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Daily Newsletter, Wednesday, 07/30/2003

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The Option Investor Newsletter                Wednesday 07-30-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: "A notch"
Futures Wrap: Watching the grass grow
Index Trader Wrap: See Note
Weekly Fund Family Profile: Brown Brothers Harriman ("BBH") Funds
Traders Corner: The Good, The Bad and The Ugly
Futures Corner: Performance Report Part 3

Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     07-30-2003         High     Low     Volume Advance/Decline
DJIA     9200.05 -  4.41  9236.54  9164.97 1.64 bln    628/ 960
NASDAQ   1720.91 - 10.46  1733.40  1717.07 1.52 bln    502/ 994
S&P 100   497.29 -  0.56   499.80   496.19   Totals   1130/1954
S&P 500   987.49 -  1.79   992.62   985.96
RUS 2000  472.80 -  0.80   474.23   470.93
DJ TRANS 2606.22 - 12.15  2620.52  2598.15
VIX        20.72 +  0.49    21.06    20.54
VXN        30.86 +  0.70    31.42    30.86
Total Volume 3,342M
Total UpVol  1,163M
Total DnVol  2,096M
52wk Highs     435
52wk Lows       58
TRIN          1.38
PUT/CALL      0.80
*******************************************************************

"A notch"
Jonathan Levinson

The markets closed lower by a notch, while the summary of the
Fed's Beige Book found that the economy edged higher by a notch.

20 day 30 minute INDU




The Dow closed lower by all of 4 points, while the COMPX dropped
10.  The narrowing pennant formations are setting the markets up
for a big move in either direction, and with a plethora of
economic data commencing tomorrow, the break could come at any
time.

20 day 30 minute COMPX





The Energy Department reported that U.S. crude inventories rose
by 1 million barrels to 277.3 million for the week ended July 25,
while the American Petroleum Institute reported a 400,000 barrel
decline to 276.6 million barrels. In either case, analysts got it
wrong, expecting a larger increase.  Gasoline inventories fell by
3.3 barrels to 204.5 million barrels according to the Energy
Department, while the API reported a 2.1 million barrel drop to
206.3 million barrels. The big news, however, was the most recent
set of data concerning mortgage and refi activity.

The Mortgage Bankers Association (MBA) announced that seasonally-
adjusted demand for mortgage refinancings, the MBA refinancing
index, dropped 32.9% for the week ended July 24.  Demand for
loans with which to buy homes, the Purchase index, dropped 3.5%
following last week's 1.1% loss.  The Application index dropped
24.9%.  The average interest rate for a 30-year fixed rate
mortgage rose to 5.87% from 5.72%.

As I have been discussing for the past several weeks in our
Wednesday market wraps, this trend poses significant risks to the
economy and to the market, as the liquidity generated by debt
origination has been providing fuel with which to support the
financial system.  Further more, the rapid rise in interest rates
comes against the backdrop posted below.  I won't rehash this
material, and strongly encourage you to review recent Wednesday
market wraps for a more detailed discussion.  Here are some
highlights:


Chart of Total Consumer Credit



Chart of Unemployment Rate




Chart of US Bankruptcy Filings




Chart of State and Local Surplus or Deficit




Against this backdrop, GE CEO Jeff Immelt made statements in an
interview worth repeating (and attributing to him).  Note that GE
owns CNBC, on which channel the interview took place:

"I'm pretty optimistic. It is not that every thing is perfect.  I
still see the U.S. on a slow economic growth trend. I don't see
anything negative as I look at the economy today..."

Photo of Jeff Immelt




I beg to differ, and while charts are always  open to
interpretation, those posted above appear pretty unequivocal.
The quote was released last night in a Reuters story at 7:05PM.
One would be hard pressed to find a clearer example of manifest
editorial bias.

The President spoke today and was optimistic about the economy,
saying that he expected his tax cut package to stimulate
productivity and job growth.  "There's still work to do, but I'm
optimistic about the future and I believe you'll see more jobs
created and that will be good for the country," he said.
Regarding the deficit: "We would have had deficits with or
without tax cuts for this reason: the slowdown in the economy,
the decline in the stock market starting March of 2000, plus the
recession, reduced the amount of revenues coming into the federal
Treasury."

Donald Grimes, economist at the University of Michigan's
Institute of Labor and Industrial Relations, released a study
today noting that U.S. economic recovery since the end of the
recession in November 2001 has been substantially more drawn-out
than the recovery period of the early 1990s. "The current jobless
recovery has lasted nearly twice as long and has resulted in
three times as many job losses compared to the economic recovery
in 1991-92.  While most people would attribute the continued
weakness to job losses in information technology industries,
states that have suffered the greatest during the post-recession
period are not technology-based states, but are industrial states
in the Midwest," he said.   Grimes noted that California, home of
the tech revolution, saw significantly greater job losses in the
early '90s than it has since 2000.

Rather than rehash the debt and money supply situation, with
which material we should by now be thoroughly familiar, the
following is a longer term view of the markets we follow.  I'm
hoping to gain some perspective on the recent market action,
particularly as the treasury and commodity markets continue to
diverge from equities during weeks past.

SPX 33 year monthly




The long term Nasdaq and S&P 500 charts speak for themselves.
Note that the unwinding of the tech bubble brought the COMPX to a
76.4% retracement off its alltime high, while the SPX stopped at
the 50% line.

COMPX 33 year monthly





The weekly charts reflect the toppiness that we've been following
for weeks in the tri-weekly Sentiment Wraps.

SPX 3 year weekly




COMPX 3 year weekly




Noteworthy is that bond yields have recently rallied very
strongly, bonds selling off sharply with no corresponding action
in either direction from equities which have drifted mostly
sideways during that time.  Recall that bonds and stocks rallied
together through most of this year, and so the recent action from
the larger treasury market is so far baffling.  My interpretation
is that the selloff in treasuries has yet to reach equities, but
I can think of arguments on the other side as well.

Ten year note yield 3 year weekly




The strong uptrend in gold does not bode well for equities, in my
opinion.  Note that the weekly chart of the Dec '03 contract
reveals a continuation pennant forming so far.


Gold 3 year weekly





The Federal Reserve Board's Beige Book was released at 2PM EST,
and caused a brief stir of buying for a few minutes.  The report
found that the U.S. economy is showing some signs of improvement,
with 8 out of 12 districts reporting "somewhat stronger growth."
The manufacturing sector looked stronger with Philadelphia and
Richmond and calling an end to the downturn in production, though
goods prices throughout the country still appeared soft.  The
report noted the jump in automobile inventories in June and July.
Overall, the report noted that economic activity had picked up "a
notch."  There are no doubt windowless offices filled with
harried quants attempting to discern what percentage of GDP
corresponds to "a notch".

The inability of the report to spark more that a fleeting bid no
doubt owes itself to the more negative "hard" data we've been
following, including initial and continuing jobless claims, the
current account deficit, the CPI and the PPI.  Statements like
"inflation remains tame" and "consumer spending is lackluster"
did nothing to rally bonds, contrary to what one might otherwise
have expected.  The markets all but ignored the Beige Book, but
what I find to be most interesting is its reflection of the Fed's
view on current and ongoing economic conditions.  The full report
can be accessed at


As Jeff Bailey noted in the 3:15 Market Update, "The word that
showed up most often was "mixed" and as one subscriber has pointed
out in the past, where I use quotation marks too frequently and
perhaps improperly, we can envision the late Chris Farley in a
Saturday Night Live skit using his fingers to signify quotation
marks around today's release of the Fed Beige Book Data, which
contains little hard data points..."

The bottom line is that the Fed pulled out the stops quite some
time ago.  The more than tripling of the money supply inside of
15 years, the lowering of rates to 45 year lows, the aggressive
ongoing daily intervention via Fed repo agreements, all indicate
a Fed increasingly open to exercising strong measures, while the
charts on unemployment, state budgets, personal borrowing and
bankruptcies tell a sad tale of the failure of those measures so
far. It is my sincere hope that the optimistic "mixed" story in
the Beige Book and in the mainstream financial media's spin
thereon is both well-founded and an indication of brighter  times
to come.  However, in light of the proliferation of "hard" data
to the contrary and the new threats posed by rising rates, a
weak dollar, and the other factors discussed above, the Fed's
Beige Book sounds more like the placative tone of an airline
steward than an objective report of the current and future
conditions facing us.

In other news, the Investment Company Institute reported that net
inflows into stock funds totaled $18.7 billion in June, topping
$11.9 billion of inflows during May.  This data follows over 1
year of mostly negative inflows since March 2002.  Trimtabs is
estimating that the trend will continue, projecting inflows of
$8.5 billion for this month.

We have the following economic data due tomorrow:

               Report                   Briefing  Market    Prior
                                        Expects   Expects
Jul 31 8:30 AM Chain Deflator-Adv. Q2 -     1.0%      1.4%   2.4%
Jul 31 8:30 AM Employment Cost Index Q2 -   0.9%      1.0%   1.3%
Jul 31 8:30 AM GDP-Adv. Q2 -                1.5%      1.5%   1.4%
Jul 31 8:30 AM Initial Claims 07/26 -       410K      400K   386K
Jul 31 10:00 AM Chicago PMI Jul -           53.0      53.8   52.5
Jul 31 10:00 AM Help-Wanted Index Jun -       37        37     36


Today's session gave us an inside day following a very light week
for economic data.  Tomorrow and Friday are much heavier, and
with tension building with today's price compression within what
is proving to be a persistent trading range, the stage is set for
a big move either way.  If this year has taught us anything, it's
patience and open-mindedness.  The markets could blast to the
upside as easily to the downside, although I personally find the
latter to be the more likely outcome.  With the indices just
below their year highs, volatility very low and beginning to
climb, bullish percents toppy and bears hesitant to go short, the
downside appears for the moment to be the path of lesser
resistance. We'll keep close on our stops in case The Great
Humiliator disagrees.

See you at the bell!


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

Watching the grass grow
Jonathan Levinson

Today's inside day was treacherous for traders who grew
impatient, decreasingly so as the session wore on, for the simple
reason that the range was narrowing into a wedge.  Treasuries
rallied back to their descending trendline but did not seriously
challenge it, and gold sold off to just above support.


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

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U      998    992    988    982    978
YM03U     9279   9228   9184   9133   9089
NQ03U     1288   1277   1269   1258   1250


10 minute chart of the US Dollar Index




The US Dollar Index climbed throughout the session, reaching
96.19 as of this writing.  The action was predictably bearish for
gold, silver and the precious metals indices, and shaved .95 off
the Commodities Index.

Daily chart of August gold




August gold gapped down and never looked back.  The move was
sufficient to cause the oscillators to pause in their ongoing
upphases, but it's going to take a break below 354 to cause them
to abort.

Daily chart of the ten year note yield




The rally in treasuries today didn't change much on the daily
chart, particularly with the bullish hammer close on the ten year
note yield, as yields bounced off their intraday lows following
the Beige Book release.  Given the strength and persistence of
this uptrend, and the fact that today's action coincided with a
net 2.25B addition from the Fed via two successive repos, I am
far from convinced that the selling in bonds is finished.


Daily NQ candles




There's little way to render today's action on the Nasdaq or
other futures interesting, as we posted an inside day across the
equity futures, with a higher low and lower high printed for all
three contracts.  In every case, the long term trendlines held,
and no fresh signals were printed.

30 minute 20 day chart of the NQ




The NQ remains on weak sell signals on the 30 minute chart, but
with the multitude of economic data scheduled for tomorrow, those
could be reduced within minutes.

Daily ES candles




The ES weakened as well, only in this case, below rather than
above its daily trendline.


20 day 30 minute chart of the ES




The lower trendline on this bear flag/ pennant looms ever closer
below, and today's intraday low of 984 was picture-perfect.  Once
again, we have weakening sell signals, open to either reversal or
continuation, depending on how tomorrow's data is received.

Daily YM candles





Same picture on the YM, with today's price action compressed into
a pennant within a broader range.  The clichi "anything can
happen" unfortunately applies.

20 day 30 minute chart of the YM





The action in treasuries and gold were both strong countertrend
moves which felt stronger than they were.  A continuation of
today's moves into tomorrow's session could change that
considerably, as a move below 354 on GC3Q and 4.2% on the TNX
could represent trend changes.  Equities continue to feel toppy,
and I continue to feel bearish, and if not for the lessons of the
spring rally, I'd be feeling bearish with greater abandon.  We
note the QQQ put to call ratio of almost 7 from yesterday's
Sentiment Wrap, which a reader and I both thought at first to be
erroneous.  That many puts is good for strong support under the
market, as their writers have every incentive to keep the price
levitated to expire them worthless.  Nevertheless, the put to
call ratio can also be signaling the beginning of a large move,
as the savvier options market positions itself.  As always, these
conjectures will be settled by the price.  Trade carefully
tonight and tomorrow, as today's inside day is setting us up for
a busy session.


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_073003_1.asp


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

Brown Brothers Harriman ("BBH") Funds

The BBH Funds are a family of mutual funds managed Brown Brothers
Harriman, America's oldest and largest partnership (private) bank
with roots dating back to 1818.  Brown Brothers & Company started
nearly 200 years ago as an importer of Irish linen and then later
entered the banking business by way of its success as a dry-goods
merchant.  In 1843, Brown Brothers moved their New York office to
Wall Street and expanded into shipping and banking.

Meanwhile, in the late 1800s E.H. Harriman was taking significant
ownership positions in U.S. railroads.  In 1931, Brown Brothers &
Company combined with two Harriman family firms and created Brown
Brothers Harriman.  The combined entity shifted its emphasis from
investment banking, to commercial banking and investment advisory
services.  In 1990, Brown Brothers Harriman made their foray into
the world of mutual funds, launching the BBH European Equity Fund
(BBEEX).

Today, the BBH Funds managed by Brown Brothers Harriman offer ten
mutual funds with different investment objectives and risk-reward
tradeoffs to meet the range of investor goals, time horizons, and
tolerances for risk.  Typically, the BBH Funds require a $100,000
minimum initial investment to open a regular account, but the BBH
Funds are also offered on a no-load NTF basis through a number of
leading NTF fund networks, including the Dreyfus LION NTF, Schwab
Retail OneSource, Fidelity Retail FundsNetwork, and TD Waterhouse
Retail NTF programs.

For more information, or to download a fund prospectus, go to the
Brown Brothers Harriman website at www.bbh.com.

Fund Overview

While there are 10 BBH Funds to choose from, only six are offered
on a no-load NTF basis through Schwab's retail NTF network, which
are also the same six funds included in Morningstar's mutual fund
database.  The BBH Broad Market Fund (BBBMX) was launched in July
2000, but couldn't be found in Morningstar's system, so we'll use
the BBH website for fund information there.

Below is a summary of the 10 Brown Brothers Harriman mutual funds
sorted into two broad groups: equity funds and fixed income funds
(including money market funds).


  BBH Equity Funds:
  BBH Tax-Efficient Equity Fund (BBTEX), Large-Cap Core
  BBH International Equity Fund (BBHEX), Large-Cap Core/Growth
  BBH European Equity Fund (BBEEX), Large-Cap Core/Growth
  BBH Pacific Basin Equity Fund (BBPBX), Large-Cap Core

  BBH Fixed Income Funds:
  BBH Broad Market Fund (BBBMX), Corporate Debt (BBB-Rated)
  BBH Inflation-Indexed Fund (BBHIX), Intermediate Treasury
  BBH Tax-Free Short/Intermediate (BBTFX), Short-Term Muni
  BBH Money Market Fund (N/a),
  BBH U.S. Treasury Money Market Fund (N/a)
  BBH Tax-Exempt Money Market Fund (N/a)


If you toss out the three BBH money market funds, you're talking
about seven stock and bond funds to select from, including three
international stock funds, one domestic stock fund and three U.S.
bond funds.  At $101 million in assets, BBH International Equity
Fund is the largest of the four stock portfolios.  BBH Inflation-
Indexed Securities Fund, at $384 million, is the family's largest
fixed income fund.  The BBH Tax-Free Short-Intermediate Fund also
has over $100 million in assets, per Morningstar.

BBH Tax-Efficient Equity Fund (BBTEX) seeks to provide investors
with tax-efficient long-term capital growth while also producing
current income.  The fund's profile says that its style/strategy
may best be characterized as a "core fundamental" approach, with
primary emphasis given to "bottom-up" stock selection.  The main
focus here is on large-sized and medium-sized companies that are
globally competitive, and have strong business models and market
positions.  Both Lipper and Morningstar put the fund in the core
(blend) style box and in the large-cap sector overall.

The BBH International Equity Fund (BBHEX) seeks long-term growth
of capital through investments primarily in the common stocks of
foreign-based companies.  It generally invests over 80% of total
assets in stocks of non-U.S./Canadian companies in the developed
markets of the world.  The BBH website states that while foreign
markets do offer strong growth potential, they're generally less
stable (more volatile) than the U.S. market.  Break the non-U.S.
market into its two main components, European and Pacific stocks,
and you have two fund siblings, BBH European Equity Fund and BBH
Pacific Basin Equity Fund.

The firm's most successful mutual fund based on fund assets, BBH
Inflation-Indexed Securities Fund (BBHIX), seeks a high level of
current income, consistent with minimum share price fluctuations
and the maintenance of liquidity.  It invests principally in U.S.
government securities that are indexed to inflation; therefore,
offering protection against inflation.  Return performance over
time has matched the return of its benchmark, the Salomon Smith
Barney Inflation-Linked Securities Index.  Debt maturities tend
to fall in the intermediate-term range overall.

BBH Broad Market Fund (BBBMX) is a general bond fund that seeks
to maximize total return consistent with preservation of capital
and prudent investment management.  It seeks to enhance yield by
investing a small but significant portion of assets in mid-grade
corporate bonds (A-rated, BBB-rated) and foreign debt securities.
Lipper calls it a corporate debt BBB-rated fund; Morningstar has
no report for the BBH Broad Market Fund.

The $104 million BBH Tax-Free Short/Intermediate Fund (BBTFX) is
a short-term muni bond fund that seeks to provide current income
consistent with a conservative bond fund strategy that minimizes
share price fluctuations and maintains liquidity.  Its benchmark
is the Lehman Brothers 3-Year Muni Bond Index.  At May 31, 2003,
the fund's portfolio had an average credit quality of AAA and an
average effective duration of 2.3 years, per Morningstar.  A 12-
month yield of 2.69% increases the fund's appeal.

In the next section, we see how these BBH funds have performed in
relation to their index benchmarks and fund category peers.

Fund Performance

BBH Tax-Efficient Equity Fund (BBTEX), Brown Brothers Harriman's
only domestic stock fund product, is currently up 11.4% on a YTD
basis through July 29, 2003, ranking in the third quartile of the
Morningstar large-blend category and lagging the S&P 500 index by
two full percentage points.  In 1999, the fund's first full year,
investors were treated to a 25.1% annual return, but from 2000 to
2002, the fund's annual fund losses were higher than both the S&P
index and category average.  The result is disappointing relative
returns on a trailing 3-year annualized basis.  Relative to other
large-cap blend funds, Morningstar rates BBB Tax-Efficient Equity
Fund just two stars, reflecting sub-par returns and above-average
risk.

Brown Brothers Harriman's three international stock funds haven't
performed strongly either compared with fund category peers.  BBH
International Equity Fund (BBHEX) is rated 3 stars by Morningstar
for risk-adjusted returns in the foreign stock category.  That is
based on average relative returns and below-average risk relative
to category peers.  The International Equity portfolio is up just
7.7% through July 29, trailing the MSCI EAFE index benchmark by a
wide margin (by 5.7%) and ranking in the category's bottom decile
(92nd percentile).  The fund's trailing 5-year annualized loss of
4.5% is a full percentage point more than the MSCI EAFE benchmark
and bad enough to rank in the third quartile of the foreign stock
category, per Morningstar.







BBH Inflation-Index Securities Fund (see chart above) has put up
the strongest, most consistent returns relative to similar funds.
However, as you can see, the inflation-indexed sector of the bond
market has been hit hard in recent weeks as investors become more
concerned about the threat of rising rates.  Morningstar rates it
five stars (highest) for risk-adjusted returns in relation to its
category peers (i.e. intermediate-term government bond funds) but
the rating looks in the rear-view mirror.  Over the past 4 weeks,
BBH Inflation-Indexed Securities Fund has fallen 4.1%, ranking in
the 95th percentile in the intermediate-government bond category,
per Morningstar.

If you're concerned about rising interest rates, the BBH Tax-Free
Short/Intermediate Fund will likely be less sensitive to interest
rate movements than its intermediate-government sibling but since
it invests in municipal debt securities, the portfolio may not be
suitable for taxable bond investors.

Conclusion

Brown Brothers Harriman, like other banks and insurance companies
made their foray into the mutual fund business in the 80s and 90s
and since then have built up their mutual fund lineup.  BBH Funds
now consist of 10 mutual funds with different objectives and risk
profiles.  While Brown Brothers Harriman does a decent enough job
of managing portfolio risk relative to similar funds, performance
has been average (at best).  BBH Inflation-Indexed Fund's returns
have ranked in the top decile of the intermediate-term government
category, but recent losses are a harbinger of things to come (in
the event of rising rates).  Some say the bull bond market may be
over, others say we're in the late innings.  Either way, this may
not be the best time to consider an inflation-indexed product for
investment, unless you are more worried about inflation than rate
hikes.

Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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

The Good, The Bad and The Ugly
by Mark Phillips
mphillips@OptionInvestor.com

After a brief hiatus to clear my mind of some other topics that
had been bouncing around in there in recent weeks, I think it's
time for us to get back to the business of discussing the approach
I've settled on for trading the e-mini index futures.  Judging by
the volume of email requests I've received over the past week,
many of you are ready for me to get back on track with this
discussion.  We've covered many of the basic issues, along with my
overall framework for making my entry/exit decisions in some of
the foregoing discussion, and last time we discussed this topic, I
showed the results of a rather successful trading day.  My hope
for the next installment was to show more of a contrast, because
as we all know, showing winning trades one after the other doesn't
really help anyone.  We need to see how a given approach will
perform in favorable and unfavorable conditions.  Fortunately for
our purposes, this week has already delivered plenty of both.

As I've mentioned with each succeeding installment in this series,
readers just joining us will need to catch up on what went before,
using the links provided below.

The Case For Futures
http://www.OptionInvestor.com/traderscorner/tc_050503_1.asp

Planning For The Future(s)
http://www.OptionInvestor.com/traderscorner/tc_051203_1.asp

Back To The Future(s)
http://www.OptionInvestor.com/traderscorner/tc_060203_1.asp

Getting Ready To Launch
http://www.OptionInvestor.com/traderscorner/tc_060903_1.asp

Painting A Picture
http://www.OptionInvestor.com/traderscorner/tc_061603_1.asp

Discipline Failure
http://www.OptionInvestor.com/traderscorner/tc_063003_1.asp

A Day In The Life
http://www.OptionInvestor.com/traderscorner/tc_070903_1.asp

So without further preamble, let's delve into the charts and see
what we might have made of the past 3 trading sessions.  Because
I'm trying to cover a larger span of time in today's discussion,
I'm going to try to be more frugal with the chart space, at least
when discussing the 60-min/30-min charts.  While I don't think it
does much in the way of helping us to divine future market action
right now, let's start with the daily chart of the ES contract to
gain a perspective of the big picture.

ES Daily Chart




Believe it or not, I drew that wedge well over a week ago, before
last Friday's euphoric ramp.  I entered this week expecting it to
provide both support and resistance, but I was actually a bit
surprised to see how perfectly it capped the early rally attempt
on Monday morning.  But the simple fact remains that I entered the
week with a bearish bias, despite the weak rebound in the daily
Stochastics.  In hindsight, it is clear that down was the right
way to play it.  For a bit more clarity as to the major turning
points, let's drill down to the 60/30 minute charts.

ES 60/30 Minute Chart Montage




I've marked the clear bearish Stochastics crossovers with vertical
red lines and the one counter-trend bullish signal with a cyan
line.  Even though the hourly chart didn't turn bearish until
midday on Monday, we can see that it was looking toppy early in
the day, with the 30-minute chart already tipping over.  That
confirmed the bearish view I had coming into Monday's open, and I
focused the bulk of my attention on capturing the downside moves
at least for Monday.  Now that we've set the stage as to my
overall expectations from the longer-term charts, it's time to
delve into the 5-minute charts, which are my primary tool for
entries and exits.

ES 5 Minute Chart for Monday




I've marked the entry signals as PT Short (Primary Trend Short)
and CT Long (Counter Trend Long).  In my estimation, only
aggressive traders should consider the Counter Trend trades.  They
tend to be choppier and harder to trade, and frequently cover less
distance.  It didn't take long after the opening bell to get that
first short entry as Stochs tipped over and price was rejected
right at the top of that wedge near 1000.  The move certainly
didn't last long, with a triple bounce from the 992 area, followed
quickly by a CT Long signal.  A proactive exit could have been
managed near 994, while a 3-point trailing stop would have had us
out at 995.  Not a stellar move, but good for 3-5 points.  If
taken, the CT long signal would have been a tough and volatile
ride.  If the stop survived the 11am ET dip (which I doubt), then
the proper exit would have been on the break of the red ascending
trendline.

That trendline break was also the proper entry (near 996.50) for
the second PT Short of the day.  This one also quickly fell to 992
support and when that level held, a quick exit for +4-5 points was
the proper course of action.  Once again, relying on a 3-point
trailing stop would have resulted in a gain of 1-2 points.  By
this time, the intraday trend is starting to feel choppy and
rangebound, but I wouldn't rule out taking the aggressive CT long
signal during the lunchtime lull.  As luck would have it, that was
actually a pretty decent trade considering it was counter trend.
When price got back to 998 and failed to push any higher, that was
a neon sign screaming exit here!  Almost immediately thereafter,
we had a new short signal near 997 and this one was very hard to
manage better than a par result as support was found slightly
higher near 993.50.  Only a very agile trader could have harvested
a gain here.

By this point in the day, I didn't care what else transpired.  I
was done, having conclusively decided that the range wasn't going
to break and I wanted to leave with my paltry gains intact.  I've
marked the chart above with then final two signals (a long and a
short) of the day, and you can see for yourself that nothing else
of note really was worth trading into the close.

These tight-range days have been coming along with greater and
greater frequency and I've been noticing that they almost always
follow large range days like we had last Friday.  It isn't a
primary trade indication, but a pattern that we will do well to
watch for.

ES 5 Minute Chart for Tuesday




After Monday's tight range day, I was looking for a bit of
expansion of the range on Tuesday and I wasn't disappointed at
all.  The early short signal before the 10am worthless economic
report was already working a bit from the 994 level before the
release.  The response to the report had gravity in full effect
and before I could blink twice, I had been filled at my 984 (+10)
profit target.  That's a nice start to the day.  Feeling a bit
flush so early in the day, I actually decided to try playing the
rebound and placed a bottom-fishing order in at 982.  Nailed it
exactly and then the confirmation of a bullish entry came from the
Stochastics about 15 minutes later.  The proper entry would have
been near 984-985.  Saddam rumors hit the tape before long and it
was a rocket ride to the moon.  Regardless of which entry was
taken, another +10 was available as ES shot through 992 and then
995.

Pride goeth before a fall and after two big wins before lunch, I
got a bit too eager to short the next Stochastics rollover just
after noon.  That one came back in my face for a 3 point loss on
the rebound, but there was another setup there just after 1:30pm
ET and I was back short again from the 995 area.  This one didn't
quite deliver the 10 point gain of the morning's moves, but it was
good for a +7.50 on a 3-point trailing stop at 988.50.  With the
final hour of trading already underway and lots of action having
taken place already, this was not the place to be forcing more
trades and I closed up shop for the day.  All told, this was a
very nice day, with a total net gain of +24.50.

Remember what I said above about large range days being followed
by small range, choppy sessions.  I finished Tuesday's session
with the expectation of less than ideal conditions on Wednesday
and my gut told me to expect less than a 10-point range.

ES 5 Minute Chart for Wednesday




That large-small-large-small pattern certainly played out
perfectly today, and I would have to label this session as UGLY.
We have them from time to time and the best we can hope to do is
survive them in order to be ready to capture the large moves that
Tuesday's session offered up.

But just because we have less than stellar expectations, doesn't
mean we don't take the entries that are offered up.  With the
60/30 minute charts still looking weak, my bias was still to the
downside, but with the expectation of more muted moves.  That
means if I get stopped out prematurely on the first trade, I'll
likely be more aggressive about harvesting gains on the next
trade.

Well, we started out with a nice short signal in the 989 area,
which only ran to the 986 area before reversing.  Best case is
that an aggressive trader might have managed 2-3 points.  I got
1.5.  The CT long signal wasn't much better, as it topped out at
991.  I didn't take that one as I only wanted the trades along the
primary trend on what I expected to be a tough day.  Next up was
another short shortly after 11am ET, once again near 989.  This
one ran a bit further, but snapped back from 984 after a fakeout
break of support.  When 986 was hit on the way down, I got more
aggressive with my stop, trailing by only 2 points, so I managed
to exit at 986.25 for a slightly better 3 points.

It was at the beginning of that last short trade that I drew the
trendline above and when I noted that pattern of lower highs, I
decided to pass on any further long entries for the remainder of
the session.  As it turns out, it was a good decision.  I took one
last short entry shortly after 1pm ET at 988 and covered
aggressively at 985 for another +3.  Net result out of that
session was +7.5 and by the time I exited near 2pm, I was
exhausted.  That's what those choppy days will do to you, they
wear you out!  At that point, the best course of action (at least
for me) was to close out the broker window, walk away and wait for
tomorrow for better conditions to arrive.  Days like today are not
about making money, they're all about NOT LOSING!  Can you see how
having this structured, albeit simple, approach helps to keep me
out of trouble, even on the days that don't have much to offer?

Now what do we look for tomorrow?  Well, the economic calendar is
heating up, we just had a super tight range day and the wedge on
the daily chart continues to narrow.  I expect a healthier range,
but by the closing bell, I think we'll still be mired within the
confines of that wedge.

I'm sure there are lots of questions, issues to be clarified, etc.
that I've neglected to cover in this long series.  I feel like
I've given a pretty good description of how I'm trading the ES,
with plenty of examples.  But I also know that I may be too close
to the trees to see the forest.  So if there are some pertinent
issues that you'd like me to expound on or things that I've
neglected to cover, send those emails along.  I'll be happy to
continue discussing this topic as long as there is an interest,
but I don't want to wear it out!

Have a great week!

Mark


**************
FUTURES CORNER
**************

Performance Report Part 3

In my first article on system development
(http://www.OptionInvestor.com/futurescorner/fc_062903_01.asp) I
discussed the 5 components needed to start developing a strategy.
Then followed with a discussion of the Tradestation Performance
Report using the Summary section to evaluate the ADX system we
currently trade in the Market Monitor.
(http://www.OptionInvestor.com/traderscorner/tc_070703_2.asp).

In my next article (http://www.OptionInvestor.com/futurescorner/fc_071503_01.asp) I
did an in-depth study of the Tradestation Performance Report,
concentrating on the Summary section only, the most important
section of the report.

This article will now finish off the study with a discussion of
the remaining Report sections; Trade Analysis, Trades List,
Performance Graphs, and Trade Graphs.

I have been using the ADX-20 system because I have extremely happy
with it, not saying I am not happy with the ADX-5, but I have
never seen results like this and wanted to make sure I was not
fooling myself. AndI can't think of a better way to do an analysis
than to have many other eyes keeping me honest.

TRADE ANALYSIS section contains four parts; Time Averages,
Outliers, Run-up/Drawdown and Efficiency Analysis.

Here is the Trade Analysis of the ADX-20 system I am so proud of.





Average Time in Trades - is the average time you spend in all
trades, winning trades and losing trades. The ADX-20 system looks
like you stay in winners longer than losers, 53 minutes to 43
minutes, this, in my opinion, is a desirable trait. I much prefer
to spend my time in winning trades and get out of losers as fast
as I can.

Average Time Between Trades - is the average time you spend
between all trades, winning trades and losing trades. As you can
see we have quitea bit of time on our hands if this is the only
system you are trading. But another thing to notice is that the
time between losing trades is a great deal more than the time
between winners, another desirable trait. It will also alert you
start to take note of the system after 6 days for on average a
trade could be setting up.

Number of Outliers is the number of trades not within the normal
bell curve of the profit loss. That is to say not within 3
standard deviations of the norm. Zeros in this row are what you
would be looking
for.

Largest Profit/Loss are the same numbers from the summary.

Largest Consecutive Profit/Loss. Your profit from the 7
consecutive winning trades was $2950.00. Your largest loss for the
1 consecutive losing trade was $550.00

Consecutive Winners and losers section is pretty interesting. Look
at the 7 under the consecutive winners. This says the strategy had
7 consecutive winners in a row but the next column under Number of
Series tells you that it happened twice. How cool! The Consecutive
Losers doesn't really reveal much because we knew the most
consecutive losers  was one from the summary. This is telling me
the strategy, from a psychological point of view, will be very
easy to follow.

TRADES LIST

This section is fairly easy to figure out because it just lists
all the trades the strategy generated. It lists the entry first
and the exit underneath it.





Type is a Buy, Sell, Sell Short or Buy to Cover

Date/Time is the date time stamp of the opening and closing trade.

Signal tells you if the trade was long or short then if the
closing trade was a stop loss or hit the profit target. I have
"named" my profit target P1.

Price gives you the entry and exit price.

Shares/Cntrcts - Profit/Loss is the number of shares and the
profit or loss from each trade

Gross Profit/Loss - Cum Profit/Loss In this strategy the Gross
Profit/loss is always the Profit/Loss from the previous column
because of the way the strategy is designed. The Cumulative
Profit/Loss is each trade added to the previous trade.

% Profit is the Gross Profit/Loss divided by the entry price. For
example on the first trade the entry price was $888 and we lost
$275, 275/888 = .31. This is not a revealing number in the ADX-20
because we take profits all at once not in portions.


PERFORMANCE GRAPHS - Tradestation provides many graphs that
provide a visual way to analyze and evaluate the performance of
your strategy. Available graphs types include Equity, Trade,
Efficiency and Drawdown/Run-up graphs. I will go over a few here.

Equity Curve Line Graph

Shows an overall view of a strategy's historical realized profit
per trade. When comparing two strategies to see which is the
better of the two, look to see which one has the smoother equity
line consistently moving upwards. If you see one with large run
ups then flat lining you may want to stay away from this kind of
strategy.




Monthly Net Profit

Shows which month the strategy generated the most profit. Once
again you are looking for relatively even gains in each month but
more importantly no loses for a any one month.




Maximum Favorable Excursion

The term Maximum Favorable Excursion is used to describe the
largest dollar movement that a trade could have gone in your favor
before that trade was closed. One of the uses of this graph is to
help you determine Profit Targets.

The green triangle indicates winning trades and the red losing
trades. A location along the x-axis shows how profitable the trade
got and the location on the y-axis shows the final result of that
trade, indicating whether it was a profitable or losing trade when
the trade was closed.






From this graph we will consider a profit target of $400 (magenta
ellipse) and we can make the following observations:

1. All losing trades (red triangles) in the southeast quadrant
could have been winning trades because they could have sold at
$400.00. There are no losing trades in this quadrant.

2. All winning trades in the southeast quadrant could have been
more profitable because they were sold at a profit less than
$400.00, as you can see there are also not winning trades in this
quadrant.

3. All winning trades in the Northeast Quadrant would have not
reached their full potential because we took profits early. There
were two trades that could have been more profitable.

This graph is much more useful if you have many trades but with
the small number of trades generated by Adx-20 and with the way we
take profits the graph is of less value.

Maximum Averse Excursion

The term Maximum Averse Excursion is used to determine where to
place a stop loss and is used to describe the largest dollar
movement that a trade would have gone against you before the trade
is stopped out.

This graph is similar to the Maximum Favorable Excursion graph
with the exception that the x-axis calculates the drawdown in
dollar amount.







From this graph we will consider a Stop loss of $300 (red ellipse)
and we can make the following observations:

1. All losing trades (red triangles) in the Northeast quadrant of
the graph could have resulted in lower losses because you would
have sold when your loss reached $300.

2. All losing trades in the Southeast quadrant of the graph would
have resulted in higher losses.

3. All winning trades (green triangles) in both the Northeast and
Southeast quadrants would have become losing trades of which you
have four.

From this analysis I would probably move my stop loss out a
little, maybe to $375. Doing this then you have "kept" two winning
trades - the one at ~$275 and the one at $400 but you would have
added one trade that resulted in higher losses.

In addition to the Performance reports Tradestation also provides
useful indicators which you can use to evaluate historical
performance. For example the Strategy Equity indicator, similar to
the Equity curve explained earlier, shows you if a strategy is
generating consistent profits throughout the period tested. With
the indicator plotted next to the chart you can see how this
strategy performed with price movements.

Well this is the end of Strategy testing and optimizing. Hope you
have learned as much as I have. It has been a very worth while
endeavor for me and I have very much enjoyed sharing it with you.

Remember plan your trade and trade you plan.

Jane


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The Option Investor Newsletter                Wednesday 07-30-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: NONE
Dropped Calls: NONE
Dropped Puts: LEH, XL
Play of the Day: Put - MRK
Spreads, Combinations & Premium-Selling Plays: Stocks Drift Lower
As Investors Await Economic Data
Watch List: Bulls Still Moving Select Stocks

Updated on the site tonight:
Market Posture: Bulls sing along, "Could you tell me how to get,
how to get to Wa'all Street?"


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Note: Options involve risk. Risk disclosure:

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


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

None


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

None


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

Lehman Brothers - LEH - cls: 63.50 chng: +0.54 stop: 64.50

We knew there was a risk of LEH spiking higher on any sort of
market strength but chose to lower the stop loss on LEH to $64.50
anyway.  Shares had been coiling lower just above support for
days without any sign of buyers.  Oddly, LEH did just that - they
spiked up towards the $65.00 mark without any significant news
and certainly without participation in the XBD broker/dealer
index or the broader markets.  For those traders willing to hold
on, we still think LEH looks weak and this failed rally may
actually be another entry point for a move towards the 200-dma,
just north of $60.00.  However, we're going to call it quits and
look for new plays elsewhere.

Picked on July 20th at    $65.18
Change since picked:       -1.68
Earnings Date           09/18/03 (unconfirmed)
Average Daily Volume =  2.86 mln



---

XL Capital Ltd. - XL - close: 78.03 change: -0.02 stop: 79.50

As we previously discussed we're dropping XL as a play with their
earnings expected after the bell tomorrow night.  Estimates are
for $1.94 a share and we really haven't heard one way or the
other whether Wall Street expects them to hit, beat or miss.
Most of the time it's not worth the risk to hold over the
announcement.  Typically, post-earnings surprises are bad but
we've seen too many positive gaps higher and that has us sticking
to our discipline of not holding over an announcement.
Unfortunately, the chart looks pretty tempting for bearish
positions.  Shares have failed three times now under $80.00 in
just the last three sessions.  We'll certainly keep an eye on it.
FYI: the company announced a quarterly cash dividend of about 50-
cents a share for both class A and class B shares to be paid at
the end of September.




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*********************
PLAY OF THE DAY - PUT
*********************

Merck & Company - MRK - close: 55.46 change: +0.07 stop: 58.25

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

- Most Recent Update (Tuesday, July 29, 2003)-
After topping out in the middle of June, the Pharmaceutical index
(DRG.X) has been working lower in a very methodical and steady
manner.  After breaching the 50-dma a couple weeks ago, the
downtrend only intensified and there are it looks like a test of
the 200-dma ($308) and the year-long ascending trendline ($303)
is in store sooner, rather than later.  In the department of
relative weakness though, MRK is really making a splash, leading
the DRG index lower.  Things started to get a bit ugly for the
stock on Monday, when the bears managed to press the stock under
its year-long trendline, but the bulls managed to save face a bit
by pushing MRK up to close fractionally above the 200-dma
($56.60).  That victory was short-lived on Tuesday though, with
MRK falling more than 2%, solidifying the breakdown under the
trendline with a close under the 200-dma.  While there haven't
been any significant news catalysts this week, the stock is still
likely feeling the pain from a disappointing earnings report on
July 21st.  Obviously there were more than a few traders watching
the stock today and they piled on to produce a daily volume tally
that nearly doubled the 7.16 million share ADV.

While we're looking for significantly more downside in the near-
term, there are a couple of obstacles that the bears will need to
overcome in the process.  First up is the $55 level that managed
to prop the stock up on Tuesday, and a quick look at the P&F
chart explains why -- it is the site of the bullish support line.
Aggressive traders might be tempted to enter the play on a
decline under that level, but the more conservative approach
might be to wait for a break under the $54 support area, which
would also deliver a break of the bullish support line and
generate a new P&F Sell signal.  That breakdown should clear the
way for MRK to work its way down towards our target of $50, which
should be firm support.  There appears to be solid resistance in
the $56.50-57.00 area now, and a failed rebound in that area
would make for the lowest-risk entry into the play, with a stop
set at $58.25, just above the intraday resistance established
last week.

- Play of the Day Comments -
We're listing MRK as the POD for Thursday due to its relative
weakness today.  The DRG drug index managed a small bounce and
while MRK also ended the day in the green, its performance looks
like another failed rally.  This time at $56.  We're still
suggesting that most traders wait for a move under $55.00 before
initiating new plays but the more aggressive traders can jump the
gun as long as they're disciplined with their stops.

Suggested Options:
Short-term traders will want to focus on the August 55 Put, as it
will provide the best return for a short-term play.  Aggressive
traders looking for a sustained move down towards our $50 target
will want to utilize the September 50 contract, while more
conservative long-term traders will want to focus on the
September $55 strike.

BUY PUT AUG-55 MRK-TK OI= 4672 at $1.00 SL=0.50
BUY PUT SEP-55 MRK-UK OI= 1565 at $2.05 SL=1.00
BUY PUT SEP-50 MRK-UJ OI= 1729 at $0.60 SL=0.30

Annotated chart:



Picked on July 29th at $55.39
Change since picked:    +0.07
Earnings Date        07/21/03 (confirmed)
Average Daily Volume =    7.2 million
Chart link:



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

Stocks Drift Lower As Investors Await Economic Data
By Ray Cummins

The major equity averages retreated Wednesday as traders moved to
the sidelines ahead of a flood of economic reports due out later
in the week.

The Dow Jones Industrial Average slid 4 points to 9,200, even as
bellwether stocks such as Caterpillar (NYSE:CAT) and Walt Disney
(NYSE:DIS) reached 52-week highs early in the session.  The NASDAQ
Composite slumped 9 points to 1,721 as weakness in semiconductor
shares overcame strength in the networking segment.  The Standard
& Poor's 500 Index closed 1 point lower at 987 as investors sold
for profits in airline, tobacco, gold and utility issues.  Trading
volume reached 1.4 billion on the NYSE and 1.5 billion on the
technology exchange.  Declining issues outpaced advancing shares
by a small margin on both the Big Board and the NASDAQ.  Treasury
prices rallied, with the 10-year note up 31/32 to yield 4.31%.

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

SUMMARY OF CURRENT POSITIONS - AS OF 7/29/03

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

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.


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

The Maximum Yield (listed in the summary and with "naked" option
selling plays) 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 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 trade.


Naked Puts
**********

Stock   Strike Strike Cost  Current   Gain    Max    Simple
Symbol  Month  Price  Basis  Price   (Loss)  Yield   Yield

AMLN     AUG    20    19.30  23.78   $0.70   8.47%   3.63%
ELBO     AUG    22    22.10  27.19   $0.40   4.23%   1.81%
IVGN     AUG    40    39.40  51.83   $0.60   3.97%   1.52%
JCOM     AUG    40    39.30  53.21   $0.70   5.19%   1.78%
NFLX     AUG    20    19.65  26.69   $0.35   4.91%   1.78%
POWI     AUG    22    22.20  28.92   $0.30   4.15%   1.35%
ELBO     AUG    22    22.20  27.19   $0.30   3.99%   1.35%
FWHT     AUG    17    17.00  20.96   $0.50   9.85%   2.94%
GENZ     AUG    42    41.85  51.94   $0.65   5.42%   1.55%
MATK     AUG    40    39.45  46.46   $0.55   4.50%   1.39%
MEDI     AUG    35    34.45  39.47   $0.55   4.76%   1.60%
MOGN     AUG    22    21.90  35.80   $0.60   9.51%   2.74%
NFLX     AUG    20    19.55  26.69   $0.45   8.23%   2.30%
OVTI     AUG    30    29.50  41.38   $0.50   6.01%   1.69%
POWI     AUG    22    22.15  28.92   $0.35   5.32%   1.58%
SNDK     AUG    40    39.45  56.75   $0.55   4.92%   1.39%
UTSI     AUG    30    29.50  43.35   $0.50   5.97%   1.69%
ACDO     AUG    22    21.50  25.44   $0.50   8.82%   2.33%
CECO     AUG    75    74.40  83.25   $0.60   3.01%   0.81%
CYMI     AUG    35    34.55  40.49   $0.45   5.27%   1.30%
ICOS     AUG    35    34.55  42.91   $0.45   5.26%   1.30%
MEDI     AUG    35    34.75  39.47   $0.25   2.95%   0.72%
MEDI     AUG    40    38.45  39.47   $1.02   7.71%   4.03%
MOGN     AUG    22    21.75  35.80   $0.75  13.72%   3.45%
MNST     AUG    20    19.65  24.78   $0.35   7.11%   1.78%
OSIP     AUG    25    24.60  32.25   $0.40   7.63%   1.63%
UNTD     AUG    25    24.40  30.19   $0.60   9.79%   2.46%
UTSI     AUG    35    34.65  43.35   $0.35   4.89%   1.01%
ZRAN     AUG    20    19.60  26.10   $0.40   8.71%   2.04%

Interdigital Communications (NASDAQ:IDCC) has previously been
closed to limit potential losses.


Naked Calls
***********

Stock  Strike Strike Cost  Current   Gain     Max    Simple
Symbol Month  Price  Basis  Price   (Loss)   Yield   Yield

PPD      AUG    27   28.10  21.75    $0.60   6.82%   2.14%
INTU     AUG    45   46.05  42.73    $1.05   6.80%   2.28%
PHTN     AUG    32   32.85  28.15    $0.35   6.22%   1.07%
PPD      AUG    27   27.85  21.75    $0.35   5.69%   1.26%
BRCM     AUG    27   27.80  21.90    $0.30   6.91%   1.08%
QCOM     AUG    40   40.40  38.13    $0.40   4.74%   0.99%
QLGC     AUG    50   50.70  44.51    $0.70   6.32%   1.38%


Put-Credit Spreads
******************

Symbol  Pick   Last   Month L/P S/P Credit  C/B    G/L   Status

AGN     80.83  79.85   AUG   70  75  0.60  74.40  $0.60   Open
CDWC    50.04  48.28   AUG   40  45  0.60  44.40  $0.60   Open
ICST    34.20  30.60   AUG   25  30  0.55  29.45  $0.55   Open
IACI    41.28  40.11   AUG   35  37  0.35  37.15  $0.35   Open
IVGN    49.48  51.83   AUG   40  45  0.65  44.35  $0.65   Open
MSTR    42.05  40.83   AUG   30  35  0.60  34.40  $0.60   Open
EBAY   114.14 108.14   AUG  100 105  0.60 104.40  $0.60   Open
EXPE    77.18  77.40   AUG   65  70  0.55  69.45  $0.55   Open
GENZ    50.71  51.94   AUG   45  47  0.30  47.20  $0.30   Open

Integrated Circuit Systems (NASDAQ:ICST) remains on the "watch"
list and eBay (NASDAQ:EBAY) should also be monitored for signs
of additional downside activity.


Call-Credit Spreads
*******************

Symbol  Pick   Last   Month L/C S/C Credit  C/B    G/L   Status

ATK     51.37  55.10   AUG  60  55   0.50  55.50  $0.40   Open?
AVE     52.20  53.39   AUG  60  55   0.65  55.65  $0.65   Open
ATH     75.35  81.05   AUG  85  80   0.60  80.60 ($0.45)  Open?
JNJ     52.60  50.63   AUG  60  55   0.40  55.40  $0.40   Open
CTX     74.29  74.88   AUG  85  80   0.55  80.55  $0.55   Open
IGEN    37.78  56.50   AUG  47  45   0.40  45.40 ($2.10) Closed
OEX    497.54 497.85   AUG 520 515   0.60 515.60  $0.60   Open

The bearish spread in Igen (NASDAQ:IGEN) was closed this week
after the firm agreed to sell Swiss pharmaceutical giant Roche
the rights to its key blood-testing technology for $1.4 billion,
which includes $47.25 per share of IGEN and stock in a company
that will be spun off and directed by Igen's current management.
Lockheed Martin (NYSE:LMT) has previously been closed to limit
potential losses.  Positions in Alliant Techsystems (NYSE:ATK)
and Anthem (NYSE:ATH) should be closed on any further upside
activity.


Synthetic Positions
*******************

No Open Positions


Debit Straddles
***************

No Open Positions

Questions & comments on spreads/combos to Contact Support
**************

NEW POSITIONS

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As with
any new investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your personal skill level, risk-reward tolerance
and portfolio outlook.  In addition, we recommend that you avoid
any trading techniques in which you are not completely comfortable
with the potential capital loss, the necessary adjustments, and
the common entry-exit strategies.  The positions with "*" will be
included in the weekly summary.  Those with "TS" (Target-Shoot)
are below our minimum monthly return, but may offer a favorable
entry price with a limit order, due to the daily volatility of
the underlying issue.

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

BULLISH PLAYS - NAKED PUTS

All of these issues have robust option premiums and relatively
favorable technical indications.  However, current news and market
sentiment will have an effect on these stocks, so review each play
thoroughly and make your own decision about its future outcome.

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

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.

**************
CCMP - Cabot Microelectronics  $61.11  *** Uptrend Resumes? ***

Cabot Microelectronics (NASDAQ:CCMP) is a global supplier of high
performance polishing slurries used in the manufacture of advanced
integrated circuit (IC) devices, within a process called chemical
mechanical planarization (CMP).  CMP is a polishing process used
by IC device manufacturers to planarize or flatten many of the
multiple layers of material that are built upon silicon wafers
and necessary in the production of advanced ICs.  Planarization is
a polishing process that levels, smoothes, and removes the excess
material from the surfaces of these layers.  CMP slurries are
liquid formulations that facilitate and enhance this polishing
process and generally contain engineered abrasives and proprietary
chemicals.  CMP enables IC device manufacturers to produce smaller,
faster and more complex IC devices with fewer defects.

CCMP - Cabot Microelectronics  $61.11

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 55    UKR TK   1,596   0.55  54.45   5.5%   1.0% *
SELL PUT  AUG 60    UKR TL     492   1.80  58.20  13.6%   3.1%


**************
CYMI - Cymer  $39.75  *** Chip-Equipment Leader! ***

Cymer (NASADQ:CYMI) is a supplier of excimer light sources, the
essential light source for deep ultraviolet photolithography
systems. DUV lithography is a key technology that has allowed
the semiconductor industry to meet the exact specifications and
manufacturing requirements for volume production of advanced
semiconductor chips. The firm's light sources are incorporated
into step-and-repeat (steppers) and step-and-scan (scanners)
photolithography systems for use in the manufacture of various
semiconductors with critical feature sizes below 0.35 microns.
Cymer's products consist of photolithography light sources,
replacement parts and service. The firm maintains a worldwide
service organization that supports its installed base of light
sources.

CYMI - Cymer  $39.75

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 35    CQG TG   1,053   0.40  34.60   6.6%   1.2% *
SELL PUT  AUG 40    CQG TH     973   1.75  38.25  18.6%   4.6%


**************
IMCL - ImClone  $42.32  *** Pure Premium Selling! ***

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.

IMCL - ImClone  $42.32

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 35    QCI TG   5,373   0.65  34.35  12.0%   1.9% *
SELL PUT  AUG 40    QCI TH   2,690   2.05  37.95  23.4%   5.4%


**************
IVGN - Invitrogen  $51.72  *** Consolidation Underway! ***

Invitrogen (NASDAQ:IVGN) develops, manufactures and sells research
tools in kit form and provides other research products, including
informatics software to customers engaged in life sciences research
and the commercial manufacture of genetically engineered products.
The company supplies research kits and reagents that simplify and
improve gene cloning, gene expression and gene analysis techniques.
In addition, Invitrogen sells sera, cell and tissue culture media
and reagents used in life sciences research, as well as in other
processes for growing cells in the laboratory and producing major
pharmaceuticals and other materials.

IVGN - Invitrogen  $51.72

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 47.5  IUV TW     156   0.55  46.95   6.2%   1.2% *
SELL PUT  AUG 50    IUV TJ     306   1.20  48.80  11.3%   2.5%


**************
MATK - Martek Biosciences  $49.76  *** A Big Day! ***

Martek Biosciences (NASDAQ:MATK) develops and sells products
made from microalgae.  Microalgae are microplants.  The firm
is engaged in the commercial development of microalgae into a
portfolio of high value products and new product candidates
consisting of Nutritional Products, Advanced Detection Systems
and Other Products, primarily Algal Genomics.  Their nutritional
products include nutritional oils for infant formula, dietary
supplementation and other products. Advanced Detection Systems
products include fluorescent dyes from various algae for use
in scientific applications for detection of certain biological
processes.

MATK - Martek Biosciences  $49.76

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 45    KQT TI     68    0.30  44.70   3.7%   0.7% TS
SELL PUT  AUG 50    KQT TJ      0    1.95  48.05  16.8%   4.1%


**************
MNST - Monster Worldwide  $23.42  *** Solid Earnings! ***

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.

MNST - Monster Worldwide  $23.42

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 20    BSQ TD      84   0.35  19.65  10.6%   1.8% *
SELL PUT  AUG 22.5  BSQ TX      62   1.15  21.35  22.9%   5.4%


**************
MSTR - MicroStrategy  $42.30  *** Entry Point? ***

MicroStrategy (NASDAQ:MSTR) is a global leader in the increasingly
critical business intelligence software market.  Large and small
firms alike are harnessing MicroStrategy's business intelligence
software to gain vital insights from their data to help them
proactively enhance cost-efficiency, productivity and customer
relations and optimize revenue-generating strategies.  The firm's
business intelligence platform offers exceptional capabilities that
provide organizations, in virtually all facets of their operations,
with user-friendly solutions to their data query, reporting, and
advanced analytical needs, and distributes valuable insight on this
data to users via Web, wireless, and voice.

MSTR - MicroStrategy  $42.30

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 35    EOU TG     416   0.40  34.60   7.5%   1.2% *
SELL PUT  AUG 40    EOU TH     157   1.50  38.50  17.6%   3.9%


**************
OVTI - OmniVision  $41.38  *** Near All-Time Highs! ***

OmniVision Technologies (NASDAQ:OVTI) designs, develops and sells
high performance, high quality and cost efficient semiconductor
imaging devices for computing, telecommunications, industrial,
automotive and consumer electronics applications.  The company's
main product, an image sensing device called a CameraChip, is used
to capture an image in cameras and camera-related products in a
range of imaging applications such as personal computer cameras,
digital still cameras, security and surveillance cameras, personal
digital assistant cameras, mobile phone cameras, and cameras for
automobiles and toys that incorporate both still picture and live
video applications.

OVTI - OmniVision  $41.38

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 35    UCM TG   2,377   0.50  34.50   8.9%   1.4% *
SELL PUT  AUG 40    UCM TH   1,818   1.65  38.35  18.6%   4.3%


**************
SNDK - SanDisk  $56.78  *** A New Multi-Year High! ***

SanDisk (NASDAQ:SNDK) designs, manufactures, and markets flash
memory storage products that are used in a wide variety of
electronic systems.  The company has designed its flash memory
storage solutions for applications in the consumer electronics
and industrial/communications markets.  The company's products
are used in a number of rapidly growing consumer electronics
applications, such as digital cameras, PDAs, portable digital
music players, digital video recorders and smart phones, as well
as in industrial and communications applications.  The company's
products include removable CompactFlash cards, MultiMediaCards,
FlashDisk cards and Secure Digital Cards and embedded FlashDrives
and Flash ChipSets with storage capacities ranging from eight
megabytes to 1.2 gigabytes.

SNDK - Sandisk  $56.78

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 50    SWQ TJ   2,315   0.50  49.50   5.8%   1.0% *
SELL PUT  AUG 55    SWQ TK   2,428   1.75  53.25  14.7%   3.3%


**************
UNTD - United Online  $30.19  *** Earnings Speculation! ***

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.

UNTD - United Online  $30.19

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  AUG 25    QAB TE     283   0.30  24.70   7.9%   1.2% *
SELL PUT  AUG 30    QAB TF     582   1.80  28.20  25.0%   6.4%


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

BULLISH PLAYS - CREDIT SPREADS

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may also be higher than other plays in the same strategy, due to
small disparities in option pricing however, each play should be
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and trading style.

***************
CB - Chubb  $61.90  *** Bullish Earnings Report! ***

Chubb Corporation (NYSE:CB) is a holding company for a family of
property and casualty insurance companies known informally as the
Chubb Group of Insurance Companies.  Chubb Group offers property
and casualty insurance to businesses and individuals around the
world.  Chubb Commercial Insurance offers a range of commercial
insurance products, including coverage for casualty, multiple
peril, workers' compensation and property and marine.  In 2000,
the Corporation organized Chubb Financial Solutions to develop
and provide customized risk-financing services through both the
capital and insurance markets.

CB - Chubb  $61.90

PLAY (conservative - bullish/credit spread):

BUY  PUT  AUG-55  CB-TK  OI=914   ASK=$0.25
SELL PUT  AUG-60  CB-TL  OI=1502  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.40-$0.50
POTENTIAL PROFIT(max)=8% B/E=$59.60


**************
CEPH - Cephalon  $48.70  *** On The Rebound! ***

Cephalon (NASDAQ:CEPH) is an international biopharmaceutical firm
dedicated to the discovery, development and marketing of products
to treat sleep disorders, neurological disorders, cancer and pain.
In addition to conducting a very active research and development
program, the company markets three products in the United States
and a number of products in various countries throughout Europe.
Cephalon's United States products are comprised of Provigil, for
the treatment of excessive daytime sleepiness associated with
narcolepsy, Actiq for cancer pain management, and Gabitril for
the treatment of partial seizures associated with epilepsy.

CEPH - Cephalon  $48.70

PLAY (less conservative - bullish/credit spread):

BUY  PUT  AUG-40  CQE-TH  OI=2032  ASK=$0.30
SELL PUT  AUG-45  CQE-TI  OI=2056  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$44.45


**************
EXPE - Expedia  $76.67  *** Same Play -- Different Week! ***

Expedia (NASDAQ:EXPE) is a provider of travel-planning services.
The company's travel marketplace includes direct-to-consumer
Websites offering travel-planning services located at Expedia.com,
Expedia.co.uk, Expedia.de, Expedia.ca, Expedia.nl and Expedia.it.
Expedia also provides travel-planning services through Voyages
sncf.com, as part of a joint venture with the state-owned railway
group in France.  In addition, the company offers travel-planning
services through its telephone call centers and through private
label travel Websites through its WWTE business.  WWTE is now a
division of Travelscape, one of Expedia's primary subsidiaries.

EXPE - Expedia  $76.67

PLAY (less conservative - bullish/credit spread):

BUY  PUT  AUG-65.00  UED-TM  OI=1155  ASK=$0.35
SELL PUT  AUG-70.00  UED-TN  OI=1362  BID=$0.95
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$69.40


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

BEARISH PLAYS - NAKED CALLS

Based on analysis of option pricing and the underlying stock's
technical background, these positions meet our fundamental
criteria for bearish "premium-selling" strategies.  Each issue
has robust option premiums, a well-defined resistance area and
a high probability of remaining below the target strike prices.
As with any recommendations, these positions should be carefully
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and personal trading style.

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option 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 options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
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 price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond 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.

***************
FRX - Forest Labs  $47.52  *** Trading Range? ***

Forest Laboratories (NYSE:FRX) develops, manufactures and sells
both branded and generic forms of ethical drug products that
require a physician's prescription, as well as non-prescription
pharmaceutical products sold over-the-counter.  The company's
most important U.S. products consist of branded ethical drug
specialties marketed directly, or "detailed," to physicians by
its Forest Pharmaceuticals, Therapeutics and Specialty sales
forces.  The company's many products include those developed by
Forest and those acquired from other pharmaceutical companies
and integrated into Forest's marketing and distribution systems.
Principal products include Celexa, an SSRI for the treatment of
depression; the respiratory products Aerobid and Aerochamber;
Tiazac, a once-daily diltiazem for the treatment of hypertension
and angina; and Infasurf, a lung surfactant for the treatment and
prevention of respiratory distress syndrome in premature infants.

FRX - Forest Labs  $47.52

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  AUG 52.5  FHA HX   2,801   0.45  52.95   5.9%   0.8% *
SELL CALL  AUG 50    FHA HJ   6,438   0.85  50.85   9.3%   1.7%


**************
NVLS - Novellus Systems  $34.74  *** Next Leg Down? ***

Novellus Systems (NASDAQ:NVLS) manufactures, sells and services
semiconductor processing equipment.  The company's products are
comprised primarily of advanced systems used to deposit thin
conductive and insulating films on semiconductor devices, as well
as equipment for preparing the device surface prior to these
deposition processes.  Novellus is a supplier of high productivity
deposition and surface preparation systems used in the fabrication
of integrated circuits.  Chemical Vapor Deposition systems employ
a chemical plasma to deposit all of the dielectric (insulating)
layers and certain of the metal (conductive) layers on the surface
of a semiconductor wafer.  Physical Vapor Deposition systems are
used to deposit conductive metal layers by sputtering metallic
atoms from the surface of a target source via high DC power.
Electrofill systems are used for depositing copper conductive
layers in a dual damascene design architecture using an aqueous
solution.

NVLS - Novellus Systems  $34.74

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  AUG 37.5  NLQ HU   5,756   0.35  37.85   5.8%   0.9% *
SELL CALL  AUG 35    NLQ HG   4,095   1.20  36.20  15.4%   3.3%


**************
QLGC - QLogic  $43.19  *** Profit-Taking Continues! ***

QLogic Corporation (NASDAQ:QLGC) designs and supplies storage
network infrastructure components and software for server and
storage subsystem manufacturers.  The company's products are
based on SCSI, iSCSI, Fibre Channel and Infiniband standards.
The company is the only end-to-end supplier of Fibre Channel
network infrastructure components that aid in the transfer and
acquisition of data within the SAN.  Their products include its
SANblade HBAs, SANbox Fibre Channel Switches and SANsurfer Tool
Kit management software.  QLogic is the only HBA vendor that
supports SCSI, Internet Protocol, Virtual Interface and FICON
protocols with the same Fibre Channel HBA.  In addition, the
company designs and supplies controller chips used in a variety
of hard drives and tape drives as well as enclosure management
and baseboard management chip solutions that monitor the health
of the physical environment within a server or storage enclosure.

QLGC - QLogic  $43.19

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  AUG 47.5  QLC HW   2,996   0.35  47.85   5.0%   0.7% *
SELL CALL  AUG 45    QLC HI   2,790   0.90  45.90  10.5%   2.0%


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

BEARISH PLAYS - CREDIT SPREADS

All of these positions are favorable candidates for "bear-call"
credit spreads, based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit from these positions may be higher
than other plays in the same strategy, due to disparities in
option pricing.  However, current news and market sentiment will
have an effect on these issues, so review each play individually
and make your own decision about its future outcome.

**************
APC - Anadarko Petroleum  $42.70  *** A Key (Technical) Moment! ***

Anadarko Petroleum (NYSE:APC), through RME Petroleum Company,
RME Holding Company, Anadarko Canada Energy, Anadarko Canada
Corporation, RME Land and Anadarko Algeria Company, is a global
independent oil and gas exploration and production company.  The
The company's major areas of operations are located in the United
States, primarily in Texas, Louisiana, the mid-continent region
and the western states, Alaska and in the shallow and deep waters
of the Gulf of Mexico, as well as in Canada and Algeria.  APC is
also active in Venezuela, Qatar, Oman, Egypt, Australia, Tunisia,
Congo and Gabon.

APC - Anadarko Petroleum  $42.70

PLAY (less conservative - bearish/credit spread):

BUY  CALL  AUG-47.50  APC-HW  OI=10301  ASK=$0.40
SELL CALL  AUG-45.00  APC-HI  OI=11918  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$45.30


**************
CHIR - Chiron  $45.50  *** In A Trading Range? ***

Chiron Corporation (NASDAQ:CHIR) is a global pharmaceutical firm
that is focused on developing products for cancer and infectious
disease.  Chiron continues to build upon its cancer franchise,
which has three dimensions, including immune system modulators,
monoclonal antibodies and novel anti-cancer agents.  In the area
of infectious diseases, the company has a range of products.  The
company commercializes its products through three business units,
which include biopharmaceuticals, vaccines and blood testing.
Chiron Biopharmaceuticals discovers, develops, manufactures and
markets a range of therapeutic products.  The company's products
include Betaseron, TOBI, Proleukin, PDGF for Regranex products
and Procleix HIV-1/HCV Assay.

CHIR - Chiron  $45.50

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-50.00  CIQ-HJ  OI=1257  ASK=$0.15
SELL CALL  AUG-47.50  CIQ-HT  OI=6840  BID=$0.40
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$47.75


**************
PG - Proctor & Gamble  $87.75  *** Earnings Speculation! ***

The Procter & Gamble Company (NYSE:PG) manufactures and markets
more than 250 products to more than five billion consumers in
130 countries throughout the world.  The company categorizes its
business operations as follows: Baby, Feminine and Family Care,
Fabric and Home Care, Beauty Care, Health Care, and Food and
Beverage.  P&G's quarterly earnings report is due 7/31/03.

PG - Proctor & Gamble  $87.75

PLAY (conservative - bearish/credit spread):

BUY  CALL  AUG-95.00  PG-HS  OI=3009  ASK=$0.10
SELL CALL  AUG-90.00  PG-HR  OI=8329  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.40-$0.50
POTENTIAL PROFIT(max)=8% B/E=$90.40


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

SEE DISCLAIMER - SECTION 1

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


**********
Watch List
**********

Bulls Still Moving Select Stocks

Magna Intl - MGA - close: 75.62 change: +0.55

WHAT TO WATCH: One stock hitting new 52-week highs is MGA.
Shares have been on an impressive run since the March lows just
above $50.  The new breakout over $75 could have bulls looking
for a run towards $80.00.  Earnings are expected near Aug. 6th.

Chart=


---

MircoStrategy - MSTR - close: 42.30 change: +1.47

WHAT TO WATCH: MSTR smashed earnings yesterday evening, beating
estimates of 21 cents by 18 cents or $0.39 a share (excluding
charges).  Today brought about some dueling broker comments on
the stock but it looks like bulls won out.  The stock opened down
but bounced very strongly off its rising 50-dma.  Traders who
agree with the bullish outlook might use a move over the $44
level as a trigger to go long (or use the $43 level if you're
really bullish).  We will note that the low this morning printed
a bearish sell signal on its P&F chart but it could be a bear
trap.

Chart=


---

Alexander & Baldwin - ALEX - close: 28.68 change: +0.57

WHAT TO WATCH: ALEX would appear to be one of those lower
volatility equities.  Shares have been stuck in the $26.00 to
$28.00 range for most of June and July.  However, recent sessions
have produced a strong breakout over the $28.00 mark on rising
volume.  We're not sure ALEX is a good candidate for a straight
directional call play but covered calls or certain spreads might
be worth looking into.

Chart=


---

Mercury Computer - MRCY - close: 20.76 change: +1.11

WHAT TO WATCH: Could someone know what MRCY's earnings are before
the announcement tomorrow?  Or is today's upside breakout over
resistance at $20.00 just eager bulls placing their bets?  Volume
was very strong today as MRCY closed strongly above its simple
50-dma.  The move also broke its long-term descending trendline
of resistance.  Should the company have solid earnings numbers to
report we could certainly see some follow through.

Chart=


---

Kronos Inc - KRON - close: 55.25 change: +2.15

WHAT TO WATCH: This software stock is certainly out performing
its peers.  Any bulls who missed the previous rally from $50 to
$60 are getting a second chance.  The stock just bounced off the
$50 mark a few days ago and it looks headed for a retest of
$60.00 soon.  Volume was pretty strong today.

Chart=



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

INVX $14.29 - Hitting levels not seen since 2000, shares of INVX
are steamrolling higher.  Volume was huge today.  It may be worth
following up with some due diligence.

FRK $49.00 - Also hitting new highs were shares of FRK.  We're
not suggesting traders chase the 5.3% move today but keep an eye
on it for a possible trading opportunity.

TRMB $27.29 - One of our personal favorites to watch, TRMB, a
leader in GPS technology is nearing yearly highs.  A breakout
over $28 could be playable.


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

Bulls sing along, "Could you tell me how to get, how to get to
Wa'all Street?"

To Read The Rest of The OptionInvestor.com Market Watch Click Here
http://www.OptionInvestor.com/marketposture/mp_073003.asp


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