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Daily Newsletter, Tuesday, 07/22/2003

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The Option Investor Newsletter                 Tuesday 07-22-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Uday and Qusay Day
Futures Markets: Dead Bad Guys
Index Trader Wrap: See Note
Market Sentiment: News and Charts
Weekly Fund Screen: Bearish Income Funds


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      07-22-2003           High     Low     Volume Advance/Decline
DJIA     9158.45 + 61.80  9174.42  9037.30 1.75 bln   1842/1386
NASDAQ   1706.10 + 24.70  1710.34  1686.15 1.72 bln   2071/1126
S&P 100   497.64 +  4.84   498.64   491.63   Totals   3913/2512
S&P 500   988.11 +  9.31   990.29   976.08
W5000    9503.48 + 89.90  9515.37  9391.00
RUS 2000  464.00 +  6.83   464.00   457.17
DJ TRANS 2576.37 +  3.80  2579.51  2558.29
VIX        20.98 -  1.14    22.38    20.96
VXN        32.45 -  0.62    33.58    32.28
Total Volume 3,740M
Total UpVol  2,723M
Total DnVol    938M
52wk Highs  281
52wk Lows    35
TRIN       0.50
PUT/CALL   0.79
************************************************************

Uday and Qusay Day

They would probably not appreciate the +100 point Dow bounce on
news of their death. Actually it was more important than that.
The Dow was headed for a retest of support at 9000 with the
morning low already 9037. Once the announcement hit the airwaves
the market turned 180 degrees and rallied to close well over
9100 once again. It was a spectacular recovery that lasted into
the close. But then tomorrow is another day.

Dow Chart


Nasdaq Chart


S&P Chart



The only economic report today was the weekly Retail Sales which
came in at +0.3% on warmer and drier weather. Seasonal summer
merchandise is reportedly selling well and relieving concerns
for the retailers. The tax credit checks are due out this week
so retailers should continue to see a pickup in sales. This was
the third consecutive weekly gain.

The major news moving the markets today, at least prior to the
Iraq news, was a very mixed bag of earnings. NVLS surprised the
street on Monday night with an upbeat outlook and decent earnings.
The company said there was a "potential" for a sustained upturn.
They warned that a delay in some orders for Japan would cause
revenue recognition problems for the next quarter but it was
only a single incident. NVLS was up +1.76 on the news.

UPS beat the street on the strength of its international business
but cautioned that it was due to past investments paying off not
an due to economic growth. They also said the only pickup in
U.S. volume was in financial document delivery for mortgage
refinancing while manufacturers showed little sign of a
turnaround.  The UPS spokesman said "throughout the second quarter
we did not see much pickup in business from the economy." The
general commentary was "no recovery yet." UPS lost -56 cents.

TXN gained +1.37 after saying the SARS fade and new models were
helping them avoid the problems of other communication chip makers.
TI is about to go head to head with QCOM on the CDMA front and
they appear to be prime to profit from the competition. TXN beat
estimates by a penny. Lehman raise its rating on AMAT, NVLS and
LRCX, which also helped the semiconductor sector.

After the bell today there was another flood of earnings:

AMZN est +0.06  actual +0.10  beat, raised guidance
AMGN est +0.46  actual +0.49  beat
BRCM est +0.09  actual +0.10  beat
ABGX est -0.38  actual -0.76  includes charges
SEBL est +0.02  actual +0.02
ATVI est +0.00  actual +0.04  beat
SUNW est +0.02  actual +0.01  miss
BSX  est +0.30  actual +0.27  miss
CPWR est +0.01  actual +0.06  beat
INVN est +0.67  actual +0.61  miss
STK  est +0.24  actual +0.27  beat
MXO  est +0.08  actual +0.03  miss
MANH est +0.21  actual +0.21
CAKE est +0.30  actual +0.30
DCLK est +0.01  actual +0.04  beat
ASKJ est +0.07  actual +0.10  beat, raised guidance
CYMI est -0.20  actual -0.15  beat
LLTC est +0.20  actual +0.21
WBSN est +0.18  actual +0.18
EFII est +0.15  actual +0.15
TRMS est -0.89  actual -0.84  miss
VTSS est -0.04  actual -0.04
BZH  est +2.85  actual +3.01  beat
RYL  est +1.80  actual +2.03  beat
ARBA est +0.00  actual -0.01  miss
WLP  est +1.39  actual +1.49  beat
COHR est -0.03  actual -0.01  beat

One of the biggest announcements came from AMZN which beat the
street with ten cents compared to estimates of only six cents.
The stock soared +$2 in after hours after AMZN raised estimates
for the full year to as much as $5.1 billion and well over the
$4.8 billion analysts had forecast. They did make about $54
million on currency translations, which enabled AMZN to post a
+$42 million profit. Think about it. The stock was beginning to
fade as the after hours session ended so maybe some others were
reading between the lines as well.

The Internet is where it is at if you believe the earnings so
far. ASKJ also beat estimates and raised guidance. They joined
YHOO, AMZN, DCLK and others in the limelight. You could list
all the Internet stocks on your fingers and have trouble filling
both hands but the survivors appear healthy.

SUNW was the disappointment for the day as they missed both
earnings and revenue. Revenue fell for the ninth consecutive
quarter for SUNW. Scott McNealy said they were looking at a
pretty tough year. Gross margins were up to 43.7% due to
aggressive cost cutting but the CFO said they would fall in
future quarters due to aggressive pricing and smaller margins
in its services business. SUNW dropped about 50 cents in after
hours to $4.31. SUNW does not provide guidance but the comments
by SUNW personnel did not give traders a warm fuzzy feeling.

SEBL announced earnings that were inline with estimates at two
cents and said they were going to cut 490 more jobs in the current
quarter. SEBL warned on July-3rd and the tone remained the same.
They said they were seeing no signs of a recovery and were faced
with growing competition for reduced technology budgets. The CEO
said "the market is quite soft" when discussing business conditions
on the conference call. SEBL warned that Q3 earnings could come
in at the low end of analysts estimates.

It was a mixed bag with cyclical companies like MMM, UTX, IR and
DE posting strong gains and drugs and tech stocks showing weakness
despite the Iraq rally. Oil companies were up despite the -5% drop
in oil prices on the Iraq news. Crude is back down in the $30 range
after hovering in the $32 area for the last week. Tomorrow will be
a strange day with no economic reports but probably a strong
reaction to the Iraq news in the overseas markets. They are likely
to open up strongly and with the confirmation of the death and
positive ID they should stay up. That sets the stage for a positive
open for us in the morning but that may be it.

While there are no economic reports there is a Fed head speaking
that will have everybody glued to the TV. Ben, printing press,
Bernanke, will be speaking late in the morning and the markets
are likely to go into suspended animation when it starts. Ben is
not likely to say anything negative about the economy but his
speech will be dissected for hints of future Fed action. He is
a strong proponent of aggressive Fed action and traders will be
hoping for a sign of coming events.

Bargain hunters took heart in the apparent holding of support by
the S&P at the 50 DMA at 975. This is critical support and it
has been tested for two consecutive days. While the bulls may
have been encouraged by the days action there was a good
possibility it was only short covering in the face of unexpected
news. The futures have rallied back to the day's highs in the
Globex session but are having trouble breaking those levels at
989. Should the markets open up on gains in Europe as expected
they will run smack into resistance at Dow 9200, S&P 1000 and
that has been very strong resistance.

Unless I missed something in the earnings news tonight we are no
closer to a recovery than we were this morning but we are +125
Dow points higher than we were at 10:30. We have been seeing
some distribution patterns that are disturbing. Today we saw a
strong bounce on light volume but the internals were weak. Over
the last week the down days have seen stronger volume with
patterns that are typical of institutional distribution. That
means funds are selling stocks instead of buying it. Trimtabs.com
reported fund inflow rose to +$2.9 billion in the week ended
July-16th but that could be the last drop from the faucet. That
is typically when the retirement funds cease to flow for another
quarter and fund companies go onto life support. With the worst
three months of the year ahead and withdrawals beating
contributions they have to plug the holes and start bailing to
keep the boat afloat. They do this by scaling down positions and
dumping weak performers to raise cash.

There is plenty of cash available according to Charles Schwab.
Their weekly report said there was nearly $4 trillion in money
markets, CDs and savings accounts that could be put into stocks
if conditions improved. In reality that is the key. We are not
seeing the economic explosion that would draw that money off the
sidelines. There is a glimmer of hope but it is just a glimmer.
It may be enough to continue to power these weekly rallies but
it does not appear to be enough to sustain them. Once the news
of the Iraqi aces passes we will be back to business as usual
and that means economic worry once again. This is a very light
economic week but another one-third of the S&P is reporting
earnings. Their guidance will be the economic news for the week.
Will investors listen to SUNW and SEBL or AMZN and ASKJ? Earnings
are like a box of chocolates. You never know what you are going
to get or how investors are going to react to the taste. Keep
those stops tight.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


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

Dead Bad Guys
Jonathan Levinson

Equities went vertical over news of the possible death of
Saddam's sons, Uday and Qusay, and then launched again on
CENTCOM's confirmation of their identities toward the end of the
cash session.  Bears who took the time to scratch their heads and
wonder at the relevance of this news to the securities markets
had little time to get out of the way.  Crude and heating oil got
dropped for 5% and 5.13% respectively.


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

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U      999	   993    984    978    968
YM03U     9247   9191   9102   9046   8957
NQ03U     1286   1275   1258   1247   1231


10 minute chart of the US Dollar Index




The US Dollar Index held at 96 support, and spent the day
climbing from those lows, finding resistance in the 96.50 area as
of this writing.  The action should have been negative for gold
in US dollars, and it was, but not nearly to the extent that we
would have expected.

Daily chart of August gold




Despite the bounce in the US Dollar Index and the somehow
significant news of the possible death of Hussein's sons, August
gold got sold very timidly, trading an intraday low of 349.70 and
closing the session down .60 at 350.40.  The oscillators moved to
confirmed buy signals, and the breakouts profiled yesterday
remain in play.

Daily chart of the ten year note yield




Treasury yields finished lightly in the red, with the five year
note yield down 2.3 basis points, the tens down 2.4 and the
thiries down 2.3 bps.  That said, as the chart reveals, there
wasn't any technical damage done to the steep uptrend above which
the ten year note yield has been trading, with a new year high
touched intraday.  We saw treasuries and equities rise and fall
together throughout the day, confirming the market liquidity
theory once again.


Daily NQ candles




The NQ finished the session higher by 21.50 at 1263, but the
action doesn't look nearly so bullish on the daily candles.
Today's print finished hear the high end of a candle which tested
the rising trendline again.

30 minute 20 day chart of the NQ




On the thirty minute candles, the picture is significantly more
bullish, with a higher low and a possible bullish ascending wedge
breakout forming into a reverse head and shoulders with the
neckline as indicated.  The oscillators are rolling over here,
and cyclically are indicating a revisit to the Monday lows.  If
the oscillators whip back up, the reverse head and shoulders and
bull wedge are looking for highs between 1300 and 1320 NQ.


Daily ES candles




The longer term outlook on ES was not improved by today's action
either, with the failed trendline farther overhead and the
oscillator downphases barely twitching despite the 15 point rally
off the intraday lows.

20 day 30 minute chart of the ES




The same bullish formations are evident on ES, but the oscillator
up-phases aren't as long in the tooth.  Today's session printed a
lower low than yesterday's opening high, but it closed just under
that high and above the breakout area of the bull wedge.  The
overnight action may well determine how far this breakout gets,
as the oscillators have grown toppy just underneath the
descending trendline.

Daily YM candles





Same story for the YM.


20 day 30 minute chart of the YM





As discussed in tonight's sentiment wrap, the move in equities
was credited to the Iraq news, but last night we saw the 30
minute oscillators on buy signals and the failure of Monday's
lows to be broken.  With those oscillators almost topped out on
the ES and YM and rolling over on the NQ, the bulls will have
their work cut out for them to rally equities above the
trendline.  The action overnight will be key.

See you at the bell!


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_072203_1.asp


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

News and Charts
Jonathan Levinson

The capture of Saddam's sons was credited for the rises in the
markets today.  Unless these two were heavily shorting equity
futures, it remains a mystery as to how or why this news swung
such a large bid.

Joe Granville once said that "News is for suckers," but it seems
evident that those who ignored it today were the ones being
played, as the indices visited yesterday's highs
contemporaneously with the wire release.  It's impossible to
predict news, and so if news isn't for suckers, then it adds an
element of chance that traders should seek to avoid.

Obviously, stop losses are the rule.  But what really happened
today?  We saw last night that some of the shorter term
oscillators were oversold and on buy signals.  The overnight
futures session saw rises that coincided with these cycle up-
phases.  However, when cash session opened, the opening move to
the lows put in a double bottom with yesterday's lows, and drove
the intraday oscillators rapidly back to oversold.

The chart conditions were susceptible to a bounce, and we had
ceased to see the same rapid-fire selling that characterized
yesterday's session.  While the news was unpredictable, the
susceptibility in the charts was not.  At this point, attentive
traders were tightening their stops, going flat, or trying on
cautious longs.  While none can predict the future, the charts
can tell us when the enthusiasm of sellers or buyers is becoming
extended, and it's at that point that we must be attentive to
surprises such as we saw today.


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

Market Averages

DJIA ($INDU)

52-week High:  9353
52-week Low :  7197
Current     :  9158

Moving Averages:
(Simple)

 10-dma: 9120
 50-dma: 8984
200-dma: 8466


S&P 500 ($SPX)

52-week High: 1015
52-week Low :  768
Current     :  988

Moving Averages:
(Simple)

 10-dma:  992
 50-dma:  976
200-dma:  903


Nasdaq-100 ($NDX)

52-week High: 1316
52-week Low :  795
Current     : 1257

Moving Averages:
(Simple)

 10-dma: 1274
 50-dma: 1212
200-dma: 1071


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

As expected the stronger market averages produced a decline in
the volatility indices.  Or as they used to be known by the "fear"
index.  We can say one thing.  From the current levels in the
VIX and VXN there is no fear in the market and that's usually a
sign of a top.  Of course we've been under the shadow of this signal
for three months now.  Maybe another rally higher will be just what
the witch doctor, I mean VIX doctor ordered (and push these to new
lows).

CBOE Market Volatility Index (VIX) = 20.98 -1.14
Nasdaq-100 Volatility Index  (VXN) = 32.45 -0.62


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.79        585,693       465,188
Equity Only    0.74        472,294       353,776
OEX            0.70         25,026        17,535
QQQ            3.49         34,959       122,120


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

Bullish Percent Data

           Current   Change   Status
NYSE          71.8    + 0     Bull Confirmed
NASDAQ-100    78.0    - 3     Bull Confirmed
Dow Indust.   83.3    + 0     Bull Confirmed
S&P 500       76.0    - 1     Bull Confirmed
S&P 100       83.0    + 1     Bull Confirmed


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

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

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

 5-Day Arms Index  0.92
10-Day Arms Index  0.87
21-Day Arms Index  1.13
55-Day Arms Index  1.12


Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.

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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    1686      2012
Decliners    1171      1026

New Highs      89       136
New Lows       26        12

Up Volume   1275M     1247M
Down Vol.    417M      463M

Total Vol.  1741M     1725M

M = millions


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

Commitments Of Traders Report: 07/15/03

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

COMMENTARY


Commercials   Long      Short      Net     % Of OI
06/24/03      405,382   447,526   (42,144)   (4.9%)
07/01/03      415,976   453,005   (37,029)   (4.3%)
07/08/03      415,053   453,720   (38,667)   (4.5%)
07/15/03      414,020   453,033   (39,013)   (4.5%)

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
06/24/03      159,405    85,182    74,223    30.3%
07/01/03      150,232    75,937    74,295    32.8%
07/08/03      152,239    74,749    77,490    34.2%
07/15/03      148,716    70,279    78,437    35.8%

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


E-MINI S&P 500

COMMENTARY


Commercials   Long      Short      Net     % Of OI
06/24/03      150,208   201,724    (51,516)  (14.6%)
07/01/03      175,893   216,993    (41,100)  (10.5%)
07/08/03      192,815   224,124    (31,309)  ( 7.5%)
07/15/03      214,274   218,765    ( 4,491)  ( 1.0%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  ( 4,491)  - 07/15/03

Small Traders Long      Short      Net     % of OI
06/24/03       84,081    44,347    39,734    30.9%
07/01/03       57,639    67,449    (9,810)   (7.8%)
07/08/03       56,394    72,090   (15,696)  (12.2%)
07/15/03       45,372    54,654    (9,282)   (9.3%)

Most bearish reading of the year: (15,696)  - 07/08/03
Most bullish reading of the year: 449,310   - 06/10/03


NASDAQ-100

COMMENTARY


Commercials   Long      Short      Net     % of OI
06/24/03       28,780     47,425   (18,645) (24.4%)
07/01/03       28,662     48,265   (19,603) (25.5%)
07/08/03       30,489     48,311   (17,822) (22.6%)
07/15/03       28,467     49,154   (20,687) (26.7%)

Most bearish reading of the year: (20,687)  - 07/15/03
Most bullish reading of the year:   9,068   - 06/11/02

Small Traders  Long     Short      Net     % of OI
06/24/03       24,519     7,064    17,455    55.3%
07/01/03       26,777     8,498    18,279    51.8%
07/08/03       26,136     9,035    17,101    48.6%
07/15/03       26,489     8,004    18,485    53.6%

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

DOW JONES INDUSTRIAL

COMMENTARY


Commercials   Long      Short      Net     % of OI
06/24/03       19,373    11,565    7,808      25.2%
07/01/03       20,504    11,871    8,633      26.7%
07/08/03       20,752    11,860    8,892      27.3%
07/15/03       21,607     7,855   13,752      46.7%

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
06/24/03        5,950     7,442   (1,492)   (11.1%)
07/01/03        5,799     6,822   (1,023)   ( 8.1%)
07/08/03        5,005     8,093   (3,088)   (23.6%)
07/15/03        5,475     9,717   (4,242)   (27.9%)

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


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******************
WEEKLY FUND SCREEN
******************

Bearish Income Funds

This mutual fund provides leveraged exposure to the most recently
issued 30-year U.S. Treasury Bond (long bond), seeking investment
results that correspond to 125% of the inverse of the daily price
movement of the long bond.  So, this fund can appreciate in value
when rates rise or investors anticipate rates will rise, the case
recently.

Income investors worry about rising rates because a 1.0% increase
in interest rates could result in a 4 percent decline in value of
the total investment-grade bond market, as measured by the Lehman
Brothers Aggregate Bond Index.  Longer-term bonds could fall by 8
percent or more, since they are more sensitive to rate moves than
short-term bonds.

So, if you are seeking protection against rising rates, this fund
may be appropriate for a portion of your income portfolio.  While
short-term bond funds minimize the negative effect of rising rate
moves, they can still depreciate in value when interest rates are
rising.

Screening/Evaluation Process

If you haven't already guessed, the fund I'm talking about is the
ProFunds: Rising Rates Opportunity ProFund (RRPIX) Investor Class
Shares.  Investor shares require $15,000 to open a regular or IRA
account.  However, the initial AIP (automatic investment program)
requires just $100 to start.  For more information or to download
a prospectus, go to the www.profunds.com website.

According to the ProFunds website, the Rising Rates Opportunity
ProFund is designed for investors that want to "actively manage"
their mutual funds, without transaction fees or exchange limits,
and also expect the price of the recent 30-year Treasury Bond to
decrease.  Since inception (May 1, 2002), this rising-rates fund
has lost approximately 25 percent.

However, the fund has a 1-week total return of 6.0% according to
Morningstar, and sports a 4-week total return of 12.7% as income
investors start to bet that rates will rise, not fall, from here.
In relation to other bearish funds, the Rising Rates Opportunity
ProFund has generated investment results that rank in the top 3%
of the group over the trailing 3-month, 12-month and YTD periods
through July 21, 2003, per Morningstar.

As the ProFunds website notes, there's no guarantee that the fund
will achieve its investment objective.  They also state that this
fund routinely employs "leveraged" investment techniques, which
can magnify gains and losses and result in higher volatility in
price (value).  Like its ProFund siblings, the fund's portfolio
investments are subject to market risks, including movements in
interest rates.  See the fund's prospectus for more information.

Fund Performance

Below is a performance summary for the ProFunds U.S. Government
Plus ProFund, which seeks investment results that correspond to
125% of the daily price movement of the long U.S. Treasury bond,
and the Rising Rates Opportunity ProFund, which seeks investment
results corresponding to 125% of the inverse of the daily price
movement of the current long bond.  Returns are through July 21.


  4-Week Total Return:
  -12.0%  ProFunds U.S. Government Plus (GVPIX)
  +12.7%  ProFunds Rising Rates Opportunity (RRPIX)
  - 1.7%  Morningstar Taxable Bond Fund Average

  YTD Total Return:
  - 4.3%  ProFunds U.S. Government Plus (GVPIX)
  + 0.7%  ProFunds Rising Rates Opportunity (RRPIX)
  + 4.8%  Morningstar Taxable Bond Fund Average

  1-Year Total Return:
  +22.1%  ProFunds U.S. Government Plus (GVPIX)
  -23.2%  ProFunds Rising Rates Opportunity (RRPIX)
  + 9.3%  Morningstar Taxable Bond Fund Average


The Stockcharts.com chart below also depicts the fund's up-trend
over the past four weeks (since mid-June).  You can see that the
fund's 50-day and 200-day moving averages have turned around, so
the Rising Rates Opportunity Fund's relative strength has gotten
much better in recent weeks.






Over the past 4 weeks, the Rising Rates Opportunity ProFund has
risen in value by 12.7%, while the average taxable bond fund is
down about 1.7 percent, per Morningstar's Quickrank tool online.
The average long-term government bond fund has lost 7.3% in the
past month.  So, while long-government funds are being hard hit,
this portfolio is thriving.

Conclusion

ProFunds Rising Rate Opportunity ProFund's total return history
is too brief to evaluate properly but you can still get an idea
of what it's capable of in a rising-rate environment.  The fund
has already run up over 12 percent in value over the past month,
so some of the opportunity has already been missed.  However, if
you feel that rates will continue to move higher over the next 6
months to year, then there may still be some opportunity left to
realize.

If you own an intermediate-term or long-term bond portfolio, you
can use the Rising Rates Opportunity Fund as a hedge against the
negative effects of rising rates.  Since ProFunds' funds have no
transaction fees or exchange limits, you can conceivably move in
and out of the Rising Rates Opportunity ProFund as your interest
rate outlook changes.  For individual investors, it is the only
mutual fund that we know of that takes advantage of rising rates.

Our guess is that they'll be more of this kind of bearish income
fund in the months ahead, as the economy recovers and rates move
higher.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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The Option Investor Newsletter                  Tuesday 07-22-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: OMC, PCAR
Dropped Puts: None
Call Play Updates: FDX, LOW
New Calls Plays: GENZ, SNPS
Put Play Updates: FITB, HD, INTU, LEH, LEN, XL
New Put Plays: BBBY


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

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


CALLS:
*****

Omnicom - OMC - close: 71.42 change: -0.19 stop: 69.99

The last several days we had grown wary of OMC, especially after
it started consolidating under its 30-dma, a previous level of
support.  However, instead of pulling the play the stock's rising
50-dma was just beneath it and should have acted as support.  We
felt somewhat safe with a stop loss under both the 50-dma and the
psychological support of $70.00.  Unfortunately, CIBC World
Markets downgraded OMC to sector perform from out perform this
morning and investors took profits early in the session before
shares rebounded.  Alas, dip buyers stepped in too late as we
were stopped out with the intraday low ringing in at $69.61.
More aggressive traders can still consider plays now that shares
have bounced but it may be prudent to wait for a little more
conviction from the bulls (like a close over $73 or $74).  The
short-term low under $70.00 this morning produced a bearish sell
signal on OMC's P&F chart and given its overbought status it
looks rather ominous.  The company also announced that it would
be releasing its Q2 earnings report on July 29th.

Picked on July 13 at $73.97
Change since picked:  -2.55
Earnings Date      07/29/03 (confirmed)
Average Daily Volume:  1.66 million
Chart =


---

PACCAR Inc. - PCAR - close: 73.50 change: +1.11 stop: 69.95

Well we tried and shares of PCAR tried but the pre-earnings ramp
up was a no-show.  Given the general market weakness the last two
weeks it was all PCAR could do to consolidate above the $70.00
level.  Shareholders shouldn't be complaining as several big
winners for the first half of 2003 have seen significant pull
backs.  The challenge now is deciphering how will investors react
to PCAR's earnings news.  Will they "sell the news" even if it's
good?  The company is set to announce Thursday morning before the
opening bell.  Estimates are for 98 cents a share.  Given the
stock's incredible gains we don't want to experience any huge
moves to the downside (a la LXK, COF and PGR) should they say
something disappointing.  Long-term investors might want to keep
an eye out for a stock split announcement, which could be
released with its earnings news.

Picked on July 08 at $73.49
Change since picked:  -0.01
Earnings Date      07/24/03 (confirmed)
Average Daily Volume:  1.24 million
Chart =



PUTS:
*****

None


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

Fedex Corp - FDX - close: 64.99 change: -1.01 stop: 61.99

It was a green day for the markets with the majority if market
sectors closing higher.  Unfortunately, it was not a stellar day
for the Transportation sector.  Even though the price of oil, a
major expense in the cost of fuel, fell substantially on the
Iraqi this afternoon the Dow Jones Transports barely budged.
Meanwhile, shares of FDX, which had traded to another new higher
yesterday and created a new triple-top buy signal on its P&F
chart, pulled back $1.00 and closed under the $65 mark.
Important news in the sector was an earnings announcement from
rival UPS.  UPS' Q2 results were positive.  Estimates were for 59
cents a share and the company beat by 2 cents.  Net income rose
from $611 million last year's Q2 to $692 million.  Revenues
soared to $8.23 billion, up 7.1%.  UPS said its international
business was stronger this quarter.  No doubt the weaker dollar
helping out there.  One might have expected FDX to rally on the
positive news but even UPS couldn't keep a gain.  We're still
positive on the play but traders might want to wait and see if
FDX offers a bounce from the $64.00 mark.

Picked on July 20 at $65.32
Change since picked:  -0.33
Earnings Date      09/23/03 (unconfirmed)
Average Daily Volume:  1.70 million
Chart =


---

Lowe's Companies - LOW - close: 47.00 change: +0.50 stop: 44.90

Continuing its pattern of relative strength, LOW gave us a great
entry point on an early dip on Tuesday.  The stock has been
consolidating its recent breakout near the $46.50 level over the
past week and the opening weakness produced a quick dip below
$46, followed by a quick consolidation and then sharp rally back
over $47.  The stock weakened a bit into the close, but still
held the bulk of its gains and looks poised to finally make
another assault on the $48 level.  Once clear of that obstacle,
LOW should work its way up to our $50 target and has plenty of
time to do so ahead of the August 18th earnings release.  We've
been watching for a dip into the $45.25-45.75 area for a solid
entry and this morning's dip appears to have been that
opportunity.  Momentum entries can be considered on a push back
over $47.50 or for more conservative traders, a clean break above
$48.05, the intraday high last Tuesday.  Maintain stops at
$44.90.

Picked on July 13th at    $46.87
Change since picked:       +0.13
Earnings Date           08/18/03 (unconfirmed)
Average Daily Volume =  4.86 mln



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

Genzyme Corp - GENZ - close: 49.76 change: +2.62 stop: 44.99

Company Description:
Genzyme Corporation is a global biotechnology company dedicated
to making a major positive impact on the lives of people with
serious diseases and medical conditions. This commitment has
driven innovation in treating both widespread diseases and rare
genetic conditions, in providing leading diagnostic products and
services, in bringing the benefits of biotechnology to the
practice of surgery, and in developing novel approaches to
cancer. Genzyme's 5,300 employees worldwide serve patients in
more than 80 countries. (source: company press release)

Why We Like It:
Set aside the media blitz today regarding Hussein's sons or the
Eiffel tower and think back to what analysts were concerned about
when earnings started last week.  You guessed it! It's earnings,
guidance going forward and the quality of the earnings being
announced.  Thankfully, that's something that GENZ can deliver
on.  The company reported earnings on July 16th and beat the
consensus estimates by two cents.  Q2 revenues jumped 30 percent
to $347.7 million compared to the same quarter a year ago.  Net
income also rose by 43 percent to $70.8 million.  The positive
results were powered by strong drug sales and the company gave an
upbeat outlook for the future and narrowed its guidance to the
upside.

Investors have accepted the good news and they're slowly pushing
GENZ higher.  Technical indicators are very positive.  The MACD
is bullish and getting stronger.  The daily and weekly
oscillators are rising while not quite yet hitting overbought
levels (okay, maybe a couple of getting overbought).  We like the
P&F chart and a trade over $50 would create a fresh new triple-
top breakout buy signal.  The stock just posted its best closing
high in over a year and is about to breakout over resistance at
the $50.00 mark.  Plus we're seeing strong volume on the advances
(since its earnings report).  We see two entry points.  Traders
can wait and hope for a dip back to $47.00-$47.50 or they can use
a trigger above $50 to leg them into the play.  Obviously, the
bounce from $47.50 offers a better risk-reward scenario but we're
going to list the play with a trigger at $50.05.  Only when
shares trade at $50.05 or higher will we consider the play open.
Our initial stop loss is going to be a little wide at $44.99.
More conservative traders might want to consider something just
under $46.00.

Suggested Options:
GENZ has August, September and October options available.  We're
going to list the August and Septembers as our preference.
If you like the 45 strikes, consider waiting for a dip to time
your entry.

BUY CALL AUG 45.00 GZQ-HI OI= 645 at $5.40 SL=3.00
BUY CALL AUG 47.50 GZQ-HS OI=2293 at $3.50 SL=1.75
BUY CALL AUG 50.00 GZQ-HJ OI=1527 at $1.90 SL=1.00
BUY CALL AUG 55.00 GZQ-HK OI= 390 at $0.45 SL= -- higher risk
BUY CALL SEP 47.50 GZQ-IS OI=   0 at $4.70 SL=2.50
BUY CALL SEP 50.00 GZQ-IJ OI=  27 at $3.20 SL=1.60
BUY CALL SEP 55.00 GZQ-IK OI= 186 at $1.25 SL= --

Annotated chart of GENZ 


Picked on July 22 at $49.76
Change since picked:  +0.00
Earnings Date      07/16/03 (confirmed)
Average Daily Volume:  3.52 million
Chart =


---

Synopsis, Inc. - SNPS - close: 61.04 change: +0.87 stop: 58.75

Company Description:
Synopsis is a supplier of electronic design automation software
to the global electronics industry.  The company's products are
used by designers of integrated circuits (ICs), including system-
on-a-chip ICs, and the electronic products (such as computers,
cell phones, and internet routers) that use such ICs to automate
significant portions of their chip design process.  SNPS'
products offer its customers the opportunity to design ICs that
are optimized for speed, area, power consumption and production
cost, while reducing overall design time.

Why we like it:
Strength in the Semiconductor sector (SOX.X) has been key to the
NASDAQ's continued bullish tendency, and even with some key
disappointments during the opening rounds of earnings season,
there has been enough positive press to keep the SOX working
higher in its ascending channel.  To be sure, last week's
rejection from the $400 resistance level was a disappointment,
but the bulls certainly didn't turn tail and run.  Instead, they
marshaled their forces at the bottom of the 5-month ascending
channel ($375) and managed a strong rebound on Tuesday, keeping
the longer-term rally intact.  SNPS has been an impressive stock
since the February lows, even more so after the blowout earnings
report in late May propelled it over the $63 level for the first
time since late 1999.  The initial rally attempt above that level
met with stiff rejection near $66 last week, sending the stock
plummeting back towards strong support in the $59-60 area, also
the site of the 50-dma ($60.41).  That was a critical test for
the bulls, and based on the sharp rebound of the past two days,
it looks like they passed.  The company isn't set to release
earnings until August 20th, so we have plenty of time until that
event muddies the waters.  This is a pure and simple rebound
play, based on the rebound in the SOX and SNPS' continued
relative strength.

The best case for new entries would be a brief dip back to the
50-dma to confirm it as support and a rebound from there.  More
conservative traders will want to wait for the stock to rally
through today's intraday high ($61.60) before entering the play.
The successful double bottom from $59, gives us a clear point to
set our stop, and we'll start with $58.75.  Note that as long as
the stock doesn't break below $58, the PnF Buy signal (bullish
price target of $70 remains intact.  Look for initial resistance
near $63, the site of the 20-dma and then again near $64.  Our
initial upside target will be $66, where SNPS found resistance
last week, with potential for a move up to the $68 level.  Should
that level be reached, we'll recommend exiting the play for a
nice gain.

Suggested Options:
Shorter Term: The August 60 Call will offer short-term traders
the best return on an immediate move, as it is currently at the
money.  More aggressive traders can use the August 65 Call.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the September 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 AUG-60 YPQ-HL OI=  92 at $3.10 SL=1.50
BUY CALL AUG-65 YPQ-HM OI= 252 at $0.90 SL=0.40
BUY CALL SEP-60 YPQ-IL OI= 622 at $4.30 SL=2.75
BUY CALL SEP-65 YPQ-IM OI=1397 at $2.00 SL=1.00

Annotated Chart of SNPS: 


Picked on July 22nd at    $61.04
Change since picked:       +0.00
Earnings Date           08/20/03 (unconfirmed)
Average Daily Volume =  1.53 mln


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

Fifth Third Bancorp - FITB - cls: 55.59 chg: +0.93 stop: 57.51

The banking sector indices are displaying great strength and
frankly look ready to lead the equity markets higher.  Yet even
in the face of this bullish sector environment shares of FITB
still can't mount an effective rebound.  The stock has been stuck
under its simple 200-dma for the last four days.  Today's session
actually saw buyers push above this level but the rally failed at
$56.37 before rolling over (and under) again.  Traders can
continue to use failed rallies at the 200-dma (or even $57.00) as
new entry points for bearish positions.  Momentum traders can
wait for a new close under $55 or under Monday's low of $54.56.
If you prefer not to consider bearish plays in a bullish sector,
then wait for the BKX or BIX to weaken.

Picked on July 17th at $55.26
Change since picked:    +0.33
Earnings Date        07/15/03 (confirmed)
Average Daily Volume =    2.4 million
Chart link:


---

The Home Depot - HD - close: 31.76 change: -0.39 stop: 34.00*new*

Continuing its pattern of underperformance, shares of HD have
finally gotten into gear this week, breaking the 50-dma yesterday
and then briefly falling below the 6/23 intraday low of $31.58
today.  With the Housing sector catching a solid rebound on the
falling bond yields today, HD did manage to recover from its
$31.40 low, but is still looking weak.  Traders still looking for
an entry can consider either a rollover below the 50-dma (now at
$32.28) or even the 20-dma (at $33.01), while breakdown entries
under today's intraday low look viable as well.  Remember, our
initial target will be $30, so expect a solid rebound from that
level.  Conservative traders will want to harvest gains at that
point and wait for another failed rally to enter new positions
for the final move lower to our $28 target.

Picked on July 10th at    $32.43
Change since picked:       -0.67
Earnings Date           08/19/03 (unconfirmed)
Average Daily Volume =  9.49 mln


---

Intuit Inc - INTU - close: 40.81 change: +0.39 stop: 43.51*new*

It's starting.  We suspected a bounce in INTU would appear sooner
or later.  The stock had been showing plenty of weakness,
completely ignoring the market bounce on Friday for another new
relative low.  Shares even sunk lower, under the $40 level of
support on Monday, before bouncing back.  Today's bounce was
rather meager but the candlestick pattern is suggesting a minor
reversal.  We would not suggest new bearish entries at this
level.  Traders can evaluate new positions on a failed rally
under $43.00 or on a close below the $40.00 mark preferably with
increasing volume.  Whether you have a position or are looking
for one be careful.  Both the NASDAQ and the GSO software index
look like they want to bounce.  As we've been saying for a few
days now, short-term traders who had been targeting $40.00 should
be closing positions or taking profits on part of their trade.
We're going to lower our stop loss to $43.51, just 16 cents above
breakeven.

Picked on July 8th at $43.35
Change since picked:   -2.54
Earnings Date       08/13/03 (unconfirmed)
Average Daily Volume =   4.1 million
Chart link:


---

Lehman Brothers - LEH - cls: 63.70 chng: -0.80 stop: 67.00*new*

The bulls tried once again to get a rally going in shares of LEH
this morning, but the early gap up on the merger news failed
miserably, with the stock quickly falling to just above $63 and
then coiling in a tight range between $63.50-64.00 for the
remainder of the day.  The news out this morning that LEH would
pay 2.6 billion to acquire Neuberger Berman in a stock and cash
deal.  The fade of the early bullishness is indicative of the
relative weakness that we've seen from LEH recently, as the stock
posted its lowest close since May 1st, despite a strong rebound
in the overall Broker/Dealer index (XBD.X), where bulls once
again defended the critical $550 support level.  If that support
gives way, then LEH should lose its own support just above $63
and make rapid progress towards our $60 target, which is just
above the 200-dma ($59.85).  Failed rallies below the $66 level
are looking good for new entries, as the bulls have now failed to
scale that obstacle for the past 4 days.  Aggressive momentum
traders can consider entries on a break of $63, but need to be
cautious due to the possibility of an oversold rebound from next
support near $62.  We're lowering our stop to $67 tonight, as
that is just above the 20-dma, which acted as strong resistance
on the last oversold rebound.

Picked on July 20th at    $65.18
Change since picked:       -1.48
Earnings Date           09/18/03 (unconfirmed)
Average Daily Volume =  2.75 mln


---

Lennar Corp. - LEN - close: 68.50 change: +2.04 stop: 71.50

Volatility is still the name of the game in the Home Construction
($DJUSHB) sector and now more than ever, it seems to be tied to
the gyrations in the bond market.  The index looked weak at the
open on Tuesday, but recovered nicely into the end of the day as
bond yields began to fall.  We've been playing the recent bearish
trend in the sector via LEN, and early in the day, the stock was
showing a $10 decline in just the past two weeks.  We've been
expecting an oversold bounce, and were eyeing the $65 level as
the likely spot from which it might commence.  Close, but no
cigar, as the rebound began from $65.61 and by the end of the day
had managed more than a $2 gain.  While bulls will claim this is
another opportunity to buy the dip, we're not convinced, as the
PnF chart has now turned decidedly bearish with the Sell signal
produced when price broke below $69.  Look for initial resistance
to be found just below $70, near the 50-dma, with the possibility
of a rally all the way up to the 10-dma ($71.11).  When this
rebound attempt fails, that will be the next solid entry point
for the ride down to our $59-60 target zone.  More conservative
traders may want to wait for the $65 support to give way before
jumping aboard with new positions.

Picked on July 15th at   $71.12
Change since picked:      -3.06
Earnings Date          09/09/03 (unconfirmed)
Average Daily Volume =  1.67 mln


---

XL Capital Ltd. - XL - close: 80.70 change: +0.28 stop: 83.00

Was last week's break of the $80 level a bear trap in XL?  That
case could be made, but based on the sharp retracement of
Tuesday's push above $81, we're thinking it is little more than
an oversold bounce.  Recall, we were looking for a failed rebound
in the $81-82 area to provide for a solid entry into the play and
we certainly got that on Tuesday as the early ramp was swiftly
turned back with old support now acting as resistance.  The
reversal from the 10-dma ($81.11) looks favorable and the falling
10-dma and 20-dma ($82.35) will continue to exert downward
pressure.  XL should provide patient traders with a nice downward
move as the price action plays out.  Unfortunately, we don't have
a lot of time to be patient, as XL is due to report earnings next
Thursday.  So we'll need to see the rollover get going in earnest
last this week or face the possibility of a stalemate near the
$80 level until those earnings results have been released.
Conservative traders may want to just wait for the breakdown
under $79.40 (just below last Friday's intraday low) before
playing, keeping in mind that a bounce is possible from the 200-
dma near $78.50.

Picked on July 17th at   $79.64
Change since picked:      +1.06
Earnings Date          07/31/03 (confirmed)
Average Daily Volume =    773 K



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

Bed Bath & Beyond - BBBY close: 37.71 change: -0.76 stop: 40.50

Company Description:
Bed Bath & Beyond is an operator of stores selling predominantly
better quality domestics merchandise and home furnishings
typically found in better department stores.  As of May, 2002,
the company had stores in 44 states.  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 housewares and general home
furnishings.

Why we like it:
A quick look at the daily chart of the Retail index (RLX.X) shows
a sector of the market that is continuing to look healthy,
continuing to post higher highs and higher lows.  So it may seem
a bit odd to be looking in this area of the market for a bearish
play.  But one look at the daily chart of BBBY should remove all
doubt.  The stock ran out of steam up near $44 in early June, and
it has been all downhill since then.  The beginning of the end
was a Wachovia downgrade on June 19th, and the bulls couldn't get
out fast enough.  BBBY gapped down near $41 and continuing
falling over the next couple weeks until finding some support
near $37.50 at prior resistance.  The next failed rebound really
tells a story, as BBBY was unable to get back over the 50-dma
(currently $40.34), and the stock is back threatening to break
below that $37.50 support.

Looking at the big picture, we can also see that the stock has
traced a nice Head and Shoulders top over the past few months
(see chart below) and a solid break below $37.50 will not only
break strong support, it will also break the neckline of that
pattern.  A conservative calculation from that pattern would give
a downside target of $31 (37.50-(44-37.50)).  We're not going to
try squeezing every last drop out of the play, and we're quite
content to target a move into the $32-34 area, which as you can
see is the site of quit a bit of congestion.  There's the
possibility of some support appearing near the 200-dma ($36.25),
but once below there, $34 should come easily.  Conservative
traders will want to wait for the break of support before
playing, using a trigger of $37.25, while those looking for a
better entry point might try to initiate new positions on a
failed rally near the 20-dma ($39.00).  Our stop is initially set
at $40.50, just above the 50-dma, which ought to be very strong
resistance.  Watch the RLX index for confirmation, because if it
loses the $330 support level, that ought to increase the pressure
on BBBY.

Suggested Options:
Short-term traders will want to focus on the August 37 Put, as it
will provide the best return for a short-term play.  Conservative
traders entering on a bounce will want to utilize the 40 strike,
as it will still be in the money.  Aggressive traders looking for
a longer-term move down towards $35 will want to utilize the
September contract, due to its greater insulation against time
decay.

BUY PUT AUG-40 BHQ-TH OI= 2076 at $2.85 SL=1.50
BUY PUT AUG-37 BHQ-TU OI=10746 at $1.30 SL=0.75
BUY PUT SEP-37 BHQ-UU OI=  508 at $2.10 SL=1.00

Annotated Chart of BBBY:



Picked on July 22nd at    $37.71
Change since picked:       +0.00
Earnings Date           09/17/03 (unconfirmed)
Average Daily Volume =  3.31 mln



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

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

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


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

Please read our disclaimer at:



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

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

Contact Support
The Option Investor Newsletter                  Tuesday 07-22-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: Buying The Bounce
Traders Corner: Elliott Wave Plays


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

Synopsis, Inc. - SNPS - close: 61.04 change: +0.87 stop: 58.75

Company Description:
Synopsis is a supplier of electronic design automation software
to the global electronics industry.  The company's products are
used by designers of integrated circuits (ICs), including system-
on-a-chip ICs, and the electronic products (such as computers,
cell phones, and internet routers) that use such ICs to automate
significant portions of their chip design process.  SNPS'
products offer its customers the opportunity to design ICs that
are optimized for speed, area, power consumption and production
cost, while reducing overall design time.

Why we like it:
Strength in the Semiconductor sector (SOX.X) has been key to the
NASDAQ's continued bullish tendency, and even with some key
disappointments during the opening rounds of earnings season,
there has been enough positive press to keep the SOX working
higher in its ascending channel.  To be sure, last week's
rejection from the $400 resistance level was a disappointment,
but the bulls certainly didn't turn tail and run.  Instead, they
marshaled their forces at the bottom of the 5-month ascending
channel ($375) and managed a strong rebound on Tuesday, keeping
the longer-term rally intact.  SNPS has been an impressive stock
since the February lows, even more so after the blowout earnings
report in late May propelled it over the $63 level for the first
time since late 1999.  The initial rally attempt above that level
met with stiff rejection near $66 last week, sending the stock
plummeting back towards strong support in the $59-60 area, also
the site of the 50-dma ($60.41).  That was a critical test for
the bulls, and based on the sharp rebound of the past two days,
it looks like they passed.  The company isn't set to release
earnings until August 20th, so we have plenty of time until that
event muddies the waters.  This is a pure and simple rebound
play, based on the rebound in the SOX and SNPS' continued
relative strength.

The best case for new entries would be a brief dip back to the
50-dma to confirm it as support and a rebound from there.  More
conservative traders will want to wait for the stock to rally
through today's intraday high ($61.60) before entering the play.
The successful double bottom from $59, gives us a clear point to
set our stop, and we'll start with $58.75.  Note that as long as
the stock doesn't break below $58, the PnF Buy signal (bullish
price target of $70 remains intact.  Look for initial resistance
near $63, the site of the 20-dma and then again near $64.  Our
initial upside target will be $66, where SNPS found resistance
last week, with potential for a move up to the $68 level.  Should
that level be reached, we'll recommend exiting the play for a
nice gain.

Suggested Options:
Shorter Term: The August 60 Call will offer short-term traders
the best return on an immediate move, as it is currently at the
money.  More aggressive traders can use the August 65 Call.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the September 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 AUG-60 YPQ-HL OI=  92 at $3.10 SL=1.50
BUY CALL AUG-65 YPQ-HM OI= 252 at $0.90 SL=0.40
BUY CALL SEP-60 YPQ-IL OI= 622 at $4.30 SL=2.75
BUY CALL SEP-65 YPQ-IM OI=1397 at $2.00 SL=1.00

Annotated Chart of SNPS:



Picked on July 22nd at    $61.04
Change since picked:       +0.00
Earnings Date           08/20/03 (unconfirmed)
Average Daily Volume =  1.53 mln



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TRADERS CORNER
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Elliott Wave Plays
By Steve Gould

Company Profile

Wendy's International Inc. is primarily engaged in the business of
operating, developing and franchising a system of distinctive
quick-service and fast-casual restaurants. The Company has 6,253
Wendy's restaurants in operation in the United States and in 21
other countries and territories. The Company and its franchisees
also operates 2,348 Tim Hortons restaurants and 210 Baja Fresh
restaurants.

Chart Analysis

We are basing our play on the weekly chart and confirming it with
the daily.  Because it is weekly, it will take a little bit longer
to play out.  Let's examine the weekly chart first.

Chart: WEN Weekly 7-22-2003





The weekly chart shows WEN in a classic Type II set up based on
the following criteria:

1. Wave 4 has retraced almost 50%.
2. The oscillator has retraced about 120% and has turned.
3. The wave 4 peaked between 138 – 162% of wave 3 in terms of
time.
4. Wave 4 subdivides into an A-B-C correction pattern. Although
the subdivisions are not as "ideal" as I would like to see it,
they are clearer on the daily pattern.
5. WEN has broken through the red auto trend line.
6. The PTI is greater than 35.
7. This pattern has the "look" of a very well behaved Elliott
Wave.

Chart: WEN Daily 7-22-2003





The daily chart shows that WEN is in the midst of a five wave
basic pattern down, consistent with the weekly chart.  Right now
WEN is in the middle of the 3 wave which can be the most intense
of the 5 waves.  The five wave basic pattern starting in March
could very easily be interpreted as an A-B-C correction pattern,
thus satisfying the look of a 4 wave on the weekly.


Trade Setup

Based on the weekly chart, WEN should hit 21 by the beginning of
the year.  That gives us about a 6 month time frame.  We are going
to make this a straight directional play within that timeframe.
The March 2004 puts would be the options of choice, but those
options show no open interest nor volume.  Therefore we will use
the January option and carefully watch the time decay.

The 25 put has a delta of -21 which is a little lower than I would
like to see, the ideal being 25 - 30.  The next available option
is the 30 put but that has a delta of 48.  I believe the 25 put is
the better play because we could buy three 25 puts for the cost of
one 30 and have a delta of 63 versus 48.

The volatility of WEN is as low as it has been in the last year.
As WEN goes lower, the volatility should increase, thus making the
play even more profitable.

WEN – 28.84 as of 7/22/2003

Option
Sym   Strike   Type   Bid    Ask   Delta   Vol   OI
WENME   25     Put   0.85   0.95   -21.2    0   771
WENMF   30     Put   2.75   2.95   -48.7    0   555


What If We Are Right

Chart: Position Analysis For The First Target





If WEN hits 21 by November 21 (two months before expiration) then
the options will be worth 4.05.  This represents a 326% gain.  We
will be taking profits on one-half the position when the options
reach 1.90 (somewhere around 24.50) thereby making this a risk
free play.


What If We Are Wrong

Chart: Wrong Scenario 1





WEN may not yet be done tracing out the wave 4 correction.  Should
that be the case, WEN will trend a bit higher before starting the
final 5th wave decent.  WEN cannot go much higher than the current
wave four labeling because it cannot invade the price territory of
the 1 wave without invalidating the wave count.  Well before that
happens, if WEN breaches 29.29 then the five wave basic pattern
down on the daily is in question.  Should this happen, it would do
so within the next couple of weeks. We would step aside and see
what transpires.  Our maximum risk then is about 0.40.


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