings and economic front, there's limited room for
stocks to go much higher.

If long puts on the move to the 500 resistance area, stay with em
per my comments last week about 500 looking to be an area to buy
OEX puts if they got this area but couldn't climb above it.

I continue to keep an eye on the RSI as to when it shows an
oversold reading again - and that's some way to go - so no green
light on getting back into calls except for very short-term
trading. I'm trading lightly, if at all - I'll wait for the
market to start trending again for doing very much.

Dow Industrials (INDU) Daily & Hourly (DJX.X) charts:

88-89 was seen as first chart support in DJX and 89 at least is
right where DJX got before rebounding - right to the low end of
the channels more or less.

What do we go from here is the next question. If 89 gives way,
look out below or at least for a test of 8800-8750 support in the
Dow.  I anticipate a decline early in the week as the economic
news sinks in to more traders and per the longer hourly
stochastic.  The daily oscillator is getting into an oversold
area, but it should dig into it more.

Nasdaq Composite Index (COMPX) – Hourly:

I'm finding lately that the hourly charts on the Nasdaq are
showing the most.  Note the triple top in the Composite.  You
actually don't see triple tops all that often in the indexes -
sometimes it turns out to an area that is the top of a trading
range for a while.

A trading range was my thought for how price action was going to
unfold last week and a pullback looked to be the most likely next
move. After that and since 1600 was a "line" of support, it was
also the place to look for a rebound.

Since the hourly stochastic is showing downward momentum and
given the top again in the same area - down we should go again
and I'm playing NDX and QQQ that way.  I would not be surprised
to see 1550 get tested based on what looks to be a broadening top

Nasdaq 100 Tracking Stock (QQQ) - Hourly:

Looking at the hourly closing chart of the Q's, a similar pattern
of an index making a top or forming the top end of trading range
is what looks to be the pattern. My target in the Q's has been
for a move down to the 29 area which I've thought was the key
near support.

I still see a chance of QQQ falling to more major support around
27.50-28. What would get me bullish again is a close above 31-
31.25 for more than one day.  More likely is that a new low for
the current correction is made - to below 29.5 on an hourly
closing basis.

If short on the last rally, stay with it, with exiting stops at
31.30.  While use of stop loss protection probably drove some
CBOT and CME index futures traders mad last week, such crazy
mistakes are rare.  I can imagine that the responsible parties
are not having a great Independence Day weekend, but hope yours
was/is pleasant.

Good Trading Success!


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Editor's Plays

So Far So Good

So far the laddered DJX put play has gone exactly like we
scripted it. Well almost like we scripted it. The Dow did not
hit the 8950 downside target on Monday but blew right by it
on Tuesday to a low of 8871. That enabled us to fill on the
July-91 calls for the 75-cent target price with room to spare.
They actually traded as low as 50 cents but we will use our
target of 75 cents for record purposes. That is also where I
filled on my order. They have traded as high as $1.50 since
but we are not trying to sell them yet.

On the put side we were scheduled to buy the Aug-88 puts at
90.50, 91.00, 91.50, 92.00 etc, using a stair step approach.
We were filled at 90.50 for $1.50, 91.00 for 1.30 and 91.50
at 1.20. I know, we did not hit 91.50, we only hit 91.48 on
Wednesday. I cheated on the entry by two cents due to the
Jobs report on Thursday. We were so close to the trigger and
if disaster struck I wanted that extra few put contracts in
my inventory.

Here is the link to the complete play description from last

Technically we only have two more levels to trigger, 91.50
and 92.00. (I already cheated on the 91.50 entry but you may
have not) I also said in the chart comments that aggressive
traders could continue buying at 92.50 and 93.00 as long as
you had the call insurance but evidently there were some readers
who missed that as I got some email on comments I made in the
Market Monitor about future trigger points.

At the close the Aug-88 puts were $1.30x$1.45 and my average
cost is $1.28.(*note-1) You still have plenty of time to enter
this trade if you missed it last week. The only thing you can't
do today is buy the calls for 75 cents at Dow 8950. You can
still buy them at $1.05 as of the close on Thursday.

With the order error implosion on Thursday the market lost
some of its steam. Whether that drive will come back on Monday
is anybody's guess. I still think we will hit 9200 and maybe
9250 but the excitement seemed to be gone at the close. It
could have been just fear of the weekend and traders taking
profits ahead of any potential terrorist event.

Continue with the plan and use 89.50 as the stop loss on the
calls and 92.50 as the profit stop unless you are going to
try and stretch to a 93.00 or higher entry on additional puts.
If so then keep the calls as long as you are expecting the
market to move up. Our profit target on the puts is 86.00.

My soft target for the top is Tuesday the 15th and Intel's
earnings. Funds could start front running that date and trying
to take profits by Friday the 10th. The latest I could see a
top would be Friday the 18th. These are just speculation and
everybody needs to recognize it is a moving target. Trying
to call a market top has made fools out of everyone who ever
tried including me. This is just speculation based on prior
years chart patterns. Trader beware! Do your own analysis
before entering and exiting this play.

DJX Chart - 30 min

Note-1: I went with a plan to buy 2, 4, 6, 8, 10 put contracts
beginning with the 90.50 strike. My 92.00 purchase will be for
8 contracts and 92.50 for 10 contracts. This may make my average
share price different than yours.


Play updates:

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

MANU Call from June-8th $4.69
($4.75 when triggered)


EMC Call from Feb-2nd  $10.93
($7.70 when recommended)



Still holding up but still barely profitable. Without RFMD at
-$1.70 it would still look significantly better.

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

Powerball Chart


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

Good Luck

Jim Brown


The Weekly View

This week saw a number of developments in the various indicators
we follow.  As we spend our days obsessing over the minutia of
the subatomic intraday charts, each fresh weekly close is a fresh
source of perspective.

The VIX, VXN and QQV all put in positive closes, the first in
three weeks and indicating a possible bullish reversal in
volatility.  There is generally an inverse relationship between
volatility and market prices, although there is often a lag at
major market turning points.

The INDU, COMPX and SPX all were positive on the week, the COMPX
the most bullish, with the SPX and INDU printing a lower highs
and lower low than the previous week.  There is therefore a
divergence between the volatility indices and equities, and while
it's uncertain as to which will prevail, one might assume that an
increase in premiums in the options market will lead a move in
broader equity markets.  On this basis, we should see equities
moving lower next week, barring some reversal.

The put to call ratio moved lower this week, coinciding with the
moves higher in equities this week.   The bullish percents remain
toppy, as do most of the breadth indicators.  While nothing
precludes a push to new highs, particularly given the solid
uptrends on the daily charts, the doji prints this week indicates
that the bulls are having to work a little harder for their
upside than we've seen at other points this year.


Market Averages


52-week High:  9410
52-week Low :  7197
Current     :  9070

Moving Averages:

 10-dma: 9070
 50-dma: 8832
200-dma: 8389

S&P 500 ($SPX)

52-week High: 1015
52-week Low :  768
Current     :  986

Moving Averages:

 10-dma:  983
 50-dma:  958
200-dma:  894

Nasdaq-100 ($NDX)

52-week High: 1266
52-week Low :  795
Current     : 1231

Moving Averages:

 10-dma: 1212
 50-dma: 1175
200-dma: 1047


The VXN has broken out to the upside of its recent two-week
descending channel.  Meanwhile the VIX remains stuck in its
horizontal channel between 21 and 25.

CBOE Market Volatility Index (VIX) = 21.61 +0.47
Nasdaq-100 Volatility Index  (VXN) = 32.47 +1.42


          Put/Call Ratio  Call Volume   Put Volume

Total          1.08        274,362       297,451
Equity Only    0.85        220,566       187,652
OEX            2.83          8,706        24,642
QQQ            9.38          6,291        59,036


Bullish Percent Data

           Current   Change   Status
NYSE          71.7    + 1     Bull Confirmed
NASDAQ-100    76.0    + 2     Bull Correction
Dow Indust.   83.3    + 0     Bull Confirmed
S&P 500       78.0    + 0     Bull Confirmed
S&P 100       81.0    + 0     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  1.40
10-Day Arms Index  1.38
21-Day Arms Index  1.25
55-Day Arms Index  1.16

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


Market Internals

            -NYSE-   -NASDAQ-
Advancers    1063      1227
Decliners    1658      1635

New Highs     213       202
New Lows       13         9

Up Volume    208M      328M
Down Vol.    656M      602M

Total Vol.   884M      944M

M = millions


***No New COT Data due to the holiday.  Check for updated COT data
in the Market Sentiment on Tuesday.***

Commitments Of Traders Report: 06/24/03

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

After last week's quadruple witching Friday rolled around,
we witnessed a HUGE collapse in outstanding positions in both
longs and shorts almost across the board.  For the full S&P 500
contacts, the commercial long positions dropped 114 thousand to
405K and the shorts dropped 52 thousand to 447 K.  This produced
the first bearish net negative (more shorts than longs) in quite
a while.

Small traders saw significant drops of 42K in longs to just
159 thousand and 98K short positions evaporated to leave 85K.
This produced a very strong net long position.  Which is exactly
how these COT reports are traditionally read.

The Small Traders always tend to do the opposite of the "smart
money" or Commercials.  Unfortunately, it is the commercials
who tend to be correct most of the time, and they're newly
bearish on the S&P.

Commercials   Long      Short      Net     % Of OI
06/03/03      438,228   422,722    15,506     1.8%
06/10/03      456,967   455,024     1,943     0.2%
06/17/03      519,887   501,401    18,486     1.8%
06/24/03      405,382   447,526   (42,144)   (4.9%)

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   18,486  -  6/17/03

Small Traders Long      Short      Net     % of OI
06/03/03      169,650   167,172     2,478     0.7%
06/10/03      199,356   185,403    13,953     3.6%
06/17/03      202,040   184,028    18,012     4.6%
06/24/03      159,405    85,182    74,223    30.3%

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

The same scenario took place in the S&P 500 e-mini contracts.
There were massive drops in outstanding positions.  Commercial
traders dropped 156 thousand long positions and 459 thousand
short positions.  This drastic reduction has produced the most
bullish reading of the year for the e-minis.

As expected, the small traders took the opposite role and
produced the most bearish reading.  This was due to a massive
reduction in outstanding long positions of 382K versus a drop
of just 26K in small traders' aggregate shorts.

Commercials   Long      Short      Net     % Of OI
06/03/03      267,680   512,648   (244,968)  (31.4%)
06/10/03      270,359   543,221   (272,862)  (33.5%)
06/17/03      306,279   661,114   (354,835)  (36.6%)
06/24/03      150,208   201,724    (51,516)  (14.6%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year: (222,875)  - 04/01/03

Small Traders Long      Short      Net     % of OI
06/03/03      470,655    58,420   412,235    77.9%
06/10/03      498,999    49,689   449,310    81.9%
06/17/03      466,837    70,609   396,228    73.7%
06/24/03       84,081    44,347    39,734    30.9%

Most bearish reading of the year:  39,734   - 06/24/03
Most bullish reading of the year: 449,310   - 06/10/03


The same disappearing act of outstanding positions occurred
in the NDX 100 futures as well.  Commercials dropped some 32K
in long positions and 18K in short positions but this left
them with their most bearish position in quite some time.

Small traders, reacting in lock step mirror image, produced
their most bullish net long position with a major drop in
outstanding shorts.

Commercials   Long      Short      Net     % of OI
06/03/03       42,232     43,217      (985)  (1.2%)
06/10/03       42,877     45,793    (2,916)  (3.3%)
06/17/03       60,964     65,561    (4,597)  (3.6%)
06/24/03       28,780     47,425   (18,645) (24.4%)

Most bearish reading of the year: (18,645) -  6/24/03
Most bullish reading of the year:   9,068  - 06/11/02

Small Traders  Long     Short      Net     % of OI
06/03/03       11,407     9,092     2,315    11.3%
06/10/03       14,759     7,761     6,998    31.1%
06/17/03       29,400    23,232     6,168    11.7%
06/24/03       24,519     7,064    17,455    55.2%

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


Small traders of the DJIA futures didn't do much other
than reduce a good number of outstanding positions but it
was the commercials who cut a number of shorts that produced
a new relative high in outstanding longs.

Commercials   Long      Short      Net     % of OI
06/03/03       19,480    15,282    4,198      12.1%
06/10/03       17,368    15,263    2,105       6.5%
06/17/03       20,625    18,593    2,032       5.1%
06/24/03       19,373    11,565    7,808      25.2%

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
06/03/03        7,948     9,353    (1,405)   ( 8.1%)
06/10/03        7,968     8,316    (  348)   ( 2.1%)
06/17/03        9,092     9,398    (  306)   ( 1.6%)
06/24/03        5,950     7,442    (1.492)   (11.1%)

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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Fibonacci retracement.  Fit it or stack it!

I'm familiar with fibonacci retracement where you take
retracement from a high and low to then define levels within a
range, but in Thursday evening market monitor, you showed the S&P
500 futures contract with a fibonacci retracement like I haven't
seen used before.  Can you explain where this technique come

Give a trader a tool and some time to experiment with things are
its surprising what you can come up with.

About a week ago, I was talking with a buddy of mine (John
Seckinger) on the phone about the markets.  He trades S&P futures
and we were talking about "key level" where the markets might
"tip there hand" as to future price direction.  He kept saying
"974, 974.  If they take out 974 then we're going lower."

Now, I've discussed a technique "I developed," several years ago
(I'm not sure I developed it, but I figured this out on my own)
called stacked retracement.  When stocks were breaking to multi-
year lows, I was always trying to figure out where a next level
of trading support was going to be found and I think I figured
out what traders and computers were doing.  This was prior to
learning about the pivot matrix levels.

Anyway, I'm going to start things out with what my buddy John was
doing.  In its basic form, what he was doing, and what I've shown
on two occasions is based more on "pattern recognition" than
anything, and then snapping or fitting a retracement bracket to
the pattern.

Before I begin, I will confess to never having read a book on
fibonacci retracement, or fully understand why the levels (61.8%,
50% and 38.2%) seem to be traded like they appear to be traded.
All I do know is that price action tends to "follow" or gravitate
toward the levels.  It was a couple of years ago that I began
using an 80.9% and 19.1% retracement level as I was noting that
for whatever reason, some stocks that were falling from 50% to
61.8% retracement and continuing lower, didn't just fall to 100%
retracement.  Some were falling halfway in-between, and bouncing
back to higher before they eventually fell to 100% retracement.

I'm going to start with a chart of the September S&P futures
contract (sp03u) that dates back to the October lows, and place a
"conventionally" used fibonacci retracement on the chart so you
can see where/how a trader has to become "creative" with there
use of retracement to try and uncover what levels are now being
traded.  It all starts with one question.

Why did the futures/stock/index trade that level?  Is there
anything in my toolbox that helps "explain" that type of trade.
If so, then perhaps I can figure out where the next level of
trade should then be expected.

September S&P futures (sp03u) - Daily Intervals

Conventional retracement could have been used to "explain" why
the sp03u traded the way it did after the October 10, 2002 low
was found.  When asking "why" the futures traded a certain level
at an inflection point, some levels make sense, while others
"don't make sense."  It's the stuff that doesn't make sense is
where a trader has his/her work cut out for them.  When a futures
contract/stock/index breaks out of a range like the sp03u did in
early June, is where a trader really needs to get creative!

So lets start with two levels that "don't make sense."  Why did
the sp03u not trade all the way down to 772.00 in March?  I ask
this question as it RELATES TO RETRACEMENT.  And with
retracement, I want to then see if I can make sense of things.

September S&P futures (sp03u) - Daily Intervals

I could "jump forward" and simply place a new retracement from
the March lows to recent highs, but I'm going to show a process
whereby, in the future, a trader might look to utilize the
retracement tool.  Sometime, when a trader sees some trades that
"didn't make sense" he/she will try and make sense of those
levels and set retracement at the inflection points that don't
make sense, but for whatever reason, those inflection points were
determined important levels of trade.  I've tried to do this by
now setting retracement from the March 12, 2003 low to April 7,
2003 relative high.  Both of these levels may not have made sense
in the first chat we looked at.

Now, the first thing that I have always thought about retracement
is that it is a tool that does little good if all I'm doing is
marking ranges where the market has already traded and all it
does is explain "what happened," but not what will happen or how
to trade it.

This is where I believe the "fitted" retracement technique is
used.  What if a trader had simply anchored retracement at the
March low and "fit" the 50% retracement at the inflection
pullback near 844.85?  Wouldn't that have given an upper end
target of 903.70?

Another question I get a lot is "why is your 0% retracement at
the top and not the bottom?" Or "why is your 100% retracement at
the top and not the bottom?"  In the above chart, I show some
equations so those that are not all that familiar with fibonacci
retracement see how the levels "add up" to 100% of a range.  You
see, it doesn't really matter if your 100% or 0% is at a bottom
or top as the offsetting percentages will always add up to 100%.

Now here is what my buddy John Seckinger is doing with his
retracement.  I can't say I'm "overly thrilled" with this
retracement, but it sets the foundation for why a trader might
use the "fitting" technique, which I'll show a little later.

September S&P futures (sp03u) - Daily Intervals

My buddy John took a retracement from the 05/20/03 lows to the
recent highs (red retracement), and there is some correlation
that makes sense starting to develop.  John was correct too when
he thought if the sp03u traded 974 that it would fall and this
Tuesday, the sp03u did fall to 962.65.

Once again I've labeled the levels 1, 2,3,4,5,6 and 7.  Here's
why.  Lets go back in time and pretend we were trading the sp03u
bullish after the low was made in March.  In the blue
retracement, if you bought at level "6" and 19.1% retracement of
881.21, you might have had to take some heat to 844.85, level 4
and 50% retracement right?  But it held and a rebound was see to
make new highs.  The MAIN OBSERVATION here is that the sp03u did
violate that level, as if that was an important "buy level" the
market was determined to buy at.  When level "5" was cleared back
to the upside, it was never re-tested.

Now lets take that observation forward to our red retracement,
where we've used similar technique of anchoring a relative low
and attaching to a high.

What's a little different right now, is after a trade at "7" we
have seen a test of "4" haven't we?  This is slight divergence
from the lower retracement isn't it?

Go back and look at both retracement and you can see that once an
upper level was traded, if you count down three levels from
there, the third level lower was never traded.  For instance, in
lower blue retracement, the first time level "6" would have been
traded, then three levels lower, level "3" was never then again
traded.  When level "4" was traded, do you see how level "6" did
serve some near-term resistance?  This may make sense as
futures/stock/index bought at "4" was probably distributed for
profit at "6."  If thinking/trading like a bear at that time,
then when level "7" was trade, buy golly two levels lower at "5"
while close to being tested was not, and a trader might think
there were just too many bulls and bears more eager to buy that
level for a real test.

Now we see in upper (red) retracement how "7" might be an
important distribution level of late, and a trade three levels
lower at "4" may be finding sellers at level "6" as they perhaps
sense DIVERGENCE from the past.

Now I'm going to fine tune the upper retracement a bit.  I still
think the recent trade is a little sloppy, but I'm really going
to keep the observation of 994.87 as resistance, especially for
those traders that are BEARS right now.

Let's use the "fitting" technique and edge the 50% retracement,
level "4" right at this recent low of 960.50.

September S&P futures (sp03u) - Daily Intervals

Using the "fitted" retracement technique of fitting the 50%
retracement, or level "4" just under the recent relative low, I
can answer the question "why" the sp03u stopped its decline at
that level, and I also get a "perfect explanation" as to why the
sp03u rose to 948.70, or level "3" in mid-May.  The RESULT is 0%
retracement at 1,010.51, which would only tie in with sp03u on a
closing, or settlement basis.  Traders have "argued" for years
that the closing levels of trade are more important that intra-
day levels of trade, but that's a different topic of conversation
in itself.

I like just about everything in the "fitted" chart, except
Wednesday's trade above 991.40, which my buddy John's chart does
a better job of presenting some resistance above that level.
Still the "fitted" chart seems to show a more accurate
representation of support levels in play.

What continues to make me "jittery" from the bullish side is what
we noted in the point and figure chart last week, and the "bull
trap" pattern that has been identified in the S&P 500 cash
(SPX.X) when it traded the 1,010 box, a triple-top buy signal
that was quickly reversed lower and then found a double-bottom
sell signal follow at 980.

I don't trade the futures contracts right now, as I'm pretty busy
with other work-related activities during the day, and I can
better trade the cash markets or options where I don't have to
monitor things more closely.

However, I've been using the futures contracts recently to
monitor things in after-cash close trading hours.  I sense a lot
of pressure building between bulls and bears right now and this
is why I've been doing some of the work shown above to kind of
keep track of things after the close.

Still, the techniques of retracement used above and observation
of systematic trading of levels can be used with stocks and

An article similar to this one that is stock oriented can be
found in the Bailey's Basics section of the OptionInvestor.com
and premierinvestor.net site, which was written on February 20,
2001, titled "Retracement Levels."  It wasn't long after I wrote
that article that I started using 19.1% retracement and 80.9%
retracement levels as I found myself missing some good swing
trade profit levels on the JDS Uniphase (NASDAQ:JDSU) $3.55
-2.73% declines, when rebounds from 0% to 38.2% seemed to "come
from nowhere."  It was the 19.1% retracement that helped
"explain" those bounces that came out of nowhere!

I think reading that article, and perhaps taking the mentality of
a market maker will help traders better apply the use of the
fibonacci retracement.

The use of retracement to try and uncover levels the market may
be trading is really more of an art than an exact science.  I
think that we trader/investors should try and use to tool to
identify "why" a security has traded the way it has based on the
levels, and can then back test a trade discipline of how things
traded in the past, to the look for SIMILARITY in the future, but
more IMPORTANTLY to sniff out any DIVERGENCE.

It is when a trader observes DIVERGENCE from the past, the he/she
senses change and must then make the proper adjustments for that

Jeff Bailey


Heidi Soumerai & Bill Apfel: The Women's Equity Fund (FEMMX)

This week's manager microscope looks at Heidi Soumerai, CFA, and
Bill Apfel, CFA, co-portfolio managers of The Women's Equity Fund
(FEMMX), a unique large-cap core portfolio that satisfies certain
social responsibility criteria, while also being proactive toward
women's social and economic equality.  The firm invests in public
companies that advance the social and economic status of women in
the workplace, representing the only pro-women's equity fund that
we know of in the retail market.

Ms. Soumerai and Mr. Apfel are portfolio managers at Boston Trust
Investment Management, the fund's sub-advisor since January 1999.
Boston Trust Investment Management ("BTIM") is a division of U.S.
Trust Company, Boston, which is responsible for constructing and
managing a portfolio that seeks high potential long-term capital
appreciation for investors consistent with a "moderate" level of
risk, the Women's Equity Fund included.

Soumerai joined BTIM in 1985, and currently serves as the firm's
director of social research and shareholder advocacy.  Apfel has
been employed by BTIM since 1989, and today chairs the company's
securities research committee and serves as the firm's director
of securities research.  Morningstar's report shows that the co-
managers' tenure began on January 1, 1999.

Other key members of the BTIM management team are Linda C.Y. Pei
and Leslie Christian.  Ms. Pei is president and director of Pro-
Conscience Funds, Inc. (fund's investment advisor).  Previously,
Ms. Christian was a director with Salomon Brothers, NYC (9 years)
and a consultant with Mercer Investment Consulting, Seattle.

The Women's Equity Fund requires a low minimum initial investment
of $1,000 to open a regular account ($500 for initial IRAs).  The
fund is 100% no-load and carries an annual expense ratio of 1.50%
(appears to be capped at that level).  The fund is distributed by
Quasar Distributors, LLC of Milwaukee, Wisconsin and is available
for purchase on a no-load, NTF basis through Fidelity, Schwab, TD
Waterhouse and other leading NTF networks.  For more information,
or to download a prospectus, go to the Womens Equity Fund website
at www.womens-equity.com.

Investment Style/Strategy

As stated earlier, Ms. Soumerai and Mr. Apfel seek to achieve the
fund's long-term capital growth objective by investing primarily
in companies that meet the advisor's financial standards and meet
criteria for the advancement of women in the workplace.  In terms
of investment strategy, the co-portfolio managers favor companies
that are well managed and growth oriented, and financially sound.

First, the co-managers analyze macroeconomic indicators, such as
inflation, interest rates, corporate profits, market trends, etc.
After that, they examine the long-term earnings growth potential
of promising companies, favoring those that have strong policies
with regard to the hiring, support and promotion of women in the

The co-portfolio managers of the Women's Equity Fund look at some
350 companies as part of their initial screen universe.  The list
is maintained by U.S. Trust Company (Boston) and includes stocks
of companies that meet their financial/social criteria, including
larger, established companies and smaller, newer firms.  Holdings
are diversified across various sectors, industries and individual
securities to spread portfolio risk.

The Women's Equity Fund website states that the majority of their
shareholders are women, who range in age from their early 20's to
late 70's.  The site indicates that more "men" are also investing
in the fund.

Note that June 30 portfolio information is not yet available, but
as of March 31, the Women's Equity Fund had roughly 94% of assets
invested in stocks, with the remaining 6% of assets held in short
term investment funds (cash).  At that time, the portfolio had an
average market capitalization of $21.7 billion, landing it in the
large-cap range.  Yet, it wouldn't be unfair to describe the fund
as multi-cap either, with 38.7% of stock assets invested in giant
capitalization stocks, 38.7% in large-cap stocks and 21.2% in mid
size companies.

According to Morningstar, this conservatively managed equity fund
has consistently landed in the large-blend style box.  As of Mar.
31, the Women's Equity Fund was moderately overweighted to health
care, consumer services and industrial materials relative to both
the S&P 500 index and category peers and moderately underweighted
to media and telecommunications, energy, and utilities.  The fund
had 64 stock holdings at the end of the first quarter, with 30.4%
of assets in the fund's top 10 holdings.  BP plc ADR and Johnson
& Johnson were the fund's top two holdings, each 3.5% of assets.

Investment Performance

Morningstar says the Women's Equity Fund has produced competitive
returns under current management (Soumerai/Apfel), but allegiance
to certain companies has caused the portfolio to lag in healthier
(rising) markets.  Such is the case this year, with the portfolio
up just 9.2% through July 2, compared to the 14% total return for
the S&P 500 index.  The co-managers' YTD performance ranks in the
bottom decile of the Morningstar large-cap blend category.

While it can lag in up markets, the Women's Equity Fund can also
hold up better in down markets.  Over the trailing 3-year period
through July 2, 2003, Soumerai and Apfel lost an average of 3.1%
a year, significantly less than the S&P 500's annualized decline
of 10.6%, per Morningstar.  The co-managers' 3-year returns rank
in the category's top decile (5th percentile).

For the trailing 5-year period through July 2, the fund sports a
positive 1.5% annualized total return compared to a negative 1.4%
annual-equivalent return by the S&P 500 index benchmark, ranking
in the category's top 13%, per Morningstar.

In terms of Morningstar ratings, the Women's Equity Fund receives
a 4-star rating (above average) overall for risk-adjusted returns
relative to category peers.  Much of that is based on how well it
performed through the market downswing.  This fund's risk adverse
style is reflected in its 3-year Morningstar rating of five stars
(highest).  Over the trailing 3-year period, the co-managers have
produced "low" risk and "high" return in relation to its category
peer group.

Still, if you are looking for something that can keep up with the
pack in market upswings, this fund may not be right for you.  The
co-managers 95th percentile rank in 2003 is very similar to their
90th percentile rank in calendar year 1999, their first full year
as sub-investment advisors of the Women's Equity Fund.


While I admire this mutual fund for its investment philosophy and
style/strategy, it has potential to lag other equity funds in the
long term because the co-managers stick with solid earners and at
times can get left behind.  If you believe that the economy grows
more than it shrinks over time, and there are more rising markets
than declining markets over time, then over long horizons such as
10 years or more, the Women's Equity Fund may lag more aggressive
equity fund styles/strategies.

If you believe the markets will continue to be volatile over time
and are looking for a fairly conservative equity investment which
promotes women's rights in the workplace, then this fund may be a
suitable core equity investment.  For more information or to view
a prospectus online, go to the www.womens-equity.com website.

Steve Wagner
Editor, Mutual Investor


Market Watch for the week of July 7th

Major Earnings This Week

Symbol  Company               Date           Comment      EPS Est

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


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

AA     ALCOA                 Tue, Jul 08  After the Bell      0.24
AMB    AMB Property Corp     Tue, Jul 08  After the Bell      0.48
PBG    Pepsi Bottling Group  Tue, Jul 08  Before the Bell     0.46

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

BRO    Brown & Brown         Wed, Jul 09  After the Bell      0.39
DNA    Genentech, Inc.       Wed, Jul 09  After the Bell      0.26
ISCA   Intl Speedway         Wed, Jul 09  -----N/A-----       0.26
RI     Ruby Tuesday          Wed, Jul 09  -----N/A-----       0.37
SDX    Sodexho Alliance S.A. Wed, Jul 09  Before the Bell      N/A
YHOO   Yahoo, Inc.           Wed, Jul 09  After the Bell      0.08

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

ABT    Abbott Laboratories   Thu, Jul 10  Before the Bell     0.52
ARA    ARACRUZ CELULOSE S A  Thu, Jul 10  -----N/A-----       0.56
INFY   Infosys Tech LTD      Thu, Jul 10  -----N/A-----       0.40
JNPR   Juniper Networks      Thu, Jul 10  After the Bell      0.02
PEP    Pepsico               Thu, Jul 10  Before the Bell     0.58
SONS   Sonus Networks        Thu, Jul 10  After the Bell     -0.02
STI    SunTrust              Thu, Jul 10  Before the Bell     1.18
SVU    Supervalu Inc.        Thu, Jul 10  -----N/A-----       0.57

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

GE     General Electric      Fri, Jul 11  Before the Bell     0.38

Upcoming Stock Splits In The Next Two Weeks...

Symbol  Company Name              Ratio    Payable     Executable

MTLG    Metrologic Instruments    3:2      Jul   3rd   Jul   7th
NTE     Nam Tai Electronics       3:1      Jul   7th   Jul   8th
CSS     CSS Industries            3:2      Jul  10th   Jul  11th
NCEN    New Century Financial     3:2      Jul  11th   Jul  14th
CNTE    Centene Corp              3:2      Jul  11th   Jul  14th
ANSI    Advanced Neuromodulation  3:2      Jul  11th   Jul  14th
CMTL    Comtech Telecom Corp.     3:2      Jul  14th   Jul  15th
EXJF    Exchange Natl Bancshares  3:2      Jul  15th   Jul  16th

Economic Reports This Week

Earnings officially start on Tuesday with Dow component Alcoa.
However, the real flood of earnings doesn't hit for another week.
The lion's share of this week's economic reports will be served
up on Thursday and Friday.


Monday, 07/07/03

Tuesday, 07/08/03
Consumer Credit (AB)    May  Forecast:   $5.0B  Previous:   $10.7B

Wednesday, 07/09/03
Wholesale Invntories(DM)May  Forecast:   0.20%  Previous:   -0.10%

Thursday, 07/10/03
Initial Claims (BB)   07/07  Forecast:     N/A  Previous:     430K
Export Prices ex-ag.(BB)Jun  Forecast:     N/A  Previous:   -0.10%
Import Prices ex-oil(BB)Jun  Forecast:     N/A  Previous:   -0.20%

Friday, 07/11/03
Trade Balance (BB)      May  Forecast: -$41.0B  Previous:  -$42.0B
PPI (BB)                Jun  Forecast:   0.40%  Previous:   -0.30%
Core PPI (BB)           Jun  Forecast:   0.10%  Previous:    0.10%

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


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The Option Investor Newsletter                   Sunday 07-06-2003
Sunday                                                      2 of 5

In Section Two:

Watch List: Pixels, Defense, and Zebras
Play of the Day: Call - HAR
Dropped Calls: None
Dropped Puts: KSS


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Watch List

Pixels, Defense, and Zebras

Pixar - PIXR - close: 61.49 change: +0.02

WHAT TO WATCH: Just barely green on the day, shares of PIXR are
fighting with 7-month old resistance at $62.00.  A breakout here
could have shorts running for cover, especially as the stock
approaches all-time highs of $66.00 set in July of 1998.



Zebra Technologies - ZBRA - close: 79.79 change: 0.84

WHAT TO WATCH: What market weakness?  ZBRA hasn't experienced
any.  Shares have been very strong but we suspect bulls might be
ready to start taking profits again.  The $80.00 level is natural
round-number psychological resistance.  The question is whether
or not it will merely consolidate between $80 and $77.50 or
whether it will pull back to the $75 level again.  Dip buyers
will be watching.  Earnings are expected on or around July 28th.



General Dynamics - GD - close: 72.60 change: -0.90

WHAT TO WATCH: The DFI defense index has been inching higher this
week while shares of GD have been inching lower.  We suspect one
is going to correct soon.  A bullish move over $74 for GD could
be the start of its next leg higher and we'd target $80.00,
bypassing current highs at $78.  Earnings are expected near July



Renaissancere Ltd - RNR - close: 47.35 change: +0.43

WHAT TO WATCH: Three days of strong gains have put shares of RNR
at a closing 52-week high.  Volume has been decent the two
previous sessions and the stock has been out performing the IUX
insurance index.  While it looks due for a small pull back the
next level to watch is $50.00.  Earnings are late July.



VeriSign - VRSN - close: 14.03 change: -0.19

WHAT TO WATCH: The consolidation for VRSN looks like it's almost
over.  Shares appear to be in a bull flag pattern but they've
found some support at the 50-dma.  We'd look for a move over
$15.00 as a possible trigger to consider new bullish positions.


RADAR SCREEN - more stocks to watch:

FITB $58.44 - The oscillators on this stock still look bearish
but the rebound from its intraday low on Tuesday is starting to
look convincing.  A move over $60 and we'll start become even
more interested.

CSC $39.07 - Shares have seen some significant profit taking from
their mid-June highs.  The bounce off its rising 50-dma looks
like an aggressive entry point for bulls.  We'll watch for a
confirming move over $40.

CL $57.86 - Colgate has broken is rising channel and closed below
its 50-dma.  Furthermore, it has confirmed the breakdown by re-
establishing the 50-dma as new overhead resistance.  The last two
sessions looked like another failed rally at this level and a
move under 57.50 could be a trigger to go short.  One problem,
this stock moves slowly and we'd expect support at $54.



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Call Play of the Day:

Harman Intl - HAR - close: 80.26 change: +0.77 stop: 76.50

See details in play list


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




Kohl's Corp. - KSS - close: 51.85 change: +0.80 stop: 51.75

Well, it certainly can't be said that we didn't give KSS every
chance to perform to our expectations.  It just didn't happen this
time.  For awhile it looked like our downside target was going to
be achieved, but the past several sessions have seen the stock
buoyed higher by a rebound in the Retail index (RLX.X).  While it
would really be a stretch to call the stock's action bullish, it
has been struggling higher in a very shallowly ascending channel
for over two weeks now.  The first hint of problems for our play
came on Monday when the stock closed over the 20-dma, but our stop
still held firm.  With the RLX index looking weak again on
Thursday, our expectations were that the stock would once again
roll over at resistance, but it wasn't to be as KSS ignored the
weakness in both the broad market and the RLX, surging to a 1.5%
gain, ending just below the high of the day.  Violating our stop
in the process of Thursday's advance, we have no choice but to
drop coverage of KSS.  Traders still holding open put positions
should look on a dip early on Monday as a gift and take the more
favorable exit point if offered.

Picked on June 15th at   $49.45
Change since picked:      +2.40
Earnings Date          08/14/03 (unconfirmed)
Average Daily Volume = 4.39 mln
Chart link:


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

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chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

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

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

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

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


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The Option Investor Newsletter                   Sunday 07-06-2003
Sunday                                                      3 of 5

In Section Three:

New Calls: DGX, HAR
Current Put Plays: COF, ICOS, SIVB, WFMI
New Puts: INTU

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AmerisourceBergen - ABC - cls: 71.19 change:-0.05 stop: 68.50*new*

Company Description:
AmerisourceBergen is a pharmaceutical services company dedicated 
solely to the pharmaceutical supply chain.  The company markets 
its products and services to hospital systems (hospitals and acute 
care facilities), alternate care customers (mail order facilities, 
physicians' offices, long-term care institutions and clinics), 
independent community pharmacies, and regional drugstore and food 
merchandising chains.  ABC also provides outsourced pharmacies to 
long-term care and workers' compensation programs.  ABC perates in 
two segments: Pharmaceutical Distribution and PharMerica.  The 
Pharmaceutical Distribution division is primarily the company's 
wholesale and specialty drug distribution business, and PharMerica 
is the company's institutional pharmacy business.

Why we like it:
It took its sweet time getting there, but ABC finally gave us the 
breakout over $70 that we had been waiting for.  That move came on 
Wednesday, with the solid bullish action in the rest of the market 
and despite some volatility in Thursday's session, ABC held onto 
the bulk of its gains, only sliding lower by a nickel.  The last 
dip before the breakout only reached $68.76 before the buyers 
appeared and with breakout, we have a couple more data points to 
add to the recent series of higher lows and higher highs.  In 
addition to Tuesday's intraday low, the bottom of the ascending 
channel ($68.85) and the 20-dma ($68.79) should provide strong 
support on any pullback.  Traders looking for entry on the next 
pullback will want to shoot for a rebound from the $70 level, 
which would confirm old resistance is now support.  If looking to 
enter on strength, then $72 is the line in the sand, as ABC was 
turned back just below that level ($71.90) on Thursday when the 
volatility hit the broad market.  Because of the strong support 
mentioned above, we're raising our stop to $68.50 this weekend.

Suggested Options:
Shorter Term: The July 70 Call will offer short-term traders the 
best return on an immediate move, as it is currently in the money.

Longer Term: Aggressive traders looking to capitalize on an 
extended rally will want to look to the August 75 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.  More conservative 
long-term traders should utilize the August 70 call.

BUY CALL JUL-70 ABC-GN OI=2681 at $2.45 SL=1.25
BUY CALL JUL-75 ABC-GO OI= 238 at $0.50 SL=0.25
BUY CALL AUG-70 ABC-HN OI= 418 at $3.80 SL=2.25
BUY CALL AUG-75 ABC-HO OI= 253 at $1.40 SL=0.75

Annotated Chart of ABC:


Picked on June 26th at     $70.00
Change since picked:        +1.19
Earnings Date             07/24/03 (unconfirmed)
Average Daily Volume =    1.49 mln
Chart link:


Allergan, Inc. - AGN - close: 78.36 change: -0.14 stop: 76.00*new*

Company Description:
Allergan is a technology-driven, global healthcare company that 
develops and commercializes specialty pharmaceutical products for 
the ophthalmic neurological, dermatological and other specialty 
markets, as well as ophthalmic surgical devices and contact lens 
care solutions.  Its revenues are principally generated by 
prescription and non-prescription pharmaceutical products in the 
areas of ophthalmology and skin care, neurotoxins, intra-ocular 
lenses and contact lens care products.  The company's are sold to 
drug wholesalers, independent and chain drug stores, pharmacies, 
commercial optical chains, commercial optical chains, food stores, 
hospitals and individual medical practitioners.

Why we like it:
A bit of schizophrenia hit the broad market an hour into 
Thursday's session and that wasn't what AGN bulls wanted to see.  
The convincing rebound from the $76 level that began early on 
Tuesday had extended up near the $79.40 level by midday on 
Wednesday and the pullback into the close looked like some normal 
profit taking in preparation for more bullish action heading into 
the weekend.  Such wasn't the case though, as the early bullish 
tone in the broad markets was waylaid by some wacky action in the 
futures pits, and that kept AGN on the defensive right into the 
end of the day.  That dropped the stock back to close right on the 
20-dma ($78.35), which it broke through on Wednesday, and now 
we're looking to see whether support will be found near $78.00, 
which is the top of the bull flag pattern that also saw a bullish 
breakout on Wednesday.  There still seems to be a fair amount of 
support in the $77.50-78.00 area and a successful rebound from 
there on Monday looks like a favorable bullish entry point.  
Should the bulls charge out of the gate first thing next week, 
then momentum entries can be considered on a rally through $79.40, 
just above Wednesday's intraday high.  Tuesday's intraday low was 
$76.01, and if that rebound was the bullish reversal we think it 
was, that level should not be broken on a successive pullback.  
For that reason, we've raised our stop to $76, slightly reducing 
our risk exposure in the play.

Suggested Options:
Shorter Term: The July 75 Call will offer short-term traders the 
best return on an immediate move, as it is currently in the money.

Longer Term: Aggressive traders looking to capitalize on an 
extended rally will want to look to the August 80 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.  More conservative 
long-term traders should utilize the August 75 call.  Note that 
open interest is still thin in the August contracts.

BUY CALL JUL-75 AGN-GO OI=1756 at $4.30 SL=2.75
BUY CALL JUL-80 AGN-GP OI=1236 at $1.05 SL=0.50
BUY CALL AUG-75 AGN-HO OI=  12 at $5.60 SL=3.50
BUY CALL AUG-80 AGN-HP OI= 116 at $2.75 SL=1.25

Annotated Chart of AGN:


Picked on June 26th at     $78.74
Change since picked:        -0.38
Earnings Date             07/28/03 (unconfirmed)
Average Daily Volume =    1.13 mln
Chart link:


Amgen, Inc. - AMGN - close: 66.06 change: -1.15 stop: 63.50*new*

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:
While it would have been nice to see our AMGN play end the week at 
a new high, we certainly won't complain about the stock's 
consistency.  Each dip near the 30-dma (currently $64.56), which 
is also near both the long-term ascending trendline and the bottom 
of the 2-month channel.  Seems like pretty strong support, don't 
you think?  Unfortunately, resistance was just as strong last 
week, as AMGN challenged the $67.50 resistance level (6/16 high) 
on 3 out of 4 days and each time the bears turned the stock back.  
A successful breakout over $67.50 next week may make for a decent 
momentum entry enroute to the $70 level, but remember this is a 
very aggressive strategy with AMGN.  The stock doesn't tend to 
have good follow-through on the breakouts, with the better entries 
coming on the pullback to support following the breakout.  While 
it was disappointing to see AMGN fall back near the $66.50 level 
at the close (note the closing price of $66.06 took place after 
hours), this just looks like more of the back and forth tango that 
we've become familiar with when trading AMGN.  It doesn't tend to 
trend very well on a day-to-day basis, but over the longer-term it 
continues to build a consistent pattern of higher lows and higher 
highs.  Posting a lower high last week could be a precursor of 
more weakness in the week ahead, as we could be setting up for a 
repeat of the bearish pattern that developed in late April and 
early May.  In that time period, the stock traded two significant 
lower highs and lower lows before once again finding strong 
support at the 50-dma.  So while we're looking for new entries 
near the $64.50-64.75 area, we need to keep in mind that it is 
possible for AMGN to trade down to the area of the 50-dma ($63.52) 
and still retain its longer-term uptrend.  Aggressive traders 
looking for a bargain and willing to try to catch the bottom of 
the next sharp selloff may do well to target a rebound from the 
$63.75-64.00 area.  We'll continue to follow the 50-dma higher 
with our trailing stop, which now moves to $63.50.

Suggested Options:
Shorter Term: The July 65 Call will offer short-term traders the 
best return on an immediate move, as it is currently at the money.

Longer Term: Aggressive traders looking to capitalize on an 
extended rally will want to look to the August 70 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.  More conservative 
long-term traders should utilize the August 65 call.

BUY CALL JUL-65 YAA-GM OI=31466 at $2.30 SL=1.25
BUY CALL JUL-70 YAA-GN OI=17727 at $0.25 SL=0.00
BUY CALL AUG-65 YAA-HM OI= 4622 at $3.50 SL=1.75
BUY CALL AUG-70 YAA-HN OI=10368 at $1.15 SL=0.50

Annotated Chart of AMGN:


Picked on June 24th at     $65.05
Change since picked:        +1.01
Earnings Date             07/22/03 (confirmed)
Average Daily Volume =   10.3 mln
Chart link:


eBay Inc - EBAY - close: 110.05 change: +0.79 stop: 104.00

Company Description:
eBay is the world's online marketplace(TM). Founded in 1995, eBay
created a powerful platform for the sale of goods and services by
a passionate community of individuals and businesses. On any
given day, there are millions of items across thousands of
categories for sale on eBay. eBay enables trade on a local,
national and international basis with customized sites in markets
around the world. (source: company press release)

Why We Like It:
Ding!  Shares of EBAY hit our short-term profit target of $110.00 
after rebounding from some early morning weakness.  The high-
flying Internet stock almost reached the $111 mark before shares 
pulled back into the early close.  Yesterday we suggested that 
short-term traders get ready to close their play or at least take 
some profit off the table.  The stock has moved a lot faster than 
we expected but we're not complaining.  Should there be any 
market weakness next week with the onset of Q2 earnings 
announcements, then traders can look for new bullish entries on a 
pull back in EBAY.  Something to watch out for is YHOO's earnings 
next Wednesday after the closing bell.  The two Internet stocks 
have completely different business models but reaction to one 
Internet stock's earnings results could affect the other.  No one 
has ever blamed Wall Street for being logical.  YHOO is expected 
to announce 8 cents a share and hit revenue of $314.8 million for 
the quarter.  

Our most recent update for EBAY mentioned Prudential's upgrade of 
the stock and their new $120 price target.  OptionInvestor had 
suggested that $120 was not out of reach and it's certainly 
possible that EBAY could mount an old-fashioned earnings run 
before its own announcement in mid-July.  Plus, First Albany's 
EBAY analyst believes the stock will beat consensus estimates of 
35 cents a share and potentially beat Albany's estimates of 37 
cents a share this quarter.  Meanwhile, we raised our stop loss 
to $104.00 on Wednesday and plan to keep it there (at breakeven) 
for the moment until we see whether bulls will push the stock 
higher or let is slip back a couple of points due to profit 

Suggested Options:
Given that there could be a pre-earnings run, our suggestion
would be to play the July options but the August strikes are not
a bad play either.


BUY CALL JUL-100 QXB-GT OI= 8074 at $10.60 SL=6.00
BUY CALL JUL-105 QXB-GA OI=13790 at $ 6.10 SL=3.25
BUY CALL JUL-110 QXB-GB OI=10177 at $ 2.80 SL=1.40
BUY CALL JUL-115 QXB-GC OI= 6991 at $ 1.00 SL= -- 
BUY CALL AUG-105 QXB-HA OI= 1726 at $ 8.00 SL=4.25
BUY CALL AUG-110 QXB-HB OI= 1061 at $ 4.90 SL=2.45
BUY CALL AUG-115 QXB-HC OI= 3842 at $ 2.75 SL=1.30

Annotated Chart:


Picked on June 27th at $104.05
Change since picked:     +6.00
Earnings Date         07/18/03 (unconfirmed)
Average Daily Volume =    6.76 million 
Chart link:


Goldman Sachs Grp. - GS - close: 84.70 change: -0.70 stop: 81.95

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

Why we like it:
There's nothing like a bit of volatility to get the adrenaline 
pumping and despite solid gains from the Brokerage sector (XBD.X) 
over the past 3 days, GS has really had a hard time getting it in 
gear.  Tuesday's breakout above the 2-week descending trendline 
certainly looked convincing, but yesterday's session provided a 
bit of an anomaly, as GS posted an indecisive Doji candle and a 
fractional loss, in contrast to a solid gain by the XBD.  
Thursday's session produced more of the same, with another 1.18% 
gain from XBD and GS remaining rather weak throughout the day, 
ending with another fractional loss.  Throwing out the opening dip 
to just above $83, the stock spent the entire session 
consolidating between $84.50-85.00.  Not enough strength to move 
through Wednesday's lows (mild resistance), but insufficient 
weakness to cause any great concern either.  Even the early dip 
found eager buying interest above the recent lows in the $82.00-
82.50 area, so for now Tuesday's breakout appears intact.  
Rebounds from above the $83.50 area look good for new entry 
points, although more conservative traders may want to wait for a 
breakout over $86.25 (just above Tuesday's intraday high) before 
playing.  Unless there is something unknown bubbling under the 
surface, GS ought to play catch up with the XBD index next week 
and breaking Tuesday's highs will go a long ways towards 
convincing us that a run at the June highs near $91.50 is still a 
viable target.

Suggested Options:
Shorter Term: The July 85 Call will offer short-term traders the 
best return on an immediate move, as it is currently at the money.

Longer Term: Aggressive traders looking to capitalize on an 
extended rally will want to look to the August 90 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.  More conservative 
long-term traders should utilize the August 85 call.

BUY CALL JUL-80 GS-GP OI=27724 at $5.20 SL=3.25
BUY CALL JUL-85 GS-GQ OI=15824 at $1.70 SL=0.75
BUY CALL AUG-85 GS-HQ OI= 2084 at $3.20 SL=1.50
BUY CALL AUG-90 GS-HR OI= 1475 at $1.30 SL=0.75

Annotated Chart of GS:


Picked on July 1st at      $85.85
Change since picked:        -1.15
Earnings Date             09/24/03 (unconfirmed)
Average Daily Volume =    4.50 mln
Chart link:


Merck & Company - MRK - close: 61.14 change: -0.58 stop: 59.75

Company Description:
MRK is a global, research-driven pharmaceutical company that 
discovers, develops, manufactures and markets a broad range of 
human and animal health products, directly and through its joint 
ventures.  Additionally, the company provides pharmaceutical 
benefit services through Merck-Medco Managed Care, LLC.  The 
company's operations are managed principally on a products and 
services basis and are comprised of two business segments.  Merck 
Pharmaceutical is involved in marketing products, while Merck 
Pharmaceuticals is focused on therapeutic and preventive agents, 
sold by prescription, for the treatment of human disorders.  The 
pharmaceutical benefit services provided by Merck-Medco include 
sales of prescription drugs through managed prescription drug 
programs as well as services through programs to manage patient 
health and drug utilization.

Why we like it:
If you like roller-coasters, then you probably loved the action in 
MRK last week.  But for those of us trying to discern the trend, 
the week's trading was rather maddening.  MRK just managed to hold 
support on Tuesday, rebounding from just below the $60 level and 
moving right to the top of the bull flag pattern shown in the 
chart below.  The next day produced the bullish breakout from the 
pattern we had been expecting, with the stock trading as high as 
$62.50.  Up to that point, the bulls were quite happy.  But the 
afternoon fade back under $62 was somewhat disconcerting, as was 
Thursday's drop back into the bull flag.  While the weakness 
heading into the weekend may have been related to the futures-
related volatility, the fact that MRK broke back inside the flag 
hints that the breakout on Wednesday may have been a false 
breakout or bull trap.  It is now critical that the stock hold 
support above the $60 level and rebound back through the top of 
the flag (now at $61.40) and hold that breakout.  Aggressive 
traders can still look to enter new positions on a rebound from 
the $60.50 area (the site of Thursday's intraday lows), but make 
sure to keep those stops in place at $59.75, just in case the 
rebound fails.  A more conservative entry strategy would be to 
wait for a rally back above the $62.50 level, which provided 
resistance on Wednesday.

Suggested Options:
Shorter Term: The July 60 Call will offer short-term traders the 
best return on an immediate move, as it is currently in the money.

Longer Term: Aggressive traders looking to capitalize on an 
extended rally will want to look to the August 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 JUL-60 MRK-GL OI=38966 at $1.85 SL=1.00
BUY CALL JUL-65 MRK-GM OI=18051 at $0.20 SL=0.00
BUY CALL AUG-60 MRK-HL OI= 3019 at $2.75 SL=1.25
BUY CALL AUG-65 MRK-HM OI= 2509 at $0.55 SL=0.25

Annotated Chart of MRK:


Picked on June 17th at    $62.37
Change since picked:       -1.23
Earnings Date           07/21/03 (unconfirmed)
Average Daily Volume =  6.21 mln
Chart link:


Progressive Corp. - PGR - close: 74.13 change: -0.52 stop: 72.50

Company Description:
Traditionally a leader in non-standard, high-risk personal auto 
insurance, PGR has moved into standard-risk and preferred auto 
insurance, as well as other personal use vehicle coverage, such as 
motorcycles and recreational vehicles.  The company's property-
casualty insurance products protect its customers against 
collision and physical damage to their vehicles and liability to 
others for personal injury or property damage.

Why we like it:
Our patience was rewarded last week, as PGR finally gave us the 
bounce we had been expecting.  After topping out just over $76 
more than 2 weeks ago, the stock had been drifting ever so slowly 
lower, consolidating its recent gains.  On Monday, it finally 
reached the bottom of that channel near $72.50, tested that 
support again on Tuesday and then rebounded strongly, ending just 
below the bottom of a shorter-term bull flag pattern.  The bulls 
placed their vote the next day, breaking the stock to the upside, 
ending back over the 10-dma and very near the high of the day.  
Thursday's session started out on a bullish note as well, with PGR 
pushing briefly above $75 before the fireworks began.  Following a 
better than expected ISM Services report, an apparent erroneous 
sell program got launched in the DOW futures, bleeding over into 
the other futures contracts and by the time it was all sorted out, 
any bullish tone to the day had been successfully squashed.  PGR 
ended fractionally lower on the day, just over $74 and any 
weakness early next week could set up a nice secondary entry point 
on a rebound from the $73.50-73.75 area.  A rebound from that 
vicinity would be a confirmation of support at the top of the bull 
flag pattern and should set up a renewed rally towards the recent 
highs.  More conservative traders may want to wait for bullish 
confirmation with a rally over $75.30 before adding new positions, 
keeping in mind that resistance just above $76 will likely present 
at least a temporary obstacle.  Another point of reference is the 
Insurance index (IUX.X) and we'd like to see it push back over 
$270 before adding momentum-based positions.  Keep stops at 

Suggested Options:
Shorter Term: The July 75 Call will offer short-term traders the 
best return on an immediate move, as it is currently just slightly 
out of the money.

Longer Term: Aggressive traders looking to capitalize on an 
extended rally will want to look to the August 80 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.  More conservative 
long-term traders should utilize the August 75 call.

BUY CALL JUL-70 PGR-GN OI=216 at $4.60 SL=2.75
BUY CALL JUL-75 PGR-GO OI=486 at $1.10 SL=0.50
BUY CALL AUG-75 PGR-HO OI=278 at $2.10 SL=1.00
BUY CALL AUG-80 PGR-HP OI= 47 at $0.50 SL=0.25

Annotated Chart of PGR:


Picked on June 15th a  $73.27
Change since picked:    +0.86
Earnings Date        07/16/03 (confirmed)
Average Daily Volume =  925 K
Chart link:


Pulte Homes - PHM - close: 63.45 change: -0.74 stop: 59.99

Company Description:
Pulte Homes, Inc., (www.pulte.com) based in Bloomfield Hills, 
Michigan, has operations in 44 markets across the United States. 
Under its Del Webb brand, the Company is also the nation's 
leading builder of active adult communities for people age 55 and 
older. Over its history, the Company has constructed more than 
330,000 homes and has been named Builder of the Year for 2002 by 
Professional Builder magazine. Pulte Mortgage LLC is a nationwide 
lender committed to meeting the financing needs of Pulte Homes' 
customers by offering a wide variety of loan products and 
superior customer service. (source: company press release)

Why We Like It:
We recently added PHM to the call list as both a hedge for our 
RYL put play (now closed) and as a chance to speculate on a 
bounce in the homebuilders.  The group has been on an incredible 
run from mid-March, which isn't surprising giving the record lows 
in mortgage rates this year.  Investor expectation is pretty high 
for this industry's earnings performance and could keep some 
shareholders from taking additional profits off the table.  So 
far PHM has retraced 38.2% (a Fibonacci retracement) of its March 
to June highs.  A bounce at this retracement level is 
traditionally seen as a technical traders' bullish entry point, 
especially for a potential run back to the recent highs.  So far 
PHM hasn't disappointed and has reclaimed its simple 50-dma.  
Likewise, the DJUSHB homebuilders index has bounced from its 
recent low but has stalled just under the 450 level, which 
appears to coincide somewhat with the $64.00 level on PHM's 
chart.  (News note: PHM just announced the all cash acquisition 
of privately held Sivage-Thomas Homes, a New Mexico-based 
builder.  Sivage-Thomas had revenues of $149 million in 2002.)

Traders might want to consider a bounce in the $62.00-63.00 area 
or a move above the $64.25 mark as a trigger to evaluate new 
bullish entries.  

Suggested Options:
Our broad market view is not very bullish through the second half 
of July and into August through September.  This bias has us 
looking more favorably at the July call options but August 
options will certainly work.  Note: the July 70s are cheap for a 


BUY CALL JUL 60 PHM-GL OI= 961 at $4.40 SL=2.20
BUY CALL JUL 65 PHM-GM OI=1126 at $1.40 SL=0.70
BUY CALL JUL 70 PHM-GN OI=1290 at $0.30 SL= -- *riskier*
BUY CALL AUG 60 PHM-HL OI= 115 at $5.70 SL=3.90
BUY CALL AUG 65 PHM-HM OI= 934 at $2.95 SL=1.50
BUY CALL AUG 70 PHM-HN OI= 108 at $1.15 SL=0.65
BUY CALL OCT 65 PHM-JM OI= 666 at $4.70 SL=2.40

Annotated Chart:


Picked on July 01 at $63.52
Change since picked:  -0.07
Earnings Date      07/24/03 (confirmed)
Average Daily Volume: 767 thousand 
Chart =


St. Jude Medical - STJ - close: 56.50 change: -0.38 stop: 54.95

Company Description:
St. Jude Medical, Inc. (www.sjm.com) is dedicated to the design,
manufacture and distribution of innovative medical devices of the
highest quality, offering physicians, patients and payers
unmatched clinical performance and demonstrated economic value.
(source: company press release)

Why We Like It:
Warning! Warning!  Like a plane that's climbed too high into the 
atmosphere, shares of STJ may be struggling for lack of oxygen.  
We added the stock to our play list due to the incredible 
strength of its trend and the opportunity to buy the bounce from 
its rising 50-dma.  The medical equipment sector has been a very 
hot group for months but negative earnings comments from BSX this 
morning didn't help us any.  Some sector analysts tried to put a 
positive spin on the BSX news and the stock actually closed 
higher.  Unfortunately, STJ didn't participate and instead 
followed the markets lower, albeit slowly.  

So far the stock has not yet violated its simple 50-dma, 
currently at 55.91, but the short-term five-day trend doesn't 
look like a positive one.  The stock failed at the $60 level late 
last week and bears may have seen that as an entry point to short 
the stock.  We've also noticed that the last three days has keep 
shares in a very narrow range with a clear top.  Tuesday and 
Wednesday the range was 57.20 to 56.60 but today it dipped to 
56.40.  This could be a very profitable entry point to buy so 
close to its 50-dma, which hasn't been violated in months HOWEVER 
it would take a lot of guts to do so in the face of this 
weakness.  We have our stop loss at $54.95 so the stock would 
have to penetrate natural psychological support at $55.00 to stop 
us out.  Should that occur, a look at the weekly chart suggest 
STJ would have plenty of room to retrace its stellar gains.

We are not suggesting new long positions until STJ can reclaim 
the $58.00 level.  More conservative traders may want to see a 
move over $60 first.  More aggressive traders might want to 
consider a bounce from $56.00 (its simple 50-dma).

Suggested Options:
Given the entry point that STJ is offering we like the July
options.  The July 60 looks very tempting.  August options are
brand new and don't have much volume or open interest yet.


BUY CALL JUL-55 STJ-GK OI=1766 at $2.55 SL=1.25
BUY CALL JUL-60 STJ-GL OI=2867 at $0.50 SL= -- 
BUY CALL AUG-55 STJ-HK OI=  11 at $3.70 SL=1.65
BUY CALL AUG-60 STJ-HL OI= 103 at $1.40 SL=0.75
BUY CALL OCT-60 STJ-JL OI= 555 at $2.70 SL=1.50

Annotated Chart:


Picked on June 24th at $57.62
Change since picked:    -1.12
Earnings Date        07/16/03 (unconfirmed)
Average Daily Volume =   1.56 million 
Chart link:


Quest Diagnostics - DGX - close: 65.78 change: +0.71 stop: 63.50

Company Description:
Quest Diagnostics was the result of a 1996 Corning spinoff, and 
currently holds the title of the world's #1 clinical laboratory.  
DGX performs more than 100 million routine tests annually, 
including cholesterol, HIV, pregnancy, alcohol, and pap smear 
tests.  Operating laboratories throughout the US and in Brazil, 
Mexico, and the UK, DGX also performs esoteric testing (complex, 
low-volume tests) and clinical trials.  The company serves 
doctors, hospitals, HMOs, and other labs as well as corporations, 
government agencies, and prisons.

Why we like it:
Despite all the talk of the current rally in the broad market 
being unsustainable, it is amazing how many really solid chart 
patterns can be found with a bit of digging.  DGX is no stranger 
to our playlist, but to be entirely honest, this is the best chart 
pattern the stock has presented since its major breakdown a year 
ago.  Since bottoming near $47.50 back in February, the stock has 
been building an impressive upward trend of higher lows in the 
process of climbing above all of its moving averages.  The 
trendline connecting those lows currently rests at $63.25, just 
slightly above last Tuesday's low of $62.83 and the 30-dma at 
$63.04.  Taken together, that $62.80-63.00 area looks like strong 
support.  This rising support has been squeezing the stock against 
formidable horizontal resistance in the $66-67 area, which has 
consistently held back each bullish advance since October.  
Looking at the more recent data, $66.30 looks like the critical 
resistance level to clear, but taking a wider view shows the top 
of this resistance band is actually defined by the 10/18/02 
intraday high of $66.99.  That makes for a pretty clear trigger 
point for new entries, as a trade at $67 should generate some 
strong bullish follow through.

Thursday's trade at $66 did generate a new PnF Buy signal, but 
looking back over the past year of data, we can see just how many 
times DGX has been turned back before trading $67.  Trading $67 
will be our trigger for making the play active, and once 
triggered, the stock looks like it could easily rise to the next 
level of historical resistance near $72.  The past several 
quarters have seen the company continue to beat earnings estimates 
on revenues that continue to grow as well.  With the company set 
to release its quarterly results on July 22nd, we're looking for 
traders to bid the stock higher in anticipation of another 
positive report.  Entering the play is a matter of personal 
preference, as momentum traders can enter on the breakout over 
$67, while more conservative traders may want to wait for a 
subsequent pullback to confirm higher support in the $65-66 area.  
We're initiating coverage with our stop set at $62.50, as a close 
below that level would represent a clear failure of the bullish 
wedge pattern.

Suggested Options:
Shorter Term: The July 65 Call will offer short-term traders the 
best return on an immediate move, as it is currently at the money.

Longer Term: Aggressive traders looking to capitalize on an 
extended rally will want to look to the August 70 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.  More conservative 
long-term traders should utilize the August 65 call.

BUY CALL JUL-65 DGX-GM OI=2301 at $2.40 SL=1.25
BUY CALL JUL-70 DGX-GN OI=1389 at $0.55 SL=0.25
BUY CALL AUG-65 DGX-HM OI=1594 at $3.80 SL=2.25
BUY CALL AUG-70 DGX-HN OI= 975 at $1.45 SL=0.75

Annotated Chart of DGX:


Picked on July 1st at     $65.78
Change since picked:       +0.00
Earnings Date           07/22/03 (unconfirmed)
Average Daily Volume =     928 K
Chart link:


Harman Intl - HAR - close: 80.26 change: +0.77 stop: 76.50

Company Description:
Harman International Industries, Incorporated (www.harman.com) is 
a leading manufacturer of high-quality, high fidelity audio 
products and electronic systems for the consumer and professional 
markets. (source: company press release)

Why We Like It:
Sometimes the adage of "buy high, sell higher" really does work.  
The fourth-month trend in shares of HAR has been nearly 
unstoppable (those words are the kiss of death, right?).  This 
maker of high-end stereo equipment has become part of the growth 
stock crowd.  That sorts of makes one scratch their heads if a 
purveyor of expensive stereo equipment can do well in an economic 
downturn.  The growth stock fans claim that it's not HAR's P/E 
ratio that counts but its PEG ratio or price to earnings growth.  
Forbes recently did an article on HAR and PEG stocks.  The 
article stated that stocks with PEG ratios of less than 1.0 are 
considered undervalued by growth stock proponents.  Given HAR's 
extremely strong earnings this year, which ends in June, the 
stock should have a PEG of 0.4.  Adding to shareholder value and 
strengthening the company's balance sheet was a recent 
announcement from HAR's management.  Last month HAR increased its 
share buyback program by 1 million shares authorizing management 
to buy back up to 1.54 million shares.  The company has 28.7 
million shares in the "float" or on the open market.  
Furthermore, the company is set to buy back up to $100 million in 
outstanding debt.

We really like the breakout over resistance at $80.00 today, 
especially in light of the broader market weakness.  This 
certainly looks like an entry point for bulls and we're going to 
suggest it as one.  However, the more patient trader may want to 
wait and see if shares pull back to their simple 21-dma.  The 21-
dma has been the buy-point for the last few months and shares 
have quickly ricocheted higher each time they pulled back to 
touch this moving average.  Currently that moving average is near 
76.95.  This has been such stead support we're going to stick our 
stop loss just below it at 76.50, which is relatively tight given 
HAR's lofty dollar value.  

Something else that could be driving shares of HAR are dreams of 
a split announcement.  The company last split 2-for-1 on 
September 20th, 2000 near $80.00.  We suspect they actually 
announced in the $60-65 dollar range.  It is more traditional to 
have the company announce any split with its earnings, which 
appear to be August 19th, but they don't have to wait.

Suggested Options:
Given that HAR's earnings are expected in August, we'd prefer to 
play the August options.  Unfortunately, after the recent 
quadruple witching in June and the new issuance of the August 
options, there haven't been any takers.  Even though there is no 
open interest, small traders who use market orders of 10 contracts 
or less should have them executed automatically at the current bid 
or ask.  We're going to list July's, August's and an October.


BUY CALL JUL 75 HAR-GO OI=1539 at $6.00 SL=3.50
BUY CALL JUL 80 HAR-GP OI=   6 at $2.00 SL=1.00
BUY CALL JUL 85 HAR-GQ OI=   0 at $0.50 SL --
BUY CALL AUG 75 HAR-HO OI=   0 at $6.90 SL=3.75
BUY CALL AUG 80 HAR-HP OI=   0 at $3.40 SL=1.70
BUY CALL AUG 85 HAR-HQ OI=   0 at $1.15 SL= --
BUY CALL OCT 80 HAR-JP OI=  16 at $5.20 SL=3.00
BUY CALL OCT 85 HAR-JQ OI  138 at $2.70 SL=1.35

Annotated Chart:


Picked on July  6th at $80.26
Change since picked:    +0.00
Earnings Date        08/19/03 (unconfirmed)
Average Daily Volume =    321 thousand
Chart link:

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Capital One Financial - COF - cls: 49.25 chg: -0.01 stop: 50.51

Company Description:
Headquartered in McLean, Virginia, Capital One Financial
Corporation (www.capitalone.com) is a holding company whose
principal subsidiaries, Capital One Bank and Capital One, F.S.B.,
offering consumer lending products. Capital One's subsidiaries
collectively had 46.4 million managed accounts and $59.2 billion
in managed loans outstanding as of March 31, 2003. Capital One, a
Fortune 500 company, is one of the largest providers of
MasterCard and Visa credit cards in the world.

Why We Like It:
There is not much new to add for our bearish play on COF.  We 
initially added it on the breakdown under the $50.00 level.  
Shares had more than doubled from its March low near $25.00 and we 
were expecting a serious round of profit taking to ensue.  Thus 
far the strength, or more correctly a lack of weakness, has been 
mirrored in COF.  The stock has churned sideways under the $50.00 
mark with support at $48.00.  The stock's simple 50-dma is quickly 
rising up to meet it and was support three days ago on the Tuesday 
weakness.  We recently lowered our stop to 50.51 so our risk is 
limited but we would not suggest new bearish plays until we see a 
close under $48.00 or under its 50-dma (take your pick).  
Fortunately, the sideways consolidation has not changed COF's 
bearish sell signal on the point-and-figure chart.

Suggested Options:
The options available to us are July's and September's.  We're
going to list both but our preference will be for July 50s and
47.50s.  We're starting to see a pick up in premium decay for the
out of money puts.


BUY PUT JUL 50.00 COF-SJ OI= 9088 at $2.30 SL=1.25
BUY PUT JUL 47.50 COF-SW OI= 9624 at $1.10 SL=0.55
BUY PUT AUG 50.00 COF-TJ OI=  145 at $3.60 SL=1.75
BUY PUT AUG 47.50 COF-TW OI=  172 at $2.50 SL=1.25
BUY PUT SEP 47.50 COF-UW OI= 1033 at $3.60 SL=1.75
BUY PUT SEP 45.00 COF-UI OI=  818 at $2.75 SL=1.35

Annotated Chart of COF


Picked on June 22 at $49.64
Change since picked:  -0.39
Earnings Date      07/16/03 (unconfirmed)
Average Daily Volume: 4.3 million
Chart =


ICOS Corp - ICOS - close: 38.50 change: -1.06 stop: 40.01

Company Description:
ICOS is a product-driven company that has expertise in both
protein-based and small molecule therapeutics. ICOS combines its
capabilities in molecular, cellular and structural biology, high
throughput drug screening, medicinal chemistry and gene
expression profiling to develop highly innovative products
expected to have significant commercial potential. ICOS applies
its integrated approach to erectile dysfunction and other
urologic disorders, sepsis and inflammatory diseases. ICOS'
strategy targets multiple therapeutic areas with drugs that act
through distinct molecular mechanisms, increasing ICOS'
opportunities to market breakthrough products.

Why We Like It:
We initially added ICOS to the put play list as a hedge against 
our other biotech longs.  The stock appeared to take the profit 
taking in the biotech sector pretty hard and had failed to rally 
past the $40.00 multiple times in the last several days.  
Unfortunately, the day after we added it ICOS and its partner Eli 
Lilly (LLY) announced that they had resubmitted their Cialis 
drug, a competitor to Viagra, to the FDA and the FDA had accepted 
the application as complete.  Last time the FDA required 
additional information and set back the entire process months.  
Now ICOS and LLY expect the FDA to approve Cialis for the U.S. 
market by the end of the year.  This is great news for the two 
companies as their data from foreign markets have shown Cialis to 
quickly acquire a good chunk of the market share in just 90 days 
of being introduced.  The following session witnessed shares of 
ICOS rally straight to the 40.00 level and stop.  With our stop 
loss at 40.01, we held our breath.  Since then the stock has 
slipped but remains in danger of moving higher due to investor 
expectation for the FDA approval some three to six months from 
now.  If you believe the BTK and the sector have more weakness 
ahead of them, then an entry this close to $40 may be a low-risk 
play.  Otherwise, it may be smarter to step back and wait for 
ICOS to break down through the $35 level.  We're not suggesting 
new bearish positions for any but the aggressive trader.

Suggested Options:
The July and October options appear to have the most open
interest as the August options probably just became available
this week.  We're prefer July and August because our time frame
is three to four weeks.


BUY PUT JUL 40 IIQ-SH OI=1632 at $2.80 SL=1.60
BUY PUT JUL 35 IIQ-SG OI=2542 at $0.70 SL= -- 
BUY PUT AUG 40 IIQ-TH OI= 404 at $4.50 SL=2.75
BUY PUT AUG 35 IIQ-TG OI= 335 at $2.15 SL=1.25
BUY PUT OCT 35 IIQ-VG OI= 556 at $3.90 SL=2.45

Annotated Chart:


Picked on June 29th at $37.62
Change since picked:    +0.88
Earnings Date        08/05/03 (unconfirmed)
Average Daily Volume =   2.63 million 
Chart link:


Silicon Valley Bancshares - SIVB - close: 23.63 change: -0.18 stop: 24.90*new*

Company Description:
Silicon Valley Bancshares is a bank holding company and a 
financial holding company.  The company's principal subsidiary is 
Silicon Valley Bank.  SIVB serves more than 9500 clients across 
the country through 27 regional offices.  The company has 11 
offices throughout California and operates regional offices in 
Arizona, Colorado, Florida, Georgia, Illinois, Massachusetts, 
Minnesota, New York, North Carolina, Oregon, Pennsylvania, Texas, 
Virginia and Washington.  The company serves emerging-growth and 
mature companies in the technology and life sciences markets, as 
well as wineries.  The company is organized along five lines of 
banking and financial services: commercial banking, investment 
banking, private banking, merchant banking and other business 

Why we like it:
Last week was definitely the source of some consternation for 
bears in SIVB, at least in the early going.  Continuing with last 
Friday's rebound, the stock rose through $24 and then on Tuesday 
actually trading briefly above the 50-dma and hitting an intraday 
high of $24.82.  Fortunately, that altitude proved to be 
unsustainable, and the stock weakened considerably into the close, 
ending back under $24, where we were initially looking for new 
entries on a rollover.  The rest of the week went much better for 
us, as SIVB traced out a pattern of lower highs, finding 
consistent resistance at the 10-dma (currently $23.66).  By the 
end of the week, SIVB was back to testing intermediate support 
near $23.45, and a break below there can be used for new entries 
next week with an eye towards an initial target of the prior 
week's lows near $22.30.  We're still expecting that support level 
to fail, and traders wanting more confirmation before playing may 
want to wait for a break below $22.25 before playing.  With the 
50-dma ($24.80) starting to roll over and the 20-dma falling as 
well, another failed rebound below $24.50 would present a lower 
risk entry, as our stop has now been trailed to $24.90, just above 
the 20-dma.  Look for more weakness from the Banking indices 
(BKX.X and BIX.X) to confirm the prudence of new entries before 

Suggested Options:
Short-term traders will want to focus on the July 25 Put, as it 
will provide the best return for a short-term play.  Those looking 
for a larger move down towards the $20 level will want to utilize 
the July 22 contract or even the August strike, the latter of 
which provides greater insulation from the spectre of time decay.  
Note that Open Interest is highest for the August strike, so entry 
and exit will likely be the easiest with these contracts.

BUY PUT JUL-25 SQU-SE OI= 35 at $1.80 SL=1.00
BUY PUT JUL-22 SQU-SX OI=  5 at $0.45 SL=0.25
BUY PUT AUG-22 SQU-TX OI= 82 at $0.95 SL=0.50

Annotated Chart of SIVB:


Picked on June 24th at   $22.82
Change since picked:      +0.81
Earnings Date          07/17/03 (unconfirmed)
Average Daily Volume =    713 K
Chart link:


Whole Foods - WFMI - cls: 46.32 chg: -0.60 stop: 48.51*new* 

Company Description:
Founded in 1980 in Austin, Texas, Whole Foods Market is the
world's largest natural and organic foods supermarket with $2.7
billion in sales in fiscal year 2002. The company currently has
143 stores and employs more than 27,000 Team Members in the
United States and Canada. The motto, "Whole Foods, Whole People,
Whole Planet"(TM) captures the company's mission to find success
in customer satisfaction and wellness, Team Member excellence and
happiness, enhanced shareholder value, community support, and
environmental improvement. For six consecutive years, Whole Foods
Market has ranked on Fortune's annual list as one of the "100
Best Companies to Work For." Whole Foods Market, Bread & Circus.
and Harry's Farmers Market. are all registered trademarks owned
by Whole Foods Market IP, LP. (Source: company press release)

Why We Like It:
Grocery stocks had a fire sale Thursday, and WFMI was no 
exception.  Closest competitor Wild Oats (OATS) and big grocers 
Safeway (SWY), Kroger (KR), and Albertson's (ABS) all traded 
down, as did the retail index, the $RLX.  

Today's high unemployment figure may have impacted the grocers.  
Although the assumption remains that people will always buy 
groceries no matter what their employment status, ABS's CEO spoke 
on CNBC a few weeks ago, commenting that people in fact changed 
their grocery-buying habits under economic duress.  They might 
buy ground round instead of steak.  They buy generic-brand paper 
towels instead of high-margin products.  We suspect they also buy 
less of the nice but pricey goods sold at OATS and WFMI.

Today, WFMI plunged tantalizingly close to our 45.00 target, 
dropping as low as 45.78 before rebounding and closing near the 
bottom of February's gap.  Now that the play has proven so 
profitable, we're lowering our stop to 48.51 to ensure that we 
capture some of those gains.  Conservative traders might even 
consider a stop at 48.01, near the bottom of the violated bear 
flag.  Stochastics, RSI, and MACD do not yet warn of an impending 
bounce, but conservative traders who entered the play when it was 
first initiated and are sitting on 3.00 gains may want to 
consider taking partial profits.  Because we're so close to 
achieving our target, we would not suggest new entries at this 

Suggested Options:
We have plenty of options to choose from.  WFMI has Julys, August
and November options already available.  The stock is approaching
our short-term target of $45.00 so we're not suggesting new plays
at this time.


BUY PUT JUL 50 FMQ-SJ OI= 715 at $4.10 SL=2.15
BUY PUT JUL 45 FMQ-SI OI=2047 at $1.05 SL=0.55
BUY PUT AUG 50 FMQ-TJ OI=1222 at $4.70 SL=2.35
BUY PUT AUG 45 FMQ-TI OI=1979 at $2.00 SL=1.25

Annotated Chart for WFMI:
Chart link:


Picked on June 13 at $49.44
Change since picked:  -3.12
Earnings Date      07/30/03 (unconfirmed)
Average Daily Volume: 1.6 million
Chart =


Intuit Inc - INTU - close: 43.79 change: -1.36 stop: 45.55

Company Description:
Intuit Inc. is a leading provider of business and financial 
management solutions for small businesses, consumers and 
accounting professionals. Its flagship products and services, 
including QuickBooks®, Quicken® and TurboTax® software, simplify 
small business management and payroll processing, personal 
finance, and tax preparation and filing. ProSeries® and Lacerte® 
are Intuit's leading tax preparation software suites for 
professional accountants. (source: company press release)

Why We Like It:
Whether you call it a seasonal play or technical weakness it just 
looks like a bearish candidate.  Last earnings season the stock 
was hammered on INTU's earnings and revenue warning for the 
second half of this year.  The company blamed a sluggish economy 
and lower consumer spending across all the product lines.  Since 
that announcement and corresponding $12 drop Prudential cut the 
stock from a "buy" to a "hold".  Shares eventually traded below 
the $35 level before rebounding with the broader markets.  INTU 
almost "filled the gap" with its mid-June high near $49.00 but 
soon thereafter traders started taking profits.  The breakdown 
under its 200-dma and the $45.00 level are rather negative.  Not 
helping the share price were negative comments just recently from 
Prudential.  The research firm is concerned about INTU's 2004 
earnings and competition from Microsoft into the small business 
accounting market.

Shares appear to be trading in a bear flag pattern and a move 
through the bottom trendline should herald the beginning of its 
next leg down. We're going to use the simple 50-dma as an easy 
trigger point to gauge an entry.  Currently, the 50-dma is at 
$43.36.  Therefore our TRIGGER to open bearish positions will be 
$43.35.  If you prefer, the recent low was $43.30 on June 27th.  
Once triggered our initial stop loss will be $45.55, which is a 
nickel above the recent highs in the last few sessions.

Suggested Options:
Stocks tend to move lower much faster than they climb.  Thus, our 
preference is for short-term options like July's but these expire 
in two weeks.  We're going to suggest the August contracts  We're 
going to list some Julys, August and October options.  


BUY PUT JUL 45 IQU-SI OI=4359 at $2.20 SL=1.10
BUY PUT JUL 40 IQU-SH OI=5121 at $0.45 SL= --
BUY PUT AUG 45 IQU-TI OI=  69 at $3.30 SL=1.65
BUY PUT AUG 40 IQU-TH OI= 244 at $1.25 SL=0.60
BUY PUT OCT 40 IQU-VH OI=1555 at $2.60 SL=1.30

Annotated Chart:


Picked on July xxth at $xx.xx
Change since picked:    -0.00
Earnings Date        08/13/03 (unconfirmed)
Average Daily Volume =    4.1 million 
Chart link:

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The Option Investor Newsletter                   Sunday 07-06-2003
Sunday                                                      4 of 5

In Section Four:

Leaps: There's The Bounce -- Now What?
Traders Corner: We're Already Naked, Why Waste The Opportunity?
Traders Corner: Elliott Wave Play Updates
Traders Corner: Where is the Dow Going?

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There's The Bounce -- Now What?
By Mark Phillips

Remember last week's title of "One More Bounce"?  Well, sure
enough, that's what the bulls had in store.  They couldn't quite
manage it on Monday, but after a drop down to the DOW 8900/SPX 962
area, the bulls came charging back.  In recent weeks, Jeff Bailey
has talked about the finite points that would denote real weakness
in the market and the one that stuck in my head was the SPX 972
level.  Isn't it interesting how that index traded within a couple
points of that level, gave one head-fake intraday move below it
and then surged back as high as 995 on Thursday?  My simple-minded
interpretation is that buying interest in the market is still
strong, and selling interest (when it exists at all) is fleeting.

Despite the closing numbers, I think Thursday's session was more
bullish than it would appear.  After the disappointing employment
report, the bulls took the ball and ran when the better-than-
expected ISM Services report came out and I think we would have
been looking at a close above DOW 9200/SPX 1000 if not for the
rather suspicious selling that appeared in the Futures pits near
10:30am ET.  I can't say that I have a clear understanding of
exactly what caused it -- whether driven by an intentional sell
program or if it was an order entry error -- but by the time the
dust settled, any bullish tone for the day had been successfully
squashed.  Holiday-shortened sessions are frequently fertile
ground for anomalous trading and I'm inclined to ignore Thursday's
trading action and wait for clarity to prevail once again on

Just so nobody is confused, I think this rally off the March lows
is way overdone and the market should be trading sharply lower,
especially following Thursday's dismal employment report that
showed the unemployment rate rising to 6.4%.  Last week I
encouraged you to take the time to look at a recent Market Wrap by
Jonathan Levinson and I have to repeat that advice again this
weekend.  He did an excellent job of painting a picture both of
what has been sustaining this rally and of the unlikelihood of the
fabled second half rally.  His Wednesday night Market Wrap is an
excellent read and if you're listening Jonathan, WELL DONE!  As
we've discussed recently, this has been a liquidity-driven rally,
but it isn't exactly what one would call healthy.  The Fed has
been trying to stimulate business growth through its inflation of
the money supply and continued lowering of interest rates.  As
Jonathan showed in his Wrap, that money hasn't found its way
anywhere near its intended target, as it has instead stimulated
the refinancing boom, consumer debt and more speculation in the
equity market.  It just goes to show, you don't always get what
you want, but you usually get what you deserve.  I share
Jonathan's concerns that this saga will not end well.  But that is
neither here nor there, as investors are still very much in a
buying mood leading into the July earnings cycle.

It is my opinion that this earnings cycle is particularly
important, as it should provide a clear picture of the post-Iraq
war economy and whether there is really any hope of a second half
recovery.  Based on the continual declining trend in business
investment, I have serious doubts as to the plausibility of the
rebound.  I do a fair amount of reading throughout the week and a
trend I've found interesting is the way some analysts have already
started back-pedaling and saying that the July earnings cycle
doesn't really count, as the real proof will be the reports that
focus on Q4 -- which means we'll be looking at the January 2004
earnings cycle before we'll be able to see the earnings growth
that the market seems to have been pricing in over the past 3
months.  The reasoning goes that the market is a discounting
mechanism, looking forward by 6-9 months and we just have to go on
faith that things are getting better because that is what the
market is telling us.  Call me a cynic, but it sounds like another
version of the 'hype and hope' story that has been foisted on
investors for the past 3 years and it is becoming rather ripe and
starting to draw flies.  It reminds me of one of the other great
lies -- "Trust me, I'm from the government and I'm here to help

My personal biases an opinions aside, all the internals are still
pointing to a full retest of the recent highs in the broad market.
At the risk of boring you to tears, I'm going to keep focusing on
the two metrics that have kept us out of trouble these past many
weeks, the Bullish Percents and the VIX.  It was a rather
uneventful week on the Bullish Percent front, as the only index
that has shown any meaningful weakness is the NDX, and it
stabilized at 76% by the end of the week.

NASDAQ-100 - 76% Now in Bull Correction, down from the 91% high
NASDAQ Composite - 70.48% (just off the 71.75% all-time high)
DOW - 83.33% (Highest reading since 1/99 -- highs in 1998 = 92%)
S&P 500 - 78.00% (Cycle high of 82.80% - Still Bull Confirmed)
S&P 100 - 81% (Just below cycle high, 11/98 all-time high = 84%)

Other than the NDX, I see very little sign of internal weakening
in the broad market, and I suspect the first couple weeks of July
will deliver that retest of the recent highs across the major
market averages.  Turning to the VIX, one could almost make the
argument that this measure of market volatility has become
unplugged from the action in the major indices as it continues to
troll along near 21 in a clear indication (to me, at least) that
there is no fear of the downside.  I think what I find most
interesting though is that despite this lack of fear, there's been
just enough fear to keep the VIX from dipping into the danger zone
below 20.  I expect it to happen eventually, but trying to gauge
when that might happen has become an exercise in futility.  It
will arrive when it is ready and that is about the best estimate I
can provide.

We've been talking in recent weeks about the bullish percent
SharpCharts for the major indices and I think it is worth
mentioning again here.  In the interest of getting this turned in
at a decent time tonight, I won't duplicate the charts here, but
you should have gotten adept at pulling them up yourselves by now.
Here is the link and BP symbols for easy reference.

Here are the pertinent Bullish Percent symbols.


Both the NDX and the SPX saw enough internal weakening to have the
bullish percent lines cross under their respective 10-dmas, with
the CCI oscillators falling below the -100 lines.  By my
reckoning, that is the bearish signal that we want to see to give
us some conviction to the downside.  But look at how we're
starting to see a rebound in these bullish percent lines, which
are now threatening to cross back above the 10-dmas.  We're also
starting to see the CCI oscillator creep back over the -100 line
and head back towards zero.  What does that mean?

I think we are likely watching a variant of the pattern of last
December and January play out.  We got the primary bearish cross
in mid-June (early December) and then after a brief rebound
following the initial dip, we ought to get a second bearish cross
at a lower level of bullish percent sometime in July, leading to a
similar pattern to that seen in January.  For now, it is all
speculation and we need to see how things play out.  As I said
above, I think the guidance provided in the July earnings cycle
will be pivotal in determining if we are at near the end of the
latest bear market rally, or if the market is just taking a
breather before continuing in its cyclical bullish trend.

So without further ado, let's take a look at our current list of
plays and see what, if anything transpired in the holiday-
shortened week.


AIG - That pesky $54.50 support level certainly proved its
validity last week, didn't it?  Just when it looked like AIG might
really break down (finally) the bulls arrived to support the stock
at Tuesday's morning low, which happened to be $54.20.  Close, but
no cigar, as we needed a print at $54 to generate a new PnF Sell
signal.  Wednesday's strong rebound ran out of steam just below
the intersection of the 50-dma and 200-dma, but I'm afraid we
won't be able to rejoice until that support at $54 is broken.  I
suspect AIG is going to need to see more internal weakening in the
broad market before it is going to be able to break lower as I
believe it should.  In the meantime, it is a waiting game, where
we watch to see whether that internal weakening will arrive in
time to head off the Buy program that is destined to break the
stock above resistance.  I still favor new entries on failed
rallies below $59, but would advise caution until we start to see
that internal weakness in the broad market or more weakness in the
IUX index.

AMGN - As we said early on, AMGN isn't going to tear up the
charts, but it ought to be a consistent gainer.  That it has been,
with the stock ever so gradually continuing to paint its trend of
higher lows.  At this point, it is all about managing the
position, as we shouldn't be able to suffer a loss unless there is
a catastrophic news event overnight.  You see, AMGN has been
riding higher along its 50-dma for 6 months now and not once has
the stock violated that average on a closing basis.  I still
expect AMGN to reach at least $70 and quite possibly the $72 PnF
bullish price target before the trend changes perceptibly.  We got
a favorable entry just above $60 and now it is just a matter of
steadily advancing our stop higher, keeping it just below the 50-
dma.  This weekend, that stop rises to $63.50.  Traders still
interested in taking a position can consider a rebound from above
the $64 level as a viable entry point.  One other point I'll make
is that AMGN is currently on the regular OI Call list and the play
is being managed in a similar manner there.  If looking for intra-
week commentary on this particular play, may I suggest following
the updates in the regular play section.

QQQ - Is anyone else tired of this incessant back and forth range?
A breakdown isn't a breakdown and a breakout never quite
materializes, as QQQ has been trapped between $29.50-31.00 for a
month now and I see little sign of the range breaking anytime
soon.  In order for this play to perform, we'll need to see the
NDX internals weaken sufficiently for the bullish percent chart to
issue a bear confirmed condition and there's more work to be done
on that front.  I still think failed rallies below the $31 level
look attractive for new entries into the play.  Entries near that
level provide a quite favorable risk/reward ratio with our stop at
$32.25 and a minimum downside objective of $27.50 and a solid
possibility of a test of $26.

Watch List:

DJX - If I had known it would require the patience of Job in
waiting for a viable entry in this DJX play, I would have waited a
couple more months before adding it to the Watch List.  That's
right, the DJX has now been sitting dormant on that list for two
whole months, but I think the time for action is drawing near.
I've continued to hear the DOW 10,000 number bandied about in
recent weeks, but I really don't know that it is achievable.
We're looking for a return to the recent highs to give us a
favorable entry in the $93.50-94.00 area.  We'll initially set our
stop rather wide at $96.25 and will look for a pullback into the
$85-86 area as an initial target for harvesting partial gains.
Note that we would still really like to see the VIX under 20
before that entry materializes -- we'll just have to see how
things shake out as we head into the July earnings season.

HD - It is almost as though last week didn't happen, as the price
pattern on HD certainly didn't.  Oh there was a failed rally
attempt on Monday and a failed selloff on Tuesday, but the stock
ended the week less than a dollar from where it ended the week
before, as the trend of riding up along the bottom of the
ascending channel continues.  We're looking for this pattern to
change with a rejection from the vicinity of strong resistance at
$35 and that just might coincide with the start of earnings
season, which really kicks off the week of July 14th.  HD doesn't
report until the third week of August, so there is plenty of time
for weakness to take hold in the meantime.

SMH - Contrary to what you might think, I'm relieved to see the
rebound in the Semiconductor index (SOX.X) and the SMH.  In fact,
it is exactly the kind of price action we want to see to provide a
favorable entry.  The $400 resistance level should be a solid
obstacle for the bulls, and that coincided nicely with the $31
level in the SMH.  This is an aggressive play, but there's no
reason to rush into it.  We want to see evidence of price weakness
AFTER trading near the top of that entry zone before playing.  In
fact, I'm going to shift that zone slightly upwards this weekend
to $30.50-31.50 area, giving us a more favorable risk/reward with
a stop set at $33.  My initial target will be for a drop to the
$26 level, although a test of the 200-dma by the September-October
timeframe is not out of the question.

Radar Screen:

GS - We're catching a bit of a bid here off the recent lows, but
not enough that I want to add GS to the Watch List just yet.  I'm
really only interested in it if we can get the stock back up above
$90.  Perhaps another week will give us an indication of our odds
of getting that lucky.

LEH - Here's another Brokerage stock that is really showing some
relative weakness over the past couple weeks.  I think it would be
foolish to chase it lower right now with a fair amount of
congestion just below current levels.  But if the bulls can manage
to prop it up over the next couple weeks, then we just might be
able to gain a favorable entry, ideally in the $71-72 area on a
rollover from the bottom of the recently broken ascending channel.

WMT - Something about WMT is bothering me, but I just can't put my
finger on it.  The stock is underperforming the Retail index
(RLX.X), but not enough to give us any bearish conviction.  I'm
left wondering this weekend whether WMT has become like MSFT in
that it is so large that it neither moves enough up or down to
make it a viable trading vehicle.  I'll continue to watch it, but
wanted to note that I'm losing interest.

ADBE - Finally a real rebound!  It's been weeks that I've been
wondering if ADBE would ever lift off the mat, but I had a strong
feeling that chasing it lower would be a fool's errand.  As I've
mentioned before, there are some real ugly skeletons in the
company's closet on the fundamental side and now the technicals
are starting to become more favorable to the bears.  A
continuation of this rebound should have ADBE moving to our
bearish Watch List next week.

LEN - With bond yields on the rise over the past couple weeks, it
is no great surprise that we're starting to finally see some real
weakness in the Housing stocks.  But we're still quite premature
to be jumping into new bearish long-term trades in the sector.
LEN is one of the few stocks in the sector that has LEAPS
available, so our choices are rather limited.  I'm going to be
watching the next attempt on new highs in LEN for an indication as
to whether the bullish enthusiasm is truly waning or if there's
another bullish leg in store.  When it does weaken, it could be
abrupt and sharp, but hopefully we'll get a favorable opportunity
to enter up near the recent highs.  Last week LEN hardly budged at
least between last Friday and this Thursday's close.  I suspect we
have a bounce in our future, and the quality of that bounce will
determine whether there is a viable play here.

BBH - As strong as the temptation is to short into the recent
rally in the Biotech sector, I can't justify it, especially when
we're already leaning bullish with our AMGN play.  I'm going to
keep BBH here though, because if the uptrend in AMGN fails, then I
think that will be a strong indication that it is time to shift
BBH to the Watch List.  Eager and aggressive traders might
consider an early play on another failure below the $135 level,
looking for a return back to the $100-110 area.

RIMM - With the strength in the Wireless and Internet space, RIMM
has had quite a run off of its March lows, consistently working
higher in a neat little ascending channel.  But that channel is
fast approaching some formidable resistance near $24.  I don't yet
see any signs of weakness on the chart, but the first indication
of such will be a break below the bottom of the channel.  The
strategy will be to wait for the breakdown and then look to enter
bearish positions on a failure to then get back into the channel.
This will still take a few weeks (I expect) to set up, but once it
does, RIMM could give us a very nice ride back to the $16-17 area,
which the most recent breakout took place.

GM - I really didn't expect GM to spend the week languishing
lower, but I'm certainly not going to be suckered into chasing it
lower.  Either another irrational rally arrives to give us a
favorable entry point in the $39 area, or I'll be content to look

SNDK - Alright, I know you're going to think I've taken leave of
my senses, but I really like SNDK and to the long side.  The stock
has been on an absolute tear in recent months and the PnF chart
has a bullish price target above $70.  This is the kind of trend
I'd like to get aboard, but entering chase mode is a loser's game,
especially with a long-term position in a toppy market.  But if we
can get some healthy consolidation, SNDK might make a strong
candidate for hedging our bets and looking for that fabled end-of-
year recovery.  Fortunately, this play isn't predicated on hype
and hope, but on the strong earnings growth the company appears to
have revived in the past few quarters.  I want to see a pullback
into the $38-40 area before considering it a play though.

Closing Thoughts:

I must admit that I'm still in a state of indecision with respect
to the market.  I really have no interest in trying to game new
bullish long-term trades in such an overextended market, but at
the same time, we can see by the performance of the few plays
currently in the Portfolio that it doesn't pay to get overly
bearish until the market gives us some indication of real
weakness.  We haven't seen that yet.  I fell the top of this rally
is close at hand and expect the July earnings cycle to help it
along.  But that is little more than an educated guess and until I
have more to go on than that, I'll continue to be shy about adding
more plays onto the Watch List and then the Portfolio.  I like the
new plays we added last week and I think I'm going to leave the
Watch List alone this week.  Take advantage of the long weekend
and rest up.  I suspect that the summer of 2003 is not going to be

Have a safe and (mostly) sane weekend!  For those of you that are
stateside, may I suggest taking a few moments to reflect on the
significance of the holiday and what it means to us in this
dynamic profession we have chosen.


LEAPS Portfolio

Current Open Plays


AMGN   05/21/03  '04 $ 60  YAA-AL  $ 7.00  $10.00  +42.86%  $63.50
                 '05 $ 60  ZAM-AL  $10.90  $14.10  +29.36%  $63.50

AIG    04/24/03  '04 $ 55  AIG-MK  $ 5.60  $ 4.30  -23.21%  $61.00
                 '05 $ 55  ZAF-MK  $ 8.50  $ 7.50  -11.76%  $61.00
QQQ    05/27/03  '04 $ 27  KLF-MA  $ 1.70  $ 1.25  -26.47%  $32.25
                 '05 $ 27  ZWQ-MA  $ 3.10  $ 2.40  -22.58%  $32.25

LEAPS Watchlist

Current Possibles



DJX    05/04/03  $93.50-94.00  DEC-2003 $ 92  DJV-XN
                               DEC-2004 $ 92  YDK-XN
HD     06/29/03  $34-35        JAN-2004 $ 32  HD -MZ
                               JAN-2005 $ 30  ZHD-MF
SMH    06/29/03  $30.50-31.50  JAN-2004 $ 30  SMH-MF
                               JAN-2005 $ 30  ZTO-MF

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We're Already Naked, Why Waste The Opportunity?
By Mike Parnos, Investing With Attitude

Independence Day!  What a concept!  What a great day for our
country.  Freedom is a beautiful thing.  I've had a few
"independence days" of my own – two divorces and the day they
invented cable TV.  All good reasons to celebrate.  Hey, it's the
American (and CPTI) way.

If you happen to be going to Barcelona this week, you can run with
the bulls for five days.   It's a little like the risk of trading
naked.  You can run in front and risk your life, or run in back.
Either way, you'd better watch your step or pay a steep price.


Trading In The Buff – Is It Ever Enough?
Last Sunday we discussed the "Nekked Strangle."  It consisted of
selling a naked put and a naked call 3-4 months out.  Time was
working for us.  If the underlying stock finished in between the
two sold strike prices, the premium was kept and we went to play
bingo with the profits.  Since we're already "nekked," here is
another trading strategy using uncovered options for your

Introducing "CC & Friends"
This week's strategy we'll call "CC & Friends."  It's another
neutral strategy. That means we don't have to pick a direction.
It's perfect for those who don't have the time to watch their
positions all day.  Basically, it consists of a covered call with
two additional short (naked) calls.  I suppose if you're going to
be naked, it's more fun to do it with friends.

At this writing KLAC is trading at about $47.50.
Buy 100 shares of KLAC @ $47.50
Sell 3 contracts of KLAC September $47.50 calls @ $3.90  = $11.70

Let's look at the range we've created by taking in the $11.90.
We'll create a chart showing profit and loss figures for each
finishing price within the range.

55 – ($310)
54 – ($110) – Bail Out Point
53 -- $90
52 -- $290
51 -- $490
50 -- $690
49 -- $890
48 -- $1,090
47.50 -- $1,190
46 -- $1,040
45 -- $940
44 -- $840
43 -- $740
42 -- $640
41 -- $540
40 -- $440
39 -- $340
38 -- $240
37 -- $140
36 -- $40
35 – ($60) - Bail Out Point
34 – ($160)

Notice how the profit figures go down in $100 increments.  That's
because the $1,190 ($11.90 x 100) acts as a cushion for the 100
shares of stock.  For every point the stock goes down, another
$100 of the cushion is used up.  When it's finally down between
$35 and $36, the cushion is exhausted (I'd be tired, too) and it's
time to GTFO.

On the upside, we have two short options working against us.  That
means that when KLAC increases by $1.00, each of the two short
options uses up $100 of the premium credit.  So it amounts to $200
per point.  That's why the upside bail out parameter is closer to
the trading strike ($47.50) than the downside bail out parameter –
which is going down at only $1.00 per point.

Calculating Our Profit
If, at September expiration, KLAC finishes anywhere between $36
and $54, we will make money.  The $1,190 we took in as credit is
the maximum profit – which we would make if KLAC finished right at
$47.50.  We will make "some" profit if KLAC finishes within the
range.  Check it out on the chart above.

Covering Our Assets
We have to establish exit points at which we bid farewell to CC &
Friends.  We have to ADHERE STRICTLY to these exit points to
protect ourselves.  No hoping. No praying. No begging.  Just
getting out when you're supposed to.  Our exit points should be
the short strike plus/minus the total premium taken in.  In our
a) upside exit point = $54
b) downside exit point = $35
If one of the outside parameters (exit points) is hit, you must
close out (buy back) ALL the option positions AND sell the stock

This is an opportunity to take advantage of the ability to place a
GTC (Good Till Cancel) contingency trade to protect yourself.  You
could give instructions that, when KLAC trades at $35 or $54, you
will buy back the short options and sell the stock.  There's your
discipline – already built in.

Picking Your Stock & Your Friends
Here, ideally, we're trying to find stocks that have overpriced
options.  At the same time, we would like to use a stock with a
history of staying within a range.  We've created a nice big
range.   You'll want to use either out-of-the-money or at-the-
money options in this strategy.

Note:  The prices of KLAC and the options in this strategy are
approximate and not based on Thursday's closing prices.

Margin Calculations
How do we calculate the margin requirement for our straddle?
According to the CBOE Margin Manual (which is commonly used among
brokers), the formula is:
a)  20% of the underlying, plus
b)  the total amount of premium taken in, less
c)  the amount the option is out of the money

Let's apply our position to this formula -- the $47.50 call:
a) 20% of $47.50 = $9.50 x 100 shares = $950, plus
b) $3.90 x 100 shares = $390
c) sold at-the-money options, so OTM credit is not applicable
Maintenance for one uncovered $47.50 call is $1,340
Total maintenance for the two $47.50 calls is $2,680

The maintenance for these two uncovered calls will fluctuate as
KLAC moves up and down.  Make sure you have sufficient money or
marginable securities in your account to cover the requirement.



July Position #1 – LLTC Baby Condor – Closed at $33.15
Sell 10 contracts of LLTC July $35 calls @ $1.05
Buy 10 contracts of LLTC July $37.50 calls @ $.45
Net credit is $.60
Sell 10 contracts of LLTC July $30 puts @ $.75
Buy 10 contracts of LLTC July $27.50 puts @ $.40
Net credit is $.35
Total credit of $.95.  Risk is $1.55 ($2.50 - $.95)
Linear Technology (LLTC) was one of our profitable quickies.  We
now want to try to establish a slightly longer relationship.
We've created a maximum profit range of $30 to $35 and a safety
range of  $29.05 to $35.95.  Maximum profit is $950.  So far, so

July Position #2 – SPX Iron Condor – Closed at $985.70
Sell 4 contracts of SPX July 940 puts
Buy 4 contracts of SPX July 925 puts
Net credit: $1.50
Sell 4 contracts of SPX July 1025 calls
Buy 4 contracts of SPX July 1040 calls
Net credit: $2.55
Total credit: $4.05.  Risk is $10.95 ($15 - $4.05)
Here we go again.  The range is 940 to 1025.  I'm still
anticipating (what do I know?) that pullback we never really got
in June.  I've reduced the number of contracts to four to reduce
our exposure.  This still may be a bit aggressive for some of you.
Be careful and stay within your risk tolerance.
Maximum profit is $1,620.  Also, so far, so good.

July Position #3 – DJX – Bear Call Spread – Plus - $90.70
We're due to experience the summer doldrums – and why shouldn't
the DOW participate?  We're going to establish a bear call spread
and use that money to buy some puts.  Here we go.
Sell 15 contracts of DJX July $90 calls @ $1.90
Buy 15 contracts of DJX July $92 calls @ $1.00
Net credit of $.90 X 15 contracts = $1,350

Now, you can just leave that position alone and, if the DOW
finishes below 9000 at July expiration, you keep the $1,350.
Your exposure would be $1.20 (9200 – 9000) X $1,800.  Your maximum
profit would be $1,350.

Position #4 – Ongoing QQQ ITM Baby Strangle – Currently at $30.58
In May we bought 10 contracts of the July QQQ $30 puts @ $2.05 and
bought 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 off 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

July Position #3 – RUT Iron Condor – Aborted.
We were going to put on an Iron Condor with a 420/480 range.
Either I was drunk when I came up with the numbers, or the
premiums changed dramatically on Monday morning.  Regardless, with
premium gone, the proposed position was aborted.

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
CPTI Master Strategist and HCP


Elliott Wave Play Updates
By Steve Gould


Chart: DJX update 7/3/2003

The net position of the Dow in relation to when we bought the spread is
the same.  We are losing time value.  I suspect that the play is going
to move one way or the other after the holiday weekend.  If nothing
happens here shortly, we may have to roll this over to January.


The original option values on 6/6/2003 were

DJX – 90.62

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Buy        DJVIN    SEP 92      Call  2.80  3.00    0.51   15
Buy        DJVUJ    SEP 88      Put   2.70  2.90   -0.33   23
                                      ----  ----   -----
                                      5.50  5.90    0.18

Current values on 7/3/2003 are

DJX – 90.70

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Buy        DJVIN    SEP 92      Call  2.10  2.35    0.45   16
Buy        DJVUJ    SEP 88      Put   2.10  2.30   -0.35   21
                                      ----  ----  ------
                                      4.20  4.65    0.10


Chart: QQQ update 7/32003

The QQQs have actually moved up in value which by all rights should not
have affected the overall spread price.  However, because of the
increase in volatility on Friday, the play is now profitable.  I suspect
there will be more increases in volatility over the coming weeks.  If
you had bought multiple contracts of this play (i.e. say you bought 10
positions), sell 10-20% of them.

(I am looking at two quotes here and am getting different values.  My
broker (real time) quotes 4.00/4.20 and the CBOE quotes 2.70/2.80.  I am
not sure which is correct.  Obviously, if you can get 4.00/4.20 and
liquidate a few contracts, do so otherwise, we are still holding as the
above analysis used faulty data.)


The original option values on 6/13/2003 were

QQQ – 29.96

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Buy   2    KLFME   Jan 04 31    Put   3.00  3.20   -0.44   32
Sell  1    QQQSK   Jul 03 37    Put   6.90  7.10    0.99   41

Credit: .50

Current values on 7/32003 are

QQQ – 30.58

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Buy   2    KLFME   Jan 04 31    Put   4.00  4.20   -0.45   43
Buy   2    KLFME   Jan 04 31    Put   2.70  2.80   -0.45   43
Sell  1    QQQSK   Jul 03 37    Put   6.40  6.60    0.94   58

Liquidation 1:  1.60 + .50 =  2.10
Liquidation 2: -1.20 + .50 = -0.70
(see notes above)


Chart: BA update 7/32003

BA is continuing its wave 4 correction.  The minimum retracement level
of 25% has been reached, but the oscillator indicates more of a
correction is forthcoming. Stochastics still indicate we are due for an
upward bounce.  This is normal and should not affect the wave count.


The original option values on 6/17/2003 were

BA – 36.15

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Sell  1     BAGF   Jul 03 30    Call  6.10  6.40   -99.5   29
Buy   2     BAAU   Jan 04 37.5  Call  2.70  2.85    52.6   25

Credit: 0.40

Current values on 7/3/2003 are

BA – 34.58

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Sell  1     BAGF   Jul 03 30    Call  4.80  5.00   -98     35
Buy   2     BAAU   Jan 04 37.5  Call  1.75  1.85    42     24

Liquidation value: -1.50 + .40 = -1.10


Chart: T update 7/3/2003

T has retraced 38% so far.  The short term oscillator indicates a more
extensive retracement forthcoming, so it is best to wait before entering
this play.  Stick with the plan which is to wait until T reaches 20.50-
20.60 before initiating the spread.

We are now using the August call otherwise we are at too high a risk of
assignment.  The new play is now.


T: $19.42

Pos  Num  Sym  Strike   Type   Bid   Ask   Delta   Vol   OI
Sell  1   TGC  Aug 15   Call  4.50  4.70    90      0    70
Buy   2   TJX  Oct 22.5 Call  0.70  0.80    29    103 10143

Credit: $290


Where is the Dow Going?
By Steve Gould

There is a story of two older men who were sitting at a park bench
discussing their inevitable funerals.  The first man said to the
second, "What do you want them to say about you at your funeral?"
The second man thought for a moment and then said, "When people
look at me in my casket, I want them to say that I was a faithful
husband, a loving father, and a shrewd businessman."  The second
man then asks the first man, "What do you want them to say about
you?"  The first man responded instantly, "When they pass by my
casket, I want them to say, 'Look!  He's alive!'"

Just when you thought it was safe to declare the bull dead, the
Dow rallies 300 points. I can't help but think that the market
read my article last week and decided that I had not truly
capitulated.  Since a bear was still alive and kicking, the market
felt it had to teach me a lesson.

I don't think so.  I think we are experiencing a head fake and
that this is going to be a short lived bounce.  The charts should
explain why.

Chart: Dow Daily 7/3/2003

A daily chart of the Dow since January 2000 shows a blip in the
downtrend of the last two weeks.  From looking at this chart, it
does not look as though this blip is anything more than a
corrective wave of the larger downtrend.

The Bear Case

Chart: Dow Daily Close Up 7/3/2003

Looking at a close up of the daily chart shows that most likely a
wave 1 is complete and that the wave 2 is now printing out.  The
retracement has reached the 62% mark and should be complete or
nearly so.  This chart does not show the 1 wave or the retracement
very well so let's look at an hourly chart to see if this is
indeed the case.

Chart: Dow Hourly Alternative 1

The hourly chart is a bit ambiguous and the wave count can be
labeled in two different ways.

In the first alternative, the 5 wave basic pattern is not yet
complete and should end somewhere around 8720 by Monday or
Tuesday.  The subsequent A-B-C corrective wave could take the Dow
back up to 9100.  Following that the Dow will continue down.

This alternative has several things going for it.

1. The oscillator is consistent with the count.  Although it is
best that the oscillator retrace no more than 138%, up to 162%
could be acceptable if other factors fall in line.

2. The Dow came right up to the resistance lines at slightly
greater than the 62% retracement and around the level of the last
wave 4.

A few factors against this alternative are

1. The 4 wave does not trace out a nice A-B-C correction.  This
does not mean that the count is wrong, just that the correction
may not be complete.  We may see a decline (wave B) then a rally
(wave C) and then the completion of the 5 wave.

2. If the 4 wave goes much higher, the oscillator is in danger of
surpassing the 162% retracement level.  At that point, the
probability that this wave count is accurate starts decreasing

Chart: Dow Hourly Alternative 2

In this alternative, the 5 wave basic pattern is complete and the
Dow is now undergoing the A-B-C corrective wave (even though it is
labeled 1, 2, 3).  If this is the path the Dow is tracing out, the
Dow will drop (wave B) and then rally (wave C) to complete the 2
wave.  The Dow will then continue down as it starts the 3 wave.

The retracement of the A-B-C correction is so far at 55%.
Depending on what kind of retracement it turns out to be (zigzag,
flat, etc) this could be as high as it goes.  The Dow could still
move up to 9300 with a valid wave count.  It all depends on the
form the correction takes.  We will know more as the pattern

This alternative has several things going for it.

1. The oscillator did retrace although it did so to the absolute
bare minimum at 90%.
2. The oscillator maps out an oscillator divergence.
3. The Dow came right up to the resistance lines at the 5 wave and
bounced off them.
4. If the pattern following the 5 wave is indeed an A-B-C
correction, the peak so far did hit the resistance level from the
previous 4 wave.

It is still too soon to tell which on of these alternatives will
play out although I think the second alternative is the more
likely.  In either case, it portends the Dow as continuing the
downward trend.

Unless of course it doesn't.

The Bull Case

Chart: Dow Daily Bull

In this bullish scenario the Dow is in a wave 4 retracement.  It
does not appear to be complete. Although the Dow has fulfilled the
requirement for retracement levels when it passed the 25% level,
the oscillator has not as of yet retraced at least 90%. The Dow
could still retrace down to the 8523 level and still fulfill this
wave count.  Anything lower than that and the 4 wave would overlap
the 1 wave, violating an Elliott Wave rule and pretty much
invalidate this scenario.

Should the Dow follow this path, it will most likely rally a bit
to finish out the B wave and then head down toward (but not
penetrating) the 8523 level. The Dow will then rally again to
complete the 5 wave.  Should it stay below 10400, the bear
scenario would still be in effect.  Above 10400 and the bearish
scenario would pretty much be dead.

Bottom line, I am more encouraged by the wave count that we are
indeed headed back down and the bull is either dead or very much
dieing. However I am not ready to make fully direction plays just
yet.  The scenario I wrote about last week with the retirement
money still hitting the market is not yet out of the question
although both bearish scenarios accommodate a small rally.  We may
have a small rally next week, but I think the ultimate direction
of the Dow is down.

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The Option Investor Newsletter                   Sunday 07-06-2003
Sunday                                                      5 of 5

In Section Five:

Covered Calls: A Much-Needed Holiday!
Naked Puts: A Great Time For A Holiday!
Spreads/Straddles/Combos: Independence Day Rally Fizzles!

Updated In The Site Tonight:
Market Posture: Extended Weekend - Overextended Market


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Trading Basics: A Much-Needed Holiday!
By Mark Wnetrzak

We all need to "take a break" once in a while and traders are no

History suggests that July is the best month of the third quarter.
The start of the second half of the year always brings an inflow
of cash from retirement funds and gains are usually seen during
the first few weeks of the pre-earnings season.  At the same time,
the market has been rather difficult to predict in recent sessions
and the deluge of conflicting outlooks and forecasts demonstrates
why each of us must work hard to overcome our emotions and think
independently.  It also important to take a break and reflect on
our past failures and use that knowledge to help avoid the same
mistakes in the future.

Here are some of the most important axioms I have learned in my
trading experiences:

1.  Trading demands foresight, flexibility, patience, common sense
    and above all, sound judgment in a timely manner.

2.  Trade with a plan, and know your limits before you open any
    position!  Predetermine each potential entry and exit target.

3.  Manage your losses successfully, and profits will soon follow!

4.  Buy on weakness, and add to your position as the rebound above
    a trend-line (or moving average) confirms the upside potential.

5.  Sell on strength, and close out winning positions at the first
    sign of hesitation.  Protect your profits with trailing stops.

6.  Distribute risk with portfolio diversity, and avoid financial
    uncertainty with hedged positions.

7.  Don't be influenced by outside forces, including friendly
    advice.  Ignore the crowd and think for yourself!

8.  When hope becomes a major part of your outlook, it's time for
    a break.  Fall back, take inventory, define your motives and
    try again.

9.  Don't over-trade!  In addition, be careful not to increase
    your trading after a string of winners - savor your success!

10. Whenever you expect something to occur, remember that the market
    is famous for doing the unexpected.

Have A Great Holiday!


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

Note:  Margin not used in calculations.

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

MIR      2.78    2.76  JUL  2.50  0.65    0.37*  15.1%
IBIS     7.95    8.23  JUL  7.50  0.85    0.40*   8.2%
SUPG     5.86    5.12  JUL  5.00  1.20    0.34*   7.9%
Q        5.23    5.00  JUL  5.00  0.50    0.27    6.2%
BEAV     2.69    3.22  JUL  2.50  0.35    0.16*   5.9%
CNET     5.71    6.43  JUL  5.00  0.90    0.19*   5.7%
AMR     11.32   10.13  JUL 10.00  1.70    0.38*   5.7%
WEBX    13.90   14.18  JUL 12.50  2.10    0.70*   5.2%
GP      18.96   19.15  JUL 17.50  2.05    0.59*   5.1%
SGR     12.62   12.26  JUL 12.50  0.90    0.54    5.0%
RSYS    13.00   14.10  JUL 12.50  1.05    0.55*   5.0%
BLUD    22.02   22.25  JUL 20.00  2.85    0.83*   4.7%
OVRL    20.68   20.00  JUL 20.00  1.50    0.82    4.6%
MTON     5.60    5.37  JUL  5.00  0.90    0.30*   4.6%
ASIA     5.75    8.87  JUL  5.00  1.00    0.25*   4.6%
WEBX    14.45   14.18  JUL 12.50  2.45    0.50*   4.5%
USG     19.95   19.57  JUL 15.00  5.40    0.45*   4.5%
RHAT     8.27    7.78  JUL  7.50  1.20    0.43*   4.4%
MHR      8.11    7.95  JUL  7.50  0.95    0.34*   4.1%
OI      13.91   13.36  JUL 12.50  1.75    0.34*   4.0%
BCGI    17.70   17.27  JUL 15.00  3.10    0.40*   4.0%
EDS     21.99   21.69  JUL 20.00  3.00    1.01*   3.9%
IMMU     6.91    6.18  JUL  5.00  2.15    0.24*   3.7%
SEBL    10.98    9.72  JUL 10.00  1.65    0.39    3.0%
ASIA     5.97    8.87  JUL  5.00  1.15    0.18*   2.7%
SEBL    10.85    9.72  JUL 10.00  1.40    0.27    2.5%
QSFT    12.58   11.63  JUL 12.50  1.00    0.05    0.3%
DNDN     7.66    6.44  JUL  7.50  1.05   -0.17    0.0%

*   Stock price is above the sold striking price.


So far, so good -- Jim's thesis about a bullish beginning in July
appears on track.  Interesting that it also coincided with a test
of the 30-day MA of the major indices.  So the question is, will
history repeat itself?  Next week surely will offer some clues.
If we do move a bit higher and then fail (double tops anyone?),
it could get ugly.  As always, monitor closely any positions that
you do not want to own.  Two positions that will be shown closed
next week will be Quest Software (NASDAQ:QSFT) and Dendreon
(NASDAQ:DNDN) -- in the name of capital preservation.  We will
also show Siebel Systems (NASDAQ:SEBL) closed in light of their
earning's warning on Thursday.  Better safe than sorry, especially
if a weaker second half in July is expected.  Other issues to
consider for an early exit include: SUPG, Q, AMR (key moment),
SGR, RHAT, and MHR.  

Positions Previously Closed:  None


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

SVNT    5.30  JUL  5.00  QTG GA  0.60  2047    4.70  14  13.9%
USG    19.57  JUL 15.00  USG GC  4.90  6631   14.67  14   4.9%
CYBX   24.04  JUL 22.50  QAJ GX  2.00  1551   22.04  14   4.5%
LEXR   10.85  JUL 10.00  EQG GB  1.05  1013    9.80  14   4.4%
RFMD    5.89  AUG  5.00  RFZ HA  1.15  3586    4.74  42   4.0%
THOR   16.36  JUL 15.00  TQU GC  1.60  689    14.76  14   3.5%

Company Descriptions

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

SVNT - Savient  $5.30  *** What's Up Doc? ***

Savient Pharmaceuticals (NASDAQ:SVNT) is engaged in the research,
development, manufacture and marketing of pharmaceutical products
that address unmet medical needs in both niche and larger market
segments.  The company distributes its products on a worldwide
basis primarily through a direct sales force in the U.S., the
United Kingdom (oral liquid products) and Israel, and through
3rd-party license and distribution relationships elsewhere.
Through a combination of internal research and development,
acquisitions, collaborative relationships and licensing, the
company has assembled a diverse drug pipeline.  SVNT, formerly
Bio-Technology General, rallied sharply Thursday on no news,
though there is some speculation that clinical trial results
will be released shortly.  We simply favor the bullish breakout
on heavy volume above near-term resistance and investors can
use this position to establish a bullish, low-risk cost basis
in the issue.  Target shooting a lower net-debit should be a
viable way to increase downside protection, as well as the 
potential yield in the position.

JUL-5.00 QTG GA LB=0.60 OI=2047 CB=4.70 DE=14 TY=13.9%

USG - USG Corp.  $19.57  *** Asbestos Speculation ***

USG Corporation (NYSE;USG) produces a range of products for use
in new residential, new non-residential and repair and remodel
construction, as well as products used in certain industrial
processes.  Its operations are organized into three operating
segments: North American Gypsum, which manufactures Sheetrock
brand gypsum wallboard and related products in the United States,
Canada and Mexico; Worldwide Ceilings, which manufactures ceiling
tile in the United States and ceiling grid in the United States,
Canada, Europe and the Asia-Pacific region, and Building Products
Distribution, which distributes gypsum wallboard, drywall metal,
ceiling products, joint compound and other building products
throughout the United States.  Shares of companies with asbestos
liabilities have rallied sharply recently after legislative
progress raised the probability of a national fund to pay asbestos
injury claims.  Traders can use this position to speculate on the
outcome with a cost basis closer to near-term technical support.

JUL-15.00 USG GC LB=4.90 OI=6631 CB=14.67 DE=14 TY=4.9%

CYBX - Cyberonics  $24.04  *** On The Rebound ***

Cyberonics (NASDAQ:CYBX) designs, develops, manufactures and
markets the NeuroCybernetic Prosthesis, an implantable medical
device that delivers a novel therapy, Vagus Nerve Stimulation,
for treating epilepsy and debilitating neurological, psychiatric
diseases and other disorders.  In July 1997, the NCP System was
approved by the United States Food and Drug Administration for
commercial distribution in the United States for the treatment
of epilepsy, which the firm sells using its own employee-based
direct marketing organization.  In addition, the NCP System is
marketed internationally for the treatment of epilepsy (mainly
in Europe) using a combination of Cyberonics' own direct sales
organization and independent distributors.  During fiscal 2001,
the firm obtained approval for commercial distribution of the
NCP System for the treatment of depression in Europe and Canada.
After disappointing earnings in May, Cyberonics rallied in June
on news that Boston Scientific (NYSE:BSX) had purchased about a
15% stake in the company.  This week, CYBX rallied after the
company said it had received European approval to sell its vagus
nerve stimulation device for treating epilepsy and depression
in patients resistant to standard therapies.  The stock is once
again testing near-term resistance and traders can speculate on
the performance of the issue with this short-term position.

JUL-22.50 QAJ GX LB=2.00 OI=1551 CB=22.04 DE=14 TY=4.5%

LEXR - Lexar Media  $10.85  *** Rally Mode! ***

Lexar Media (NASDAQ:LEXR) designs, develops and markets high-
performance flash cards and connectivity products marketed as
"digital film" to the digital photography market, as well as to
other markets utilizing portable digital storage media for the
capture and retrieval of digital content.  The company's digital
film products enable customers to capture digital images and
download them to a personal computer for editing, distributing
and printing.  Lexar Media offers flash cards in the 5 primary
formats used by digital cameras and other electronic devices:
CompactFlash, Memory Stick, SmartMedia, Secure Digital Card
and MultiMedia Card.  Lexar continues to rally higher, reaching
a new 2-year high on heavy volume, which suggest further upside
potential.  With earnings due on July 17, traders can speculate
on the company's future with this position.  Try target shooting
a lower net-debit to improve both the cost basis and potential

JUL-10.00 EQG GB LB=1.05 OI=1013 CB=9.80 DE=14 TY=4.4%

RFMD - RF Micro Devices  $5.89  *** Bottom Fishing! ***

RF Micro Devices (NASDAQ:RFMD) is a designer, developer, producer
and marketer of proprietary radio frequency integrated circuits
(RFICs), primarily for wireless communications products and
applications.  The company's products are included in cellular
and personal communications service (PCS) phones, base stations,
wireless local area networks (WLANs) and cable television modems.
The company offers a broad array of products, including amps,
mixers, modulators/demodulators and single chip transmitters,
receivers and transceivers that represent a substantial majority
of the RFICs required in wireless subscriber equipment. These
ICs perform the transmit and receive functions that are critical
to the performance of wireless and PCS phones.  Rf Micro has 
been forging a Stage I base for almost a year with strong support
around $5.  Regardless of the recent slump in share value, RFMD
is one of the top companies in its sector and is a core holding
for many institutional investors.  The current technical outlook
is recovering and this position offers a favorable reward potential
at the risk of owning this industry-leading issue at a reasonable
cost basis.  This August position should offer target-shooters a
fair chance at a lower net-debit entry point than shown here.

AUG-5.00 RFZ HA LB=1.15 OI=3586 CB=4.74 DE=42 TY=4.0%

THOR - Thoratec  $16.36  *** Rally On No News! ***

Thoratec (NASDAQ:THOR) offers 2 complementary circulatory support
product lines, the Thoratec Ventricular Assist Device system (VAD
system), an external device for short- to mid-term cardiac support,
and the HeartMate Left Ventricular Assist system (HeartMate), an
internal device for longer-term cardiac support.  In addition to
its cardiac assist products, the company offers vascular access
grafts used in hemodialysis for patients with end-stage renal 
disease.  The company is also developing a small-diameter access
graft for use in coronary artery bypass graft surgery.  Thoratec
also sells whole-blood coagulation testing equipment for use in
bedside anticoagulation management, coagulation screening and skin
incision devices for the drawing of blood from adult, children and
infant patients.  There's not much news on Thoratec to explain
Thursday's continued rally but the technical indications suggest
the issue has successfully completed a recent consolidation and
is poised for future gains.  In addition, the fundamental outlook
for the company is excellent and the drug sector is performing
very well; both factors that lead to a bullish position in the
issue.  Target shooting a lower net-debit will offer a higher
potential yield and increase the downside protection in the

JUL-15.00 TQU GC LB=1.60 OI=689 CB=14.76 DE=14 TY=3.5%



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

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

FLE    10.45  JUL 10.00  FLE GB  1.00  0       9.45  14  12.6%
SCSS   18.94  JUL 17.50  QSL GW  2.00  1054   16.94  14   7.2%
LENS    7.57  JUL  7.50  DVU GU  0.30  0       7.27  14   6.9%
ATYT   10.40  JUL 10.00  QFY GB  0.70  2201    9.70  14   6.7%
WDC    12.70  JUL 12.50  WDC GV  0.55  6740   12.15  14   6.3%
PLXT    5.35  AUG  5.00  PIU HA  0.75  0       4.60  42   6.3%
IBIS    8.25  AUG  7.50  UIB HU  1.25  20      7.00  42   5.2%
FLSH   13.12  JUL 12.50  FFU GV  0.90  485    12.22  14   5.0%
FWHT   19.91  JUL 17.50  HFQ GW  2.80  192    17.11  14   5.0%
IGEN   33.76  JUL 30.00   GQ GF  4.40  7983   29.36  14   4.7%
CIEN    5.51  AUG  5.00  EUQ HA  0.80  1033    4.71  42   4.5%
VICL    5.51  AUG  5.00  VAQ HA  0.80  96      4.71  42   4.5%
LWSN    7.71  AUG  7.50  QPA HU  0.65  226     7.06  42   4.5%
PKTR   18.00  JUL 17.50  XOU GW  0.85  220    17.15  14   4.4%
NXTL   18.38  JUL 17.50  FQC GS  1.20  20880  17.18  14   4.1%
ASKJ   14.19  JUL 12.50  AUK GV  1.90  707    12.29  14   3.7%


Options 101: A Great Time For A Holiday!
By Ray Cummins

Each year on July 4, Americans celebrate freedom and independence
with fireworks and family gatherings.

Most people know the story behind the Fourth of July holiday, but
relatively few take time to consider how important this date is to
the heritage of the United States.  Our country is a diverse nation
made up of unique and dynamic people, however our freedom should
not be taken for granted because it came at a price.  In the early
1700s, the colonies that made up England's eastern empire in the
"New World" were becoming unhappy with the dictatorship imposed by
a king who lived on the other side of the planet.  They were also
unhappy with the excessive taxes imposed upon their labor.  At the
same time, the colonists could not ignore the fact that they were
British citizens and that they owed allegiance to their homeland.

One of the staples of colonial life in that era was tea and yet
despite the apparent demand, the tea industry was struggling.  To
help compensate the losses among prominent English companies, King
George III levied a tax on tea sold in the colonies.  This did not
go over well with the colonists and in show of rebellion, Samuel
Adams and a group of Boston citizens dressed up as Native Americans
and dumped a cargo of the tea into Massachusetts Bay.  Of course,
the British government did not welcome this show of "patriotism"
and soldiers were posted to guard the port for future shipments.
Eventually, a small skirmish broke-out at the customs house and the
soldiers killed some of the colonists -- 5 to be exact.  The actual
number of people who died was exaggerated in the community and one
of the patriots popularizing the tragic event was none other than
Paul Revere.  His activities in the wake of the "Boston Massacre"
highlighted the current tyranny and stir up anti-British sentiment
among fellow colonists.  Along with general unrest, these events
became the catalysts that led America down the road to independence.

A group of politicians in Virginia took the first step by voting to
set up a committee to represent the colonies.  In the Fall of 1774,
the First Continental Congress met to draw up a list of grievances
against the crown, which became the first draft of a document that
would formally separate the colonies from England.  A planter from
Virginia, George Washington, was elected Commander in Chief of the
Continental Army and he began fighting the British in Massachusetts.
For the next few years, colonists fought fervently in a revolution
that would become known as America's War for Independence.  At the
same time, a war of words was being waged in Philadelphia and in
1776, the Second Continental Congress produced another draft of the
list of grievances against the crown, which John Hancock was first
to sign.  The document, called the Declaration of Independence, was
officially adopted on July 4, 1776, and over the next few weeks it
was read publicly throughout the colonies.  Although the war dragged
on until 1783, the Fourth of July holiday is based on the date the
final draft was recorded.  John Adams, the second President of the
United States, is often credited with starting the tradition of
celebration.  In a note to his wife he wrote, "I believe that it
will be celebrated by succeeding generations as the great anniversary
festival... it ought to be celebrated by pomp and parade, with shows,
games, sports, guns, bells, bonfires and illuminations from one end
of this continent to the other..."

So, on July 4, 1776, we claimed our independence from England and
Democracy was born.  Now on this day every year, Americans take a
holiday from work and people attend picnics, parades and fireworks
shows.  The activities surrounding the Fourth of July are the true
foundation of the American dream and I am glad our forefathers
were self-motivated people willing to give their lives so we could
enjoy this day of independence in the "land of the free and the home
of the brave."


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

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

GNTA    14.21   13.74  JUL 10.00  0.50    0.50*   4.6%  13.0%
CBST    12.95   11.39  JUL 10.00  0.40    0.40*   3.6%  11.6%
FWHT    20.33   19.91  JUL 17.50  0.45    0.45*   3.8%  11.3%
FWHT    19.14   19.91  JUL 15.00  0.40    0.40*   3.0%  10.3%
ADVS    17.74   17.60  JUL 15.00  0.45    0.45*   3.4%  10.2%
KMRT    25.20   25.73  JUL 20.00  0.50    0.50*   2.8%   9.8%
OIIM    16.49   16.62  JUL 15.00  0.30    0.30*   3.0%   8.0%
AVCT    31.21   30.97  JUL 27.50  0.70    0.70*   2.8%   8.0%
CHKP    19.94   19.69  JUL 17.50  0.40    0.40*   2.5%   7.3%
ISIL    26.48   26.76  JUL 22.50  0.35    0.35*   2.3%   7.3%
AMLN    25.45   22.02  JUL 20.00  0.45    0.45*   2.0%   7.1%
SNDK    41.20   43.05  JUL 32.50  0.40    0.40*   1.8%   6.7%
MEDI    37.71   36.82  JUL 30.00  0.60    0.60*   1.8%   6.4%
MCHP    24.86   25.68  JUL 22.50  0.35    0.35*   2.3%   6.4%
AAII    20.10   19.95  JUL 17.50  0.25    0.25*   2.1%   6.4%
SOHU    32.45   33.84  JUL 22.50  0.50    0.50*   2.0%   6.2%
CTSH    24.25   26.57  JUL 20.00  0.40    0.40*   1.8%   5.9%
PLMD    42.59   39.07  JUL 35.00  0.50    0.50*   1.6%   5.5%
NTES    33.70   37.63  JUL 25.00  0.45    0.45*   1.6%   5.4%
CVTX    34.43   31.50  JUL 25.00  0.45    0.45*   1.6%   5.3%
YHOO    32.14   34.85  JUL 27.50  0.40    0.40*   1.6%   5.0%
JCOM    45.95   47.66  JUL 37.50  0.35    0.35*   1.4%   4.9%

*  Stock price is above the sold striking price.


The holiday-shortened week ended with little fanfare - there
were no fireworks or "rockets red glare."  Analysts blamed the
bearish activity on soft data in the job market and low trading
volume likely exacerbated the downward momentum.  Quarterly
earnings will soon be upon us and those reports will set the
trend for the coming months.  Until then, monitor the positions
on the "watch" list: Cubist (NASDAQ:CBST), Amylin (NASDAQ:AMLN),
Core Therapeutics (NASDAQ:CVTX) and Genta (NASDAQ:GNTA).

Previously Closed Positions: None


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


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

For more information on margin requirements, please refer to:



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


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

SINA   23.53  JUL 20.00  NOQ SD 0.30 1446 19.70  14   3.3%  10.5%
CDWC   48.30  JUL 45.00  DWQ SI 0.80 3299 44.20  14   3.9%  10.3%
AVCT   30.97  JUL 27.50  QVX SY 0.40 211  27.10  14   3.2%   9.3%
MERQ   41.34  JUL 37.50  RQB ST 0.50 2451 37.00  14   2.9%   8.2%
AVID   38.99  JUL 35.00  AQI SG 0.45 65   34.55  14   2.8%   8.1%
NTE    41.99  JUL 35.00  NTE SG 0.30 115  34.70  14   1.9%   6.4%

Company Descriptions

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

SINA - SINA Corporation  $23.53  *** Another China-dot-com! ***

SINA Corporation (NASDAQ:SINA), formerly known as SINA.com, is an
online media company and value-added information service provider
for China and the global Chinese communities.  With a branded
network of localized Websites targeting China and overseas Chinese,
the company provides an array of services to its users including
region-focused online portals, search, directory, interest-based
and community-building channels, free and premium e-mail, wireless
short messaging, online games, virtual Internet service provider,
classified listings, e-commerce, e-learning, and enterprise
e-solutions.  In turn, SINA generates revenue through advertising,
fee-based services, e-commerce and enterprise services.  Stocks
in the "China-dot-com" group are soaring and traders who think the
recent trend will continue can speculate on that outcome with this

JUL-20.00 NOQ SD LB=0.30 OI=1446 CB=19.70 DE=14 TY=3.3% MY=10.5%

CDWC - CDW Computers  $48.30  *** On The Rebound! ***

CDW Computer Centers (NASDAQ:CDWC) is a direct marketer of various
brands of computers and related technology products and services.
CDW's extensive offering of products, including hardware, software
and accessories, combined with its service offerings, provide
comprehensive solutions for its customers' technology needs.  The
company offers more than 80,000 products, which include a wide
range of product types from manufacturers such as Cisco, Compaq,
Hewlett-Packard, IBM, Intel, Microsoft, Sony and Toshiba, among
others.  The company's value-added services include its ability to
custom-configure multi-branded solutions for its many customers
and offer technical support 24 hours a day, seven days a week.
The company has two main operating segments, corporate, which is
comprised of business customers, but also includes consumers, and
public sector, which is comprised of federal, state and local
government and educational institutions who are served by CDW
Government, a wholly owned subsidiary.  There's little news to
explain the rally in this stock; it couldn't be the distribution
deal signed with VRTS right?!?  Regardless of the reason, someone
is buying CDW shares and traders can profit from continued upside
activity in the issue with this position.

JUL-45.00 DWQ SI LB=0.80 OI=3299 CB=44.20 DE=14 TY=3.9% MY=10.3%

AVCT - Avocent  $30.97  *** Trading Range? ***

Avocent Corporation (NASDAQ:AVCT), together with its wholly owned
subsidiaries, designs, manufactures and sells analog and digital
KVM (keyboard, video and mouse) switching systems, as well as serial
connectivity devices, extension and remote access products and also
display products for the computer industry.  The firm's switching
and connectivity solutions provide information technology managers
with access and control of multiple servers and network data centers
from any location.  AVCT has struggled in recent sessions but the
trading-range support near $29, and then again at $27.50 provides a
reasonable expectation of a profitable outcome in this position.
The company is due to announce quarterly earnings on July 14, 2003.

JUL-27.50 QVX SY LB=0.40 OI=211 CB=27.10 DE=14 TY=3.2% MY=9.3%

MERQ - Mercury Interactive  $41.34  *** Testing Recent Highs! ***

Mercury Interactive (NASDAQ:MERQ) is a provider of integrated
performance management solutions that enable businesses to test
and monitor their Web-based applications.  Its software products
and hosted services help Global 2000 companies enhance the user
experience by improving the performance, availability, reliability
and scalability of their Web-based applications.  Its many hosted
services provide its customers with a cost-effective solution that
quickly meets business needs without dedicating significant time
and internal resources.  Its integrated performance management
solutions enable customers to more quickly identify and correct
problems before users experience them.  The company also provides
outsourced load testing and Web performance monitoring services
that complement its software products.  MERQ has recovered from a
recent consolidation phase and the move above near-term resistance
at $40 bodes well for its future share value.

JUL-37.50 RQB ST LB=0.50 OI=2451 CB=37.00 DE=14 TY=2.9% MY=8.2%

AVID - Avid Technology  $38.99  *** Break-Out! ***

Avid Technology (NASDAQ:AVID) develops, markets, and supports a
wide range of software, and hardware and software systems, for
digital media production, management and distribution.  Avid
Technology participates in two principal markets transitioning
from well-established analog content-creation processes to
digital content-creation tools.  Both of these markets, video
and film editing and effects and professional audio, are using
the worldwide web to collaborate and distribute video and audio
content.  The company's products, which are categorized into the
two principal markets in which they are sold, are used worldwide
in production and post-production facilities, film studios,
network, affiliate, independent and cable television stations,
recording studios, advertising agencies, government and also
educational institutions, corporate communication departments,
and by game developers and Internet professionals.  Shares of
AVID broke-out to a new "all-time" high last week and the recent
buying support near $36 provides an excellent margin of downside
protection for this speculative position.

JUL-35.00 AQI SG LB=0.45 OI=65 CB=34.55 DE=14 TY=2.8% MY=8.1%

NTE - Nam Tai Electronics  $41.99  *** 3-for-1 Stock Split! ***

Nam Tai Electronics (NYSE:NTE) is a electronics manufacturing and
design services provider to original equipment manufacturers of
telecommunication and consumer electronic products.  Through its
electronics manufacturing services operations, the company makes
electronic components and subassemblies, including liquid crystal
display panels, transformers, LCD modules, and radio frequency
modules.  The firm also manufactures finished products, including
cordless phones, palm-sized personal computers, personal digital
assistants, electronic dictionaries, calculators and digital camera
accessories for use with cellular phones.  In addition, the company
assists its OEM customers in the design and development of their
products and furnishes full turnkey manufacturing services.  Its
services include hardware and software design, component purchasing,
assembly into finished products or electronic subassemblies and
post-assembly testing.  Nam Tai recently announced that its board
of directors has approved a three-for-one split of its outstanding
common stock and investors who want to own a part of this unique
company can establish a conservative cost basis in the issue with
this position.

JUL-35.00 NTE SG LB=0.30 OI=115 CB=34.70 DE=14 TY=1.9% MY=6.4%



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

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

AMR    10.13  JUL  9.00  AMR SL 0.25 3042  8.75  14   6.2%  17.1%
NFLX   27.75  JUL 25.00  QNQ SE 0.60 2096 24.40  14   5.3%  14.6%
OI     13.36  JUL 12.50   OI SV 0.30 491  12.20  14   5.3%  13.6%
SNDK   43.18  JUL 37.50  SWQ ST 0.50 4460 37.00  14   2.9%   9.0%
MRVL   37.51  JUL 35.00  UVM SG 0.50 1760 34.50  14   3.1%   8.4%
PRX    49.70  JUL 45.00  PRX SI 0.55 612  44.45  14   2.7%   7.6%
IGEN   33.76  JUL 27.50   GQ SY 0.25 1745 27.25  14   2.0%   7.2%
JBLU   42.76  JUL 40.00  JGQ SH 0.45 936  39.55  14   2.5%   6.6%
KKD    43.61  JUL 40.00  KKD SH 0.35 1551 39.65  14   1.9%   5.4%



Independence Day Rally Fizzles!
By Ray Cummins

Stocks closed the holiday week on bearish note as soft employment
data dampened investor's hopes for a recovery in the U.S. economy.
The Dow Jones Industrial Average retreated 72 points to 9,070, led
downward by sharp losses in AT&T (NYSE:T), which was hit by a debt
rating downgrade.  The NASDAQ Composite slumped 15 points to 1,663
with a sell-off in networking companies driving the departure from
technology shares.  The Standard & Poor's 500 Index slid 8 points
to 985 despite gains in brokerage and oil service issues.  Volume
was light at 738 million shares on the NYSE and at 946 million on
the NASDAQ.  Decliners outpaced advancers 3 to 2 on the Big Board
and 6 to 5 on the technology exchange.  U.S. treasury prices fell
sharply after a surprisingly strong report on the service sector
eliminated earlier gains from the weak jobs report.  The 10-year
note slid 29/32, driving its yield higher to 3.64%.


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


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

AGN     77.24  78.36   JUL   65  70   0.50  69.50  $0.50   Open
ERTS    72.35  75.17   JUL   60  65   0.55  64.45  $0.55   Open
UNH     48.93  50.91   JUL   42  45   0.60  44.40  $0.60   Open
BGEN    46.25  39.99   JUL   37  40   0.30  39.70  $0.29  Closed
PRX     49.16  49.70   JUL   40  45   0.60  44.40  $0.60   Open
WLP     86.87  83.69   JUL   75  80   0.60  79.40  $0.60   Open
GILD    53.75  57.96   JUL   45  47   0.30  47.20  $0.30   Open
JCOM    44.35  47.66   JUL   30  35   0.60  34.40  $0.60   Open
MRK     62.59  61.14   JUL   55  60   0.50  59.50  $0.50   Open
EBAY   102.36 110.02   JUL   90  95   0.35  94.65  $0.35   Open
UNH     50.22  50.91   JUL   45  47   0.30  47.20  $0.30   Open

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

The position in Biogen (NASDAQ:BGEN) should have been closed when
the issue moved below the sold (put) strike at $40.  Watch-list
issues include Merck (NYSE:MRK) and Wellpoint Health (NYSE:WLP).


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

APC     44.46   43.86   JUL   50  47   0.40  47.90  $0.40   Open
FNM     68.55   70.12   JUL   80  75   0.60  75.60  $0.60   Open
GDT     39.95   44.26   JUL   50  45   0.60  45.60  $0.60   Open
KSS     49.45   51.85   JUL   60  55   0.60  55.60  $0.60   Open
LOW     44.15   42.12   JUL   50  47   0.30  47.80  $0.30   Open
BZH     87.00   83.45   JUL  100  95   0.75  95.75  $0.75   Open
HOV     62.12   60.76   JUL   75  70   0.65  70.65  $0.65   Open
IBM     84.92   83.95   JUL   95  90   0.45  90.45  $0.45   Open
IGEN    31.60   33.76   JUL   37  35   0.35  35.35  $0.35   Open
MHK     56.56   57.15   JUL   65  60   0.45  60.45  $0.45   Open
OEX    491.61  496.08   JUL  520 515   0.40  515.40 $0.40   Open

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

Guidant (NYSE:GDT) shares soared last week after the company said
it expects to meet or exceed the upper end of its previous outlook
for second quarter sales and earnings.  The issue was also raised
to a "Buy" at AG Edwards and with the up-trend resuming, traders
should consider closing the position to limit potential losses.
Issues on the watch-list include Igen International (NASDAQ:IGEN)
and Kohl's (NYSE:KSS).


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

NBIX    56.84  55.20  JUL   45  50   4.25   49.25  0.75   Open
GILD    53.81  57.96  JUL   45  47   2.20   47.20  0.30   Open
BSTE    48.96  49.35  JUL   40  45   4.50   44.50  0.50   Open

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


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

INTU    46.13  43.79  JUL   55  50   4.50   50.50   0.50   Open

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


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

QCOM    33.55  37.36   JUL     37    30     0.10    1.00    Open
SGR     12.62  12.26   OCT     15    10    (0.10)   0.00    Open
ESI     29.63  30.05   OCT     35    25     0.15    0.30    Open

Qualcomm (NASDAQ:QCOM) has already offered a favorable profit for
short-term traders.


No Open Positions


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

CHKP    18.05  19.69   OCT-20C   JUL-20C   0.10    1.30    Open
GDT     39.98  44.26   OCT-45C   JUL-45C   0.80    1.75    Open
BRCM    21.40  26.59   JAN-25C   JUL-25C   1.70    2.75    Open
SRNA    19.71  21.02   AUG-22C   JUL-22C   0.45    0.90    Open
VIA     44.95  43.08   AUG-47C   JUL-47C   0.70    0.40   Closed
MCDT    13.47  14.36   OCT-15C   JUL-15C   0.70    1.00    Open
BEAS    11.08  11.00   SEP-12C   JUL-12C   0.65    0.55    Open
IR      47.95  47.64   SEP-50C   JUL-50C   1.20    1.10    Open
OVER    18.24  19.25   NOV-20C   JUL-20C   1.90    2.00    Open

Closed positions in Electronic Data (NYSE:EDS), National Semi
(NYSE:NSM), Verity (NASDAQ:VRTY), and Viacom (NYSE:VIA) have
previously achieved profitability.


No Open Positions


Stock   Pick   Last   Exp.   Long  Long  Initial   Max     Play
Symbol  Price  Price  Month  Call  Put    Debit   Value   Status
TYC     17.27  18.81   JUL   17.5  17.5   1.80     2.70    Open?
RJR     36.19  36.84   AUG   37.5  35.0   3.15     3.70    Open
DG      18.64  18.66   AUG   20    17.5   1.20     1.30    Open
BSX     60.00  62.56   AUG   60    60     7.00     7.30    Open
MBI     50.24  49.25   AUG   50    50     5.20     5.00    Open
AIG     55.69  56.48   AUG   55    55     4.90     4.90    Open
FRE     50.00  53.50   AUG   50    50     5.10     5.70    Open

Tyco (NYSE:TYC) has achieved a favorable "early-exit" profit.

Questions & comments on spreads/combos to Contact Support

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


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

IRF - International Rectifier  $28.00  *** Recovery Mode! ***

International Rectifier (NYSE:IRF) is a designer, manufacturer
and marketer of power management products and a global supplier
of a type of power semiconductor, MOSFET, which stands for metal
oxide semiconductor field effect transistor.  Power semiconductors
process electricity into a form more usable by electrical products.
The company's products are divided among three main categories:
analog integrated circuits, and advanced circuit devices, power
systems and power components.  Its products are used in a range
of end markets, including consumer electronics, information
technology), automotive, aerospace and defense, communications
and industrial.

IRF - International Rectifier  $28.00

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-22.50  IRF-TX  OI=23   ASK=$0.40
SELL PUT  AUG-25.00  IRF-TE  OI=118  BID=$0.70
POTENTIAL PROFIT(max)=14% B/E=$24.70

MER - Merrill Lynch  $49.25  *** Strong Sector! ***

Merrill Lynch & Company (NYSE:MER) is a holding company that,
through its subsidiaries and affiliates, provides broker-dealer,
financing, advisory, wealth and asset management, insurance,
lending and related products and services.  The Global Markets
and Investment Banking (GMI) segment provides equity and debt
trading, capital markets services, investment banking and also
trategic merger and acquisition advisory services to its clients
worldwide.  The Company's Global Private Client segment provides
wealth management products and services to assist clients in
building financial assets and maximizing returns relative to risk
tolerance and investment objectives.  The principal subsidiaries
engaged in asset management activities conducted through the
Merrill Lynch Investment Managers brand-name include: Merrill
Lynch Investment Managers, L.P., and Merrill Lynch Investment
Managers Limited.

MER - Merrill Lynch  $49.25

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-42.50  MER-TV  OI=4208  ASK=$0.35
SELL PUT  AUG-45.00  MER-TI  OI=2314  BID=$0.60
POTENTIAL PROFIT(max)=14% B/E=$44.70

YHOO - Yahoo!  $34.85  *** Global Internet Leader! ***

Yahoo! (NASDAQ:YHOO) is a worldwide Internet business and consumer
services company that offers a comprehensive branded network of
properties and services to more than 200 million individuals
worldwide.  The company offers an online navigational guide to the
Internet via its www.yahoo.com Website, which is a guide in terms
of traffic, advertising and household and business user reach.
Through Yahoo! Enterprise Solutions, the firm also provides many
business services designed to enhance the productivity and Web
presence of its clients.  Yahoo! has offices in the United States,
Europe, Asia, Latin America, Australia and Canada.  

YHOO - Yahoo!  $34.85

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-27.50  YHQ-TY  OI=1810  ASK=$0.40
SELL PUT  AUG-30.00  YHQ-TF  OI=670   BID=$0.70
POTENTIAL PROFIT(max)=17% B/E=$29.60

ACS - Affiliated Computer  $45.06  *** No Rally Here! ***

Affiliated Computer Services (NYSE:ACS) is a global company
delivering comprehensive business process outsourcing and
information technology outsourcing solutions, as well as system
integration services.  The company operates in three business
segments: commercial, federal government and state and local
governments.  Affiliated provides state and local governments
technology-based services with a focus on transaction processing
and program management services, such as child support payment
processing, electronic toll collection, welfare to workforce
services and traffic violations processing.  Within the commercial
sector, it provides its clients with business process outsourcing,
technology outsourcing and systems integration services.  The firm
also serves the federal government market by providing business
process outsourcing services, which consist primarily of loan
processing services and human resources services, as well as
systems integration services.

ACS - Affiliated Computer  $45.06

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-55.00  ACS-HK  OI=129  ASK=$0.35
SELL CALL  AUG-50.00  ACS-HJ  OI=660  BID=$0.90
POTENTIAL PROFIT(max)=14% B/E=$50.60

BBBY - Bed Bath & Beyond  $38.59  *** Rolling Over? ***

Bed Bath & Beyond (NASDAQ:BBBY) is an operator of stores selling
predominantly better quality domestics merchandise and other home
furnishings typically found in better department stores.  The
company operates over 400 Bed Bath & Beyond stores in 44 states
and one territory.  Domestics merchandise includes bed linens and
related items, bath items and kitchen textiles.  Home Furnishings
include kitchen and tabletop items, fine tabletop and giftware,
basic house-wares and general home furnishings.

BBBY - Bed Bath & Beyond  $38.59

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-45.00  BHQ-HI  OI=1085  ASK=$0.20
SELL CALL  AUG-42.50  BHQ-HV  OI=2107  BID=$0.50
POTENTIAL PROFIT(max)=17% B/E=$42.85

MMM - 3M Corporation  $128.38  *** Range-Bound? ***

3M Company (NYSE:MMM), formerly known as Minnesota Mining and
Manufacturing Company, is an integrated enterprise characterized
by intercompany cooperation in research, manufacturing and sale
of products.  3M's business has developed from its research and
technology in coating and bonding for coated abrasives, the
company's original product.  Coating and bonding is the process
of applying one material to another, such as abrasive granules
to paper or cloth (coated abrasives), adhesives to a backing
(pressure-sensitive tapes), ceramic coating to granular mineral
(roofing granules), glass beads to plastic backing (reflective
sheeting) and low-tack adhesives to paper (repositionable notes).
The company conducts business through six operating segments:
Industrial Markets; Transportation, Graphics and Safety Markets;
Health Care Markets; Consumer and Office Markets; Electro and
Communications Markets, and Specialty Material Markets.  The
company's quarterly earnings are due on July 21, 2003.

MMM - 3M Corporation  $128.38

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-140  MMM-HH  OI=439   A=$0.30
SELL CALL  AUG-135  MMM-HG  OI=1816  B=$0.85
POTENTIAL PROFIT(max)=14% B/E=$135.60


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

EBAY - eBay Inc.  $110.02  *** New All-Time High! ***

eBay (NASDAQ:EBAY) is a web-based community in which buyers and
sellers are brought together to browse, buy and sell items such as
collectibles, automobiles, high-end or premium art items, jewelry,
consumer electronics and a host of practical and miscellaneous
items.  The eBay trading platform is a fully automated, topically
arranged service that supports an auction format in which sellers
list items for sale and buyers bid on items of interest, and a
fixed-price format in which sellers and buyers trade items at a
fixed price established by sellers.

EBAY - eBay Inc.  $110.02

PLAY (conservative - bullish/debit spread):

BUY  CALL  AUG-95.00   QXB-HS  OI=54   A=$16.20
SELL CALL  AUG-100.00  QXB-HT  OI=630  B=$11.50
POTENTIAL PROFIT(max)=11% B/E=$99.50


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

ADTN - Adtran  $55.69  *** Multi-Year High! ***

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

ADTN - Adtran  $55.69

PLAY (very speculative - bullish/calendar spread):

BUY  CALL  AUG-60.00  RQA-HL  OI=53  ASK=$1.85
SELL CALL  JUL-60.00  RQA-GL  OI=70  BID=$0.50

ARTI - Artisan Components  $23.42  *** Earnings Speculation! ***

Artisan Components (NASDAQ:ARTI) is a maker of high-performance,
high-density and low-power embedded memory, standard cell and
input/output intellectual property components for the design and
manufacture of complex integrated circuits or semiconductors.
The firm's products are used for the design of integrated circuits
used in complex, volume applications, such as portable computing
devices, cellular phones, consumer multimedia products, automotive
electronics, personal computers, workstations and servers.  Artisan
focuses on licensing its products and providing related services to
semiconductor manufacturers and integrated circuit design companies.
The company's quarterly earnings are due July 17, 2003.

ARTI - Artisan Components  $23.42

PLAY (speculative - bullish/calendar spread):

BUY  CALL  SEP-25.00  UAR-IE  OI=77   ASK=$2.00
SELL CALL  JUL-25.00  UAR-GE  OI=250  BID=$0.45

NSCN - NetScreen Technologies  $24.18  *** Testing Recent Highs! ***

NetScreen Technologies (NASDAQ:NSCN) develops, markets and sells a
broad family of integrated network security solutions.  The firm's
security solutions provide key security technologies, such as
virtual private networking (VPN), denial of service protection,
firewall and intrusion detection and prevention (IDP), in a line
of easy-to-manage security systems and appliances.  NetScreen's
firewall and VPN systems and appliances deliver integrated firewall,
VPN and denial of service protection capabilities in a single device
using its proprietary application-specific integrated circuits, the
GigaScreen and GigaScreen-II ASICs, and its proprietary security
operating system and applications, ScreenOS.

NSCN - NetScreen Technologies  $24.18

PLAY (speculative - bullish/calendar spread):

BUY  CALL  SEP-25.00  QKN-IE  OI=301  ASK=$2.10
SELL CALL  JUL-20.00  QKN-GE  OI=213  BID=$0.55


Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable volatility-based plays.

BAC - Bank of America  $80.01  *** Reader's Request! ***

Bank of America (NYSE:BAC) is a bank holding firm and a financial
holding company that provides a diversified range of banking and
non-banking financial services and products.  The company operates
in four primary segments: consumer and commercial banking, asset
management, global corporate and investment banking and equity
investments.  Its operations are conducted primarily throughout
the mid-Atlantic (Maryland, Virginia and the District of Columbia),
the midwest (Illinois, Iowa, Kansas and Missouri), the southeast
(Florida, Georgia, North Carolina, South Carolina and Tennessee),
the southwest (Arizona, Arkansas, New Mexico, Oklahoma and Texas),
the northwest (Oregon and Washington) and the west (California,
Idaho and Nevada) regions of the United States and in selected
international markets.  The company's quarterly earnings are due
July 14, 2003.
BAC - Bank of America  $80.01  

PLAY (very speculative - neutral/debit straddle):

BUY CALL  JUL-80.00  BAC-GP  OI=12133  ASK=$1.30
BUY PUT   JUL-80.00  BAC-SP  OI=2274   ASK=$1.25


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