Option Investor

Daily Newsletter, Sunday, 07/27/2003

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The Option Investor Newsletter                   Sunday 07-27-2003
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: Saddam Rally
Futures Market: Gold soars, Treasuries Fade
Index Trader Wrap: ROAD TRIP
Editor's Plays: I Am Not Having Fun
Market Sentiment: Extreme Readings
Ask the Analyst: Looking for "short squeeze" candidates
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 7-25         WE 7-18         WE 7-11         WE 7-04
DOW     9284.57 + 96.42 9188.15 + 68.56 9119.59 + 49.38 + 81.16
Nasdaq  1730.70 + 22.20 1708.50 - 25.43 1733.93 + 70.48 + 38.19
S&P-100  502.94 +  1.44  501.50 -   .98  502.48 +  6.40 +  4.47
S&P-500  998.68 +  5.36  993.32 -  4.82  998.14 + 12.44 +  9.48
W5000   9599.36 + 52.70 9546.66 - 64.23 9610.89 +148.38 +104.02
RUT      468.88 +  4.12  464.76 -  9.01  473.77 + 17.42 +  7.60
TRAN    2615.79 + 39.50 2576.29 + 30.71 2545.58 +130.27 -  1.72
VIX       19.94 -  1.42   21.36 +   .64   20.72 -  0.89 -  0.10
VXN       30.04 -  3.37   33.41 +   .61   32.80 +  0.33 +  1.54
TRIN       0.67            0.60            0.94            1.98
Put/Call   0.67            0.61            0.98            1.07
Avg Highs   365             522             791             435
Avg Lows     31              29              21              25

Saddam Rally
by Jim Brown

The markets rallied off strong support on Friday on mixed economic
news and news about Hussein from Iraq. A general reportedly said
they were getting closer to catching Saddam after a group of his
aides and body guards were captured on Friday. With this highly
volatile market and a definitely bullish undertone I am sure more
than a few bears realized the extreme weekend risk and covered
their shorts. Bulls happy about the better than expected Durable
Goods report saw the market bounce off strong support and they
jumped on for the ride. The result was the third strongly bullish
Friday in a row.

The economic reports continued to show a glimmer of hope for
those squinting to see a recovery ahead. The Durable Goods rose
by a better than expected +2.1% pace and better than the expected
+1.5% consensus. Nondefense capital good rose for the second month
in a row. The only really negative component was communications
equipment which fell by -9.6% and increased its rate of drop for
the fifth consecutive month. Computers posted the smallest gain at
+0.8% and Aircraft/Autos rose the most at +4.2%. Shipments and
unfilled orders both rose as well.

Also showing positive momentum was the Weekly ECRI Leading Index
which rose to 127.4 from 126.8. This was the best level in three
years. It made these gains on only two components, Jobless Claims
and 10-year Treasury Yields, with minor declines in most of the
other components. This shows the economy is poised to expand and
the ground work has been laid. It is not however showing an
expanding economy. The mediocre internals are struggling to make
the gains but still creeping to new highs. The recovery is in
progress but at a snails pace.

New Home Sales jumped +4.7% to 1.16 million units and +21% higher
than the same period last year. However May was revised down to
1,108 from 1,157 and April was revised down to 999 from 1,028.
These were significant downward revisions but as long as the June
number holds at 1,160 nobody will care. The problem will come if
June is revised down next month. The higher mortgage rates will
pressure home sales going forward and it will be difficult for
future numbers to match these levels. After several years of record
sales the demand for new homes is beginning to slow. As the baby
boomers begin to retire over the next few years there will be a
surplus of used homes to pressure the market.

Existing Home Sales fell unexpectedly to 5.83 million from 5.85
million in May and was much less than the 5.97 million that was
expected. Sales in the Northeast fell by -4% and the Midwest by
-3% and increased +3% in the West. Inventory levels soared to
levels +10.6% higher than the same period last year. More for
sale signs are appearing just as mortgage rates are beginning
to soar.

AOL was under pressure on Friday after disclosing that it had
padded the subscriber numbers in 2001-2002 by giving away
subscriptions to marketing partners for $1 to $3 each. The very
discounted subscriptions accounted to about 15% of their subscriber
base during that growth period. Essentially they sold these
highly discounted subscriptions in bulk to employers and marketing
partners which those companies then gave to employees. This
distorted the true value of the subscription base when analysts
multiplied average revenue by gross subscriber numbers. AOL said
they lost -846,000 subscribers in the second quarter and they
were continuing to clean up the subscriber lists and eliminate
nonpaying customers. AOL called it a nonevent but they did warn
that revenues would be light for the current quarter due to the
falling subscribers and weak advertisement revenue.

Richmond Fed President Alfred Broaddus spoke on Friday and said
he was disappointed in the lack of economic progress. He said
"there were a few signs that the recovery may be gaining strength
but in my view there is not much hard evidence that it is
happening yet." He also said "it was too soon to conclude from
recent hopeful indicators that a faster-paced expansion had
taken hold." We will get look at the GDP for the 2Q next week and
most analysts think we will be lucky to see a +1.7% gain after
the +1.4% gain in the 1Q. With the country gearing up for the
war most feel the first half of the quarter was flat to down.
This will be a hindsight number and should not be a market mover
unless it is significantly less. Still it is one more mile marker
for the current economic progress.

The Wendover-Global Insight IT Spending Index, an independent
survey of 80,000 businesses and 300,000 individuals, showed that
tech spending fell -14% in the second quarter. It predicts lower
IT spending for the balance of the year. The Q2 spending levels
were the lowest since the index was started in 1999. This was
also the first time the index had been released to the public.
While most smaller surveys predict spending will be flat to +6%
for the rest of the year the Wendover Index shows declining
spending sentiment. The index fell -6.2 points to 37.6 in the
latest survey. The high was 115.4 in Q2-2000. They did show a
slight increase in spending in the CRM and ERP markets. They
also showed a sharp drop of -45% in new tech initiatives. They
said they were seeing a trickle of new spending budgeted over
the next 6-9 months but far from the flood that had been hoped.
They said businesses are waiting for significant signs that
the economy is recovering before planning on committing any new
funds to IT projects. The survey showed that companies are still
concentrating on cutting costs to maintain profitability and
much of those costs were in capex spending. 40% of all capital
expenditures are on IT projects. With businesses accounting for
two thirds of all U.S. tech spending there will not be a tech
recovery until the economic recovery is well underway.

The stock market was rocked on Friday morning by what was called
an asset allocation program where stocks were being sold and
bonds bought. This clearly shocked many traders as this would be
a very bearish signal. Just when bonds are reaching three month
lows and economic reports are starting to show a glimmer of hope
you would not expect a huge shift of assets out of stocks. Those
stocks should benefit from an improving economy and bonds should
continue to go down. That poses a question why a major player
would drastically change directions. The Dow dropped nearly -100
points on the sell program before triggering a series of
offsetting buy programs when the S&P futures hit the 50 DMA at

There are some very mixed views about the current market. After
Friday's bounce, the third bounce for the week, the bulls are
frothing at the mouth. They are pointing at the 161 companies
that have either initiated or raised dividends over the last
six months as positive proof that the economy and the market
is improving. There were only 110 positive dividend events in
all of last year. The average increase is +18%. They are also
pointing to the +15% growth in S&P earnings so far this quarter
as better than the expected +14% growth. With 65% of the S&P
already reported, the better companies report early, it is
still likely we could see 14% or even worse. Remember, the
majority of these earnings have come from cost cutting not
from sales. What the bulls do not want to acknowledge is the
2:1 ratio of negative guidance to positive guidance for Q3.
During the Q2 earnings cycle in 2002 the ratio was only 1.3:1
for the same period. With drastically lowered expectations for
Q3 already the warning pace is drastically worse than Q2-2002.
What is wrong with this picture?

After watching the markets alternate triple digit days this
week I have to admit I am about ready to concede. We have had
multiple chances to fail and have tested the critical support
on the S&P five times in the last seven trading days. Each day
it held and on more than one occasion soared to very near a
Dow high. This is very bullish trading for the third week of
July. This is not the normal July pattern. I am seeing bullish
events breaking out all around me in a typically bearish period.
This is not to say we are not seeing some bearish events as
well. The bearish sentiment as recorded by Investor Intelligence
is extremely low at 19.8. This is also reflected in the VIX
which finally closed under 20 and the first close under that
level since March-28th of 2002. This was also the last time
the Dow touched 10,500. Coincidence?

Like I said earlier, I am about ready to concede. That should
mean there is a capitulation due any day. When all the indicators
line up in one direction a change in that direction can come at
any moment. The close on Friday was very bullish but what caused
it? I think it is the Lazarus syndrome. Saddam has been off the
radar screen for a couple months. When the U.S. removed his top
two biological weapons last week the markets exploded. At least
they exploded for one day. Bears have a decent short term memory.
They remember getting killed by the resurrection of the Hussein
name only two days ago. When a general said on Friday that the
noose was closing on Saddam they listened. When more of his aides
and bodyguards were captured on Friday on tips from Iraqi citizens
they listened. They weighed the potential for risk over the
weekend and decided there was more potential for upside than
downside. They weighed the Durable Goods numbers and the ECRI
and the New Home Sales and decided the risk reward ratio was not
favorable for shorts.

Bulls on the other hand were seeing money come out of bonds and
yields rising which normally means economic growth on the way.
They kept hearing the spin about the better than expected earnings
and Ralph Acompora's Dow 10,500 forecast. Dollar signs blinded
their reasoning and they bought stocks before they ran away from
them. They heard the rumors about Saddam and thought if we can
get +150 on his sons we can get +300 on the father. They bought
stocks. Do you remember the market during the war? The rumors,
the UN meetings and the showdown at the UN corral? The market
jumped all over the place for no rhyme or reason. Well this has
definitely brought back memories of that time. The volatility
has been huge but the VIX closed at a new low. What do you
suppose will happen if Saddam is not found over the weekend?
Once reader theorized we could add +1000 points over the next
couple weeks if we could get a new Saddam capture rumor every
day next week. When does he become priced into the market?

I am not going to tell you today that the Dow is going to 8500.
If this hype continues we could see 9500 before 8500. I am
going to tell you that 9300 is serious resistance. I am going to
tell you that S&P 1015 is huge resistance. Neither are unbreakable.
You might also notice that the S&P closed at 998, just under the
1000 barrier with the Dow already at 9275. The Dow is 35 points
away from its high and the S&P is 17 points below its high. The
broader market is not keeping up with the Dow. The Nasdaq is
-46 points from its high, farther than the Dow. All of these
things can change and we could be on the verge of a massive
bullish breakout. Stranger things have happened before.

Next week is going to be more dangerous than a casual stroll
though Monrovia, Liberia. It will be equally dangerous to both
bulls and bears. Monday will be neutral with no economic reports
scheduled but the calendar heats up fast. Tuesday has July
Consumer Confidence but that should not be a market mover.
Wednesday has the Fed Beige Book. The fireworks start on Thursday
with Jobless Claims, adjusted?, Employment Cost Index, GDP, PMI
and the Help Wanted Index. Friday has Personal Income/Spending,
Nonfarm Payrolls, ISM, Michigan Sentiment and Construction
Spending. Whew! I would not want to be a market maker going
into Friday.

These reports will be dangerous to both sides because they will
reflect the economic conditions for the first month of the 3Q.
As July goes, so goes the quarter. If they are seen to be
weakening then the party may be over. If they are seen to be
getting stronger then break out the champagne.

Remember what happened to EBAY on Friday? They lost $6 at the
open after record earnings because the market wanted more. It
wanted something to justify the huge gains over the last several
months. Well at 9300 the Dow is priced to perfection. MMM jumped
from $126 to $141 last week on strong earnings. That is a huge
gain and a new 52 week high. CAT jumped to $65 from $58 and a
new 52 week high but stalled. DD jumped +10% and is near a new
high. INTC soared to over $25 after earnings and a new high but
stalled to close at 24.91 for the week. AA +10% and at new high.
These leaders are very extended and carrying a lot of baggage.
Consider the charts for MO, IBM, GM, WMT, JNJ, MRK, HD, BA, HPQ
and SBC. How much farther can the leaders run with a third of
the index on their back?

Before you decide I am a perma bear I would like to restate my
position. I am bullish on the market long term. I think the cost
cutting and restructuring will be very beneficial when the future
recovery appears, hopefully in the fourth quarter. While I have
been anticipating a dip at the end of July it was only because
a historical period of consolidation and profit taking normally
occurs at this time each year. If I look at the charts with a
bullish bias I could paint a bullish case despite the calendar.

Wilshire-5000 Bullish Chart

Using the Wilshire-5000, the broadest market indicator of all,
we can avoid material spikes from $15 moves in MMM and see what
the real market is doing. We had a bounce in the $TMW.x from
7503 in March to 9692 in June with very few pauses for profit
taking. That is a +29% gain in four months. This is highly
abnormal. At the top of that gain we dropped back -400 points
and held on 9300 for two weeks. Then we made another try at the
highs and have pulled back again for two weeks but at a higher
low around 9400. This sideways consolidation is bullish. We
have held the majority of the gains and are slowly inching
higher. A bearish view would say a lower high on this current
attempt will signal doom for the bulls and they could be right.
They are not right until the index falls below 9300, which is
very strong support and it will have to break the 50 DMA at 9379
first. 9300 on the Wilshire happens to equate to 9000 on the Dow.

Dow Chart Bullish View

The Dow chart looks very similar to the W5K chart in that it is
clearly showing a nice consolidation pattern between 9000-9300
and higher lows since July 1st. The resistance at 9300 is strong
but you can see the upward pressure building.

Depending on whether your glass if half full or half empty you
could also paint a bearish case from these charts. Using the
Nasdaq below you can see for the last two weeks it has been
trending down. Down in an uptrend channel but down. The real
test is about to occur if it can break that declining resistance
line around 1740. You can see the resistance/support points
narrowing and something is going to break soon. With the uptrend
line now at 1700 the importance of holding that level is becoming

Nasdaq Chart Bearish View

Dow Chart - Bearish view

The Dow bearish view anticipates a double top failure at 9300 and
a failed retest of Dow 9000. Granted that is a lot to swallow
today but that is the bearish view.

The problem all along has not been the case for investing in
stocks. I have been saying for months that when bonds crashed
billions of dollars would find its way into the stock market.
Well boys and girls bonds crashed. They gave up nearly 2.5 years
of gains in the ten year and 3.5 years of gains in the 30 year.
This takes into account the price of the bonds and the yields.
The ten-year yield at 4.2% is very near a 12 month high. This
all happened since the June-25th Fed meeting. This bond disaster
will hit home when the monthly statements come in about a week
and the bond buyers thinking they are in a safe investment will
get a serious shock. Stocks will start looking a lot better very
soon if we get one more leg down in bonds. I actually think bonds
will improve over the next two weeks. Why? Because there is a
FOMC meeting on Aug-12th. While the Fed Funds futures are
showing a zero chance of a rate cut there has been some noises
out of a couple Fed heads last week that things are not rosy.
Bernanke said deflation was still a substantial risk and could
increase even with a pickup in the economy. Broaddus said he
was not convinced a recovery had started. The biggest reason of
all is to shock bonds. If Greenspan popped another surprise 25
point cut out at the Aug-12th meeting the bond market would go
crazy. They would start worrying like there was no tomorrow and
rates would plummet. The housing market would get back on track
and we would be back in the grove. Idle speculation on my part
but then it would solve a major problem for Greenspan.

That brings us back to the original July decline premise. It is
historical and very dependable. However you don't normally get
a multiyear bond meltdown in July. This was a catastrophic event
in the bond market that has shaken the normal July calendar. Add
in some glimmers of hope in the economic reports and we could be
off to the races. Except for a couple of points. Obviously from
the multiple attempts to break support last week there are quite
a few people who are not convinced the recovery is in progress.
Whether you admit it or not there was some heavy selling several
times. Also, remember those fat finger trades that were determined
to be real trades once the smoke cleared? Not everybody is on the
Sugarland express and expecting to be popping champagne with
Acompora at the 10,500 party anytime soon.

Yes, I am almost ready to concede the July dip has been cancelled
due to lack of interest and a bond catastrophe that will be talked
about for years. Almost. I still have that nagging thought in the
back of my mind that if Saddam is still in hiding on Monday the
outlook could change quickly. If they catch him over the weekend
then Dow 9300 is history and the entire conversation will begin
again at a higher level. There are no guarantees for anyone and
least of all traders. Just when you think you have everything
figured out something changes. That is what keeps it exciting.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


Gold soars, Treasuries Fade
Jonathan Levinson

I was set to write that equities rallied after Friday's action,
but they merely challenged the week's range, printing a lower
lows on the NQ, ES and YM contracts and a lower high on the NQ,
while admittedly closing at their session highs.

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

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U     1013   1005    990    982    967
YM03U     9277   9273   9265   9261   9253
NQ03U     1286   1249   1230   1193   1174

10 minute chart of the US Dollar Index

The US Dollar Index was sold aggressively Thursday night and
again Friday, with CDN dollar futures rising 1.3% on Friday, euro
futures +.45% and swiss franc futures + .28%.  On a weekly basis,
the US Dollar Index completed a gravestone doji top last week and
an evening star this week, with a lower high and lower low.  It
appears to have commenced a new leg down.  Conversely, gold
printed a dragonfly doji last week and a morning star this
week, as one would expect.

Daily chart of August gold

Gold advanced again on Friday, not with the same ferocity as in
recent sessions, but it did not pull back either and closed at
its session high of 364.50, +2.20, despite the ambiguous candle
print on the above chart.  This was a wildly bullish week for
gold and precious metals stocks, and the breakout setup
discussed here last weekend has played out to a "T".

Daily chart of the ten year note yield

Treasuries had another bearish week, with the ten year note yield
printing a bullish kicking candle formation, higher highs and
higher lows on the weekly TNX.  The steep uptrend in the yield
brought us a pullback in the MBA's mortgage and refi indices this
week, as homeowners begin to take a breather from "as-good-as-it-
gets" borrowing rates.  I continue to expect this pullback in
debt origination to cause a pullback in market liquidity and
therefore stock and bond prices.  I also remain fascinated with
the selloff in treasuries, and wonder at what point the Fed will
be forced to put its money where its mouth is regarding its
targets for the long bond yield.

For equities, the question remains as to the effect of Bernanke's
words.  If the Fed aggressively inflates the money supply,
nothing stops equities from reaching even higher valuations, as
this money chases assets, be they bonds, stocks, other currencies
or precious metals, just as we saw during the spring rally.  The
markets were uncertain as well, with the Friday rally giving
bears pause to consider the possibility.  The rally was led by GE
and MSFT throughout the session.

Daily NQ candles

NQ gave us a bullish engulfing candle, turning the longer cycle
oscillators back up, once again touching the rising trendline and
bouncing higher.

30 minute 20 day chart of the NQ

The extent of the action is clearer on the 30 minute candles, on
which we can see that the NQ left us holding a perfect question
mark as to the action for Monday.  The upper descending trendline
on our neutral pennant was the exact closing print on the NQ
contract.  An upside break is a very real possibility because of
the oscillator configuration (bullish) and because the neutral
pennant tends to be a continuation pattern.  In this case, as we
see on the daily chart above, the trend has been up for months,
and on this basis, the bias would be towards an upside break.
Lastly, as can be seen in the chart of the ES, the upside
resistance trendline was broken on a closing basis.

Daily ES candles

ES is still sucking wind below its broken rising trendline, but
the action Friday was a massive bullish engulfing.  Bears caught
in the squeeze got very small pullbacks in which to cover, and
the ES closed less than one point off its high of the day.  The
oscillators are trying for a turn as well, but the real bull
victory is in the next chart.

20 day 30 minute chart of the ES

Whether it holds or proves to be a throwover, to use the great
J.M. Hurst's term, we can only guess, but it's not a bearish
chart.  That said, the upper daily trendline is looming just
above 1000, and the ES is going to have to deal with that
resistance if the rally continues into Monday.

Daily YM candles

The YM also had a massive day on Friday, admittedly on light
summer volume.  We are left with the same question as for the NQ
futures, with the closing print right at the upper resistance

20 day 30 minute chart of the YM

On a weekly basis, the equity futures didn't have the explosive
upward bias of gold or the downward bias of treasuries and the
dollar, but they didn't fall apart either, all closing positive.
The week's range proved to be lethal for all but the most patient
directional traders, with numerous sudden moves interspaced with
long, aimless drifts.  Traders should be asking themselves what
they think of the long term prospects for equities, particularly
at or above the yearly highs.  The action on Friday gave traders
reason to expect a test of those highs, and it's better to have
your game plan clear in the event that those levels get printed.

Bears made much ado about the downright silly reasons given to
paper the Wednesday and Friday rallies.  On Wednesday it was the
killing of two enemies, two boys who, to the best of my
knowledge, had no positions in or relevance to the US markets or
economy.  On Friday, it was a rumor of Hussein's capture.  The
fact that GE and MSFT we rallying before the Friday rumor
circulated should not be lost on traders.  Rumors don't move
markets, but they exploit vulnerabilities in the markets.
Whether the Friday rally sticks or not, there was a great deal of
room to run to the upside off the Friday low.  Traders need to be
ready for the possibility of the move's continuing on Monday,
particularly given the breakout on the ES 30 minute chart.

Have a great weekend and see you at the bell!


By Leigh Stevens

Probably better to take one then do any significant level of
summer trading in this market, as the Indices appear to have
reached some level of equilibrium for now.

Pretty much on cue, at least from what I was seeing in the Index
charts, the marker trend last week continued sideways and was
more of a premium sellers market on balance. I've sold some Index
puts here and there but have not taken on much trading in the
summer doldrums. Tough to make money on outright long calls/long
puts unless you catch an Index right at the low or top end of its
current price range.

The trend, or some would say "trendless" (i.e., sideways) market,
is right in line with what is being reported about business
conditions. On the one hand you have select stocks reporting
better earnings, such as Eastman Kodak, 3M and Amazon, but other
companies like Sun Micro are suffering and eBay suffered a
downgrade based on its future prospects - although it should also
be noted that its Q2 revenues and profits doubled.

There was a slight pickup reported for the leading economic
indicators put out by the Conference Board, but then there was
Fed Governor Ben Bernake saying earlier in the week that the Fed
is keeping its options open to even go down to a 0% Fed funds
rate if that's what it takes to prevent deflation.

And with inflation worries moribund, what does gold do but make a
sharp jump last week! And, it seems the bond market more believes
a pick up in economic activity as the benchmark 10-year yield
closed the week at over 4%.

As Jeff Bailey noted last week, the Fed Governor's comments could
be seen as doing some "jawboning" by the Fed to have bond traders
putting a floor under T-bonds after a sharp sell off (yields
higher)in recent weeks. These comments set a somewhat negative
tone to equities earlier in the week, as well as the U.S. dollar
on trader fears that the Fed is still concerned about deflation
hampering any further economic recovery.

So what's a poor investor to do in the face of this conflicting and
uncertain news!? - Road trip! More barbecues!! Take a swim!!!

The S&P 500-stock index was up 17 points to 998.68, with the Dow
30 (Industrials) higher by 172 (+1.9%) to end at 9284.57.  The
Nasdaq Composite (COMPX) gained 29 points (+1.7%) in Friday's
session, to end the week at 1730.7.

The major indexes were in a rally mode on buying that appeared to
be partly linked to short-covering type buying into the weekend,
as U.S. troops made progress in Iraq, with the capture and
killing of Saddam Hussein's sons, numbers 2 and 3 on the most
wanted list - number 4 was captured alive and he was Saddam's
trusted personal aide.  No doubt he has some interesting stories
to tell!  The shorts were of course thinking about what the
effect on the market would be should U.S. forces find the man
himself, Saddam Hussein.

The influence of better earnings can't be overlooked - according
to Friday's (Wall Street) Journal, 67% of Q2 profits have
exceeded forecasts, which is significant even with the low
expectations for the second quarter.

A bullish influence should also be noted for a report on a
substantial rise in durable good orders during June - a 2.1% jump
was reported by the Commerce Department, the largest single
monthly gain since January 2003 and well above economists'
expectations for a gain of 1.2%. Durable goods figures are a
traditionally volatile number, but this much of an increase is
taken as a bullish sign for the economy and that the U.S.
manufacturing sector is recovering. Besides this is just the
psychological shift as investors want to believe in recovery.

Orders for non-defense capital goods were up by 2% in the month
after rising just 0.2% in May - what a difference a zero makes!
Overall durable goods, those goods expected to last 3 or more
years, were produced at an increased rate of nearly 1 and half
percent, after rising at less than a percent in May.  Overall
goods orders that exclude the fluctuations of the defense sector
rose 1.7%, after being up 1.2% in May.

Friday saw existing home sales reported as in a slight decline.
The National Association of Realtors (NAR) reported that existing
home sales for June fell 0.3% to a seasonally adjusted annual
rate of 5.83 million units, which was below a consensus forecast
for a 6 million annual rate.  The NAR also said May sales were
revised down to 5.85 million units from a previously reported
5.92 million.  June sales were still close to 9% above the pace
set by June of last year and tied for the 4th highest month on
record - so, it's all relative!

Year-to-date (existing) home sales are 4.5% above the same period
in 2002, and are at a pace, should it continue, that would make
for a new record this year.

New home sales however, set records as the Commerce Department
reported a 4.7% jump to a 1.6 million annual pace - this was
higher than the 1.1 million forecasted.  Commerce said new home
sales were country wide as every region in the country posted
gains for June.

Dow component AT&T (T) was up 2% to 20.4 after the company
reported a Q2 profit - cost cutting helped T swing to net of $536
million from a loss a year ago and the company increased its
quarterly dividend by 27%.  Noted by the consumer (more than
stock investors I suppose), in their less than robust confidence
of late, is that cost cutting usually means JOB cutting - Kodak
noted earlier will be reducing its work force by 6000 - so far
absent from the business news is that company XYZ is ADDING a few
thousand folks to its payroll.

Treasuries finished lower on Friday and for the week, with the
10-year YIELD ($TNX.X) finishing higher at 4.178%, its highest
weekly close since early-January.

The dollar traded down slightly against the Yen, to 118.81 from
118.89 late Thursday in New York, while the euro strengthened to
$1.15 from $1.1473.


Along with "other" markets, I always tend to keep my eye on gold
and the commodities index in general in an awareness that they
tend to move counter-cyclical to equities.  (Not always counter
to bonds however.) Note the qualifying word "tends" to.  Not
always, which is what makes the markets such a puzzle sometimes.
Even if gold is an anxiety barometer, which we have plenty of in
the new mellenium, it's a point of wonder as to whether the
unrest and economic uncertainty reflected in the rising price of
the gold mining shares is going to also lift stocks much this
year -

What's noticeable with the XAU chart above is the decisive
bullish breakout above the triangle marking the reaction lows and
relative highs. Usually this is a bullish technical indication
for a breakout and further run up.  If the (time) premiums
weren't so rich, I might be long the calls. (Again, a possible
put sale candidate.)

S&P 500 (SPX) - Daily chart:

Again, the daily chart tells the story on the S&P (SPX) 500 -
when SPX got down to the low end of its recent price range, and
held a "line" of support at and just under 980, a rally followed.
I continue to suggest buying near the low end of this range
(better to then be able to exit with a break to below the range)
and sell at the upper end of the sideways channel - currently in
the 1015-1017 area.

The sideways drift is keeping the RSI in a more or less "neutral"
range.  Right now there seems to be the propensity to rally when
the RSI has dipped to below 50.

My sentiment indicator is more or less neutral also.  Neutral
chart, neutral oscillators, neutral sentiment.  Well, you get the
picture.  That said there is room on the upside for another
challenge of the 1000 mark.

The 21-day moving average is also telling the story here, as
movement back and forth across the 21-day is showing a definite
sideways trend - I suspect its a consolidation before a typical
seasonal move higher into a September - October peak.

Dow Industrials Hourly (DJX.X) chart:

Still plenty of upside if the Dow were to rally now toward the
upper end of either its recent sideways trading range. First of
course it has to get through a line of resistance at 92.80 which
has been the top of the recent range on an hourly closing basis.
Not far above that is a cluster of prior highs at 93.4.

A daily close above 93.4 is needed to suggest a bullish breakout
and move more toward the upper channel line.  I'm not looking for
such a breakout anytime soon but there could be surprises also of
course.  91 is key near support and a close under 9100 for the
Dow is a definite technical bear move.  9000 is probably "must
hold" support for the bulls.

Overall a bullish outlook is warranted as long as the Dow Index
trades within its hourly uptrend channel.  The trend starts to
turn neutral however with a continued sideways move that takes
prices out beyond the outlined channel lines above.

S&P 100 Index (OEX) – Hourly chart:

The hourly chart continues to best show the chart and technical
picture for the OEX.  The Index continues to find support in the
485-495 zone - this past week a double bottom low was made in the
491.5-492 area.

Resistance or selling interest can be anticipated on moves up the
area of the prior highs around 511-512 or just a bit higher - the
previously broken up (magenta) trendline is what I am watching.
I suggest put purchases in the 510-515 zone, especially as the
longer (21) hourly stochastic gets back up into the overbought

Nasdaq Composite Index (COMPX) – Daily:

The Composite is still "holding" its daily chart uptrend channel,
as the lows last week walked up the lower line so to speak.  Such
a well-defined trendline - well, the market is being supported on
breaks.  1700 is near support, then 1650, support assumed at the
50-day moving average.  I would take a close under this average
to put the near-term trend down again.  1800-1825 is key near
technical resistance.

Interestingly, the recent downswing is causing the 14-day
stochastic to fall enough to be near to oversold again.  A
sideways to lower trend will cause this indicator to fall and it
doesn't have to fall a big distance price wise.

If the trendline that contained the price dips of last week is
pierced by a move below Friday's low at 1685, the pattern
immediately suggests a bearish reversal - this because the chart
formation would then look like a bear flag reversal. Absent that,
on a technical basis, continue to give the benefit of the doubt
to the bullish influences that are looking ahead to a hoped for
improvement in the economy and in tech spending in particular.

Nasdaq 100 Tracking Stock (QQQ) - Hourly:

And, last but not least, there is not a whole lot new to say
about the Q's on a technical basis from last week.  They held
their bull trend channel (lower) boundary on the last two sell

Resistance and selling interest is assumed to be in the area of
the prior highs around 32.50 to 32.70 - exiting as least some
long trading positions and even shorting the stock is suggested
in this area. On short positions, my suggested stop point is at

A daily close over the prior 32.5-32.7 highs suggests further
upside potential in QQQ possibly to as high as the upper channel
boundary and I would not want to buck this trend. The overall
trend is still up, but my assumption is that we're also moving
into a sideways trading range like the other indices.  In a
trading range, you can either stay out and wait for the trend (or
a new trend) to resume or you can trade the range.

If there is a decisive downside penetration of the prior hourly
closing lows in the 30.70-30.80 area, I continue to suggest being
short on the break, looking for an eventual downside objective to
the 29 area.

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Editor's Plays

I Am Not Having Fun

The alternating triple digit days on the Dow have played havoc
with our August DJX puts. They have been doubling and halving
almost daily and driving a serious speculator to drink.

Without going into too much detail today we are very close to
done. Initially I had suggested a stop loss at Dow 9300 and 9350
but that was two weeks ago when there was still some time premium
left. The options closed on Friday at 20x35 after trading over
$1.00 last week. At 25 cents there is little incentive for me
to sell them. With an adjusted cost of 44.6 cents each we could
get out with a scolding and go on to other things. Instead I am
looking at them as a lottery play for a quarter. We still have
three weeks until expiration and who knows what will happen in
the market. I actually bought more on Wednesday's pop for 35
cents so I am a believer. At least I was a believer on Wednesday.

Dow 9300 will be the key. If we break over that level and hold
then I would expect them to expire worthless. If we fail at that
level next week then we could get to something below 9000 very
fast if the economic reports turn sour. Unfortunately there is
a Fed meeting in two weeks and although the Fed funds futures
are showing a zero chance of a rate cut it is still a possibility.
That means the retail traders could be bidding up the market if
any Fed head starts making rate cut noises.

My exit plan at this point is still the same. Go for broke if
we drop on Monday. If we rally on Monday then start looking for
any dip that brings us back to 50 cents and bail. With only three
weeks left we need to get a major trend change to ride down quickly
or we will never get back over 50 cents.

Dow Chart (DJX)


EBAY Call 2:1 split  $112.28

While EBAY took a licking on Friday it is still kicking and
has a 2:1 stock split in its near future. The stock dropped
-$6 at the open on Friday and then recovered to lose only

The retail trader is alive and well and EBAY is their favorite
Internet stock. The cult following should follow it all the
way to the split but we should be gone long before that.

The record date is Aug-4th and the split date is Aug-28th. If
the market is positive EBAY should move back to its pre earnings
high around $118 by the record date.

I am suggesting the September $115 call for $4.80 with a target
price of $7.00. I know it does not sound like much but it is
a 40% profit in a little over a week. You could go high risk
and use the August $115 call for $2.25 but the time premium
should be dropping like a rock next week as we hit Aug-1st. It
would be a race to see if EBAY could hit $117 before Aug-5th
just to break even. With the September options you do not have
the time pressure to worry about.

Quick play, in at $4.80 or better on Monday, out at $7.00 to
$7.50 if you get lucky.

The stop loss on this is $110. If EBAY gives up its gains then
we will abandon ship and shop elsewhere.

EBAY Covered Calls

Another way to play this would be to buy the stock on Monday
and write covered calls on it. Using margin at $56 it works out
like this.

Sept-$115 $4.60 + difference between $112.25 and $115 = $7.35
$7.35 divided by $56 = 13%.

Sept-$120 $2.80 + difference between $112.25 and $120 = $12.35
$12.35 divided by $56 = 22%. (Probably not called)

You could write the $120 and have the stock rise to $118 and
not be called. You keep the stock and the premium.

DO NOT hold the stock/option over the split. The post split
depression can be violent.

EBAY Chart


Play updates:

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



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


Extreme Readings
Jonathan Levinson

The VIX made a new closing low for the year today at 19.94, while
the QQV and VXN came close.  The bullish percents and record high
percents are pinned to the tops of their ranges, while the
bullish vs. bearish advisor surveys remain very close to
multiyear bullish extremes.

Despite the all-out bullish tenor to our breadth, sentiment and
volatility measures, equity prices have failed to advance, with
the Dow and SPX trading for a month below its rally high, while
the Nasdaq more bullishly printed its high during the week before

One would be correct to identify this as an unhealthy situation,
with traders beating the drum harder but from lower levels.
Unfortunately, reading the secondary indicators is never an
absolute science, and the story need not be bearish.  The VIX,
for instance, could be leading an upside move in equity prices
with its bearish divergence, as the smaller, "sharper" options
market sends volatilities lower, possibly signaling a fresh
break to the upside for stocks.

As with all indicators, their effectiveness is based on the
respect of their usual range.  In daytrading, a favorite strategy
for playing a declining market was to sell downside spikes in the
TRIN.NQ.  As the market's bias was downward, every downside spike
in the TRIN.NQ tended to be an unsustainable spike in buying
pressure, and signaled a short term top.

Unfortunately, in a turning or a rising market, when the longer
"waves" of buying pressure are building, this sensitive indicator
would become buried at extreme low levels for hours or even days
at a time.  These low readings were signaling not selling
opportunities, but their opposite.

In reviewing the weekend data, I find it useful to try seeing
both sides of the trend, particularly as a defense against
surprises during the trading days to follow.  As always, minds
work best when they're open.


Market Averages


52-week High:  9353
52-week Low :  7197
Current     :  9284

Moving Averages:

 10-dma: 9148
 50-dma: 9015
200-dma: 8491

S&P 500 ($SPX)

52-week High: 1015
52-week Low :  768
Current     :  998

Moving Averages:

 10-dma:  990
 50-dma:  979
200-dma:  906

Nasdaq-100 ($NDX)

52-week High: 1316
52-week Low :  795
Current     : 1278

Moving Averages:

 10-dma: 1269
 50-dma: 1219
200-dma: 1078


If the VIX and VXN were stocks one might think they were both
about to breakdown to new lower lows.  Or in the VIX's case, follow
through on the breakdown through support.  Low VIX readings typically
indicate market tops as bullish sentiment reaches extremes and
buyers have absolutely no fear.

CBOE Market Volatility Index (VIX) = 19.94 -0.52
Nasdaq-100 Volatility Index  (VXN) = 30.04 -1.41


          Put/Call Ratio  Call Volume   Put Volume

Total          0.67        508,821       339,703
Equity Only    0.54        378,442       205,434
OEX            0.60         33,855        20,404
QQQ            2.68         16,922        45,392


Bullish Percent Data

           Current   Change   Status
NYSE          69.4    + 0     Bull Confirmed
NASDAQ-100    75.0    - 1     Bull Confirmed
Dow Indust.   80.0    - 7     Bull Correction
S&P 500       75.8    + 0     Bull Correction
S&P 100       82.0    - 2     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  0.96
10-Day Arms Index  0.93
21-Day Arms Index  1.05
55-Day Arms Index  1.13

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


Market Internals

            -NYSE-   -NASDAQ-
Advancers    1900      1775
Decliners     927      1257

New Highs     113       123
New Lows        8         6

Up Volume   1214M     1003M
Down Vol.    413M      542M

Total Vol.  1634M     1559M

M = millions


Commitments Of Traders Report: 07/22/03

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

Not much new for us to decipher in the full contracts of the
S&P 500 futures.  Commercials remain slightly next short and
the small traders remains significantly net long, expecting
the markets to rise.

Commercials   Long      Short      Net     % Of OI
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%)
07/22/03      411,206   442,131   (30,925)   (3.6%)

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
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%
07/22/03      155,891    76,466    79,425    34.2%

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

In contrast to the full size S&P contracts above, the E-minis
is showing a drastic change.  Commercial traders have been
moving from net short to net long the last four weeks and
the longs have finally out numbered the shorts.  Right on
cue, the small traders have turned the most bearish they
have been in months.

Commercials   Long      Short      Net     % Of OI
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%)
07/22/03      249,392   249,386          6     0.0%

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:        6   - 07/22/03

Small Traders Long      Short      Net     % of OI
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%)
07/22/03       45,945    76,071   (30,126)  (24.7%)

Most bearish reading of the year: (30,126)  - 07/22/03
Most bullish reading of the year: 449,310   - 06/10/03


There is little change in the NDX futures by the commercial
traders or small traders.

Commercials   Long      Short      Net     % of OI
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%)
07/22/03       32,502     48,139   (15,637) (19.4%)

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
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%
07/22/03       27,321     8,844    18,477    51.1%

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


Commercial traders are becoming even more bullish on the
Industrials while small traders are slowing increasing
their net short positions.

Commercials   Long      Short      Net     % of OI
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%
07/22/03       22,198     8,176   14,022      46.2%

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
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%)
07/22/03        6,110    10,898   (4,788)   (28.2%)

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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Looking for "short squeeze" candidates

I like to trade stocks and even options on a 3 to 5 day time
period and have seen some pretty good moves from trades that
you've profiled as short squeeze candidates.  Can you tell me
what you look for, other than a high short interest to identify
some of the better candidates?  There are a lot of stocks with
high short interest that don't move, or actually go lower as
shorts have been right.

I don't know if there is one thing particular that I look for in
a "short squeeze" candidate, but I'll tell you this.  The stocks
I do find often come from something technical like a spike in
volume, a fellow competitor having just made a big move higher, a
stock's chart that looks to be having pressure building up in a
pennant-type of formation, a stock that is has shown ability to
trade a wide range historically, stocks breaking to new highs or
looks to challenge historical highs, and a "super ludicrous, or
no-way-it-could-ever-trade-that bullish vertical count stock"
from the point and figure chart can be the best candidates!

Once I find a stock with some interesting technicals described
above, I will then go and look at what the stock's short interest
has been doing and what the number of days to cover is looking
like.  Has a building short interest had any negative impact on
the stock, or have shorts just been feeding liquidity to hungry
bulls over a 2 to 3-month time period?  Then I like to imagine
I'm short the stock, and try and determine a "level" where I
would certainly look to cover my loss.  Perhaps that will be the
point where other bears would look to for cover.  When all the
bears head for the exits and bulls pull their offers, that's when
the squeeze begins.  Remember too, "the bigger the base, the
bigger the pace" potential for the move higher.

Sometimes a good short squeeze will get the correctly analyzed
candidate a quick 2 to 3-day pop on a short-squeeze, but a very
impressive percentage move higher as shorts become aware that
they might have been wrong.  Some stocks, with smaller public
floats and/or thinly traded will provide a more longer-lasting
type of squeeze, which can last weeks on end.

If looking to trade some smaller floats, I still prefer to stick
with stocks that trade at least $3 million capital per day.  For
instance, a stock that is trading at 100,000 shares per day at
$50 per share is $5 million.  A stock that is $2 and trades
1,000,000 shares per day is probably being scalped for pennies by
day traders, and may not be on a hedge fund or institutional
watch list.

In the past couple of years, hedge funds have attracted a lot of
capital and these types of fund managers are looking to try and
break a short and get a squeeze going.  At the same time, a lot
of these hedge funds are "synthetically" hedged with a stock, but
they'll cover their short aggressively if the stock begins moving
against them quicker than their offsetting bullish trade.  These
hedge fund managers usually want to be trading in liquid stocks
where they can get out of a position quickly if need be.


One trader analogy I believe in is "volume precedes price."  As
one starting point, look for stocks in a stock scan for "strong
volume gainers."  Stockcharts.com provides such a screen for
FREE!  http://www.stockcharts.com

I'll discuss some patterns a trader might look for in a minute,
but when you make some observations of stocks that have shown a
volume spike, even if it looks like it made too big of a move, or
is in a consolidation phase, at least make a note of this stock
as it may be a week or two, if not a month later that your volume
observation pays off.

Know the competition

Last Friday (07/18/03) in OptionInvestor.com's Market Monitor, I
made an observation that a stock/company a friend of mine works
for had made a major move higher.  A conversation I had with a
neighbor that works for a competitor month's prior, had him
saying that business was stabilizing.

Market Monitor observation/thinking - 07/18/2003

I "missed" a good short-term move in SLNK, but knew AV was in the
same type of business.

The following session, Monday (07/21/2003), evidently Dougherty &
Company was thinking the same thing I was, or they were following
Avaya (NYS:AV) from a fundamental point as they initiated
coverage with a "buy rating" and target of $10.  I thought...
"10?, the Point and figure chart's vertical count is $20!  That's
ludicrous enough to get further attention."

While there was good potential for some micro-sector type of
bullishness to build near-term for Avaya after seeing what SLNK
did, I checked the NASDAQ website for short interest and make
some observations.

Avaya Short Interest - Reported monthly from NASDAQ

Short interest had been declining since January, but a recent
decline in volume and still having roughly 1.8% of float short,
might have recent earnings from SLNK and upgrade from Dougherty
moving the rest of bears to cover.  Where would I cover if I were
short right now... with what I know.

Stock's at $7.00, (reward 7), bullish count $20 (risk $13),
competitor blows away earnings, business doing better, S&P 500
(market) still holding tough, but off the highs.

Pattern (supply/demand)

While AV's short interest isn't the "prime" example for short
squeeze in the making, there are observations that can be made as
to what bears are doing, or what they've been doing, and what the
rest of the pod might be looking to do.  A trader that's going to
try and trade a short squeeze, really wants to put
himself/herself in the paws of the bear and imagine you're short.
Then figure out what the exit plan is going to be.  Then get set
to implement that plan, but from the bullish side of the trade.

Avaya Inc. (NYSE:AV) - Daily Interval

Conventional retracement from the recent lows near $2.00 and June
6th high was of little help and really didn't tie in with how AV
had been trading.  One chart I created with retracement and
regression is shown above.  The "spike" in volume on June 6th and
that high represented some type of "important level."
Observations from short interest and Days to cover gives the
impression that bears were pretty sure the high was in at $7.91.
If they could only get a break below the combined 21-day, 50-day
and regression support, bears would have a chance.  If not, then
exit points were $6.98, or back above the high of $7.91.  Bears
could also wait to see if $10 were tested, but "there's no way AV
would ever trade $20.25!"

Ok... SLNK catch's fire, I'm near some support moving averages,
so stop my bearish trade out on move above $7.

The "patterns" I like best for short squeezes are stocks that
have made a "big move higher," and have had a BIG volume spike in
the move higher.  The VOLUME spike shows INTEREST and
DISAGREEMENT among market participants.  I look for stocks where
OVERHEAD SUPPLY is relatively nonexistent where a higher short
interest or days to cover will have the shorts looking over their
shoulder with the understanding that there my not be much bullish
liquidation if the stock begins to make a break higher.
Remember, the lowest a stock can go is $0.00, and the highest is
infinity if not at least the bullish vertical count.

Counting cards

You've heard the term "counting cards."  I don't know if it is
illegal to count cards in Las Vegas, NV, but I would think if the
casino thought you were counting cards at the blackjack table,
you might be asked to leave.

Here's how a trader might also look to use short interest data
along with a company's disclosure of how many shares it has in
the public float, to "count cards" if you will, to determine just
how a the number of shares short in a stock might tilt the scale
markedly toward some type of excess demand situation coming into
play, where supply (public float) is limited.

Monster Worldwide Short Interest - Reported monthly from NASDAQ

Short interest has been declining, if not steady the past two
months.  Volume patterns have been declining, and the past two
months, that has the days to rising during the same period.  What
grabs a traders attention if looking for a short squeeze is the
public float is 63.2 million shares and July 15th short interest
is 13.4 million shares.  That would have roughly 21% of the
public float short right now!

The "float" is defined as the total number of shares publicly
owned and available for trading.  The float is calculated by
subtracting restricted shares from the outstanding shares.
According to Yahoo! Finance, MNST has 111.8 million shares

However, a trader looking for a short squeeze in MNST may find
the HIGH level of shares short (needs to be bought back and
returned at some point in the future) of 21% rather high compared
to the float (total supply currently available in the market).

Now... using some of the short interest data above (make note of
May 15 to July 15 short interest data) you can apply your skills
of "fitted retracement" to perhaps create a chart that looks
something like this.

Let's do this.  Imagine right now, today, YOU are short 13.4
million shares at $22.25.  Up until three days ago, you have been
the best bearish trader in the bunch.

Monster Worldwide (MNST) Chart - Daily Intervals

Short interest is reportedly monthly, but a trader can still try
and "count cards."  The trend of short interest hints that bears
were relatively comfortable or not doing much covering from May
15 to July 15th and that comfort level might be defined by the
$25.25 level.
As noted in Thursday's 01:00 PM EST update at premierinvestor.net
and OptionInvestor.com, the move above $22.25 on Wednesday, is a
little suspicious in that MNST was able to close above that
level, the day before WEEKLY jobless claims came in below
economists' forecast and lowest levels since February 8th.

While we can never "count cards" as it relates to short interest,
I might think this.  Even if ever share traded in the past three
days was ENTIRELY short covering, that would equal roughly 9
million shares.  I might cut that in half as there were most
likely some bulls doing some buying too and still leaves a rather
high short interest relative to the public float.

I looked at MNST's point and figure chart, and the first buy
signal and bullish vertical count on the stock, when it was
trading under the NASDAQ symbol TMPW was bullish to $31.50.
However, since April, when the stock built that bullish count, it
did give a double bottom sell signal at $18.50, which negated
that count, but Thursday's trade at $24.00 got MNST's PnF chart
back on a buy signal and the current bullish vertical count is
currently building to $45.50.

MNST is one of those "volatile" stocks.  You can see from the
chart above that the stock traded a daily range of $1.70.

When a short squeeze unfolds, you just never know for sure how
long or how powerful it can become.  Bulls should also be
cognizant that sometimes, bears can still be correct in their
convictions, thus the high levels of short interest.

A trader looking to play a short squeeze in MNST as I have
profiled (disclosure, I currently hold bullish position in MNST),
that has made a stronger move after giving a better entry to a
more alert trader just above $22.25, may want to turn to the
options market where a more minimal amount of capital risk can be
exposed, but still allow for exposure and some time for an near-
term extended chart to work itself out longer-term.

An example I'd reflect back on right now is SanDisk (NASDAQ:SNDK)
$56.44 +2.95%.  In early June, when the stock was trading the $35
level, a trader was wondering if it was time to "short/put" SNDK
as it had nearly doubled in price from the $20.00 level.

My comments at the time.... while the stock did look "extended"
and I wasn't sure that the bullish vertical count of $81.50 would
be reached (humph... that bullish count is still intact as no
sell signal has been given) volume patterns and such an
unrealistic bullish vertical count should have a bear at least
waiting for a sell signal.

Some of you bulls have got to remember SNDK from early 2002 when
the stock fetched more than $160 per share.  Don't you?  I think
there's a few bears that remember it too.

Heck... I'm sure some bulls remember when TMP Worldwide (TMPW),
now Monster Worldwide (MNST) fetched more than $80 per share.
I'm sure some bears do too!


To get short interest from the NASDAQ site (www.nasdaq.com)
simply enter a symbol of a stock in their "get up to 10 quotes"
box, then click the "Flash Quotes" button.

A refreshed browser page should be created.  Click the scroll
down button that contains the words "FlashQuotes" (a pull down
menu of categories should be seen) and select short interest.

Jeff Bailey


Market Watch for the week of July 28th

Major Earnings This Week

Symbol  Company               Date           Comment      EPS Est

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

ACE    ACE LTD               Mon, Jul 28  After the Bell      0.99
APD    Air Product Chems     Mon, Jul 28  Before the Bell     0.55
LNT    Alliant Energy        Mon, Jul 28  Before the Bell     0.23
AFC    Allmerica Financial   Mon, Jul 28  After the Bell      0.03
AXP    American Express Co   Mon, Jul 28  -----N/A-----       0.57
AFR    Am Finl Rlty Trst     Mon, Jul 28  Before the Bell      N/A
AMKR   Amkor Technology, Inc Mon, Jul 28  After the Bell     -0.12
BOH    Bank of Hawaii Corp   Mon, Jul 28  Before the Bell     0.48
ABX    Barrick Gold          Mon, Jul 28  -----N/A-----       0.06
BRG    BG Group              Mon, Jul 28  Before the Bell      N/A
BIO    Bio-Rad Laboratories  Mon, Jul 28  Before the Bell     0.81
BMC    BMC Software          Mon, Jul 28  Before the Bell     0.02
CHK    Chesapeake Energy CorpMon, Jul 28  After the Bell      0.26
DTE    DTE Energy Company    Mon, Jul 28  Before the Bell     0.40
ETR    Entergy               Mon, Jul 28  Before the Bell     1.17
ENT    Equant NV             Mon, Jul 28  After the Bell     -0.42
FMX    FEMSA                 Mon, Jul 28  -----N/A-----       0.97
FCNCA  First Cit BancShares  Mon, Jul 28  -----N/A-----        N/A
FHCC   First Health Group    Mon, Jul 28  -----N/A-----       0.38
GGP    General Growth Prop   Mon, Jul 28  -----N/A-----       1.48
HLT    Hilton Hotels Corp    Mon, Jul 28  Before the Bell     0.14
HUM    Humana Inc.           Mon, Jul 28  Before the Bell     0.29
ITT    ITT Industries        Mon, Jul 28  -----N/A-----       1.02
JP     Jefferson-Pilot       Mon, Jul 28  After the Bell      0.87
K      Kellogg Co.           Mon, Jul 28  Before the Bell     0.47
MXICY  Macronix Intl         Mon, Jul 28  Before the Bell      N/A
MVSN   Macrovision           Mon, Jul 28  After the Bell      0.16
MWV    MeadWestvaco          Mon, Jul 28  Before the Bell     0.08
WFR    MEMC Electronic Mats  Mon, Jul 28  -----N/A-----       0.11
MCY    Mercury General       Mon, Jul 28  -----N/A-----       0.70
NFS    Nationwide Finl Serv  Mon, Jul 28  After the Bell      0.72
NTES   Netease.com Inc       Mon, Jul 28  After the Bell      0.24
NOC    Northrop Grumman      Mon, Jul 28  Before the Bell     0.86
PSO    Pearson plc           Mon, Jul 28  Before the Bell      N/A
PD     Phelps Dodge          Mon, Jul 28  Before the Bell    -0.26
PNW    Pinnacle West Capital Mon, Jul 28  -----N/A-----       0.72
PVN    Providian Financial   Mon, Jul 28  After the Bell      0.10
RCII   Rent-A-Center         Mon, Jul 28  After the Bell      1.43
ROH    Rohm and Haas Company Mon, Jul 28  Before the Bell     0.39
RCL    Royal CaribCruises    Mon, Jul 28  Before the Bell     0.15
RPM    RPM INTL INC          Mon, Jul 28  Before the Bell     0.37
SAFC   Safeco Corp.          Mon, Jul 28  Before the Bell     0.37
SEM    Select Medical Corp   Mon, Jul 28  After the Bell      0.31
PCS    Sprint Corp           Mon, Jul 28  After the Bell     -0.11
FON    Sprint FON Group      Mon, Jul 28  After the Bell      0.33
SPW    SPX                   Mon, Jul 28  -----N/A-----       0.65
TI     Telecom Italia        Mon, Jul 28  -----N/A-----        N/A
TEM    Telefonica Moviles    Mon, Jul 28  Before the Bell      N/A
RSE    The Rouse Company     Mon, Jul 28  -----N/A-----       0.93
TRI    Triad Hospitals, Inc  Mon, Jul 28  Before the Bell     0.49
TZA    TV Azteca S.A. de C.V Mon, Jul 28  -----N/A-----       0.17
TSN    Tyson Foods           Mon, Jul 28  -----N/A-----       0.21
UDR    Un Dom Rlty Trust     Mon, Jul 28  After the Bell      0.38
VMC    Vulcan Materials      Mon, Jul 28  After the Bell      0.65
WEG    Williams Energy Part  Mon, Jul 28  Before the Bell     0.85
XRX    Xerox Corporation     Mon, Jul 28  Before the Bell     0.12
ZBRA   Zebra Technologies    Mon, Jul 28  Before the Bell     0.67

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

ABB    ABB                   Tue, Jul 29  Before the Bell      N/A
ACS    Affiliated Computer   Tue, Jul 29  -----N/A-----       0.59
ALA    Alcatel               Tue, Jul 29  -----N/A-----      -0.17
AC     Alliance Capital      Tue, Jul 29  -----N/A-----       0.47
ALD    Allied Capital Corp   Tue, Jul 29  Before the Bell     0.52
AIB    Allied Irish Banks    Tue, Jul 29  Before the Bell      N/A
AHC    Amerada Hess          Tue, Jul 29  Before the Bell     1.22
AHM    Amersham              Tue, Jul 29  Before the Bell      N/A
ADP    Automatic Data ProcessTue, Jul 29  Before the Bell     0.38
AVE    Aventis               Tue, Jul 29  -----N/A-----       0.68
BLDP   Ballard Power Systems Tue, Jul 29  -----N/A-----      -0.25
STD    Banco Santander Cntrl Tue, Jul 29  -----N/A-----        N/A
BVF    Biovail Corporation   Tue, Jul 29  Before the Bell     0.47
BSG    BISYS GROUP INC       Tue, Jul 29  After the Bell      0.28
BP     Bp PLC                Tue, Jul 29  Before the Bell     0.79
BTI    British Am Tobacco    Tue, Jul 29  Before the Bell     0.58
BPO    BROOKFIELD PPTYS CORP Tue, Jul 29  -----N/A-----       0.52
BG     BUNGE LIMITED         Tue, Jul 29  Before the Bell     0.71
CPT    Camden Property Trust Tue, Jul 29  After the Bell      0.74
CZ     Celanese AG           Tue, Jul 29  Before the Bell     0.45
CNP    CenterPoint Energy    Tue, Jul 29  -----N/A-----       0.12
GIB    CGI Group             Tue, Jul 29  -----N/A-----        N/A
CRL    Charles River Lab     Tue, Jul 29  After the Bell      0.41
CINF   Cincinnati Financial  Tue, Jul 29  Before the Bell     0.43
CCU    Clear Channel Comm    Tue, Jul 29  Before the Bell     0.37
COH    Coach, Inc.           Tue, Jul 29  Before the Bell     0.30
CE     Concord EFS           Tue, Jul 29  Before the Bell     0.18
CVH    Coventry Health Care  Tue, Jul 29  Before the Bell     0.87
CREE   Cree Inc.             Tue, Jul 29  -----N/A-----       0.16
DD     DuPont                Tue, Jul 29  Before the Bell     0.57
ECA    EnCana Corporation    Tue, Jul 29  Before the Bell     0.77
ENH    Endurance Specialty   Tue, Jul 29  After the Bell      0.70
EC     Engelhard Corporation Tue, Jul 29  Before the Bell     0.45
EOP    Eq Office Prop Trust  Tue, Jul 29  Before the Bell     0.69
FSH    Fisher Scientific IntlTue, Jul 29  After the Bell      0.57
FLR    Fluor Corporation     Tue, Jul 29  After the Bell      0.55
FMC    FMC Corporation       Tue, Jul 29  After the Bell      0.58
FDP    Fresh Del Monte Prod  Tue, Jul 29  Before the Bell     1.27
GGB    Gerdau S.A.           Tue, Jul 29  -----N/A-----       0.55
HMC    Honda Motor Co. Ltd.  Tue, Jul 29  Before the Bell     0.48
KEG    Key Energy Services   Tue, Jul 29  Before the Bell     0.05
KIM    KIMCO REALTY CORP     Tue, Jul 29  Before the Bell     0.79
KG     King Pharmaceuticals  Tue, Jul 29  Before the Bell     0.36
KYO    Kyocera Corporation   Tue, Jul 29  Before the Bell      N/A
TVL    LIN TV Corp.          Tue, Jul 29  Before the Bell     0.17
LPX    LP Corp               Tue, Jul 29  Before the Bell     0.15
MCD    McDonalds Corporation Tue, Jul 29  -----N/A-----       0.37
NBR    Nabors Industries     Tue, Jul 29  -----N/A-----       0.17
NEU    Neuberger Berman      Tue, Jul 29  Before the Bell     0.39
ORLY   O'Reilly Automotive   Tue, Jul 29  After the Bell      0.50
OMC    Omnicom Group         Tue, Jul 29  Before the Bell     1.03
PH     Parker Hannifin Corp. Tue, Jul 29  Before the Bell     0.47
PFGC   PERFORMANCE FOOD GRP  Tue, Jul 29  -----N/A-----       0.49
PER    Perot Systems         Tue, Jul 29  Before the Bell     0.13
PDG    Placer Dome           Tue, Jul 29  After the Bell      0.08
PAA    Plns All Am Pipeline  Tue, Jul 29  Before the Bell     0.38
PNM    PNM Resources         Tue, Jul 29  After the Bell      0.29
PDLI   Protein Design        Tue, Jul 29  After the Bell     -0.06
PUK    Prudential PLC        Tue, Jul 29  -----N/A-----        N/A
RJR    R.J. Reynolds Tobacco Tue, Jul 29  Before the Bell     0.84
RCI    Renal Care Group, Inc Tue, Jul 29  After the Bell      0.52
SSCC   Smurfit-Stone Cntanr  Tue, Jul 29  Before the Bell    -0.05
SO     Southern Company      Tue, Jul 29  Before the Bell     0.45
STTS   ST Assembly Test Serv Tue, Jul 29  After the Bell       N/A
SRCL   Stericycle            Tue, Jul 29  -----N/A-----       0.33
SLF    Sun Life Finl Serv CanTue, Jul 29  -----N/A-----       0.41
TEF    Telefonica de Espaqa  Tue, Jul 29  Before the Bell      N/A
TU     TELUS                 Tue, Jul 29  During the Market    N/A
TPP    Teppco                Tue, Jul 29  -----N/A-----       0.35
TEVA   Teva Pharmaceutical   Tue, Jul 29  -----N/A-----       0.44
TGN    Texas Genco Holdings  Tue, Jul 29  -----N/A-----        N/A
MHP    The McGraw-Hill Comp  Tue, Jul 29  Before the Bell     0.73
RIG    Transocean Inc.       Tue, Jul 29  Before the Bell    -0.02
TMIC   Trend Micro           Tue, Jul 29  Before the Bell      N/A
TYC    Tyco International    Tue, Jul 29  Before the Bell     0.35
UNEWY  United Business Media Tue, Jul 29  Before the Bell      N/A
UCL    Unocal                Tue, Jul 29  After the Bell      0.69
VLO    Valero Energy Corp.   Tue, Jul 29  -----N/A-----       1.07
VZ     Verizon               Tue, Jul 29  Before the Bell     0.68
WPC    W. P. Carey & Co. LLC Tue, Jul 29  Before the Bell     0.66

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

AES    AES Corporation       Wed, Jul 30  Before the Bell     0.11
AET    Aetna Inc.            Wed, Jul 30  After the Bell      1.02
AGU    Agrium, Inc.          Wed, Jul 30  After the Bell      0.50
AMI    ALARIS Medical, Inc.  Wed, Jul 30  Before the Bell     0.04
ACL    Alcon Inc.            Wed, Jul 30  After the Bell      0.51
AEE    Ameren Corporation    Wed, Jul 30  Before the Bell     0.66
AEP    American Elect Power  Wed, Jul 30  Before the Bell     0.40
APPB   Applebee's Intl       Wed, Jul 30  After the Bell      0.43
ARI    Arden Realty Inc      Wed, Jul 30  After the Bell      0.67
ASL    ASHANTI GOLDFIELDS LTDWed, Jul 30  Before the Bell     0.07
BCE    BCE                   Wed, Jul 30  Before the Bell      N/A
BYD    Boyd Gaming           Wed, Jul 30  -----N/A-----       0.27
CMX    CareMark Rx, Inc.     Wed, Jul 30  -----N/A-----       0.25
CB     Chubb Corporation     Wed, Jul 30  After the Bell      1.03
COP    ConocoPhillips        Wed, Jul 30  Before the Bell     1.43
CAM    Cooper Cameron        Wed, Jul 30  Before the Bell     0.37
COX    Cox Communications IncWed, Jul 30  Before the Bell     0.00
CVS    CVS Corporation       Wed, Jul 30  Before the Bell     0.48
XRAY   DENTSPLY Intl         Wed, Jul 30  After the Bell      0.53
DUK    Duke Energy Corp      Wed, Jul 30  Before the Bell     0.31
DRE    Duke Realty Corp      Wed, Jul 30  After the Bell      0.59
ENB    Enbridge Inc.         Wed, Jul 30  -----N/A-----        N/A
ELE    Endesa, S.A.          Wed, Jul 30  Before the Bell      N/A
ETM    Entercom Comm         Wed, Jul 30  Before the Bell     0.35
ESS    Essex Property Trust  Wed, Jul 30  After the Bell      1.09
EXC    Exelon Corporation    Wed, Jul 30  Before the Bell     1.08
FRT    Fed Rlty Invstmnt TrstWed, Jul 30  After the Bell      0.63
FBR    Friedman, Bill, RamseyWed, Jul 30  Before the Bell     0.32
GRMN   Garmin Ltd.           Wed, Jul 30  Before the Bell     0.43
HTV    Hearst-Argyle Tele    Wed, Jul 30  Before the Bell     0.28
HB     Hillenbrand IndustriesWed, Jul 30  Before the Bell     0.95
IMDC   INAMED                Wed, Jul 30  After the Bell      0.65
IM     Ingram Micro          Wed, Jul 30  After the Bell      0.11
INGR   Intergraph            Wed, Jul 30  After the Bell      0.08
IVX    Ivax                  Wed, Jul 30  Before the Bell     0.17
JNS    Janus Capital Group   Wed, Jul 30  Before the Bell     0.20
KMT    Kennametal Inc.       Wed, Jul 30  Before the Bell     0.42
KMG    Kerr-McGee            Wed, Jul 30  Before the Bell     0.81
MKL    MARKEL CORP           Wed, Jul 30  -----N/A-----       3.38
MLM    Martin Marietta Mat   Wed, Jul 30  Before the Bell     0.73
MC     Matsushita Elec Indl  Wed, Jul 30  After the Bell       N/A
MX     Metso Corporation     Wed, Jul 30  Before the Bell      N/A
MNST   Monster Worldwide     Wed, Jul 30  After the Bell      0.08
MUR    Murphy Oil Corp       Wed, Jul 30  After the Bell      0.59
NFG    National Fuel Gas Co  Wed, Jul 30  After the Bell      0.32
NXTP   Nextel Partners       Wed, Jul 30  Before the Bell    -0.16
IX     Orix Corporation      Wed, Jul 30  -----N/A-----        N/A
PIO    Pioneer Corporation   Wed, Jul 30  -----N/A-----        N/A
PXD    Pioneer Natural Res CoWed, Jul 30  Before the Bell     0.69
PDE    Pride International   Wed, Jul 30  After the Bell      0.09
STR    Questar.com           Wed, Jul 30  After the Bell      0.39
RDA    READERS DIGEST ASSN   Wed, Jul 30  Before the Bell     0.06
REP    Repsol YPF            Wed, Jul 30  Before the Bell     0.45
RSG    Republic Services, IncWed, Jul 30  After the Bell      0.37
SKYW   SkyWest               Wed, Jul 30  Before the Bell     0.24
SYT    Syngenta              Wed, Jul 30  Before the Bell      N/A
TDK    TDK                   Wed, Jul 30  -----N/A-----        N/A
SPC    The St. Paul CompaniesWed, Jul 30  Before the Bell     0.86
UN     Unilever N.V.         Wed, Jul 30  -----N/A-----       0.90
UL     Unilever PLC          Wed, Jul 30  Before the Bell     0.64
UMC    United Microelec      Wed, Jul 30  Before the Bell     0.02
VSH    Vishay IntertechnologyWed, Jul 30  Before the Bell     0.07
WDR    Waddell & Reed Finl   Wed, Jul 30  Before the Bell     0.27
WGL    WGL Holdings          Wed, Jul 30  After the Bell     -0.16
WFMI   Whole Foods Market    Wed, Jul 30  After the Bell      0.42
YPF    YPF, S.A.             Wed, Jul 30  Before the Bell      N/A

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

SE     7-Eleven              Thu, Jul 31  Before the Bell     0.29
ATG    AGL Resources         Thu, Jul 31  -----N/A----     -  0.25
ABF    Airborne, Inc.        Thu, Jul 31  Before the Bell     0.11
AW     Allied Waste Indus    Thu, Jul 31  After the Bell      0.20
APCC   American Power ConversThu, Jul 31  After the Bell      0.17
APC    Anadarko Petroleum    Thu, Jul 31  -----N/A-----       1.25
AU     Anglogold Limited     Thu, Jul 31  During the Market   0.27
ATH    Anthem, Inc.          Thu, Jul 31  Before the Bell     1.25
ASN    Archstone-Smith Trust Thu, Jul 31  -----N/A-----       0.46
BEC    Beckman Coulter       Thu, Jul 31  Before the Bell     0.77
BAB    British Airways       Thu, Jul 31  -----N/A-----        N/A
BTY    BT Group PLC          Thu, Jul 31  Before the Bell     N/A
BOBJ   Business Objects      Thu, Jul 31  After the Bell      0.17
CCJ    Cameco                Thu, Jul 31  -----N/A-----       0.51
CAJ    Canon                 Thu, Jul 31  Before the Bell      N/A
CAH    Cardinal Health, Inc. Thu, Jul 31  Before the Bell     0.89
CRE    Carramerica Realty    Thu, Jul 31  After the Bell      0.80
CTL    CenturyTel, Inc.      Thu, Jul 31  Before the Bell     0.55
CBI    Chicago Bridge & Iron Thu, Jul 31  Before the Bell     0.34
CBB    Cincinnati Bell Inc.  Thu, Jul 31  -----N/A-----       0.12
CMCSA  COMCAST HOLDINGS CORP Thu, Jul 31  -----N/A-----      -0.02
BVN    Compania de Minas BV  Thu, Jul 31  -----N/A-----       0.51
CEG    Constellation Energy  Thu, Jul 31  Before the Bell     0.40
TEU    CP Ships              Thu, Jul 31  Before the Bell     0.29
CCI    Crown Castle Intl     Thu, Jul 31  After the Bell     -0.33
DB     Deutsche Bank         Thu, Jul 31  -----N/A-----        N/A
DDR    DEVELOPERS DIVERSIFIEDThu, Jul 31  After the Bell      0.67
RDY    Dr. Reddy's Lab       Thu, Jul 31  Before the Bell      N/A
E      ENI SpA               Thu, Jul 31  -----N/A-----       1.34
EPD    Enterprise Products   Thu, Jul 31  Before the Bell     0.13
EQY    Equity One            Thu, Jul 31  Before the Bell     0.36
ETH    Ethan Allen Interiors Thu, Jul 31  Before the Bell     0.55
XOM    Exxon Mobil Corp      Thu, Jul 31  -----N/A-----       0.56
FFH    Fairfax Financial     Thu, Jul 31  After the Bell       N/A
FIA    Fiat S.p.A.           Thu, Jul 31  -----N/A-----        N/A
FMT    Fremont General       Thu, Jul 31  Before the Bell      N/A
GPRO   Gen-Probe             Thu, Jul 31  Before the Bell     0.21
GILD   Gilead Sciences       Thu, Jul 31  After the Bell      0.44
HAL    Halliburton Company   Thu, Jul 31  Before the Bell     0.02
HAN    Hanson PLC            Thu, Jul 31  Before the Bell      N/A
HIW    Highwoods Properties  Thu, Jul 31  After the Bell      0.65
HIT    Hitachi Limited       Thu, Jul 31  -----N/A-----        N/A
ICI    Imperial Chemical Ind Thu, Jul 31  Before the Bell      N/A
IRF    International Rectif  Thu, Jul 31  -----N/A-----       0.23
IRM    Iron Mountain Incorp  Thu, Jul 31  Before the Bell     0.17
JHF    John Hancock Finl ServThu, Jul 31  After the Bell      0.75
JNY    Jones Apparel Group   Thu, Jul 31  Before the Bell     0.56
KPP    Kaneb Pipe Line Part  Thu, Jul 31  Before the Bell     0.80
KROL   Kroll Inc.            Thu, Jul 31  Before the Bell     0.31
LAF    Lafarge North America Thu, Jul 31  After the Bell      1.21
LIZ    Liz Claiborne         Thu, Jul 31  Before the Bell     0.41
MON    Monsanto Company      Thu, Jul 31  Before the Bell     1.01
NWL    Newell Rubbermaid     Thu, Jul 31  Before the Bell     0.42
NMR    Nomura Holdings, Inc. Thu, Jul 31  -----N/A-----        N/A
ORH    Odyssey Re Holdings   Thu, Jul 31  After the Bell      0.37
OLN    Olin                  Thu, Jul 31  After the Bell      0.15
OCR    Omnicare              Thu, Jul 31  Before the Bell     0.46
OKE    ONEOK Inc.            Thu, Jul 31  After the Bell      0.21
PHS    PacifiCare Health Sys Thu, Jul 31  After the Bell      1.33
PNP    Pan Pacific Retail    Thu, Jul 31  Before the Bell     0.80
PCZ    Petro-Canada          Thu, Jul 31  Before the Bell     0.96
PDS    Precision Drilling    Thu, Jul 31  -----N/A-----       0.05
PG     Procter & Gamble      Thu, Jul 31  Before the Bell     0.86
O      Realty Income         Thu, Jul 31  -----N/A-----       0.69
RTP    Rio Tinto PLC         Thu, Jul 31  Before the Bell     2.33
SPP    Sappi Limited         Thu, Jul 31  -----N/A-----       0.15
SLE    Sara Lee              Thu, Jul 31  During the Market   0.38
SHR    Schering AG           Thu, Jul 31  Before the Bell      N/A
SHPGY  Shire Pharmaceuticals Thu, Jul 31  Before the Bell     0.37
SPG    Simon Property Group  Thu, Jul 31  Before the Bell     0.93
SKM    SK Telecom            Thu, Jul 31  Before the Bell      N/A
SU     Suncor Energy         Thu, Jul 31  -----N/A-----       0.28
TNE    Tele Norte Leste      Thu, Jul 31  Before the Bell    -0.09
TLSN   TeliaSonera AB        Thu, Jul 31  -----N/A-----        N/A
SMG    The Scotts Company    Thu, Jul 31  Before the Bell     2.81
TOC    The Thomson Corp      Thu, Jul 31  -----N/A-----       0.18
WPO    The Washington Post   Thu, Jul 31  -----N/A-----       7.32
TXU    TXU Corp.             Thu, Jul 31  Before the Bell     0.35
UNTD   United Online Inc.    Thu, Jul 31  Before the Bell     0.28
DIS    Walt Disney           Thu, Jul 31  -----N/A-----       0.16
WEC    Wisconsin Energy      Thu, Jul 31  -----N/A-----       0.33
XL     XL Capital Ltd        Thu, Jul 31  After the Bell      1.94

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

AVZ    AMVESCAP PLC          Fri, Aug 01  Before the Bell     0.21
CVX    ChevronTexaco         Fri, Aug 01  Before the Bell     1.53
CI     CIGNA                 Fri, Aug 01  Before the Bell     1.08
DVA    DaVita                Fri, Aug 01  Before the Bell     0.51
DEG    Delhaize Group        Fri, Aug 01  Before the Bell      N/A
FS     Four Seasons Hotels   Fri, Aug 01  Before the Bell     0.18
GFI    Gold Fields Limited   Fri, Aug 01  -----N/A-----       0.10
NDE    IndyMac Bancorp, Inc. Fri, Aug 01  Before the Bell     0.72
ICST   Integrated Circuit SysFri, Aug 01  -----N/A-----       0.22
LYG    Lloyds TSB Group      Fri, Aug 01  Before the Bell      N/A
VRC    Varco International   Fri, Aug 01  Before the Bell     0.23
WPL    W.P. Stewart & Co.    Fri, Aug 01  Before the Bell     0.23
XEL    Xcel Energy           Fri, Aug 01  Before the Bell     0.23

Upcoming Stock Splits In The Next Two Weeks...

Symbol  Company Name              Ratio    Payable     Executable

PULB    Pilaski Financial Corp.   2:1      Jul  21st   Jul  22nd
MRTN    Marten Transport          3:2      Jul  24th   Jul  25th
SYNX    Synergx                   2:1      Jul  25th   Jul  28th

Economic Reports This Week

Wall Street is heading into its fourth full week of corporate
earnings.  We're also approaching the end of the month.  Friday,
August 1st, is packed with a truckload of economic reports.


Monday, 07/28/03

Tuesday, 07/29/03
Consumer Confidence (DM)Jul  Forecast:    85.0  Previous:     83.5

Wednesday, 07/30/03
Fed's Beige Book (DM)

Thursday, 07/31/03
Initial Claims (BB)   07/26  Forecast:    400K  Previous:     386K
Employment Cost Indx(BB) Q2  Forecast:    1.0%  Previous:     1.3%
GDP-Adv. (BB)            Q2  Forecast:    1.7%  Previous:     1.4%
Chain Deflator-Adv. (BB) Q2  Forecast:    1.4%  Previous:     2.4%
Help-Wanted Index (DM)  Jun  Forecast:      37  Previous:       36
Chicago PMI (DM)        Jul  Forecast:    53.7  Previous:     52.5

Friday, 08/01/03
Auto Sales (NA)         Jul  Forecast:    5.5M  Previous:     5.5M
Truck Sales (NA)        Jul  Forecast:    7.6M  Previous:     7.5M
Personal Income (BB)    Jun  Forecast:    0.3%  Previous:     0.3%
Personal Spending (BB)  Jun  Forecast:    0.4%  Previous:     0.1%
Nonfarm Payrolls (BB)   Jul  Forecast:      5K  Previous:     -30K
Unemployment Rate (BB)  Jul  Forecast:    6.3%  Previous:     6.4%
Hourly Earnings (BB)    Jul  Forecast:    0.2%  Previous:     0.2%
Average Workweek (BB)   Jul  Forecast:    33.8  Previous:     33.7
Mich Sentiment-Rev. (DM)Jul  Forecast:    90.7  Previous:     90.3
ISM Index (DM)          Jul  Forecast:    51.5  Previous:     49.8
Construction Spnding(DM)Jun  Forecast:    0.4%  Previous:    -1.7%

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


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The Option Investor Newsletter                   Sunday 07-27-2003
Sunday                                                      2 of 5

In Section Two:

Watch List: More Bullish Ideas
Call Play of the Day: AZO
Dropped Calls: SNPS
Dropped Puts: INTU


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Watch List

More Bullish Ideas

Electronic Arts - ERTS - close: 82.63 change: +1.12

WHAT TO WATCH: We came very close to adding ERTS to the OI play
list this weekend.  It looks like a very tempting call candidate.
Shares have reacted strongly to the company's earnings report
where ERTS beat estimates by 10-cents.  The breakout to new highs
and Friday's retest of $80.00 as support looks like an entry



Amgen Inc - AMGN - close: 68.71 change: +0.41

WHAT TO WATCH: We want to keep our eye on AMGN.  The current
trend has been almost non-stop since last November.  Now that
earnings are out (July 22, AMGN beat by 3 cents) we could see a
consolidation back to the trendline. Currently, that trendline is
near $65.00 but we suspect the rising 50-dma nearer to $66 should
offer support.  A bounce there might be an entry for bulls.



EchoStar Communications - DISH - close: 37.51 change: +0.73

WHAT TO WATCH: We've not played DISH in a while.  Shares have
been consolidating sideways between $34 and $37.50 for weeks.
Despite this sideways action the longer-term up trend is still
intact.  A breakout above $38.00 or a dip back to $35.00 looks
like tempting entry points for the bullish trader.  Earnings are
in mid-August.



Pepsico Inc - PEP - close: 47.13 change: +0.46

WHAT TO WATCH: Shares of PEP don't move that fast but for
investors looking for less volatile stocks that is just fine with
them.  Longer-term traders or covered call writers might find
interest in PEP.  On the weekly chart the stock has broken out
above the $45 level and been able to maintain its gains.  The
recent bounce on Friday from the $46.00 mark looks like an entry
point for the bullish minded.  Next overhead resistance should be
$50.00 then again at $53.00.


RADAR SCREEN - more stocks to watch

PCAR $74.06 - We had tried to play PCAR prior to its earnings
announcement in hopes of some pre-earnings excitement.  Buyers
failed to show up but there were no sellers either.  Now that
earnings are out we still don't see any sellers.  Look for a
breakout above $75.00 for new potential bullish plays.

TEVA $55.90 - TEVA remains on the radar list with a strong bounce
from the $52 mark and back above the $55 level.  Is this just a
bull flag consolidation pattern?  If so, then a move over $57.50
could herald a test of $60.00 and a possible new leg higher.

CSCO $19.08 - We're keeping an eye on CSCO.  Shares have been
building on a series of higher lows.  We suspect a breakout above
resistance at $19.50 and again at $20.00 might be worth trading
for the short-term investor.  Earnings are Aug. 5th.

AXP $45.60 - Shares of AXP look very tempting.  The stock has
been in a strong up trend since March and the recent breakout
over resistance coupled with Friday's bounce smells like an entry
point.  Earnings are the 28th so we'll find out soon how their
quarter went and how investors react.

BUD $52.19 - The recent consolidation between $50.00 and $52.00
looks about done.  Unfortunately, BUD has strong resistance at
$54.00-$55.00.  Has it built up enough steam to make new highs?


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Call Play of the Day:

AutoZone, Inc. - AZO - close: 80.17 change: +1.40 stop: 77.00

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.


Synopsis, Inc. - SNPS - close: 60.15 change: +0.13 stop: 58.75

The only thing that saved SNPS from a complete breakdown on Friday
was the fact that the Semiconductor index (SOX.X) staged a major
rebound from the bottom of its channel.  SNPS dropped early in the
day (on no news) to trade just barely above $58.  The early hint
that more weakness might be in store came from yesterday's break
below the 50-dma.  The early trade in SNPS on Friday violated our
stop, and despite the sharp intraday rebound to actually end the
day with a fractional gain, the technical damage has been done.
Further evidence of the waning strength is seen on the daily
chart, where the stock ended the session below the 50-dma for the
second time in a row -- the first time the stock has done that
since early March.  We'll take this as our warning to exit the
play.  Use any continuation of Friday's rebound on Monday to exit
open positions at a more favorable level.

Picked on July 22nd at    $61.04
Change since picked:       -0.89
Earnings Date           08/20/03 (unconfirmed)
Average Daily Volume =  1.51 mln
Chart link:


Intuit Inc - INTU - close: 42.37 change: +0.63 stop: 42.51

The rally on Friday was too much for bears in INTU and they
either covered or were overwhelmed by new buyers.  Or maybe
underwhelmed is a more appropriate word.  Shares added just 1.5%
on the day and the intraday high was $42.51, which coincidentally
is our stop loss.  The current trend from its June high is still
down but if the markets plan on starting a new leg higher then
investors might be tempted to buy INTU thinking its relatively
oversold condition makes it cheap to its peers.  For traders
still willing to stick it out, the $43.00 level looks like
tougher resistance.  However, be forewarned that many of the
oscillators are curving higher suggesting there may be more
bounce left in the stock.

Picked on July 8th at $43.35
Change since picked:   -0.98
Earnings Date       08/19/03 (confirmed)
Average Daily Volume =   4.1 million
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

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

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

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

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

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 07-27-2003
Sunday                                                      3 of 5

In Section Three:

Current Calls: FDX, GENZ, LOW
New Calls: AZO, GDW
Current Put Plays: BBBY, FITB, FRE, HD, LEH, LEN, PGR, XL
New Puts: None



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Fedex Corp - FDX - close: 65.25 change: +0.70 stop: 61.99

Company Description:
With annual revenues of $22 billion, FedEx Corp. is the premier
global provider of transportation, e-commerce and supply chain
management services. The company offers integrated business
solutions through a network of subsidiaries operating
independently, including: FedEx Express, the world's largest
express transportation company; FedEx Ground, North America's
second largest provider of small-package ground delivery service;
FedEx Freight, the largest U.S. provider of regional less-than-
truckload freight services; FedEx Custom Critical, North
America's largest provider of expedited time-critical shipments;
and FedEx Trade Networks, North America's largest customs broker
and a provider of international freight forwarding and trade
facilitation services. FedEx ranked highest in the J. D. Power
and Associates 2002 Small Package Delivery Service Business
Customer Satisfaction Study(SM) in the categories of air, ground
and international delivery services. (source: company press

Why We Like It:
Traditional Dow Theory states that for the market to have a
sustainable rally it needs the Transportation sector to lead or
accompany the markets higher.  Take a look at the $TRAN now.
Friday's action pushed it above significant resistance at 2600,
appearing very much to be a breakout bulls can build on (unless
you count the 200-week MA just overhead).  The rally was not lost
on shares of FDX either.  The stock added another one percent and
closed above the $65 level.  We had been suggesting all week that
traders consider bounces from the $64.00 area as opportunities
for new entries.  FDX offered two such opportunities this week.
Now we're ready to see some follow through.  We're going to leave
our stop at $61.99 for now but more conservative traders can
probably cinch theirs higher to just under the 50-dma at $63.25.
If you missed the dip, FDX still looks attractive at current
levels.  It would be nice to see some follow through on last
Monday's fresh P&F chart buy signal.

Suggested Options:
We're going to list the August, September and October 65 and 70
calls but the recent dips have probably offered opportunities to
jump on the 60 strikes as well.

BUY CALL AUG 60 FDX-HL OI= 491 at $5.80 SL=3.00
BUY CALL AUG 65 FDX-HM OI=1986 at $1.40 SL=0.70
BUY CALL AUG 70 FDX-HN OI= 290 at $0.15 SL= -- higher risk!
BUY CALL SEP 65 FDX-IM OI= 228 at $2.40 SL=1.25
BUY CALL SEP 70 FDX-IN OI= 369 at $0.60 SL= --
BUY CALL OCT 65 FDX-JM OI=3753 at $3.10 SL=1.65
BUY CALL OCT 70 FDX-JN OI=1684 at $1.00 SL=0.55

Annotated chart of FDX:

Picked on July 20 at $65.32
Change since picked:  -0.07
Earnings Date      09/23/03 (unconfirmed)
Average Daily Volume:  1.70 million
Chart =


Genzyme Corp - GENZ - close: 50.45 change: +0.99 stop: 46.49

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:
Any companies who have missed significantly or warned about
future quarters are getting the share prices pummeled.  Which is
standard operating procedure on Wall Street.  However, investors
are also disciplining stocks when the earnings quality is being
called into question.  Fortunately, GENZ is not one of them.  The
company's most recent earnings report was very strong.  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.

The technical picture for GENZ looks pretty attractive too.
Wednesday's move higher produced a fresh double-top breakout (buy
signal) on its P&F chart.  Shares are at new yearly highs after
consolidating under resistance between $49 and $50.  The recent
dip to $48.00 was seen as a buying opportunity.  Traders quickly
pushed GENZ back above $50.00.  If the BTK biotech index can show
some strength and bounce from the 450 level and its rising 50-
dma, then GENZ may get the chance to really lead the group

Our next target is $55.00.  Currently our stop is $46.49 but
conservative traders seeking to reduce their risk might be able
to play it with a tighter stop.

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= 632 at $6.00 SL=3.50
BUY CALL AUG 47.50 GZQ-HS OI=2279 at $3.80 SL=1.85
BUY CALL AUG 50.00 GZQ-HJ OI=1817 at $2.25 SL=1.15
BUY CALL AUG 55.00 GZQ-HK OI=1078 at $0.50 SL= -- higher risk
BUY CALL SEP 47.50 GZQ-IS OI=  17 at $5.10 SL=3.00
BUY CALL SEP 50.00 GZQ-IJ OI= 239 at $3.60 SL=1.80
BUY CALL SEP 55.00 GZQ-IK OI=1573 at $1.45 SL=0.70

Annotated chart of GENZ

Picked on July 22 at $49.76
Change since picked:  +0.69
Earnings Date      07/16/03 (confirmed)
Average Daily Volume:  3.52 million
Chart =


Lowe's Companies - LOW - cls: 48.23 chng: +1.13 stop: 46.00*new*

Company Description:
As a retailer of home improvement products, Lowe's has a specific
emphasis on retail do-it-yourself and commercial business
customers.  The company specializes in offering products and
services for home improvement, home decor, home maintenance, home
repair and remodeling and maintenance of commercial buildings.

Why we like it:
After the recent breakout over $46 a couple weeks ago, LOW has
been consolidating that breakout in a very healthy fashion,
consistently finding support above the level of that breakout.
Continuing to show the relative strength that first attracted us
to the stock, LOW finally gave us the breakout over $48 that
we've been waiting for.  Recall that one of our near-term
concerns when we initiated coverage after that breakout was that
price was above the upper Bollinger band and we needed to see
some sideways price action to allow that band to expand upward.
Well after 2 weeks, that is just how it has played out, with
several opportunities to get aboard on dips near the $46.50 level
and today's subsequent breakout.  The upper Bollinger band is now
at $49.44, providing more room to the upside.  Now we can look to
enter on either breakout over $48.40 or a pullback and rebound
from the vicinity of the 10-dma ($47.16) for new entries ahead of
the expected push to our $50 target.  Note that on the daily
chart below, LOW did dip as low as $45.71 last Tuesday.  Looking
at an intraday chart though shows that it was a very short-lived
dip and our new stop at $46 should be safe.

Suggested Options:
Shorter Term: The August 47 Call will offer short-term traders
the best return on an immediate move, as it is currently in the

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the September 50 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 could utilize the September 47 call.

BUY CALL AUG-47 LOW-HT OI= 3756 at $1.85 SL=0.90
BUY CALL AUG-50 LOW-HJ OI= 1819 at $0.65 SL=0.30
BUY CALL SEP-47 LOW-IT OI=   91 at $2.70 SL=1.25
BUY CALL SEP-50 LOW-IJ OI= 1543 at $1.45 SL=0.75

Annotated Chart of LOW:

Picked on July 13th at    $46.87
Change since picked:       +1.36
Earnings Date           08/18/03 (unconfirmed)
Average Daily Volume =  4.80 mln
Chart =


AutoZone, Inc. - AZO - close: 80.17 change: +1.40 stop: 77.00

Company Description:
AutoZone is a retailer of automotive parts and accessories,
primarily focusing on do-it-yourself customers.  Each of its more
than 2900 stores in 42 states and Mexico carries an extensive
product line for cars, vans and light trucks, including new and
re-manufactured automotive hard parts, maintenance items and
accessories.  Approximately half of its domestic stores also have
a commercial sales program, which provides commercial credit and
prompt delivery of parts and other products to local repair
garages, dealers and service stations.

Why we like it:
You certainly haven't heard much on the topic from Stock TV
lately, but automotive related-stocks look like they might
actually be a beneficiary of the recent rise in interest rates.
If it cuts into consumers' willingness to take on the payment for
a new car, that means they'll need parts and service for their
existing vehicles, right?  That seems to be what investors are
thinking, as shares of AZO have been gradually working their way
higher over the past few weeks.  There was a fair amount of
indecision around the 200-dma in late June and early July, but
the bulls eventually prevailed, leading to the trend we're seeing
on the daily chart tonight.  The stock has been tracing out a
nice bullish triangle, with higher lows and horizontal resistance
in the $79.50-80.00 area (see chart below).  The bulls were so
eager for a positive conclusion to that pattern that they broke
above the top of that pattern on Friday at the close.  It wasn't
just horizontal resistance that was eliminated either, as the
close over $80 was also a breakout over the 50-dma.

It gets better too, as the PnF chart is on a Buy signal, in a
column of X and has a vertical count of $90.  Can AZO break out
to new highs ahead of its earnings report at the end of August?
Stranger things have certainly happened in the past, but we
aren't going to set our sights quite that high.  Our initial
target will be for a rally to the $85 resistance level and if it
really gets moving, then we may target a trade in the $88 area
(very strong resistance) as our profit exit.  But first we need
to get into the play.  Aggressive traders can use a further
breakout over $80.30 (Friday's intraday high) to enter the play,
while more patient dip-buyers can look to enter on a pullback and
rebound from either the 10-dma ($78.82) or the ascending
trendline and 20-dma which are overlapped near $77.75-77.80.  Set
stops initially at $77, as that is just below the low print of
last Tuesday's dip.

Suggested Options:
Shorter Term: The August 80 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 September 85 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 can use the September 80 Call.

BUY CALL AUG-80 AZO-HP OI=2361 at $2.00 SL=1.00
BUY CALL AUG-85 AZO-HQ OI= 722 at $0.40 SL=0.00
BUY CALL SEP-80 AZO-IP OI=1366 at $3.80 SL=2.25
BUY CALL SEP-85 AZO-IQ OI= 713 at $1.60 SL=0.75

Annotated Chart of AZO:

Picked on July 27th at    $80.17
Change since picked:       +0.00
Earnings Date           08/26/03 (unconfirmed)
Average Daily Volume =  1.29 mln
Chart =


Golden West Fincl. - GDW - close: 85.66 chg: +2.46 stop: 80.99

Company Description:
Headquartered in Oakland, California, Golden West is the nation's
third largest savings institution with assets of $72 billion as
of June 30, 2003. Currently operating 476 savings and lending
offices in 38 states under the World name, the Company has one of
the most extensive thrift branch systems in the country.
(source: company press release)

Why We Like It:
If the economy really is on the rebound then the financial sector
is going to be leading the race.  Both the BKX and BIX rebounded
strongly in Friday's market rally and from the looks of it they
looked primed for another leg higher.  One of the leaders in that
group is GDW.  The company reported very strong profits on July
21st.  Estimates were for $1.69 a share, GDW beat them by 7-
cents.  Net income jumped 22 percent.  Not only is GDW building
its loan and mortgage portfolio but they're doing it in a way to
protect themselves for when interest rates rise.  Here's an
excerpt from the company's earnings announcement by Marion
Sandler, Chairman and CEO:

"Despite the exceptionally low rates being offered by our
competitors on their fixed-rate alternatives, the majority of our
new loan volume in the second quarter was in the form of
adjustable rate mortgages, also called ARMs. These mortgages have
many consumer benefits, and are desirable from the Company's
point of view as well, because they help limit our earnings
exposure when market interest rates rise." Adjustable rate loans
comprised 91% of new lending in the second quarter of 2003."

Wall Street must be cheering because the stock just closed at
all-time highs on Friday.  We like the way its MACD has just
produced a bullish buy signal and its remaining oscillators are
all pointing higher.  Even more attractive is the fresh breakout
from its bullish triangle on the stock's point-and-figure chart.
This happens to be one of the most powerful (and profitable)
bullish patterns in a rising market.

We're going to initiate the play with a stop loss at $80.99.
Shares have bounced twice at the $81 mark in the last few weeks
so this should suffice for support.  Our first target is $90.00.
Once reached we'll re-evaluate the play.

Suggested Options:
GDW has plenty of options to choose from with August, September,
November and February's.  We're going to list August and
September strikes.

BUY CALL AUG 80 GDW-HP OI= 463 at $6.00 SL=3.50 only 34 cent premium
BUY CALL AUG 85 GDW-HQ OI=3738 at $1.70 SL=0.90
BUY CALL AUG 90 GDW-HR OI=  25 at $0.20 SL= --
BUY CALL SEP 85 GDW-IQ OI=   0 at $2.75 SL=1.00
BUY CALL SEP 90 GDW-IR OI=   0 at $0.60 SL= --

Annotated chart:

Picked on July 27 at $85.66
Change since picked:  +0.00
Earnings Date      07/21/03 (confirmed)
Average Daily Volume:  581  thousand
Chart =

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Bed Bath & Beyond - BBBY cls: 39.10 chng: +1.04 stop: 40.25*new*

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

Why we like it:
Was that a bear trap?  To be sure, last week provided some
interesting and volatile swings, but that is to be expected in
the heart of earnings season.  But there has been no such
influence on our BBBY play.  Proceeding according to plan on
Wednesday, the stock broke below the $37.50 level, and with the
expanding volume it looked like the bears were off to the races.
"Not so fast", said the bulls, as they stepped in just above the
200-dma and bought the dip.  That gave rise to a strong move
upwards on Thursday and another strong gain to close out the week
back over $39 and the 20-dma.  Further confusing things, the
rebound has also come on strong volume.  That leads us to the
very real possibility that last week's drop may have been a bear
trap.  Looking at the Retail index (RLX.X), we can see how it
rebounded from the bottom of its ascending channel on Friday, and
that's another problem for our play.  But we're going to force
the market to prove us wrong before pulling the plug, as BBBY is
still below its descending trendline from the early June highs.
We're moving our stop just slightly lower this weekend to $40.25,
still just above the 50-dma.  More conservative traders will want
to use a stop just above the descending trendline, perhaps at
$39.50.  We need to see renewed weakness before considering new
positions after the strong rebound last week, and at this point
it would require a reversal back lower that drops price back
under $38.  Ideally, that will be accompanied by the RLX dropping
under $335, breaking the bottom of its channel.

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 will want to utilize the 40 strike, as it is still 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= 2097 at $1.65 SL=0.75
BUY PUT AUG-37 BHQ-TU OI=10851 at $0.55 SL=0.25
BUY PUT SEP-37 BHQ-UU OI=  469 at $1.40 SL=0.75

Annotated Chart of BBBY:

Picked on July 22nd at    $37.71
Change since picked:       +1.39
Earnings Date           09/17/03 (unconfirmed)
Average Daily Volume =  3.34 mln
Chart link:


Fifth Third Bancorp - FITB - cls: 56.50 chg: +1.51 stop: 57.01*new*

Company Description:
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. The Company has $88 billion in
assets, operates 17 affiliates with 943 full-service Banking
Centers, including 132 Bank Mart. locations open seven days a
week inside select grocery stores and 1,883 Jeanie. ATMs in Ohio,
Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee and
West Virginia. The financial strength of Fifth Third's affiliate
banks continues to be recognized by rating agencies with deposit
ratings of AA- and Aa1 from Standard & Poor's and Moody's,
respectively. Additionally, Fifth Third Bancorp continues to
maintain the highest short-term ratings available at A-1+ and
Prime-1 and is recognized by Moody's with one of the highest
senior debt ratings for any U.S. bank holding company of Aa2.
Fifth Third operates four main businesses: Retail, Commercial,
Investment Advisors and Fifth Third Processing Solutions.
(source: company press release)

Why We Like It:
Uh-oh!  The rally on Friday really helped the bulls' sense of
confidence and the financials look ready to lead the next leg
higher.  This is bad news for our bearish play in FITB.  While
previously the stock appeared to be ignoring any rallies in the
banking sectors, its relatively oversold status could now attract
investors thinking this is a "value" compared to its peers.  The
big bounce in FITB from its $55 mark back above the 200-dma is a
warning signal.

Fortunately, it is still below overhead resistance at its 50-dma
and the $57.00 level.  However, we mentioned on earlier that the
stall in the descent near $55 had many of the oscillators turning
up.  Several are really starting to turn higher now.  This could
just be a bear flag consolidation pattern over the last four or
five days but we want to preserve our capital.  Thus we're going
to lower our stop loss to $57.01.  More aggressive traders who
are more willing to take the risk can leave their stops at $57.50
or $58.00.  This is really too bad.  The daily and weekly and P&F
charts on FITB all looked (and some still look) so promising for
a bearish trade.

Suggested Options:
We are not suggesting new entries at this time.

Annotated Chart:

Picked on July 17th at $55.26
Change since picked:    -0.27
Earnings Date        07/15/03 (confirmed)
Average Daily Volume =    2.4 million
Chart link:


Freddie Mac - FRE - close: 50.75 change: +0.42 stop: 53.00

Company Description:
Freddie Mac (Federal Home Loan Mortgage Corporation) is a
stockholder-owned corporation tht was established by Congress in
1970 to support home ownership and rental housing.  FRE purchases
single-family and multi-family residential mortgages and
mortgage-related securities, which it finances primarily by
issuing mortgage passthrough securities and debt instruments in
the capital markets.  The company guarantees these securities and
mortgage lenders sell their loans to the company and use the
proceeds to fund new mortgages, which in turn increases the money
supply to homebuyers.

Why we like it:
"Gotcha!" said the bears early on Friday, as shares of FRE got
pummeled under $50, triggering our play to active status.  But
then a funny thing happened.  The market bottomed at the end of
the first hour of the day and FRE caught a strong rebound from
the $49.50 level, ending the day just shy of $51.  Now we're
going to see if it is just an oversold rebound or something more
significant.  The descending trendline from the July 9th highs
crosses just above $52 and that will line up nicely with
horizontal resistance at that level early next week.  A rollover
from that area could set up a solid entry for those that didn't
want to chase FRE lower on Friday.  There are a lot of skeletons
I FRE's closet and we're suspecting that there are still several
of them that haven't been revealed yet.  Fear of the next
revealed skeleton should keep the stock under pressure,
especially if the mortgage market continues to be pressured by
the rise in Treasury yields.  Maintain stops at $53.

Suggested Options:
Short-term traders will want to focus on the August 50 Put, as it
will provide the best return for a short-term play.  Conservative
traders will want to utilize the September 50 Put, while
aggressive traders looking for a longer-term move down towards
$45 or below will want to utilize the September $45 contract, due
to its greater insulation against time decay.

BUY PUT AUG-50 FRE-TJ OI= 4977 at $1.20 SL=0.60
BUY PUT SEP-50 FRE-TU OI=  371 at $2.35 SL=1.25
BUY PUT SEP-45 FRE-UU OI=  423 at $0.85 SL=0.40

Annotated Chart of FRE:

Picked on July 22nd at    $50.33
Change since picked:       +0.42
Earnings Date                N/A
Average Daily Volume =  7.17 mln
Chart =


The Home Depot - HD - close: 32.00 change: +0.52 stop: 33.25

Company Description:
A home improvement retailer, The Home Depot operates more than
1500 stores throughout the United States.  The do-it-yourself
warehouse retail stores offer building materials, home
improvement products and related furnishings.  Additionally, the
company provides lawn and garden products and an assortment of
services to both individual home-owners and independent

Why we like it:
It looks like we've got ourselves an ideal relative strength play
working in the Home Improvement sector.  While we'd certainly
like to see more weakness out of HD, there's no argument that it
has been doing a good job of fulfilling its role as the weakling
in the group.  Last week HD broke below the 50-dma (now $32.40)
and after finding resistance at that level through Thursday,
started the final day of the week with a slight dip down to
$31.24.  That was as good as it got for the bears though, as HD
caught a pretty decent bounce from the broad market strength and
recovered back to $32 by the close.  Note the daily chart shown
below is erroneous, as it shows HD trading below $31 -- that was
a bad tick.  That doesn't mitigate the reality that Friday's
session looked pretty bullish and now we're likely to see whether
that was just an oversold bounce or the punctuation at the end of
the decline.  Since we're still covering the play, you may
correctly surmise we think the latter is the correct choice.  The
descending trendline from the recent top in early July currently
falls at $32.80 and that lines up with solid resistance (broken
support) near $32.70.  It's going to take more than an oversold
bounce to clear that resistance level and before even getting
there, the bulls will have to contend with resistance near
$32.25.  Entries still look favorable on a rollover from one of
those resistance points, especially if the strong stock in the
sector (LOW) falters in its breakout move.  Keep stops set at

Suggested Options:
Aggressive short-term traders will want to focus on the August 32
Put, as it will provide the best return for a short-term play.
More conservative traders will want to utilize the September 32
contract due to its greater insulation against time decay.

BUY PUT AUG-32 HD-TZ OI=9582 at $1.15 SL=0.50
BUY PUT SEP-32 HD-UZ OI= 340 at $1.80 SL=0.80
BUY PUT SEP-30 HD-UF OI= 457 at $0.75 SL=0.40

Annotated Chart of HD:

Picked on July 10th at   $32.43
Change since picked:      -0.43
Earnings Date          08/19/03 (unconfirmed)
Average Daily Volume =  9.51 mln
Chart =


Lehman Brothers - LEH - close: 63.53 change: +0.35 stop: 66.50

Company Description:
Through its subsidiaries, LEH constitutes one of the leading
global investment banks, serving institutional, corporate,
government and high-net-worth individuals clients.  The company
is engaged primarily in providing financial services, including
securities writing and direct placements, corporate finance and
strategic advisory services, private equity investments and
securities sales and trading.  Completing its array of banking,
research and trading capabilities, LEH also engages in the
trading of foreign exchange, derivative products and certain

Why we like it:
What's wrong with LEH?  Another solid bounce in the Brokerage
sector (XBD.X) barely had an effect on shares of LEH on Friday.
While the XBD managed to produce a 1% gain and close at its best
level in the past 7 sessions, shares of LEH only managed a
positive close by virtue of a sector-driven rebound from the
lows.  The explanation is easy -- relative weakness.  LEH has
been underperforming its sector for the past several weeks and
given the rather anemic buying volume (compared to recent bearish
sessions) on Friday afternoon, it doesn't look like that pattern
is going to change any time soon.  After breaching $63 early on
Friday, the stock was magnetized right back to that 50%
retracement near $63.50 at the close.  There's mild resistance in
the $64.00-64.25 area, followed by strong resistance in the
$65.50-66.00 area.  A bounce and rollover from either of these
levels can be used for new entries.  Due to the stingy manner in
which the stock has been trending lower in recent sessions, we're
not really interested in chasing a breakdown below $62 with new
entries, especially given the fact that our eventual target for
the play is just down at $60.  Maintain stops at $66.50, and
remember to look for weakness in the XBD to confirm weakness in
LEH before playing.  If the pattern of relative weakness
continues, a rollover and subsequent selloff in the XBD should
act like a sledge hammer, driving the stock down through support
to hit our target for a nice gain.

Suggested Options:
Short-term traders will want to focus on the August 65 Put, as it
will provide the best return for a short-term play.  Aggressive
traders looking for a move down towards the $60 level or below
will want to utilize the September 60 contract, which although it
is currently out of the money, should provide enough time to
achieve profitability before time decay has a pronounced effect.

BUY PUT AUG-65 LEH-TM OI=1218 at $2.70 SL=1.25
BUY PUT AUG-60 LEH-TL OI=3081 at $0.65 SL=0.30
BUY PUT SEP-60 LEH-UL OI= 485 at $1.75 SL=0.80

Annotated Chart of LEH:

Picked on July 20th at    $65.18
Change since picked:       -1.65
Earnings Date           09/18/03 (unconfirmed)
Average Daily Volume =  2.85 mln
Chart =


Lennar Corp. - LEN - close: 67.80 change: +0.05 stop: 71.50

Company Description:
Lennar Corporation has two core businesses, homebuilding and
financial services.  The company's homebuilding operations
include the sale and construction of single-family attached and
detached homes, as well as the purchase, development and sale of
residential land directly and through its unconsolidated
partnerships.  Its financial services subsidiaries provide
mortgage financing, title insurance, closing services and
insurance agency services for both buyers of its homes and
others, and sell the loans they originate in the secondary
mortgage market.

Why we like it:
What happened to the housing boom?  All we have to do is look at
the action in the bond market for that answer.  Yields have been
rising and with them go mortgage rates.  That's putting the pinch
on Housing stocks as measured by the $DJUSHB index, as investors
infer that higher rates are going to put a significant crimp in
the recent growth rate in the sector.  Whether right or wrong,
that is the sentiment that is playing out in the group.  Contrary
to some recent past attempts at a bearish play in the sector,
this one is actually behaving itself fairly well.  After breaking
below $70 just over a week ago, LEN came pretty close to reaching
our first target of $65 last Tuesday, with an intraday low of
$65.61.  Proving that they hadn't given up just yet, the bulls
staged a nice little rebound, which ran out of steam just below
$70 on Wednesday morning and it continues to drift lower.  Of
course, things looked a lot better for the play before The short-
covering rally off the early lows, but so far there really isn't
a sign of a strong rebound brewing.  That means fading the
rallies is still the way to go.  The 10-dma ($69.36) has been
providing intraday resistance and just above there we have the
50-dma lurking at $70.05.  Failed rallies below those two
measures of resistance should make for strong entries in
anticipation of a subsequent breakdown under $65.  That breakdown
can be used for quick momentum entries, for a quick play down to
our anticipated final target in the $62-63 area.  For now, keep
stops set at $71.50.

Suggested Options:
Aggressive short-term traders will want to focus on the August 65
Put, as it will provide the best return for a short-term play.
With the volatility seen in the Home Building stocks lately, more
conservative traders may want to use the August 70 contract,
which is currently in the money and less susceptible to the
ravages of time decay.  Since there is nearly 2 months to the
company's next earnings release, we've also listed a SEP
contract, for those traders looking to take advantage of a
longer-term move.

BUY PUT AUG-70 LEN-TN OI=3417 at $4.00 SL=2.50
BUY PUT AUG-65 LEN-TM OI=2073 at $1.70 SL=0.80
BUY PUT SEP-65 LEN-UM OI= 219 at $3.10 SL=1.50

Annotated Chart of LEN:

Picked on July 15th at   $71.12
Change since picked:      -3.76
Earnings Date          09/09/03 (unconfirmed)
Average Daily Volume =  1.68 mln
Chart =


Progressive Corp - PGR - close: 66.39 chg: +1.09 stop: 67.51

Company Description:
The Progressive group of insurance companies ranks third in the
nation for auto insurance based on premiums written, offering its
products by phone at 1- 800-PROGRESSIVE, online at
progressive.com and through more than 30,000 independent
insurance agencies. (source: company press release)

Why We Like It:
From February though June 2003 we heard from bears wondering what
could be driving shares of PGR higher.  Every dip appeared to be
bought.  Finally, when its Q2 earnings announcement came out and
the company beat estimates by 7-cents bears had something to
cheer about.  All right, we're being sarcastic.  The company had
a strong quarter but we suspect the "quality" of the earnings was
called into question or PGR didn't hit some insurance sector
metric that analysts were looking for.  Whatever the case,
investors took profits and took them fast.  What made this so
appealing to us was the completely lack of bounce from its big
drop.  We've seen a couple of big rallies in the markets since
then and PGR failed to participate.  Even this last Friday's 1.6%
gain for PGR didn't do much for it.  The stock is still making
new lower lows and lower highs in this current six-day old trend.

We feel that PGR is worth evaluating for new positions at current
levels BUT it would certainly be more comforting to see a close
under the $65.00 mark.  Less confident bears might feel better
waiting for such a close.  Our short-term target is $60.00, near
its 200-dma.

Suggested Options:
PGR has plenty of options to choose from.  Currently there are
August, September, November and Februarys to choose from. Our
preference will be for the August-September strikes with an
emphasis on August 65's.

BUY PUT AUG 70.00 PGR-TN OI=443 at $4.20 SL=2.75
BUY PUT AUG 65.00 PGR-TM OI=528 at $1.35 SL=0.65
BUY PUT AUG 60.00 PGR-TL OI=865 at $0.30 SL= --
BUY PUT SEP 65.00 PGR-UM OI= 61 at $2.40 SL=1.20
BUY PUT SEP 60.00 PGR-UL OI=156 at $0.90 SL= --

Annotated Chart for PGR:

Picked on July 23 at $65.22
Change since picked:  +1.17
Earnings Date      07/16/03 (confirmed)
Average Daily Volume:  941  thousand
Chart =


XL Capital Ltd. - XL - close: 78.50 change: +1.92 stop: 80.50

Company Description:
XL Capital Ltd. provides insurance and reinsurance coverages and
financial products and services to industrial, commercial and
professional service firms, insurance companies and other
enterprises on a worldwide basis.  Insurance business written
includes general liability, other liability, professional and
employment practices liability, environmental liability,
property, program business, marine and energy, aviation and
satellite, as well as other product lines.  Reinsurance business
written includes treaty and facultative reinsurance to primary
insurers of casualty and property risks, as well as life
reinsurance, primarily European term assurances, group life,
critical illness coverage , immediate annuities in payment and
disability income business.

Why we like it:
Holy Rebound, Batman!  Just as swiftly as XL sliced through the
200-dma on Wednesday as though it didn't exist, the stock found
strong support on Friday morning just above $76.  Throughout last
week's wild gyrations, there hasn't been anything of note on the
newswires, and our best guess is that the sharp drop following
the failed bounce from the prior week was simply the expected
bearish follow-through after that technical break of $80.  But we
would have expected some hint of support at that moving average
on the way down.  Perhaps that's why price halted at $78.50 on
Friday, just below the 200-dma ($78.61).  As much as we'd like to
see price rollover from below this measure, we suspect there may
be enough gas in the bulls' tank to stage a rally attempt up to
the $79-80 area.  That will be the moment of truth.  We would
expect a rollover from that level of strong support-turned-
resistance and would be the point where we would recommend
looking for new entries for a decline into earnings on July 31st.
Remember, our eventual target is in the $73-74 area, so a
breakdown under $76.25 can be used as a momentum entry for a
quick play down to that target.

Suggested Options:
Aggressive short-term traders will want to focus on the August 80
Put, as it will provide the best return for a short-term play.
Traders with a more conservative approach will want to utilize
the September contract, as it should not be subject to as much
time decay over the near term.

BUY PUT AUG-80 XL -TP OI=1074 at $3.20 SL=1.50
BUY PUT AUG-75 XL -TO OI=  50 at $1.15 SL=0.50
BUY PUT SEP-75 XL -UO OI=  80 at $2.20 SL=1.00

Annotated Chart of XL:

Picked on July 17th at   $79.64
Change since picked:      -1.14
Earnings Date          07/31/03 (confirmed)
Average Daily Volume =    755 K
Chart =



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The Option Investor Newsletter                   Sunday 07-27-2003
Sunday                                                      4 of 5

In Section Four:

Leaps: Bulls Will Be Bulls
Traders Corner: When Is The Last Time Your Underlying Rose?
Traders Corner: Elliott Wave Play Updates
Traders Corner: Where is the Dow Going?
Futures Corner: Emini Momentum Trading


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Bulls Will Be Bulls
By Mark Phillips

My closing thought from last week's column was that I didn't
expect a typical listless summer ahead of us.  That was certainly
the case last week, with plenty of volatility to keep everyone
guessing.  Take a look at the hourly chart below and I think
you'll see what I mean.

Hourly Chart of the S&P 500

Down, up, down, up, etc.  For all those oscillations, the bulls
certainly didn't make much headway now, did they?  By my count,
the SPX gyrated from 993 down to 977, back up to 990, down to 980,
up to 997, and back down to 977 before finally closing at the high
of the week at 998.  Adding up the numbers, that makes a total of
97 points of directional movement -- all to tack on a measly 6
points from Friday to Friday.  A return to wider intraday swings
has got to have the futures traders smiling again, but it doesn't
do much to reinforce any feelings of strong bullishness when all
of those gyrations are only good for a 0.6% advance on the week.

So far, that plays right into our view of an imminent market top.
So allow me to throw in a new twist.  Looking at the longer-term
picture, I certainly am forced to consider the possibility of
another strong upward leg.  Care to take a look?

Daily Chart of the S&P 500 vs. the VIX

There's a lot of critical information in the chart montage above,
so let's take it one step at a time.  First up, note how the SPX
has consistently found strong support near 975 since early June.
There have been a couple intraday violations, but there has been a
concerted effort to keep the index above that critical level.  A
quick look at a weekly chart would show the criticality of this
level, as it was important resistance in 1997 and then closing
support in late 1998.  It is also very close to where the index
bottomed (965 on a closing basis) following 9/11.  Anyone can pick
an arbitrary point and call it "critical" support or resistance,
but I think the market is telling us that 975 is important.

I've made no secret of my bearish long-term view of the equity
market for the next several years due to the still ridiculously
huge valuations due to the remaining speculative excesses that
ruled during the late 1990s.  I've been eagerly looking for the
next top to aggressively short for nearly 3 months now and based
on what I see in the charts, we're no closer to it than we were in
early June.  Since early June, the market has trended sideways
between 975-1015 in what appears to be a very healthy sideways
consolidation.  That has given the 50-dma time to catch up with
price action and after 3 tests last week, Friday's sharp rebound
from that moving average seems to indicate that we're going back

That view would seem to be confirmed by the action of the VIX over
the past several weeks.  I've been wondering why with the lack of
upside momentum, the VIX seems to be indicating a lot of
complacency.  Well, with Thursday's dip below 20 and Friday's
close just below that level, the complacency just got a bit more
entrenched, bringing us that much closer to where we'll see a top
put in.  But we need to remember that there is nothing magical
about the 20 level -- it is a general area, rather than an exact
value.  Last spring, the VIX trended down to 18.87 before the
bottom was in.  But isn't it interesting how even after the March
high was in (3/19), we can see that the VIX continued drifting
downwards until the end of March (3/28)?  So following that
pattern, we could have already seen the top in terms of price and
the VIX could continue to drift lower for a couple more weeks.

So what does it all mean?  I still think we are very close to an
intermediate term top, but I am cooling my jets on whether we're
really going to see a major drop between now and September.
Fundamentally, I still think this market is a pig and is currently
valued at least double where it should be.  And if I'm right,
there are some nasty surprises in store for the US economy in the
years ahead.  But the market doesn't care about that -- it only
wants to know what is just over the 6-month horizon.  Clearly,
based on the price action, investors see a recovering economy,
floated upwards on the surging sea of liquidity and easy money
provided by Uncle Alan, Benevolent Ben and the rest of the gang at
the Fed.

Speaking of that strong surge in liquidity, it appears the gold
market is viewing the long term picture as less favorable for the
US dollar.  Gold surged sharply higher last week, and NEM - THE
bellwether gold stock broke out above major resistance to set new
5-year highs.  Remember when we finally gave up on our Watch List
play on NEM as it broke through $32 in early June?  A bit more
patience and we could have taken an entry on the rebound from the
50-dma near $31 just over a week ago.  Another missed
opportunity...  The key point here is that the gold market sees
economic problems that the equity market is currently ignoring.

We'll have to pay the piper eventually, but that isn't on the
agenda right now and technically this market looks like it wants
to break out to the upside.  What is so astounding about that
technical view is that we are talking about starting from a VERY
overbought condition, at least in terms of the Bullish Percents.
I know many of you may be getting tired of hearing me prattle on
about this measure of market internals, but I think it does an
excellent job of keeping us on the right side of the dominant tide
in the market.  So let's review what happened in that view last

NASDAQ-100 - 75% Still Bull Confirmed, down from the 91% high
NASDAQ Composite - 71.83% (just off the 73.50 all-time high)
DOW - 80% (Finally reversed into Bull Correction)
S&P 500 - 75.80% (Cycle high of 82.80% - Now Bull Correction)
S&P 100 - 82% (Just below cycle high, 11/98 all-time high = 84%)

As we've been noting in recent weeks, the BP internals have been
awfully stingy about giving up any ground and that still remains
the case.  We're starting to see a bit of fraying about the edges,
but the best any of the major indices have been able to muster is
a reversal into bull correction in the case of the DOW and the
SPX.  Even the NDX (now 16% below its cycle high) is still in Bull
Confirmed.  But this is where I think the SharpCharts of the
Bullish Percents really give us an edge.  Recall that in the past
few weeks, I've been talking about my expectation for the indices
(particularly the SPX and NDX, as they have shown weakness first)
to rebound, produce a lower BP high and then break down.  Take a
look at the charts below for the SPX and NDX and you can see that
does indeed seem to be playing out.

SPX Bullish Percent SharpChart

Holding true to the pattern we've been talking about in recent
weeks, the SPX BP is weakening, with a pattern of lower highs, and
BP below its 10-dma, with the CCI oscillator showing weakness
below the -100 level.

NDX Bullish Percent SharpChart

We have a similar picture in the NDX as well, with the expected
pattern of lower highs in BP, the BP line below the 10-dma and the
CCI oscillator threatening to break back under -100 after failing
to move above the +100 line.

Now these two indices seem to be showing the most weakness
internally of all those we follow here, and it is not overwhelming
by any stretch of the imagination.  Take a look at the other
indices' SharpCharts, and we can see possible signs of topping,
but again, they are in the very early stages of showing weakness.


Here are the pertinent Bullish Percent symbols.


Astute readers will recognize that there are some serious mixed
signals being given by the market, as least based on what I've
shown above.  The expected weakness in the internals is certainly
coming to pass, but the market has been very stingy about showing
any weakness so far.  Looking at the price action, we see the
indices (we've looked at the SPX) holding important support over
the past several weeks and absolutely refusing to deliver a
breakdown under key support levels.  My bias is still to the
downside, but as we've seen, that hasn't been working out very
well lately.  I'm not changing my expectations for the market, as
I think significant upside from here is going to be hard to
manage.  At the same time, until we see some sort of technical
breakdown, gaming the downside remains an exercise for those able
to stomach the continuing volatility.  Before we really have any
conviction to the downside, the SPX needs to close below 975
(giving another PnF Sell signal), the DOW needs to break 9000 and
the NDX needs to puncture 1230.

I'm sure more than a few of you have noted the seeming
inconsistency in the term volatility, as the VIX is breaking to
levels not seen in well over a year.  But at the same time, we're
seeing the intraday movement in the market become more volatile.
That increase in intraday volatility is actually welcome, as it
perhaps is telegraphing that the broad market is getting ready to
break out of the range in which it has been trapped for the past 2
months.  The direction and sustainability of that break should
give us a much better read on what to expect between now and the
historically more active (and bearish) period in September and

I've once again run much longer with my general market commentary
than I had intended, so let's now turn to our list of plays and
see what developments occurred over the past week.


AIG - As I feared, our AIG play finally broke out of its recent
consolidation and did so to the upside following the company's
earnings report last week.  Thursday's breakout also triggered our
stop and the play is (thankfully) removed from our Portfolio.
More details below.

HD - The continued rise in bond yields has really exerted some
nice downward pressure on those stocks that have benefited in the
past several months from the housing and refinancing boom and HD
finally gave us some of the weakness we've been expecting.  The
week started off nicely with a break of the 50-dma and after
finding resistance near that level through the middle of the week,
it looks like we're on our way to our target at $28.  Friday's
sharp rebound from just above $31 is somewhat concerning, but with
all the major moving averages above in the $32-33 area, any rally
from here is going to be an uphill battle.  There should now be
strong resistance at $33 and traders still looking to enter the
play can use a rollover below that level as the trigger.  We're
lowering our stop to $34 this weekend, as a rally over that level
would be a clear indication that the bulls have gotten a fresh
shot of adrenaline.

SMH - Volatility was the name of the game in the Semiconductor
sector last week, and the apparent breakdown on Monday was sharply
reversed later in the week, with the SMH closing the week back
above the midline of its ascending channel and it looks like our
$33 stop could be threatened as early as Monday.  It will require
a close below the rising 20-dma (currently $30.98) to give us an
indication of incipient weakness.  Due to my bearish expectations
for the group, if stopped out, I will be looking for another setup
to enter the play, as the SOX (and SMH) should lead to the
downside once investors accept the reality that economic recovery
in the second half is nothing more than a fantasy.

ADBE - Close, but no cigar!  ADBE continued last week's breakdown
on Monday, but found support at $32, which just happens to be the
site of the ascending trendline connecting the October and March
lows.  The stock then spent the remainder of the week pinned
between that trendline and the $34 level, with downward pressure
being exerted by the 10-dma ($33.71) and 20-dma ($33.76).
Additionally, the declining 50-dma ($34.01) is adding to this
stiff resistance and it appears to me that the bears are gaining
the upper hand.  But we're going to need a break and close below
$32 before we really have confirmation of that weakness.  After
that, the next big test will be at the $30 support, which is the
top of the mid-March gap, as well as the site of the 200-dma
(currently $29.89).  I'm still keeping a pretty wide stop on the
play, but it should be safe to lower our stop to $36.50.

Watch List:

DJX - Another week of rangebound action and the DJX appears closer
to a breakout than a breakdown.  So what's it going to be?  As you
can tell by my bifurcated commentary above, I really don't know.
But my gut feel is that we're going to see at least a bonified
test of the recent highs and perhaps a run to the $95 area before
it tips over for good.  What's so significant about the $95 level?
Well, $94.74 happens to be the 50% retracement of the entire drop
from the all-time highs in early 2000 to the lows in October of
last year.  So here's the strategy -- if the DJX tips over from
within the listed entry point, we'll be in the play.  However, if
it rallies through the $94 level, then we'll be looking for a
rollover just south of $95.  In either case, no entry will be
taken until the rollover begins.  With August looming around the
corner, the listed December '03 strikes are getting awfully close
to where they will feel the pinch of time decay more than we are
comfortable with in our LEAPS approach.  So while that strike is
still listed, we're recommending that traders look to the '04
strikes for insulation against the ravages of time decay that we
come to expect from LEAPS.

LEH - Quite honestly, I was a bit surprised to see the complete
lack of buying interest in LEH last week, especially with the
Broker/Dealer index (XBD.X) catching a solid rebound from the $550
support level.  That's relative weakness for you.  For those of
you that use Qcharts, type in "LEH /index:xbd.x" in the symbol
field for a graphical display of this relative weakness.  Last
week, that chart broke down to levels not seen since late 2000 and
the stock looks very unhealthy relative to its peers.  The stock
did manage a mild rebound from the $63 area on Friday, but even
that looked quite anemic.  The problem we're faced with now is
finding a favorable entry point, as the stock is overdue for a
rebound.  We want to wait for that rebound and then enter on the
rollover.  The last rollover occurred near $69, and I'm looking
for the 20-dma (currently $66.04) to provide stiff resistance.  So
our entry target moves down to the $66-67 area and if filled,
we'll start with our stop at $70, just above both the early July
top and the 50-dma ($69.09).  The PnF chart is now on a very clear
Sell signal and the tentative vertical count projects down to a
bearish price target of $56, which is just below the bullish
support line at $58.  There's plenty of downside there for a nice
gain if we can get a favorable entry, but it does not appear
prudent to chase the stock lower from here.

RIMM - The NASDAQ certainly caught a nice bounce on Friday, and
that allowed RIMM to cap off a very bullish week with a close at
$22.94 on strongly expanding volume.  I've got no interest in
trying to short into that sort of ramp, but we could have a nice
entry setup delivered next week.  The bottom of the stock's broken
channel is now at $23.25, with the recent relative highs looming
near $23.80.  a rejection from that level looks favorable for new
entries, but we must see the rollover before playing.  Earnings
aren't in the picture until the end of September, so in the near
term the stock will be left to trade on its own technicals and
whatever fundamental news may appear.  We're still looking to fade
this rally near resistance, and we've raised our entry target
accordingly to $23-24 this weekend.  If we get a favorable entry,
initial stops will be set at $26, just above the top of the gap
from April of 2000.  If RIMM closes above $24 before rolling over,
then we'll stand aside and wait for a clearer bearish setup.

Radar Screen:

WMT - More tight rangebound action was served up in both the
Retail index (RLX.X) and WMT last week, with the latter still
underperforming the RLX.  A relative strength chart shows that
pattern of relative weakness quite clearly.  I still view WMT as a
solid bearish candidate once the RLX starts to weaken, but so far
that hasn't happened.  The RLX is still working higher in an
ascending channel and WMT is trading near the upper end of its 4-
month range.  Despite this underperformance, I remain cautious due
to the picture on the PnF chart.  A look at the weekly chart shows
descending trendline resistance firmly in place at $60, which the
PnF chart shows us the potential for another Buy signal on a trade
at $58.  That gives me a confused technical picture to deal with,
so I'm content to leave WMT on the Radar Screen for now, pending
further price developments.

LEN - Continued weakness in Treasuries has yields continuing to
rise, and mortgage rates are doing the same.  That delivered more
weakness to the Housing sector, although we haven't seen a huge
breakdown either.  I'm still hopeful that we'll get a favorable
setup for playing LEN to the downside, but we need to see a pop to
higher levels to set that up.  At a minimum, I want to see the
stock able to scale the $70 level, and that seems unlikely in the
near term.  My ideal entry scenario is still for a failed rally in
the $73-75 area, but that will have to wait until the current bout
of weakness has been played out.  We may not get an opportunity to
see this play come to fruition, but it is still worth watching.

BBH - Given the increased volatility in the broad market, I
continue to be impressed with the resilience in the Biotechnology
sector, with the BBH holding in a tight range between $130-135 for
the past couple weeks.  I expect to see a breakout to the upside,
but that breakout should be short-lived.  Very strong resistance
lies in wait near $140-145, and given the sector's recent relative
strength, I'm content to wait for some weakness and/or a lower
high to form before sticking my neck too far out.

GM - Now that is precisely why I've been in no hurry to initiate a
bearish play on GM, the automotive company that I think runs the
greatest chance of bankruptcy in the years ahead, primarily due to
the incredible hidden load of its underfunded pension obligations.
Additionally, recent earnings reports have shown the company is
wholly unable to profitably engage in what used to be its core
business -- the manufacture and sale of cars and trucks.
Virtually all of GM's net income is coming from its financing arm
(GMAC) and with rates on the rise, that cash cow may find itself
having to get lean as well.  See how the stock managed to find a
floor near $35 over the past several weeks and actually
participate in Friday's strong broad market rally.  The $40 level
should be very strong resistance, and if the stock can get near
that level, we'll look at putting it back on the Watch List.  For
now, we watch in amazement.

XL - The mild rebound from just below $80 was just about what I
was expecting from XL, but I was caught by surprise by the very
sharp downward move last week that sliced through the 200-dma as
though it didn't even exist.  It looked like a sure deal for the
stock to then fall into the $73-74 area ahead of earnings, but
there was another surprise in store.  Friday's session saw a
strong rise in the stock, and I think we could see a run back to
the $80-81 area ahead of the company's earnings report on
Thursday.  I think the prudent course of action is to wait for
that report and let any reaction to the news play out before
sticking my neck on the line.  Providing there are no surprises,
and the stock can't scale the $82 level (which should now be
strong resistance), look for XL to make the Watch List next

Closing Thoughts:

I had every intention this week of adding a couple more Watch List
plays (LEN and XL were the leading candidates), but after
finishing my commentary above, I decided that I just didn't have
the conviction to believe in a pending collapse in the broad
market.  Both LEN and XL gave too much price weakness last week
for us to have considered them as viable plays in the near term.
That coupled with my divergent opinion of the broad market left me
erring on the side of caution.  Note that I don't have any
confidence in significant upside from here, but I also don't want
to step in front of what could be a strong breakout above near
resistance in the major indices.  Wait and watch is still my
chosen approach, but with the weakening of the internals and the
VIX closing under 20, I feel we are inching closer to that elusive
top that should provide at least moderate downside action through
the remainder of the summer.

Have a great weekend!


LEAPS Portfolio

Current Open Plays



HD     07/09/03  '04 $ 32  HD -MZ  $ 2.45  $ 3.00  +22.45%  $34.00
                 '05 $ 30  ZHD-MF  $ 3.20  $ 3.70  +15.63%  $34.00
SMH    07/09/03  '04 $ 30  SMH-MF  $ 2.70  $ 2.45  - 9.26%  $33.00
                 '05 $ 30  ZTO-MF  $ 5.00  $ 4.70  - 6.00%  $33.00
ADBE   07/17/03  '04 $ 35  AEQ-MG  $ 4.20  $ 4.90  +16.67%  $36.50
                 '05 $ 35  ZAE-MG  $ 7.20  $ 7.50  + 4.17%  $36.50
                 '06 $ 35  WAE-MG  $ 9.00  $ 9.00  + 0.00%  $36.50

LEAPS Watchlist

Current Possibles



DJX    05/04/03  $93.50-94.00  DEC-2003 $ 92  DJV-XN
                 $95           DEC-2004 $ 92  YDK-XN
LEH    07/20/03  $66-67        JAN-2004 $ 65  LEH-MM
                               JAN-2005 $ 65  ZHE-MM
                               JAN-2006 $ 60  WHE-ML
RIMM   07/20/03  $23-24        JAN-2004 $ 22  RUL-MX
                               JAN-2005 $ 20  XRY-MD

New Portfolio Plays


New Watchlist Plays



AIG - $62.20 Over the past couple weeks, I had been growing
concerned that our bearish AIG play was not going to deliver the
breakdown I had been expecting these many weeks.  The price action
early last week seemed to confirm that fear as the stock edged up
over $60 (within spitting distance of our $61 stop) leading up to
the company's earnings report.  That report on Thursday provided
the fuel the bulls had apparently been waiting for with earnings 2
cents ahead of consensus estimates.  The stock exploded higher on
strong volume and triggered our stop just after the open and it
appears we did have that stop set at just the right point.  After
clearing that $61 level, the stock ran strongly higher throughout
the remainder of the week, closing at $64.65, its best level since
December.  No matter how many ways I look at it, I can't see where
the play was flawed, and if given the setup we had at the outset
back in April, I would take it again.  This is just one of those
plays that never went far enough in our favor to allow us to
tighten the stop, and we got kicked out at our "max pain" point.
That's what those stops are for.


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When Is The Last Time Your Underlying Rose?
By Mike Parnos, Investing With Attitude

For some out there it has been a long draught.  When you ain't
gettin' any, it can be very frustrating.  Profits, of course.

As outrageous as it may seem, there are still people holding LU in
their portfolio, fully expecting that it will return to its glory
days. They also believe in the Easter Bunny, the Big Bang theory,
that Elvis lunches at Burger King in Kalamazoo, and that "buy and
hold" refers to stocks and devices requiring inflation and/or four
AA batteries.  This is absolute proof that Artificial Intelligence
is no match for Natural Stupidity!

CPTI students know better.  They have been to the mountaintop.
They have looked over and seen the profits.  They need not fear
any man (except market makers).  They know that we shall overcome!

However, for the less fortunate souls in our reading audience, we
will devote some space to a "hands off, off, off" strategy.  It's
also a worthwhile strategy to keep in your arsenal because it can
also be used in most IRA accounts.

Rising From The Dead
The market leaders of years past have been beaten down.  Some have
come back up nicely in the recent market upswing.  Others have
not.  Will they follow?  Will the economy continue to improve?
Will Sadam Hussein's two sons rise from dead, only to be found
running a party store in Queens?  Who the hell knows?  Maybe some
of the downtrodden will, indeed, have a second coming.

But when?  Will it be in three months?  Six months? A year?  Two
years?  Since we can't even tell if it's going to rain tomorrow,
what would lead us to believe that we can figure out where a stock
is going?  It's that chaos theory or random walk theory.  If
you're going on a random walk, don't use credit cards -- they can
be traced.  In life, all we can count on is the TV guide – and
even that's subject to change.

An Old Favorite
Let’s start with an old favorite – SUNW (Sun Microsystems) --
currently trading at $3.97.
Buy 1,000 shares of SUNW @ $3.97
Buy 10 contracts of SUNW January 2006 $5.00 put at $2.20
Your total out of pocket investment is $6.16.  For the next 30
months, your total risk is only $1.16 – the time premium.  That's
only 3.5-cents per month.  The other $1.03 represents intrinsic
value that will always be there.

Let’s look at a few “what if” scenarios which will show you why
your risk for 2 1/2 years is only $1.16 and how you can profit.

Going Up?
What if . . . in 6 months SUNW is 7.50?   The January 2005 $5 put
would still have a value of about $.50 and the stock would be
worth $7.50 – for a total of $8.00.  Your cost was $6.16, so your
profit would be $1.34 with 2 more years until January 2006

Going Down?
What if . . . in 12 months SUNW is $2.50?  The January 2006 $5 put
would have a value of about $2.70 and the stock would be worth
$2.50 – for a total of $5.20.  With a cost of $6.16, you would
have a paper loss of $.96 with 18 more months until January 2006

The Worst
What if . . . at January 2006 expiration SUNW is $4.25?  The
January 2005 $5 put would have a value of $.75 and the stock would
be worth $4.25 – for a total of $5.00.  With a cost of $6.16, you
would have incurred the maximum loss of only $1.16.

The Best
What if . . . at January 2006 expiration SUNW is $10?  The January
2005 $5 put will expire worthless, but the stock would be worth
$10.  With a cost of $6.16, your profit is $3.84.

Take a look at the SUNW January 2006 $5 call options.  You could
buy it for just $1.35.  Is that a better deal?  After all, you be
tying up only $1,350 for 2 1/2 years instead of $6,160 (for 10

Benefit of Owning The Stock Vs. The Call
Well, if you’re right – and that’s a big “if” – owning the stock
enables you to participate penny for penny as SUNW moves up.  The
delta on the January 2006 $5 call is only about 53%.  It’s your

Here are a few more stocks that may rise from the dead – or they
may rest in peace.  They trade millions of shares every day.
There must be a lot of praying going on.

NT (Nortel).  Trading at $2.98.  The January 2006 NT $2.50 put is
$.90.  Total cost is $3.27.  Risk is $.77.  Upside is unlimited!

LU (Lucent).  Trading at $1.79.  The January 2005 LU $2.50 put
(the 2006 LEAPS should open up soon) is $1.15.  Total cost is
$2.94.  Risk is $.44.  Upside is unlimited!

GTW (Gateway). Trading at $4.14.  The January 2006 GTW $5.00 put
is $1.85. Total cost is $5.99.  Risk is $.99.  Upside is

MOT (Motorola).  Trading at $9.17.  The January 2006 MOT $10 put
is $2.95.  Total cost is $12.12.  Risk is $2.12.  Upside

COMS (3 Com).  Trading at $4.77.  The January 2006 COMS $5.00 put
is $1.25.  Total cost is $6.03.  Risk is $1.03.  Upside is

A lot can happen in 30 months – good and bad.  These beaten down
companies were among those that led the markets higher during the
tech bubble of a few years ago.  There still may be some "ho" in
their horoscope, some hot dog left in their buns, some personality
left in their pet rocks, some fight left in their neophyte.  Then
again, maybe not.  Time will tell.


August Position #1 – BBH Iron Condor – Closed at $132.95
Let's sell 10 contracts of BBH August $125 puts @ $1.45 and buy 10
contracts of BBH August $120 puts @ $.80 for a net credit of $.60.
Let's also sell 10 contracts of BBH August $140 calls @ $1.75 and
buy 10 contracts of BBH August $145 calls @ $.85.
We have a maximum profit range of $125 to $140 with a total credit
of $1,550.   Our risk is $3,450.  At $132.95, we're comfortably
positioned – right in the middle of the range.

August Position #2 – LLTC Sell Straddle – Closed at $36.21
We're sold 10 contracts of LLTC August $35 call @ $1.45 and sold
10 contracts of LLTC August $35 put @ $2.40 for a total credit of
$3.45. Our maximum profit can be about $3,450 if LLTC finishes at
$35.  Our profit range is from $31.55 to $38.45.  Our bail-out
points are at the parameters of the profit range.  Someone goosed
the bulls today.  At $36.21, we're still in good shape, but
there's still a long way to go.

August Position #3 – SPX Iron Condor – Closed at 998,68
This is a slightly more aggressive position than usual.  Why?  The
range is smaller.  Also, note the different number of contracts we
use for the calls and the puts.

We sold 3 contracts of the SPX August 1025 calls and bought 3
contracts of the August 1050 calls for a net credit of $3.70
($1,110).  Then, we'll sold 6 contracts of the August SPX 960 puts
and bought 6 contracts of the August SPX 950 puts for a net credit
of $2.00 ($1,200).  The total credit was $2,310 – and that's our
maximum profit.  I reduced the number of contracts on the bear
call spread because there's a $25 exposure.  As of Friday's close,
SPX did not have call strike prices between 1025 and 1050.
Monday, no additional strikes were opened, so we went with the
original plan.  Thus far, no additional strikes, between 1025 and
1050 have been opened.  The SPX closed at 998.68– comfortably
within our range.

Words Of Wisdom
Keep them coming!  Remember, 1,000 words are worth one picture –
and a smile.

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


Where is the Dow Going?
By Steve Gould

We have two cats.  Nay.  My kids have two cats.  As far as the
cats are concerned, they let me live in the house.  Stubborn
creatures, those cats are.  When they make up their minds to do
something, nothing gets in their way.  For example, they like (or
shall I say liked) to lounge on the dining room table.  I don't
particularly care for them to be up their, so whenever I would see
one of them on the table, I would try and make it an unpleasant
experience for them. You would think they would get the hint.
Yet, day after day, I would enter the room and see them lounging
leisurely on the table.  Even in the face of repeated bouts of
raving hysteria, they would defiantly make this their favorite
resting places.  Not until I took drastic action did they relent
and find some where else to laze.  (Don't ask what drastic action
I took.)

Up until last week, I was without a doubt stubbornly convinced
that the markets were going to tank at any moment.  Then after one
of my buddies shot nerf darts at me (OK, OK, I admit it.  I shot
nerf darts at the cats.) I saw clearly that the markets are going
to head higher before making the trek downward. In the light of
overwhelming evidence, I am officially changing my tune.  NO, I am
not turning into a bull (just yet), but I am saying that the
markets will trend higher for a bit before coming back down.  I am
still long term bearish, but short term bullish.

Chart: Dow Daily Obsolete 7/25/2003

Here is the daily chart of the Dow the way I used to label it.
The chart as labeled connotes that the Dow is just starting a long
downward correction that could take it all the way down to 2000.

It is a little difficult to label this chart as the waves are not
really well behaved.  One trick is to use a larger timeframe to
try and ascertain what the overall wave pattern is for the stock.
Knowing what the bigger picture is sometimes makes it easier to
figure out how the subdivisions need to be labeled. With this in
mind, let's look at the Dow weekly.

Chart: Dow Weekly Obsolete 7/25/2003

Here is a weekly chart of the Dow with the same wave labeling.
Unfortunately, this is not any clearer.  So now what do we do?
Another trick is to use a stock that parallels the one you are
trying to label.  For example, if Citibank is not exhibiting a
clear pattern, perhaps the banking index would.  As the following
charts show, the S&P 500 pretty much parallels the action of the
Dow and vice versa.  The NASDAQ follows the general up and down
but appears to be much more intense.  This is because the NASDAQ
is heavily weighted with volatile technology stocks whereas the
Dow and S&P 500 are more of an overall view of the markets.

Chart: S&P 500 Weekly 7/25/2003

This weekly chart of the S&P 500 exhibits a much clearer wave
pattern for the last four years.  Since the Dow and S&P 500 march
in lock step, I am going to relabel the Dow to match this wave

Chart: Dow Daily New Labeling 7/25/2003

It is a little bit of a struggle to label the subdivisions, but I
am going to trust the S&P 500 as its wave pattern is very clear.

I wish I could stop right here and say that I now know where the
Dow is going based on the S&P 500, but I can't.  In order to see
why, let's take a closer look at the weekly S&P 500, since it is
the clearer of the two markets.

Chart: S&P 500 Weekly Interpretation 1, 7/25/2003

Let's assume for now that Advanced Get has labeled the chart
correctly.  What we are looking at is the makings of a classic
Type I set up.  It does not look like the C wave is complete which
means that the 4 wave has not yet topped.  (When we look at the
daily the reason will be clear.)  However, the following Type I
criteria are satisfied:

1. The S&P 500 has retraced 38.2% and looks like it will retrace
anywhere from 50-62%.
2. The oscillator has retraced about 140%.  Depending on how much
higher the S&P 500 goes, this may reach the 162% retracement
level.  162% is the maximum the oscillator level can retrace
without lowering the likelihood that this is actually a Type I
3. The A and B waves are very well defined
4. The PTI is greater than 35.

Chart: S&P 500 Daily Interpretation 1, 7/25/2003

The daily chart of the S&P 500 shows that the C wave on the weekly
is segmenting nicely into a five wave basic pattern.  The daily
S&P 500 is now starting the wave 4 retracement.  I believe that
over the next several weeks, the S&P 500 will fall to somewhere
around the 930 level before making the final thrust higher.  At
that point the C wave on the weekly will be complete and the S&P
500 will start heading down toward 650 by February 2005.
(Depending on your political leanings, this could be a good or bad

Unless of course, it doesn't.  There is another valid
interpretation of the S&P 500 weekly chart.

Chart: S&P 500 Weekly Interpretation 2, 7/25/2003

What if Advanced Get labeled the pattern incorrectly and the 5th
wave is already complete?  This would mean that the S&P 500 is
starting the A-B-C correction.  The wave pattern and the
oscillator could support a completed 5th wave as the oscillator
has retraced more than 90% and exhibits divergence.  If this
interpretation plays out, then again, the A wave will trend a bit
higher before the B wave starts.  However, the B wave will
probably not trend lower than 800 and will most likely complete by
the end of the year. We will then start the new year off trending
higher.  This interpretation would be consistent with the behavior
of the stock market during a presidential election year.

In either case, I believe that the daily market is currently in a
five wave basic pattern and is just starting the 4 wave.  The
markets will complete the wave 4 retracement over the next several
weeks before running up again.  At that point we will see the
markets trend lower.  Just how low it goes depends on which
scenario plays out.

Note:  I am going to be on vacation from Aug 1-10 to attend my
XXth high school reunion. (That is not a misprint.  I do not want
you to do the math.)  I am feverishly trying to get my laptop set
up to take with me but I am having many technical difficulties.  I
hope to be able to get it working in time so I can continue to
submit articles, but if not, I will be back on the 17th.


Elliott Wave Play Updates
By Steve Gould


Chart: DJX update 7/25/2003

The Dow seems to be taking an inordinate amount of time tracing
out this retracement pattern.  We are rapidly running out of time.
As stated in "Where is the Dow Going?", I believe that the Dow
will trend lower.  According to Advanced Get, the first resistance
level is going to be at 8800.  I would hang on to the puts for two
more weeks.  If the Dow does not hit at least that level by then,
close out the play.  If the Dow breaks through 9353, close out the


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 7/25/2003 are

DJX – 92.84

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Buy*       DJVIN    SEP 92      Call  2.55  2.95    0.64   13
Buy        DJVUJ    SEP 88      Put   1.00  1.15   -0.22   22
                                      ----  ----  ------
                                      3.55  4.10    0.29

* sold last week


Chart: QQQ update 7/25/2003

The QQQs should follow the Dow and S&P 500 in retracing this 4
wave.  The first target is going to be 28.50.  Stochastics
indicate that the QQQs may trend a bit higher first, but I suspect
that the QQQ should continue to decline over the next week or so.


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 7/25/2003 are

QQQ – 31.80

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Buy   2    KLFME   Jan 04 31    Put   1.95  2.05   -0.35   32
Sell  1    QQQSK   Aug 03 37    Put   5.10  5.30    0.94   37

Liquidation 1:  -1.40 + .50 =  -0.90


Chart: BA update 7/25/2003

If you weren't watching the markets on Friday's open, you missed
an opportunity to buy back the 30 call when BA gapped down to
31.50 on the open.  The hourly chart shows that this is as far
down as BA is going to go.  If you haven't already done so, buy
back the Aug 30 calls and ride the Jan 37.50 calls as BA should
now be headed to 39.


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 7/25/2003 are

BA – 32.68

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Sell  1     BAHF   Aug 03 30    Call  2.75  2.85   -95     21
Buy   2     BAAU   Jan 04 37.5  Call  0.75  0.80    26     22

Liquidation value: -1.35 + .40 = -0.95


Chart: T update 7/25/2003

T met our entry criteria on Thursday.  This play will make money
as long as it moves.  Based on the hourly chart, T should move a
bit higher, probably 21.50, before it starts to head down.


T: $20.00 (entry)

Pos  Num  Sym  Strike   Type   Bid   Ask   Delta   Vol   OI
Sell  1   TIC  Sep 15   Call  5.00  5.30   100     25    70
Buy   3   TJX  Oct 22.5 Call  0.50  0.65    31    368 10285

Credit: $305


Chart: WEN update 7/25/2003

I think we got in at the optimal time for WEN.  I believe we are
starting the iii wave of the 3 wave which should be a forceful
move down.  Stochastics and the oscillator suggest WEN is headed
down more the beginning of the week.


The original option values on 7/22/2003 were

WEN – 28.84


Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Buy   10    WENME   Jan 04 25   Put  0.85  0.95    -20     34

Current values on 7/25/2003 are

WEN – 28.06

Pos   Qty   Sym     Strike      Type  Bid   Ask    Delta   IV
Buy   10    WENME   Jan 04 25   Put  1.00  1.10    -23     34


Emini Momentum Trading

That is probably a misnomer and it should be called Momentum
Oscillators. I say that because it is really an oscillator system
that centers around a 100/130 PMA pivot on the 30 min chart.

The system evolved out of some averages I was experimenting with
for stocks on the 15 min chart. I found that the 52 and 130 EMA
on the 15 min chart (2/5 day) provided a pretty good short term
trade timer. When the 52 crosses the 130 trade in the direction
of the cross.

While I had these averages dialed in on my charts as defaults
I noticed that the 130 period average seemed to be relative on
nearly every time frame I tried. The shorter average did not
work as well but the 130 was amazing for trading.

To me the hardest part of trading is entering the trade. There
are always so many factors that tempt you to think that any
given bounce, dip, resistance or support becomes an entry point
for something. I found myself constantly entering on emotion and
not logic. You only need check my swing trading on Friday to see
the proof of that statement.

Once you have a system, regardless of how the system works then
you eliminate much of the emotion from the trade.

While experimenting with the 130 pma (30) on the ES I found that
the 100 closely tracked the 130 at normally a two point range.
That means if the 130 was at 985 the 100 was probably 983. Both
seemed to give consistent resistance and support.

I found that the ES tended to cross the averages about once every
3-5 days back in May and that decreased to 2-3 days in June and
lately every other day. The problem is the consolidation phase
we are currently seeing. This system works best when the markets
are trending up or down. Sideways is more of a challenge because
of the more frequent crosses.

When the ES crosses the average in a trending market it would
sometimes stay crossed for 20-30 points or more. In the current
sideways market we have been seeing 10-15 point swings as common.

Knowing how the ES reacts and the point range to expect it is
easy to pick a simple entry point on a cross of the averages and
then close for +10 on the other side. It is only easy if that is
what you are trying to do. I get greedy and keep remembering
those 20-30 point swings in May/June and have held on too long
recently and gave back some nice gains. However, since I
restructured the system in early June we have been seeing some
decent gains on a weekly basis. Had I not been trying to hold
for the home run we would have gotten more.

Week ended 7/25 +13.75
Week ended 7/18 +12.75
Week ended 7/11 +29.25
Week ended 7/03 +18.00
Week ended 6/27 +16.53
Week ended 6/20 +14.50

System components.

The averages I use for this system (50/100/130) are based on
an exponential average of the high and low for the bar. In
TradeStation you set the Price input in Moving Average
Exponential to (h+l)/2.

This is how you set it up in Qcharts.

Moving Average Setup

If you have any doubt about these averages impacting the ES
you only need to look at this chart from the last two weeks.
The averages consistently acted as support or resistance.

ES Chart - Failure and Support

Once you determine the validity of the averages as support and
resistance then the next step is determining the distance from
that pivot level for the average swing. In the chart below you
can see the different swing amounts away from the averages before
they return to cross/bounce again.

ES Chart - Point Swings

I am not going to reprint a bunch of timeframes here because
of space but put these averages on your chart system and then
scroll backwards to see the number of times they come into play.

System Operation

This is not a complicated system. In fact it is extremely simple.
When the price crosses or bounces off the 100/130 (normally the
130 controls) you trade in the direction of the trend until the
trend changes. The more success we have with the system the more
it will be refined.

The only major problem is when to enter on a touch of the average.
If you are flat and the ES is below the average then you are faced
with two possibilities. The ES will bounce off the averages as
overhead resistance and make another dip or break through the
averages and sprint to the upside. You have to make the decision
at the time it touches the average as to which way it is going.

It is never nice and clean. Resistance and support never are.
There are usually multiple candles touching the average before
one catches fire and rockets away. You need to apply your market
sentiment to the decision process to decide which way you are
going to trade. If the markets are weak then expect a failure
at resistance. If strong then expect a bounce off support.

I have been entering as the price moves away from the average by
a couple points as you can normally determine internals from the
trend change by then.

Simple system:

Trade in the direction of the price away from the averages.
Prepare to exit at +10 points and trail a stop for longer moves.
After you exit simply wait for the next bounce/cross of the
averages. Should be good for two trades a week.

Complex System:

Because the swings have been so easy to see recently I have used
the average as the zero line with the ES as an oscillator. When
the swings have become extended I have been going short/long at
the extensions. Unfortunately this requires you to make judgment
calls as to entry points at tops and bottoms. It is much harder
to target the entries because you do not have any fixed point
that you know will be a pivot.

ES Chart - ES as Oscillator


I am attempting to improve the exit procedure for the system
to prevent giving back large gains and still be in for the
homeruns. I am going to attempt to exit in quarter increments
at +10, +15, +20, +25. Obviously this is not a perfect world
and we will very seldom get a full 25 points.

In order to get the most out of the exit I am not going to trail
the entire portion where I can be stopped out on a spike/dip.

Using a short at the current 997 level in the chart above I
would tighten up the stop as the price approached the averages
in anticipation of a bounce off support at the 130. I would
exit 1/4 at the 130 PMA of 987 for +10 and move the stop to +5
for the balance. If we broke through the averages then I would
exit another 1/4 in the 982 range and move the stop on the
balance to the 130 pma of 987. I now have 50% of my initial
position and a decent profit.

Now remember, the average point swing is between 10-20 points
from the average. Once we get 10 points away from the average
we need to start getting ready to exit the balance. In this
example it would be 977 which just happens to be the support
line where we would expect a bounce. In this example the answer
is obvious, exit the balance because of support. If support was
not so clearly defined I would exit another 1/4 at 977 and snug
up the stop on the remaining 1/4 to as close as you dare
depending on market conditions.

If you are playing the outside swings it would be best to exit
it all and get ready to focus on the next entry.

100/130 ?

Why have both averages? As you can see by the examples and your
own charts the 130 is the predominant average but the 100 seems
to also come into plan from time to time. It gives me a better
focus on the range of support/resistance.

Also, in cases where you are playing the swings from the outside
you can use the touch of the first average to exit and watch for
a direction change. A break of the second average is a signal to
reenter in the direction of the move. It is kind of like a safe
zone in the middle. If the market is moving fast and directional
then just sit tight. If it is wandering then the averages are
more likely to hold and exiting on a touch is the better plan.

50 ?

Originally the 50 was supposed to be the exit average. Kind of
a trailing stop loss. With the new exit strategy I think of it
as more of a guide to impending action. If the price moves back
across the 50 after an extended period below then I would exit
any remaining positions. You need to go back to a period where
the market was trending to see the benefit of this. However,
I like the staged exit plan better.

Back testing

If you want to back test this I suggest you use the $SPX as
the symbol as it is not contract dependent and has a consistent
volume of candles for as far as you want to go back.


If all this seems too complicated then Alan Knuckman and Andy
Aronson would be happy to autotrade this for you. Their firm,
OneStopOption.com is setup to trade the momentum system for
you. They will handle everything from entries to staged exits.
aknuckman@OptionInvestor.com  aaronson@OptionInvestor.com


This is a really easy system to understand and does not have
any complicated combination of indicators and a bunch of rules.
If you have any questions feel free to email me and I will try
to answer them.

Jim Brown


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because you stepped away from your computer?

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The Option Investor Newsletter                   Sunday 07-27-2003
Sunday                                                      5 of 5

In Section Five:

Covered Calls: The Best Strategy?
Naked Puts: More Success Basics
Spreads/Straddles/Combos: Stocks Rally Amid Bullish Economic Data

Updated In The Site Tonight:
Market Posture: A Few New 52-Week Highs


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Stock Option Principals




Trading Basics: The Best Strategy?
By Mark Wnetrzak

One of our professional traders has generously contributed his
thoughts on the subject of successful option trading strategies.

Over the past few months, I have been asked by many clients what
investment strategies have been most successful in all market
environments.  The answer is relatively easy.  The strategy of
buying stock and selling calls on stock, also known as Covered
Calls, has been very consistent in generating income in rising,
steady and even falling markets.  When buying stocks, an investor
has three possible outcomes.  The stock could go up, stay steady,
or go down.  In all three of these situations, a trader has the
possibility to make money using covered calls.  Lets examine some
possible scenarios for this strategy.

If we were to buy XYZ stock at $30 alone, we have limited exposure
(stock falls to zero) of thirty dollars a share and unlimited
upside potential.  If however, we think the stock may take some
time to move higher, selling calls against our position may be
beneficial.  Let’s assume that XYZ June 35 calls were selling at
$3 and we decided to sell the June 35 call.  We have two possible
outcomes at expiration.  The stock is either above or below $35.
If it is above $35, we will be called out’ of the stock at $35
a share.  The premium we sold is ours to keep in addition to the
$35 a share we will be paid for our stock.  Our net profit is easy
to calculate.  We paid $30 for the shares originally, and we were
called out at $35.  We also need to add the $3 premium for the
sold call, thus our net profit would be $8 a share (35-30+3).  If
the stock moved like a rocket and went to $65 a share, obviously
we would be very disappointed with the outcome.  At One Stop
Option, we have statistical software that can quantify the odds of
being called out of our stock.  When we feed the data into our
software, we can determine, for example, that this stock has a 15%
chance of reaching $35 by expiration.  With the aid of our
software, we work with our clients to choose the best option to
sell against their stocks.

We will now examine the two other possibilities.  If the stock we
bought stays roughly the same, or below $35, we would collect the
$3 premium and be free to sell another option.  The $3 collected
would be used to lower our cost basis of the stock by $3.  The
same scenario would be used if the stock were to drop.  As long as
the drop in the stock is less than $3, we would be ahead in the
trade.  Even if the stock were to fall by more than $3, the call
premium would be used to lower our cost basis.  In this example,
the stock would have to drop by more than 10% before we started to
lose money in the overall position.  The most important item that
I like to stress with my clients is the fact that covered calls
involves the purchase of stock.  I have seen many websites that
only stress the Return on Investment and fail to mention the fact
that the stock ay and can fall very quickly and by a large amount.

We urge our clients to do their own financial research or work
with a Registered Representative in order to evaluate the stocks
they buy in conjunction with call selling.  One Stop Option is
committed to working with clients to determine their objectives
and formulate a solid game plan based on these objectives.  Please
feel free to call me (888-281-9569) to discuss creative ways to
utilize our experience and expertise in the Futures and Securities

Andrew Aronson
VP Investments One Stop Option

This material is intended solely for information purposes and is
not to be construed, under any circumstances, by implication or
otherwise, as an offer to sell or a solicitation to buy or sell or
trade in any commodities or securities herein named.  Information
is obtained from sources believed to be reliable, but is in no way
guaranteed.  No guarantee of any kind is implied or possible where
projections of future conditions are attempted.  In no event
should the content of this material be construed as an express or
implied promise, guarantee or implication by or from Man Financial
Inc, or any of its officers, directors, employees, affiliates,
divisions or other agents that you will profit or that losses can
or will be limited in any manner whatsoever.  Past results are no
indication of future performance.  All investments are subject to
risk which should be considered prior to making any investments
decisions.  Privacy policy is available upon request.


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

BEAS    12.79   13.32  AUG 12.50  1.00    0.71*   6.5%
CYBX    23.38   27.48  AUG 20.00  4.40    1.02*   5.8%
SSTI     5.47    5.94  AUG  5.00  0.75    0.28*   5.2%
CHINA   13.48   12.57  AUG 10.00  4.00    0.52*   4.8%
DRIV    21.98   21.69  AUG 20.00  2.80    0.82*   4.6%
EXTR     5.75    5.85  AUG  5.00  0.95    0.20*   4.5%
THOR    16.35   16.65  AUG 15.00  1.95    0.60*   4.5%
CY      13.84   12.65  AUG 12.50  1.95    0.61*   4.5%
AW      12.55   12.44  AUG 12.50  0.60    0.49    4.5%
INSP    15.52   15.36  AUG 15.00  1.20    0.68*   4.1%
RFMD     5.89    6.49  AUG  5.00  1.15    0.26*   4.0%
ANEN    10.75   10.57  AUG 10.00  1.10    0.35*   3.9%
STEL     8.25    7.02  AUG  7.50  1.10   -0.13    0.0%
INET     5.08    4.30  AUG  5.00  0.45   -0.33    0.0%

*   Stock price is above the sold striking price.


There will be no correction!  At least that appears to be the
current theme as the major averages once again avoided a break-
of-support and ended the week on a rally.  As for the covered-
call portfolio, Cyberonics (NASDAQ:CYBX) reversed its reversal
on Wednesday after a key study showed its implantable device
used to treat epilepsy was also effective in treating severe
depression.  This week's early exit watch list includes: Cypress
Semiconductor (NYSE:CY), Infospace (NASDAQ:INSP), Stellent

Positions Previously Closed:  Boston Communications (NASDAQ:BCGI)


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

ROXI    7.99  AUG  7.50  RXU HU  0.90  299    7.09  21   8.4%
SLNK   15.40  AUG 15.00  SXU HC  1.15  64    14.25  21   7.6%
ABGX   13.05  AUG 12.50  AZG HV  1.15  901   11.90  21   7.3%
OIIM   17.90  AUG 17.50  XQQ HW  1.20  83    16.70  21   6.9%
IMCL   39.86  AUG 35.00  QCI HG  6.40  4283  33.46  21   6.7%
BONZ   15.28  AUG 15.00  QBN HC  0.85  38    14.43  21   5.7%
MOGN   31.97  AUG 30.00  QOG HF  2.90  1196  29.07  21   4.6%

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).

ROXI - Roxio  $7.99  *** Bracing For Earnings ***

Roxio (NASDAQ:ROXI) is a publisher of digital media software that
enables consumers to create, manage, customize, share and archive
digital media, such as digital music, video and photographs.  The
company provides software that enables individuals to record
digital content onto CDs and DVDs.  Roxio also offers a complete
line of photo and video editing products.  The company is also a
publisher of software used to restore lost or damaged data, due
to system crashes, virus damage, failed software installations and
even user error.  In February 2002, Roxio acquired MGI Software,
a global provider of visual media software.  Roxio's long-term
chart remains bullish and the stock continues to move higher on
increasing volume.  Investors appear to be anticipating "good"
news when Roxio reports earnings on July 31 and traders who
believe the rally will continue can profit from that outcome
with this position.

AUG-7.50 RXU HU LB=0.90 OI=299 CB=7.09 DE=21 TY=8.4%

SLNK - SpectraLink  $15.40  *** Earning's Rally! ***

SpectraLink (NASDAQ:SLNK) designs, manufactures, and markets
workplace wireless telephone systems that complement existing
telephone systems by providing mobile communications in a
building or campus environment.  SpectraLink's product portfolio
consists of 2 product categories: the Link Wireless Telephone
System (Link WTS) and NetLink Wireless Telephones.  Link WTS
targets customers that only require a wireless voice solution
for their on-premises mobile workforce.  The NetLink products
target organizations that want both a wireless voice and wireless
data solution on a single network.  Investors were very pleased
with SpectraLink's earnings report in mid July, rallying the
stock almost $5 in two days.  The company's income rose 78% and
revenues were up 22% compared to last year.  Investors who wouldn't
mind owning the issue near a cost basis of $14 can profit from
future upside activity in the issue with this position.

AUG-15.00 SXU HC LB=1.15 OI=64 CB=14.25 DE=21 TY=7.6%

ABGX - Abgenix  $13.05  *** Next Leg Up? ***

Abgenix (NASDAQ:ABGX) is a biopharmaceutical company that is
focused on the discovery, development and manufacture of human
therapeutic antibodies for the treatment of a variety of disease
conditions, including cancer, inflammation, metabolic disease,
transplant-related diseases, cardiovascular disease and infectious
diseases.  Abgenix has proprietary technologies that facilitate
rapid generation of highly specific, antibody-therapeutic product
candidates that contain fully human protein sequences and that
bind to disease targets appropriate for antibody therapy.  Abgenix
developed its XenoMouse technology, a technology using genetically
modified mice to generate fully human antibodies.  It also owns a
technology that enables the rapid ID of antibodies with desired
function and characteristics, referred to as SLAM technology.
On Tuesday, Abgenix said its 2nd-quarter net loss narrowed as the
company trimmed expenses.  We like the move above the June high,
which should now provide support.  The position offers a reasonable
risk-reward scenario in a strong sector with a cost basis near
technical support.

AUG-12.50 AZG HV LB=1.15 OI=901 CB=11.90 DE=21 TY=7.3%

OIIM - O2Micro  $17.90  *** Rally Mode! ***

O2Micro (NASDAQ:OIIM) designs, develops and markets innovative
power management and security components for mobile telecom,
communication, computer, information appliance, and LCD products.
Its unique products include AudioDJ, SmartCardBus for secure on
line e-commerce, Intelligent Lighting and Battery Management IC's.
O2Micro International also maintains an extensive portfolio of
intellectual property with 1079 patent claims granted, and over
3800 more pending.  O2Micro shares continue to rally higher and
the technical indications suggest additional upside activity in
the near-term.  With earnings due on July 30, traders can use this
position to speculate on the company's future share value.

AUG-17.50 XQQ HW LB=1.20 OI=83 CB=16.70 DE=21 TY=6.9%

IMCL - ImClone  $39.86  *** The Waksals Are Gone ***

ImClone Systems (NASDAQ:IMCL) is a biopharmaceutical company whose
mission is to advance oncology care by developing a portfolio of
targeted biologic treatments designed to address the medical needs
of patients with a variety of cancers. The company's lead product,
Erbitux, is a therapeutic antibody that inhibits stimulation of
epidermal growth factor receptor upon which certain solid tumors
depend in order to grow. In addition to the development of its
lead product candidates, the company conducts research in a number
of areas related to its core focus of growth factor blockers, as
well as cancer vaccines and angiogenesis inhibitors. IMCL has also
developed diagnostic products and vaccines for certain infectious
diseases.  ImClone's shares have rallied recently on positive news
regarding the firm's experimental cancer drug Erbitux.  Now, with
the exit of the Waksals, it seems that investors are no-longer
focused on the "old" insider scandal of yesteryear and are looking
towards a positive future for IMCL.  The technicals remain bullish
and this position offers a favorable cost basis in the issue.

AUG-35.00 QCI HG LB=6.40 OI=4283 CB=33.46 DE=21 TY=6.7%

BONZ - Interpore  $15.28  *** Blue Sky Territory ***

Interpore International (NASDAQ:BONZ) is a medical device company
that designs, develops, manufactures and markets a complementary
portfolio of products for spine, orthobiologic and minimally
invasive surgery applications.  The company offers three distinct
product lines that can be used in combination for spinal fusions:
spinal implants, bone graft materials and products used to derive
growth factors.  Interpore's products include the Synergy Spinal
System, the C-TEK Anterior Cervical Plate system, the Geo Structure
vertebral body replacement device and the TPS Telescopic Plate
Spacer.  It also offers Boneplast, which is a resorbable bone void
filler, and Pro Osteon, which is a bone graft substitute, as well
as several minimally invasive surgery products.  Interpore reported
stellar earnings in July that showed a 25% increase in revenues
over last year.  The stock has moved into "Blue Sky Territory"
(above all resistance) as the issue has now made a new all-time
high.  The stock appears poised to move even higher in the coming
sessions and traders can use this position to gain a reasonable
entry point in Interpore.

AUG-15.00 QBN HC LB=0.85 OI=38 CB=14.43 DE=21 TY=5.7%

MOGN - MGI Pharma  $31.97  *** FDA Approval! ***

MGI Pharma (NASDAQ:MOGN) is an oncology-focused pharmaceutical firm
that buys, develops and commercializes proprietary pharmaceutical
products that meet patient needs.  MGI has a balanced product
portfolio of proprietary pharmaceuticals, and intends to become a
leader in oncology.  MGI markets Salagen. Tablets (pilocarpine
hydrochloride) and Hexalen. (altretamine) capsules in the U.S.
The company directly markets its products in the United States
and collaborates with various alliances in international markets.
Shares of MGI exploded today after the company said the FDA
approved Aloxi for the treatment of acute nausea and to prevent
delayed nausea associated with most common types of chemotherapy.
MGI Pharma holds the exclusive North American marketing rights to
Aloxi, which was developed by a privately owned Swiss drug company,
Helsinn Healthcare.  Investors who want to own a popular issue in
drug manufacturing sector should consider this position.

AUG-30.00 QOG HF LB=2.90 OI=1196 CB=29.07 DE=21 TY=4.6%



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

GNTA   12.99  AUG 12.50  GJU HV  1.35  7597  11.64  21  10.7%
AYE     8.05  AUG  7.50  AYE HU  0.90  449    7.15  21   7.1%
FTUS    7.67  AUG  7.50  FEQ HU  0.50  83     7.17  21   6.7%
WMGI   22.57  AUG 22.50  QWM HX  1.00  5050  21.57  21   6.2%
FFIV   17.64  AUG 17.50  FLK HW  0.85  536   16.79  21   6.1%
BRCD    5.55  AUG  5.00  BQB HA  0.75  1867   4.80  21   6.0%
ASKJ   18.52  AUG 17.50  AUK HW  1.60  1524  16.92  21   5.0%
LEXR   13.16  AUG 12.50  EQG HV  1.05  1097  12.11  21   4.7%
FCEL    8.12  AUG  7.50  FQG HR  0.85  79     7.27  21   4.6%
RTEC   19.21  AUG 17.50  UXH HW  2.25  76    16.96  21   4.6%
ALGN   13.83  AUG 12.50  CUA HV  1.70  748   12.13  21   4.4%
ASYT   11.05  AUG 10.00  QQY HB  1.35  489    9.70  21   4.4%


Options 101: More Success Basics
By Ray Cummins

New readers are always asking for help with their trading systems.
The first step in developing a profitable approach to the options
market is learning some of the fundamental rules for success.

There are a number of prerequisites for making money in the world
of finance but the most important concept that a new investor must
understand to how to manage risk.  A person who has no respect for
risk should not participate in the market because there is a high
probability that they will lose all their money.  Since money is
the primary reason most of us play this unique game, it's critical
that we find ways to reduce the effects of unexpected moves in the
market.  One of the best methods to limit the effects of adverse
share value activity is through the use of diversification, both
in position size and portfolio allocation.  Experts say that most
investors should commit no more than 15% of their capital to any
one position -- no matter how good it looks -- because one losing
play would severely affect the portfolio's performance.  In fact,
the effects of a "trade gone bad" in a poorly diversified account
are often so devastating that an investor is forced to liquidate
other holdings just to offset the drawdown from one losing play.
Experienced investors also agree that portfolio capital should be
spread relatively evenly across the various industry groups, in
order to limit exposure to a particular sector or market segment.

Another important step in developing a viable trading system is
strategy selection.  Most investors who trade derivatives form
an opinion on which direction a stock will move and they buy
options on the issue to profit from a correct forecast with
increased leverage and limited risk.  The most common form of
option trading -- the purchase of calls -- offers investors
many of the benefits of stock ownership for a fraction of the
underlying issue's price and the potential risk is limited to
the amount paid for the options.  Some investors use options
to protect existing stock holdings and acquire new portfolio
positions while yet another group of market participants use
combination strategies and spreads to profit from small price
discrepancies between similar or offsetting instruments.  In
addition, floor traders at the major exchanges (market-makers
and specialists) also contribute to the activity as middlemen;
buying and selling to accommodate retail orders.  Investors who
intend to focus primarily on options must completely understand
the most common strategies and combinations, including their
advantages and weaknesses, and use only those methods that fit
their personal trading style and portfolio outlook.  You can't
make sound decisions without thorough knowledge of the mechanics
of a specific technique and the most successful investors are
those who are acutely aware of the benefits and shortcomings of
their particular approach to the market.

Position selection and market timing are also basic components
of a winning trading system.  The basic step in mastering these
concepts is to find a time frame that you are comfortable with
and use the appropriate form of analysis to generate trading
signals for that particular period.  In the stock market, there
are a number of cycles (or rhythms) which continuously repeat.
These range from the very short term, to the very long term and
nearly all of them are non-linear in time.  These rhythms help
astute traders identify key reversal points and also allow them
to anticipate recurring highs and lows in specific time periods.
In addition to trading in a time frame that is well suited to
your personality and circumstances, it is also important to use
only the best signals when entering new positions.  Most methods
of analysis produce a variety of indications, with the quality
of entry and exit signals ranging from excellent to borderline.
The key is to overcome the enthusiasm that can cloud your judgment
and participate only in the best prospects.  In cases where the
pattern is clear and well-defined, market activity tends to be
much more direct and easy to predict.  Conflicting indications
are difficult to interpret and generally produce poor results in
the long run.  Trading only those situations when the outlook is
superb allows you to proceed with confidence, and the margin for
error is far greater with regard to mistimed entries and exits.

Finally, it is essential that new investors learn to manage their
emotions and avoid instinctive or reaction-based judgments as they
almost always lead to poor decisions.  For some people, this is an
incredibly difficult task but it must be completed or the road to
success will be plagued with a never-ending series of potholes.
Another necessary trait is persistence as the learning process can
be lengthy and costly for those who fail to heed past experiences.
Impatience is never your friend in investing but despite that fact,
it's very easy to want constant action.  The problem is that great
opportunities do not occur on a consistent basis.  In fact, idle
periods are part of the game so don't try to force a trade if the
conditions are not ideal.  That is the absolute worst possible time
to commit your hard-earned capital to the market.  Instead, you
need to be thoroughly prepared with a sound game plan and a proven
entry and exit strategy for the techniques you are utilizing.  If
your approach includes the sale of uncovered puts, make that you
establish reasonable entry prices for the stocks you wish to own.
This involves a number of steps including studying the recent price
activity of each issue to determine its trading range, as well as
common support areas based on moving averages or trend lines.  Also,
you should make an estimate of future volatility, either manually or
with an online calculator, so you will have an idea of the future
movement of the stock.  With this information, you can identify good
profit targets and stop prices for each position and decide which
plays have the best overall risk/reward outlook.

Good Luck!


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

LEXR    12.76   13.16  AUG 10.00  0.30    0.30*   3.4%  11.4%
SOHU    40.90   39.71  AUG 35.00  1.20    1.20*   3.9%  11.2%
ALGN    13.38   13.83  AUG 10.00  0.35    0.35*   3.2%  10.1%
BLUD    23.10   20.80  AUG 20.00  0.65    0.65*   2.9%   8.3%
CYBX    23.72   27.48  AUG 20.00  0.60    0.60*   2.7%   8.2%
MSTR    43.68   41.10  AUG 35.00  0.75    0.75*   1.9%   6.8%
SNDK    54.98   56.44  AUG 42.50  0.70    0.70*   1.8%   6.5%
NFLX    26.49   27.02  AUG 20.00  0.35    0.35*   1.5%   5.4%
SHPGY   22.05   22.77  AUG 20.00  0.35    0.35*   1.9%   5.3%
DRIV    23.05   21.69  AUG 17.50  0.30    0.30*   1.5%   5.3%
TRN     21.93   21.89  AUG 20.00  0.35    0.35*   1.9%   5.3%
SNDK    48.18   56.44  AUG 37.50  0.60    0.60*   1.4%   5.1%
MRVL    38.10   34.82  AUG 32.50  0.60    0.60*   1.6%   5.1%
CELG    32.18   34.66  AUG 25.00  0.30    0.30*   1.3%   4.8%
BJS     38.34   35.81  AUG 35.00  0.45    0.45*   1.4%   3.9%
RDC     23.43   21.95  AUG 22.50  0.45   -0.10    0.0%   0.0%

*  Stock price is above the sold striking price.


Another outstanding Friday has pushed the major equity averages
to recent highs and it appears the consolidation is over in the
near-term.  Only a few groups are ignoring the upside activity
and one of those is the oil service segment.  Rowan Companies
(NYSE:RDC) and BJ Services (NYSE:BJS) are in that category and
both positions should be closed on further downside movement.
Other issues on the "watch" list include Marvell Technology
Group (NASDAQ:MRVL) and Immucor (NASDAQ:BLUD).

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

AMLN   22.97  AUG 20.00  AQM TD 0.55 611  19.45  21   4.1%  11.8%
BOBJ   25.00  AUG 22.50  BBQ TX 0.45 68   22.05  21   3.0%   8.2%
KOSP   28.29  AUG 25.00  KQW TE 0.45 234  24.55  21   2.7%   7.7%
UNTD   29.39  AUG 25.00  QAB TE 0.40 270  24.60  21   2.4%   7.5%
SIE    25.36  AUG 22.50  SIE TX 0.35 12   22.15  21   2.3%   6.6%
MNST   26.15  AUG 22.50  BSQ TX 0.30 32   22.20  21   2.0%   6.1%
AMAT   19.30  AUG 17.50  ANQ TW 0.25 8411 17.25  21   2.1%   5.9%

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).

AMLN - Amylin Pharmaceuticals  $22.97  *** Biotech Speculation ***

Amylin Pharmaceuticals (NASDAQ:AMLN) is a biopharmaceutical firm
engaged in the discovery, development and commercialization of
drug candidates for the treatment of diabetes and other metabolic
diseases.  The company has two lead drug candidates in late-stage
development for the treatment of diabetes, SYMLIN (pramlintide
acetate) and exenatide, formerly referred to as AC2993 (synthetic
exendin-4).  Amylin has received a letter from the FDA indicating
that SYMLIN is approvable for marketing in the United States as an
adjunctive therapy with insulin, subject to satisfactory results
from additional clinical trials.  The company's second candidate,
exenatide, is in pivotal Phase III clinical trials.  AMLN shares
are consolidating after a rally in early June and investors who
think the upside activity will resume can use this position to
profit from that outcome.

AUG-20.00 AQM TD LB=0.55 OI=611 CB=19.45 DE=21 TY=4.1% MY=11.8%

BOBJ - Business Objects S.A.  $25.00  *** New Trading Range? ***

Business Objects S.A. (NASDAQ:BOBJ) develops, sells and supports
business intelligence software for client/server environments,
intranets, extranets and the Internet.  The three main markets
for BI are enterprise, extranet and analytic applications.  For
enterprise, Business Objects products provide employees with
information to make better business decisions.  Deployments can
range from small workgroups to enterprise deployments exceeding
50,000 users.  For extranet, products allow organizations to
build stronger relationships by linking customers, partners and
suppliers via the world-wide web, and for analytic applications,
products offer packaged practice analytics, alerts driven by
business rules and workflow for specific business users, such as
sales managers or supply chain managers.  BOBJ appears ready to
"break-out" of its recent trading range and investors who agree
with a bullish outlook for the stock can establish a conservative
basis in the issue with this position.

AUG-22.50 BBQ TX LB=0.45 OI=68 CB=22.05 DE=21 TY=3.0% MY=8.2%

KOSP - KOS Pharmaceuticals  $28.29  *** Earnings Are Due! ***

KOS Pharmaceuticals (NASDAQ:KOS) is a fully integrated specialty
pharmaceutical company engaged in the development of proprietary
prescription products for the treatment of chronic cardiovascular
and respiratory diseases.  The company manufactures its marketed
products, Niaspan and Advicor, and markets such products directly
through its own specialty sales force and through a sales force
provided by a contract sales organization.  Their cardiovascular
products are based on controlled-release, once-a-day, oral dosage
formulations.  The company's respiratory products in development
consist of aerosolized inhalation formulations to be used mainly
with its proprietary inhalation devices.  Shares of KOSP climbed
to a new 15-month high this week as investors speculated on the
company's upcoming quarterly report, which should be delivered
on 7/31/03.  Investors who think the numbers will be bullish can
profit from a favorable earnings report with this position.

AUG-25.00 KQW TE LB=0.45 OI=234 CB=24.55 DE=21 TY=2.7% MY=7.7%

UNTD - United Online  $29.39  *** Internet Sector Rally! ***

United Online (NASDAQ:UNTD) is an Internet service provider
offering consumers free and value-priced Internet access and
e-mail.  Its Internet access services are offered through its
NetZero and Juno subsidiaries under their brands, and are
available in more than 5,000 cities across the United States
and Canada.  In addition, the company offers marketers numerous
online advertising products, as well as online market research
and measurement services.  As of June 30, 2002, the company had
approximately 1.7 million subscribers to its pay Internet access
services and approximately 4.8 million active users, including
pay users.  Active users include all pay users and those free
users that have logged onto its services during the preceding
31-day period.  Stocks in the Internet sector have performed
very well in recent sessions and traders who believe the rally
will continue can profit from that outcome with this position.

AUG-25.00 QAB TE LB=0.40 OI=270 CB=24.60 DE=21 TY=2.4% MY=7.5%

SIE - Sierra Health Services  $25.36  *** Solid Earnings! ***

Sierra Health Services (NYSE:SIE) is a diversified health care
services company that operates health maintenance organizations,
indemnity and workers' compensation insurers, military health
programs, preferred provider organizations and multi-specialty
medical groups.  Sierra's subsidiaries serve nearly 1.2 million
people through health benefit plans for employers, government
programs and individuals.  Shares Of Sierra Health Services hit
a 52-week high this week after the health insurer said quarterly
profits nearly doubled, as the firm raised premiums and managed
medical costs.  The company also raised its earnings outlook for
the full year and investors who expect a bullish future for SIE
can establish a conservative cost basis in the issue with this

AUG-22.50 SIE TX LB=0.35 OI=12 CB=22.15 DE=21 TY=2.3% MY=6.6%

MNST - Monster Worldwide  $26.15  *** New 52-Week High! ***

Monster Worldwide (NASDAQ:MNST), formerly known as TMP Worldwide,
is a global provider of career solutions.  The company, through
its flagship Interactive product, Monster (www.monster.com), is
engaged in online career management.  Monster Worldwide is also a
worldwide recruitment advertising agency through its Advertising
and Communications division and a yellow pages advertising agency
through its Directional Marketing division.  On March 31, 2003,
the company completed the distribution of the common stock of
Hudson Highland Group, previously reported as the eResourcing and
Executive Search divisions of Monster Worldwide.  Staffing stocks
surged this week as investors bet on improvement in the U.S. job
market and Monster Worldwide was one of the top performers in the
group.  Traders who think the trend will continue can speculate
conservatively on that outcome with this position.

AUG-22.50 BSQ TX LB=0.30 OI=32 CB=22.20 DE=21 TY=2.0% MY=6.1%

AMAT - Applied Materials  $19.30  *** Entry Point? ***

Applied Materials (NASDAQ:AMAT) develops, manufactures, markets
and services semiconductor wafer fabrication equipment for the
worldwide semiconductor industry.  The firm manufactures systems
that perform most of the primary steps in the chip fabrication
process, including atomic layer deposition, CVD or chemical vapor
deposition, physical vapor deposition, electroplating, etch, ion
implantation, rapid thermal processing, wafer cleaning, chemical
mechanical polishing, metrology and wafer inspection.  Applied
Materials' subsidiary, AKT, manufactures CVD systems used to make
flat panel displays that are used in notebook computers, desktop
monitors, televisions and other applications.  Another business
subsidiary, Etec, is a manufacturer of systems used to generate,
etch and inspect circuit patterns used in the photolithography
process.  The firm also provides manufacturing facility management
software, as well as services to enhance manufacturing yields.
Lehman said on Tuesday it raised the rating on Applied Materials
to "overweight" and investors applauded the news, boosting the
issue to a 52-week high.  Traders who like the outlook for the
stock can establish a low risk cost basis in the issue with this

AUG-17.50 ANQ TW LB=0.25 OI=8411 CB=17.25 DE=21 TY=2.1% MY=5.9%



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

THER   13.35  AUG 12.50  UKT TV 0.50 0    12.00  21   6.0%  14.5%
SEPR   23.75  AUG 22.50  ERQ TX 0.70 745  21.80  21   4.7%  11.3%
CYTC   12.66  AUG 12.50  YQK TV 0.40 275  12.10  21   4.8%  10.9%
ATYT   11.22  AUG 10.00  QFY TB 0.25 723   9.75  21   3.7%  10.3%
MSTR   41.10  AUG 35.00  EOU TG 0.70 348  34.30  21   3.0%   9.2%
ZRAN   27.28  AUG 25.00  ZUO TE 0.50 24   24.50  21   3.0%   7.9%
CUM    45.16  AUG 42.50  CUM TV 0.65 250  41.85  21   2.2%   5.9%
MKSI   23.11  AUG 20.00  QQB TD 0.25 1    19.75  21   1.8%   5.7%



Stocks Rally Amid Bullish Economic Data
By Ray Cummins

The major equity averages surged Friday as news of a favorable
durable goods report boosted investor confidence for a rebound
in the economy.

The Dow soared 172 points to 9,284.57, its highest close in five
weeks, with all 30 components finishing the day "in the black."
The technology-laced NASDAQ index jumped 29 points to 1,730 amid
a buying spree in virtually all the major technology groups.  The
broader Standard & Poor's 500 index climbed 17 points to 998 as
traders shopped for shares of aluminum, paper & packaging, retail,
and brewing stocks, among others.  Trading was average with 1.4
billion shares swapped on the Big Board, while 1.6 billion shares
changed hands on the technology exchange.  Advancing issues beat
decliners by more than 2 to 1 on both the New York Stock Exchange
and the NASDAQ.  Bonds were pressured by the durable goods report
that could be a sign of stronger economic growth in the second
half of the year.  The benchmark 10-year Treasury was down 2/32,
yielding 4.18%.


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

IRF     28.00   28.40  AUG   22  25   0.25  24.75  $0.25   Open
MER     49.25   54.16  AUG   42  45   0.25  44.75  $0.25   Open
EBAY   113.07  112.24  AUG   95 100   0.50  99.50  $0.50   Open
GENZ    44.02   50.45  AUG   35  38   0.20  37.30  $0.20   Open
MEDI    39.01   40.00  AUG   32  35   0.25  34.75  $0.25   Open
SYMC    45.65   46.82  AUG   35  40   0.55  39.45  $0.55   Open
CCMP    57.61   58.73  AUG   45  50   0.55  49.45  $0.55   Open
GILD    66.52   68.20  AUG   55  60   0.55  59.45  $0.55   Open
SII     37.87   35.97  AUG   32  35   0.25  34.75  $0.25   Open

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

The position in Yahoo! (NASDAQ:YHOO), although positive, has been
closed to limit potential losses.


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

ACS     45.06   43.53   AUG   55  50   0.65  50.65  $0.65   Open
BBBY    38.59   39.10   AUG   45  42   0.35  42.85  $0.35   Open
MMM    128.28  141.40   AUG  140 135   0.70 135.70 ($1.30) Closed *
CI      44.49   41.52   AUG   55  50   0.00  50.00  $0.00  No Play
ICUI    27.90   24.39   AUG   35  30   0.60  30.60  $0.60   Open
PG      88.56   89.55   AUG   95  90   1.25  91.25  $1.25   Open
BRL     59.25   62.95   AUG   60  55   0.00  55.00  $0.00  No Play
BGEN    40.05   39.40   AUG   47  45   0.30  45.30  $0.30   Open
NVLS    35.70   36.04   AUG   42  40   0.30  40.30  $0.30   Open

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

The bearish spread in Barr Labs (NYSE:BRL) was not initiated as
the issue "gapped" higher before the open Monday after the stock
was upgraded by First Albany on expectations that earnings will
benefit from patent challenges and it drugs pipeline.  The spread
on 3M Corporation (NYSE:MMM) was closed later in the session after
the company reported that earnings and sales were stronger in the
second quarter, and raised its guidance for the full year.  The
cost to exit the position was lower earlier in the day, however
the summary reflects the posted prices as of 12 P.M. EST on 7/21.
Proctor & Gamble (NYSE:PG) remains on the early-exit "watch" list.


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

TECD    31.03  30.24  AUG   25  30   4.20   29.20  0.08   Open?
EBAY   110.02 112.24  AUG   95 100   4.60   99.60  0.40   Open

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

Tech Data (NASDAQ:TECD) remains on the watch-list and conservative
traders should consider closing the position on further downside


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

LXK     73.50  64.90  AUG   85  80   4.80   80.20   0.20  No Play

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

There was no position initiated in Lexmark (NYSE:LXK) as the issue
"gapped" lower prior to the start of Monday's session.


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

ESI     29.63  38.77   OCT     35    25     0.15    5.00    Open?

ITT Educational Services (NYSE:ESI) was one of the best plays this
the month with an outstanding $5.00 potential gain for speculative


No Open Positions


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

CHKP    18.05  17.34   OCT-20C   JUL-20C   0.10    1.50   Closed
BEAS    11.08  13.32   SEP-12C   JUL-12C   0.65    1.00   Closed
IR      47.95  54.27   SEP-50C   JUL-50C   1.20    1.60   Closed
ARTI    24.32  21.09   SEP-25C   JUL-25C   1.60    1.65   Closed
NSCN    24.18  22.64   SEP-25C   AUG-25C   0.40    0.25    Open
GP      19.25  20.55   OCT-20C   AUG-20C   0.90    1.00    Open
MSFT    27.31  26.89   JAN-27C   AUG-27C   1.40    1.50    Open
NE      34.86  32.97   DEC-37C   AUG-37C   1.40    0.90    Open
ING     19.07  19.76   JAN-20C   AUG-20C   0.90    0.90    Open

A number of issues gapped lower this week, offering little or no
opportunity to sell new call options, thus many of the positions
in the time-selling portfolio have been closed to protect profits
or limit losses.


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

RJR     36.19  36.99   AUG   37.5  35.0   3.15     3.70   Closed
BSX     60.00  60.80   AUG   60    60     7.00     7.30   Closed
AIG     55.69  64.65   AUG   55    55     4.90     9.40    Open?
FRE     50.00  50.75   AUG   50    50     5.10     6.25   Closed

American International Group (NYSE:AIG) was the big winner this
week, offering up to $4.50 profit on $4.90 invested in less than
one month.  The R.J. Reynolds (NYSE:RJR) straddle has previously
achieved a favorable "early-exit" profit.  Positions in MBIA Inc.
(NYSE:MBI) and Dollar General (NYSE:DG) have been closed to limit


No Open Positions

Questions & comments on spreads/combos to Contact Support

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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.

AMZN - Amazon.com  $41.60  *** Another Multi-Year High! ***

Amazon.com (NASDAQ:AMZN) is a website where customers can find
and discover anything they may want to buy online.  The company
lists millions of items in categories such as books, music, DVDs,
videos, consumer electronics, toys, camera and photo items, PC
software, computer and video games, tools and hardware, outdoor
living items, kitchen and house-wares products, toys, baby and
baby registry, travel services and magazine subscriptions.  At
its Amazon Marketplace, Auctions and zShops services, businesses
and individuals can sell virtually any product to millions of
customers, and with Amazon.com Payments, sellers are able to
accept credit card transactions in addition to other methods of
payment.  The company operates a U.S.-based Website: amazon.com,
and four internationally focused Websites: www.amazon.co.uk,
www.amazon.de, www.amazon.fr and www.amazon.co.jp.

AMZN - Amazon.com  $41.60

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-35.00  ZQN-TG  OI=22310  ASK=$0.25
SELL PUT  AUG-37.50  ZQN-TU  OI=11091  BID=$0.45
POTENTIAL PROFIT(max)=11% B/E=$37.25

GRMN - Garmin  $45.23  *** Next Leg Up? ***

Garmin (NASDAQ:GRMN) is a worldwide provider of navigation,
communications and information devices, which are enabled by
global positioning system technology.  The company designs,
develops, manufactures and markets a wide range of handheld,
portable and fixed-mount GPS-enabled products and navigation,
communications and information products for the aviation and
consumer markets.  Each of Garmin's GPS products utilizes its
proprietary integrated circuit and receiver designs to collect,
calculate and display location, direction, speed and other
information in forms optimized for specific uses.  The firm's
consumer segment includes portable receivers and accessories
for marine, recreation, land and automotive use sold primarily
to retail outlets.  The firm's aviation products are portable
and panel-mount avionics for aircraft navigation, and are sold
mainly to aviation dealers and certain aircraft manufacturers.

GRMN - Garmin  $45.23

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-35.00  GQR-TG  OI=766  ASK=$0.30
SELL PUT  AUG-40.00  GQR-TH  OI=310  BID=$0.65
POTENTIAL PROFIT(max)=8% B/E=$39.60

IMCL - ImClone  $39.86  *** Bristol-Meyers Buying More? ***

ImClone Systems (NASDAQ:IMCL) is a biopharmaceutical company whose
mission is to advance oncology care by developing a portfolio of
targeted biologic treatments designed to address the medical needs
of patients with a variety of cancers. The company's lead product,
Erbitux, is a therapeutic antibody that inhibits stimulation of
epidermal growth factor receptor upon which certain solid tumors
depend in order to grow. In addition to the development of its
lead product candidates, the company conducts research in a number
of areas related to its core focus of growth factor blockers, as
well as cancer vaccines and angiogenesis inhibitors. IMCL has also
developed diagnostic products and vaccines for certain infectious

IMCL - ImClone  $39.86

PLAY (less conservative - bullish/credit spread):

BUY  PUT  AUG-30.00  QCI-TF  OI=1100  ASK=$0.55
SELL PUT  AUG-32.50  QCI-TT  OI=48    BID=$0.85
POTENTIAL PROFIT(max)=14% B/E=32.20

NTES - NetEase.com  $42.07  *** China Internet Revolution ***

NetEase.com (NASDAQ:NTES) is a China-based Internet technology
company that pioneered the development of applications, services
and other technologies for the Internet in China.  The NetEase Web
sites, operated by a company affiliate, organize and provide access
to 18 content channels through distribution arrangements with more
than one hundred international and domestic content providers.  In
addition, the NetEase Internet sites offer a variety of products and
services, including Instant Messaging (Popo), Dating, Love, Alumni
and Personal Home Page.  These products and services enable users to
communicate about interests and areas of expertise.  At the end of
March 2003, the number of registered users of the NetEase Web sites
reached 114 million with the average number of daily page views over
370 million.

NTES - NetEase.com  $42.07

PLAY (less conservative - bullish/credit spread):

BUY  PUT  AUG-30.00  NQG-TF  OI=755  ASK=$0.35
SELL PUT  AUG-35.00  NQG-TG  OI=212  BID=$0.90
POTENTIAL PROFIT(max)=14% B/E=$34.40

BSTE - Biosite  $46.06  *** Downgrade = Sell-Off! ***

A leader in the drive to advance diagnosis, Biosite (NASDAQ:BSTE)
is a unique research-based company dedicated to the discovery and
development of novel protein-based diagnostic tests that improve
a doctor's ability to diagnose debilitating and life-threatening
diseases.  The firm combines integrated discovery and diagnostics
businesses to access proteomics research, identify proteins with
high diagnostic utility, develop and commercialize products and
educate the medical community on new diagnostic approaches that
improve health care outcomes.  Biosite's "Triage" rapid diagnostic
tests are used in approximately 50% of U.S. hospitals and in over
40 international markets.

BSTE - Biosite  $46.06

PLAY (less conservative - bearish/credit spread):

BUY  CALL  AUG-55.00  BQS-HK  OI=925  ASK=$0.25
SELL CALL  AUG-50.00  BQS-HJ  OI=450  BID=$0.80
POTENTIAL PROFIT(max)=14% B/E=$50.60

BVF - Biovail  $41.60  *** Consolidation In Progress! ***

Biovail (NYSE:BVF) is a pharmaceutical company engaged in the
development, manufacture and marketing of medications utilizing
advanced drug delivery technologies for the treatment of chronic
medical conditions.  The firm's primary focus is on three major
therapeutic areas: cardiovascular (including Type II diabetes),
central nervous system and pain management.  Other major areas of
interest include antiviral medicine and select niche therapeutic
categories with identified potential.  Biovail Pharmaceuticals
Canada performs sales and marketing activities in Canada for the
company's products, as well as for products licensed from third
parties.  Biovail also has a full-service independent Contract
Research Division that provides clinical research and laboratory
testing services for its product development projects and for
third-party international and domestic pharmaceutical companies,
including several developmental partners.

BVF - Biovail  $41.60

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-50.00  BVF-HJ  OI=1606  ASK=$0.15
SELL CALL  AUG-45.00  BVF-HI  OI=6535  BID=$0.60
POTENTIAL PROFIT(max)=11% B/E=$45.50


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

RGLD - Royal Gold  $23.94  *** Gold "Bulls" Only! ***

Royal Gold (NASDAQ:RGLD) is engaged in the acquisition and
management of precious metals royalties.  The company seeks to
acquire existing royalties or to finance projects that are in
production or near production in exchange for royalty interests.
Royal Gold also explores and develops properties thought to
contain precious metals and seeks to obtain royalty and other
carried ownership interests in these properties through the
subsequent transfer of operating interests to other mining
companies.  Its principal mineral property interests are two
sliding-scale gross smelter returns (collectively, the GAS
Claims), one fixed GSR royalty, and one net value royalty,
relating to the mining complex that includes the Pipeline gold
mines, operated by the Cortez Joint Venture.  The Pipeline
Mining Complex is located in Crescent Valley, Nevada.

RGLD - Royal Gold  $23.94

PLAY (speculative - bullish/debit spread):

BUY  CALL  AUG-20.00  MJQ-HD  OI=329  ASK=$4.20
SELL CALL  AUG-22.50  MJQ-HX  OI=623  BID=$1.95
POTENTIAL PROFIT(max)=11% B/E=$22.25

BRCM - Broadcom  $22.76  *** A Broad(com) Retreat! ***

Broadcom (NASDAQ:BRCM) is a provider of highly integrated silicon
solutions that enable broadband communications and networking of
voice, video and data services.  Broadcom designs, develops and
supplies complete system-on-a-chip solutions and related hardware
and software applications for every major broadband communications
market.  Broadcom's diverse product portfolio includes solutions
for digital cable set-top boxes and cable modems; high-speed local,
metropolitan and wide area and optical networks; home networking;
Voice over Internet Protocol; carrier access; residential broadband
gateways; direct satellite and terrestrial digital broadcast; DSL;
wireless communications; SystemI/OTM server solutions, and for
broadband network processors.

BRCM - Broadcom  $22.76

PLAY (speculative - bearish/debit spread):

BUY  PUT  AUG-27.50  RCQ-TY  OI=4822   ASK=$4.90
SELL PUT  AUG-25.00  RCQ-TE  OI=16995  BID=$2.65
POTENTIAL PROFIT(max)=11% B/E=$25.25


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.

SPW - SPX Corporation  $44.65  *** Earnings Speculation! ***

SPX Corporation (NYSE:SPW) is a global provider of technical
products and systems, industrial products and services, flow
technology and service solutions.  The firm offers a collection
of products, including scalable storage networking solutions,
fire detection and building life-safety products, television
and radio broadcast antennas and towers, life science products
and services, transformers, compaction equipment, high-tech die
castings, dock systems, cooling towers, air filtration products,
valves, back-flow prevention and fluid handling equipment and
metering and mixing solutions.  Its products and services also
include specialty service tools, diagnostic systems, service
equipment and technical information services.  SPX' products
are used by customers in various industries, including chemical
processing, pharmaceuticals, infrastructure, mineral processing,
petrochemical, telecommunications, transportation, power, and
financial services.  Quarterly earnings are due on 7/28/03.

SPW - SPX Corporation  $44.65

PLAY (speculative - bullish/calendar spread):

BUY  CALL  DEC-47.50  SPW-LW  OI=22  ASK=$2.90
SELL CALL  AUG-47.50  SPW-HW  OI=50  BID=$0.45


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

SHPGY - Shire Pharmaceuticals  $22.77  *** On The Rebound! ***

Shire Pharmaceuticals Group plc (NASDAQ:SHPGY) is an emerging
global pharmaceutical company with a strategic focus on four
therapeutic areas: central nervous system disorders, gastro
intestinal, oncology and anti-infectives.  The firm has sales
and marketing subsidiaries with a large portfolio of products
targeting the United States, Canada, the United Kingdom, the
Republic of Ireland, France, Germany, Italy and Spain.  Shire
also covers other significant pharmaceutical markets indirectly
through distributors.  It operates and manages its businesses
within three individual operating segments: United States,
International and Global Research and Development.

SHPGY - Shire Pharmaceuticals  $22.77

PLAY (very speculative - bullish/synthetic position):

BUY  CALL  JAN-30.00  UGH-AF  OI=235  ASK=$0.60
SELL PUT   JAN-17.50  UGH-MW  OI=205  BID=$0.50

Note:  Using options, the position is similar to being long the
stock.  The minimum initial margin/collateral requirement for the
sold option is approximately $500 per contract.  However, do not
open this position if you can not afford to purchase the stock at
the sold put strike price ($17.50).




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