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Daily Newsletter, Wednesday, 08/06/2003

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The Option Investor Newsletter                Wednesday 08-06-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Below the Trendlines
Futures Wrap: At the Brink
Index Trader Wrap: See Note
Weekly Fund Family Profile: AXA Rosenberg Mutual Funds


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     08-06-2003         High     Low     Volume Advance/Decline
DJIA     9061.74 + 25.42  9134.57  8997.11 1.75 bln   1212/1995
NASDAQ   1652.68 - 20.82  1675.46  1648.42 1.84 bln   1610/1607
S&P 100   488.13 +  1.47   492.70   484.68   Totals   2822/3602
S&P 500   967.08 +  1.62   975.74   960.84
RUS 2000  453.91 -  3.54   458.24   452.79
DJ TRANS 2533.81 - 10.05  2556.31  2526.38
VIX        23.30 -  0.81    25.88    23.11
VXN        34.42 +  0.19    35.98    33.84
Total Volume 3,875M
Total UpVol  2,372M
Total DnVol  1,442M
52wk Highs     157
52wk Lows       92
TRIN          0.80
PUT/CALL      0.88
*******************************************************************

Below the Trendlines
Jonathan Levinson

In a tale of two markets, the Dow added 25 points today and the
Nasdaq lost nearly 21.  Both results were surprising, as it
appeared possible this morning that we might see a full-fledged
meltdown following John Chambers' less-than-stellar attempt to
talk up CSCO's most recent results, and the selling frenzy in the
futures following the cash close yesterday.

20 day 30 minute INDU




The Dow's 30 minute candlechart is open to interpretation, to say
the least.  However, the strong bounce off the morning low
violated the downtrend off Thursday's high, and the close left us
right on that trendline for a retest with the oscillators lagging
the closing drop.

20 day 30 minute COMPX




The equivalent chart of the COMPX avails itself of no such
bullish interpretation, although the descending channel from
Thursday could be construed as a bull flag.  The CSCO-show
effectively prevented the breakout we saw today in the INDU, and
note the strong stochastic divergence on the closing sell candle.
The up-phase in progress from this morning's opening low aborted
early on both indices, a bearish development on the COMPX and the
INDU.

6 month daily chart of the INDU




Zooming out to the 6 month chart of the Dow, we see that today's
25 point gain did nothing to correct the damage done by
yesterday's trendline break.  The oscillators are in downphases,
and it will take a strong push from the bulls to regain the
trendline and reverse the sell signals on the stochastics and
macd.

6 month daily chart of the COMPX




We have the same setup on the 6 month Nasdaq chart, except that
today took the index lower still, and paints a pretty unequivocal
picture.  While the optimistic bull flag drawn on the 30 minute
chart above is not technically incorrect, I find it difficult to
think bullish thoughts about the index when looking at the daily
chart.  A bounce and even possible trendline retest is possible
from here, but the onus has clearly shifted from the bears to the
bulls.

The Mortgage Bankers Association (MBA) announced this morning
that seasonally-adjusted demand for mortgage refinancings, the
MBA refinancing index, declined 2.4% for the week ended July 31
following the previous week's 32.9% drop.  Demand for loans with
which to buy homes, the Purchase index, rose 6.9% following the
previous week's 3.5% loss.  The Application index rose 1.1%
following the prior week's 24.9% decline, posting its second
lowest reading for the year.  The average interest rate for a 30-
year fixed rate mortgage rose to 6.37% from 5.87%, a 50 basis
point increase in one week.  Given the continued rise in yields
and the fact that most home equity borrowers probably aren't
watching the stochastics, Macd and ADX on the Ten and Thirty year
yield charts, I'm thinking that the uptick is simply stragglers
and latecomers to the market who had been procrastinating.  I do
not expect to see home borrowing and refinancing activity
continue to advance side-by-side a climb in yields.

On that basis, so long as bonds continue along their downtrend, I
expect to see mortgage activity and overall borrowing contract.
Whether this is the cause or the effect of an overall contraction
in liquidity, or rather in the availability of money to the
financial system, is a chicken-or-egg question worthy of
bounteous discussion.  But the result is the same, which is good
enough for us traders.  With a contraction in liquidity comes
what the Fed has been calling "dis-inflation," and for an idea of
the effects of dis-inflation on the markets, take your charts of
Jan-June and turn them upside down.  You'll see the US Dollar
Index rising, mortgage and refi activity falling, yields
rising/bonds dropping, stocks dropping, gold falling.  I believe
that the efforts to avoid or at least ease the effects of the
former will cause the latter, gold, to outperform, but I do not
believe that commodities will be exempt from price declines in an
overall deflationary.  If dollars come to be worth more, then
assets valued in those dollars will sell for fewer of them.

It's worth recalling a quote from Vice president JP Morgan Chase,
Peter Smith: "Gold is nobody else's paper."  This applies to
commodities and "hard assets" in general.  The fear of deflation
derives from its potential to cause a descending spiral in a
high-debt economic environment such as we have currently.  If
liquidity contracts and bond prices drop, yields will increase,
requiring higher payments from debtors.  At the same time, as
money is increasing in value/becoming harder to come by, business
investment softens, and unemployment persists.  This causes
debtors to default on their debt, which ultimately pressures
creditors holding that paper, and so on.  This is the trend that
the Fed has been fighting. In such an environment, hard assets
are not vulnerable to default.  While their return on investment
might be poor, their return OF investment is far more certain
than in the case of paper assets.

Updated chart of Total Consumer Credit Outstanding



Total Loans and Leases at Commercial Banks




Bank Prime Loan Rate 1949-2003




The above discussion is intended to put some context behind the
current market action we've been seeing and the recent releases
from the Fed.  One would think that equities would be far weaker
than they have in fact been, and I'm not suggesting that we
grit our teeth and go short, awaiting a certain crash.  We've
been seeing the beginning of an uptick in economic activity in
some of the reports of the past few weeks, and as even Doug
Noland has speculated, the aggressive inflation of the money
supply by the Fed and aggressive consumer spending even on
foreign goods, must have at least some stimulative effect on the
economy.  For example, discount air carrier JBLU reported today
that its July load factor rose 2.8%  over July 2002's level to
90.6%, with a 79% increase in traffic and a 74% increase in
capacity.  We've also seen declines in the initial jobless claims
data in recent  weeks.

Furthermore, more directly related to the markets themselves, the
aggressive inflation of the money supply, lowering of rates and
expansion of debt serve to inflate the price of all financial
assets.  This effect was, in my view, the cause of the rally in
stocks and bonds this spring.  While the value of stocks and
bonds may not be increasing or even diminishing, their price
rises as increasing amounts of money seek different investments.
For this reason, and given the huge stakes, traders, particular
options and futures traders, must remain nimble.  The equity and
commodity markets are very small relative to the treasury and
currency markets, and each ripple in those larger markets is a
potentially huge wave in equities and commodities.

The Energy Department reported that U.S. crude oil inventories
rose by  2.9 million barrels to 280.2 million in the week ended
August 1. Yet again, analysts got it wrong, predicting a drop for
the week.  The American Petroleum Institute (API) reported a 1.6
million barrel gain for the same period.  Gasoline inventories
dropped by 2.7 million barrels to 201.8 million barrels according
to the Energy Department, with the API reporting a 4.5 million
barrel drop. Distillate supplies gained 1.7 million barrels to
119.1 million barrels, with the API reporting a lower 400,000
barrel increase to 116.1 million barrels.

The second day of this quarter's record 60B treasury auction saw
18B in five year treasury notes sold at a 3.30% yield, compared
with last quarter's 2.68% yield.  The notes were well-received at
that rate, generating a bid-to-cover ratio of was 2.48 vs. the
average over the previous four quarters of 1.86.  The demand was
unexpected after the softness in seen yesterday, with three year
notes generating a mere 1.32 bid-to-cover.  The strength in
treasuries throughout the day, with no apparent assistance from
the Fed via its open market operations, bodes well for tomorrow's
18B ten year note auction.


We have the following economic data due tomorrow:

               Report                   Briefing  Market    Prior
                                        Expects   Expects
Aug 07 8:30 AM Initial Claims 08/02 -      400K     395K     388K
Aug 07 8:30 AM Productivity-Prel Q2 -      3.5%     4.0%     1.9%
Aug 07 10:00 AM Wholesale Inventories Jun -0.2%     0.0%    -0.3%
Aug 07 3:00 PM Consumer Credit Jun -      $5.5B    $6.0B    $7.3B

Today's session left us with more questions than it answered.
Was the decline in the Nasdaq merely CSCO-related, or does it
represent the confirmation of the trendline break yesterday?  I
believe that the failure of the Dow to put together more than a
25 point gain following its trendline break yesterday points to
something beyond CSCO.  More puzzling, however, was the strong
bid in treasuries and the positive reception of the 5 year
treasury auction.  The Fed did not add reserves via its open
market operations this morning, and if treasuries were being
bought by "value" players looking for bargains at current yields,
then we have perhaps witnessed the bottom in treasuries.  I'm at
a loss to explain it, as the 18B of new 5 year paper should have
drained liquidity from stocks and bonds, compounding yesterday's
losses.  We'll watch the ten year auction tomorrow for clues, but
for the moment, it remains puzzling.  As Jeff Bailey noted in a
comment from a reader, the Fed is meeting tomorrow, and while the
Fed Funds futures are predicting zero possibility of a rate cut,
perhaps some of the bid in bonds today was frontrunning the
possibility.  I do not know.

The economic data tomorrow before the cash open should go a long
way toward determining market direction.  Initial claims are
expected to come in relatively low, and an upside surprise could
move economic concerns back to the forefront of the market's
attention.  See you at the bell!


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

At the Brink
Jonathan Levinson

The S&P futures managed a positive close, while the Nasdaq was
weaker, managing a round trip in today's session.  Treasuries
were up strongly, and gold managed a 2 point gain on the day with
the metals indices sharply higher.


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

Figures rounded to the nearest point:

           R2     R1    Pivot   S1     S2
ES03U      983    974    966    957    950
YM03U     9183   9109   9042   8968   8901
NQ03U     1248   1231   1221   1204   1194


10 minute chart of the US Dollar Index





The US Dollar Index spend the night and today moving off its lows
just above 95.60, touching a high just below 96.40.  Whether it
was foreign demand for dollars with which to purchase some of the
18B in 5 year treasury notes auctioned today at 3.3%, or other
forces at work, a great deal of technical damage was undone by
the move. Surprisingly, gold and the CRB were both higher on the
day.  Strength in the commodities index came from cotton, wheat,
lean hogs and natural gas.

Daily chart of December gold



December gold traded higher against its ongoing cycle downphase
for the second day in a row, printing a bullish hammer and
approaching the former 354 support/resistance level from below.
The precious metals equity indices were particularly strong, with
HUI adding 4.27 to 169.53 and XAU higher by 1.71 to 82.62.


Daily chart of the ten year note yield




Tomorrow is the final day of this quarter's record 60B treasury
auction, with 18B worth of 10 year debt for sale.  Ten year notes
had a very bullish day today, despite the Fed's 250M net drain
via overnight repo in the amount of 5.25B versus 5.5B expiring.
The five year note auction went well, with the higher 3.3% yield
generating a bid-to-cover ratio of 2.48 compared with the 1.86
average over the previous four quarters. The oscillators on the
ten year note yield (TNX) appear primed for a downphase, and
another day like today will finally take out the ascending
trendline under the yield that cautious bond bulls have been
watching for a break.  The TNX closed lower by 15.3 basis points
at 4.288%, the five year note yield down 13 bps, and the thirty
lower by 13.4 bps.

Daily NQ candles




The strength in treasuries didn't find its way to equities, which
all went out with bearish gravestone dojis.  They opened near
their lows, moved up to set lower highs, and closed back in
varying proximities to their lows.  The NQ was particularly weak,
and yesterday's break below the 50 day EMA (purple line) was
confirmed by today's print.  The oscillators are on sell signals,
and the broken trendline grew more distant today.  Note that the
closing candle body is below the lower Bollinger band, and so
once again, a technical bounce remains a possibility.


30 minute 20 day chart of the NQ




The lower high on the 30 minute chart generated new sell signals,
with the stochastic and macd rolling over before reaching
overbought territory.  The daily Bollinger bands may imply a
bounce, but the shorter cycles look very bearish on the heels of
the burst of selling into the close.


Daily ES candles




ES had a better finish than the COMPX, but all the technicals are
unpleasantly similar to the NQ, with the 50 day EMA decisively
broken and serving as resistance on today's failed upside retest.
The oscillators on both the daily and 30 minute charts are in
gear to the downside, and other than the possible Bollinger band
support, the ES daily chart provides little for bulls to
celebrate.


20 day 30 minute chart of the ES




If the nascent downphase plays out, we should see lower lows
tomorrow.  Today's session was actually an inside day on the ES,
but with the higher closing low, it could be the beginning of a
rising triangle, although it's far too early to do more than
guess at this point.  I'll be watching resistance at R1 of 974,
which coincides with the upper trendline on the descending
channel from Thursday's high.


Daily YM candles





Same bearish picture on the Dow futures.

20 day 30 minute chart of the YM




As noted in the Market Wrap, the bullishness in treasuries, while
a welcome relief, was puzzling.  Short of frontrunning a surprise
move from the Fed, I can think of nothing to explain it.  The
strength in the US Dollar Index does not suggest that it was
inflationary activity from the Fed or the Working Group, but
rather suggests a genuine demand for bonds at current rates.  If
so, then there's more liquidity in the markets than yesterday's
selloff implied, and in that case the fundamentals could support
more than a mere technical bounce in the indices.  While the
charts don't suggest it, this possibility should keep bears alert
to their stops.  Don't forget those vertical flagpole rallies
from the spring.

We'll get more clues following tomorrow's treasury auction, and
hopefully some clarification as to the divergence between gold
and commodities, and the rallying US Dollar Index.  See you at
the bell!


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_080603_1.asp


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

AXA Rosenberg Mutual Funds

This week's fund family profile takes a look at the AXA Rosenberg
Mutual Funds, a family of 11 no-load equity funds managed by AXA
Rosenberg Investment Management, a California-based money manager
that uses quantitative techniques to identify "misvalued" stocks,
to construct sector and style neutral portfolios, and to immunize
portfolio exposure to systematic equity market factors, which can
contribute excess risk.  Systematic factors include size, yield,
growth and beta, things that contribute too much risk per unit of
return.

If this sounds like a lot of investment rocket science it should.
Rosen Institutional Equity Management, now known as AXA Rosenberg
Investment Management, was started in 1985 to provide specialized
investment management services to institutional investors across
the world.  Barr Rosenberg, the firm's founder and former global
chief investment officer, also started another firm called BARRA
that specializes in risk analytics and management technology and
is used by leading financial institutions to manage their equity
risk and to optimize their portfolios.  Nobel-Prize winner, Bill
Sharpe, Economic Sciences 1990, is an independent trustee of the
AXA Rosenberg Series Trust (each of the funds is a series of the
AXA Rosenberg Series Trust).

According to the fund family website (www.axarosenbergfunds.com),
Barr Rosenberg is responsible today for the securities valuation
and portfolio optimization systems used to manage the various AXA
Rosenberg fund portfolios.  However, Dr. Rosenberg began a 1-year
sabbatical in April 2002 (not clear if he is back yet).  Tom Mead
is fulfilling Rosenberg's regular functions during his sabbatical
focusing on modeling.  Kenneth Reid is AXA Rosenberg global chief
investment officer.  He's responsible for analyzing the empirical
evidence that validates and supports the daily recommendations of
the securities valuation models.  Bill Ricks, a fourth executive
officer of the firm, is responsible for the implementation of the
investment strategies designed by Barr Rosenberg Research Center.

The AXA Rosenberg Funds got their start in October 1996 with the
launch of the Barr Rosenberg U.S. Small Cap Fund, now called AXA
Rosenberg U.S. Small Cap Fund.  The fund's investor class shares
(BRSCX) still reflect the original Barr Rosenberg name.  As time
passed, more AXA Rosenberg mutual funds were introduced and fund
distribution channels were expanded.  Today, AXA Rosenberg Funds
are sold/marketed to institutional investors, through financial
advisors (load fund series), and directly to investors (no-load
fund series).  Our primary focus will be on the Investor shares,
which have no loads and require a $2,500 minimum fund investment.
For more information or to download a fund prospectus, go to the
AXA Rosenberg Funds website at www.axarosenbergfunds.com.

Mutual Fund Overview

The Barr Rosenberg Series Trust is an open-end management company
offering ten diversified funds with different fund objectives and
strategies.  Management of each fund's portfolio is overseen by a
committee made up of the company's executive officers (Rosenberg,
Mead, Reid and Ricks).  The AXA Rosenberg executive committee has
responsibility for researching and monitoring each fund's results
against benchmarks, monitoring cash balances, and other fiduciary
duties of the Trust.

The AXA Rosenberg Mutual Funds are divided into three categories:
domestic funds, international funds, and alternative funds.  Doug
Burton, Stephen Dean and Floyd Coleman are portfolio managers for
the four domestic funds, while Kevin Chen is portfolio manager of
the three international equity funds.  Kathryn Mohan McDonald and
James Kan are portfolio managers of the alternative funds.  Below
is a summary of the AXA Rosenberg Funds and their respective fund
portfolio managers.


  Domestic Funds:
  AXA Rosenberg Enhanced 500 Fund (Doug Burton)
  AXA Rosenberg U.S. Discovery Fund (Stephen Dean)
  AXA Rosenberg Large Capitalization Fund (Stephen Dean)
  AXA Rosenberg U.S. Small Capitalization Fund (Floyd Coleman)

  International Funds:
  AXA Rosenberg European Fund (Kevin Chen)
  AXA Rosenberg International Equity Fund (Kevin Chen)
  AXA Rosenberg International Small Capitalization (Kevin Chen)

  Alternative Funds:
  AXA Rosenberg Global Long/Short Equity Fund (Kathryn McDonald)
  AXA Rosenberg U.S. Large/Mid Cap. Long/Short Equity (James Kan)
  AXA Rosenberg Value Long/Short Equity Fund (Kathryn McDonald)


AXA Rosenberg U.S. Small Capitalization Fund (BRSCX), started in
1996, seeks a total return greater than that of the Russell 2000
Index through investment primarily in equity securities of small
size U.S. companies that are misvalued at the time of investment.
In selecting securities, the fund seeks to match the "market cap"
profile of the Russell 2000 small-cap index (about $500 million),
while also maintaining sector neutrality versus the Russell 2000
index weights.  If AXA Rosenberg has a flagship product, this is
it, with a good chunk of the firm's institutional assets managed
in the small-cap strategy.

AXA Rosenberg U.S. Large Capitalization Fund (AXLVX) was started
a little over a year ago on July 31, 2002.  It seeks to generate
a total return that's higher than that of the Russell 1000 Index
through investment primarily in the common stocks of the largest
1000 U.S. companies that are misvalued (undervalued) at the time
of investment.  AXLVX is similar to BRSCX except that it chooses
investments from the largest 1000 U.S. companies, while its fund
sibling selects investments from the next 2000 U.S. firms, based
on market capitalization.  Together, the two funds invest in the
total U.S. equity market (as measured by the Russell 3000 index).

The firm's international small-cap equity product, AXA Rosenberg
International Small Capitalization Fund (RISIX), also dates back
to October 1996 when the U.S. small-cap mutual fund was launched.
The fund seeks a total return greater than that of a proprietary
global small-company stock index (Cazenove Rosenberg index) that
comprises small companies that trade mainly in principal markets
outside of the United States.  An international large-cap equity
product, AXA Rosenberg International Equity Fund (RIEIX) came in
2000.  It seeks a total return that's greater than the MSCI EAFE
Index of developed foreign markets (over 1,000 securities listed
on the stock exchanges of 20 developed market nations in Europe,
Australia and Asia/Far East).  Together, these two international
funds invest in the total international equity market (excluding
emerging markets).

There are other equity funds to choose from at AXA Rosenberg but
we'll let you explore them further at your leisure.  In the next
section, we take a look at how well the Investor Class Shares of
the AXA Rosenberg Funds have performed in relation to their fund
benchmarks and category peers, using Morningstar and Lipper data.

Mutual Fund Performance

Because AXA Rosenberg Funds maintain industry and sector weights
near those of their respective benchmarks and invest in equities
that are misvalued at time of investment, most funds have blend
(core) style characteristics, with a "value" tilt.  Accordingly,
you may find one or more of the AXA Rosenberg funds in the value
style box from time to time.  Over the long run, they tend to be
industry, sector and style neutral, so comparing them to "blend"
fund averages and index benchmarks seems to be the most suitable
basis for comparison.

Below is a summary of fund returns and rankings through August 5,
using Morningstar data.  No data was found for the AXA Rosenberg
Enhanced 500 Fund and the AXA Rosenberg European Fund so they're
excluded.


  YTD Return %/Category Rank (Aug-05)
  + 9.7% AXA Rosenberg U.S. Large Cap (AXLVX), 56th Percentile
  +14.1% AXA Rosenberg U.S. Small Cap (BRSCX), 78th Percentile
  +16.4% AXA Rosenberg U.S. Discovery (RDIVX), 52nd Percentile
  +12.4% AXA Rosenberg Int'l Equity (RIEIX), 35th Percentile
  +25.5% AXA Rosenberg Int'l Small Cap (RISIX), 4th Percentile
  - 7.5% AXA Rosenberg Value Long/Short (BRMIX), 100th Percentile
  - 5.3% AXA Rosenberg U.S. Large-Mid L/S (RMNIX), 100th Percent.
  - 4.3% AXA Rosenberg Global Long/Short (RMSIX), 99th Percentile


You can see from the YTD performance summary that the alternative
funds (i.e. long-short funds) have produced negative returns this
year, ranking near the bottom of their respective category groups
per Morningstar.  Meanwhile, with this year's market advance, the
AXA Rosenberg domestic and international funds have generated YTD
returns ranging from 10.0% to 25.0%.  AXA Rosenberg International
Small Cap Fund leads the pack with a 25.5% YTD total return as of
August 5.  That is good enough to rank the fund in its respective
category's 4th percentile and to beat most U.S. and foreign index
benchmarks.

Meanwhile, the U.S. Small Cap Fund's YTD return of 14.1% was only
good enough to rank in the 78th percentile of the small-cap blend
fund group per Morningstar.  Here, the fund's "value" tilt may be
causing it to lag its small-blend peers this year.  Over the past
five years, it has produced a positive annualized total return of
7.7% (42nd percentile).  While that doesn't appear all that great
on the surface, consider that the S&P 500 large-cap index fell by
about 0.85% a year on average for the same trailing 5-year period
through August 5, 2003.

Where the AXA Rosenberg style/strategy has worked best relatively
speaking has been on the international small-cap front.  Over the
past five years, the fund has generated a positive average annual
return of 5.3%, less than that of its U.S. small-cap fund sibling
but strong enough relatively to rank in the top 8% of the foreign
stock fund category, per Morningstar.  We would have expected the
international small-cap fund to lag in 2003 as the U.S. small cap
product has because they both lean to the left, to value but that
has not been the case this year.  So currency risk management may
be making a positive contribution to relative performance.

Conclusion

Morningstar gives the AXA Rosenberg U.S. Small Cap Fund "4" stars
for risk-adjusted returns relative to its small-blend peers.  AXA
Rosenberg International Small Cap Fund receives their highest "5"
star overall rating in the foreign stock fund category.  So, over
longer time periods (5 years or more), the domestic small-cap and
international small-cap funds have held their own, generating top
quartile or second quartile returns versus their category groups.
Long-term investors that appreciate quantitative techniques/tools
and want to maintain a slight "value" bias overall should look at
the AXA Rosenberg domestic and international funds.

When you immunize fund portfolios against systematic stock market
factors (such as size, yield, growth and beta) and maintain tight
risk controls, fund performance can lag other types of funds when
stocks advance.  Such is the case in 2003, with the AXA Rosenberg
U.S. Small Cap Fund.  Its year-to-date and trailing 1-year total
returns rank in the bottom quartile of the Morningstar small cap
blend category, but its trailing 3-year return ranks in the 24th
percentile (top quartile) and its trailing 5-year return puts it
in the category's second quartile.

If your long-term portfolio is dominated by large-cap stocks and
funds and you seek exposure to the extended market of midcap and
smallcap stocks, you may want to consider the AXA Rosenberg U.S.
Discovery Fund (RDIVX), which seeks to outpace the Russell 2500
index while maintaining similar risk characteristics as the mid-
and small-cap index.  It is doing a little better than its small-
cap fund sibling this year, generating a YTD return of 16.4% for
shareholders.

For more information or to download a fund prospectus, go to the
www.axarosenbergfunds.com website.



Steve Wagner
Editor, Mutual Investor
steve@mutualinvestor.com


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The Option Investor Newsletter                Wednesday 08-06-2003
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: ATH, HD
Play of the Day: Call - KSS
Spreads, Combinations & Premium-Selling Plays: Stocks End Mixed As
Investors Appraise Economic Outlook
Watch List: Defense, Media and Drugs

Updated on the site tonight:
Market Posture: Can Support Hold?


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

None


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

None


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

Anthem Inc. - ATH - close: 68.40 chg: -3.86 stop: 75.50

Wow!  That didn't take very long.  Our new put play (from Sunday)
on ATH has quickly reached our target.  We were looking for a
move to $70 with a potential drop to the 200-dma near $67.00.
General profit taking in the HMO sector and a "disappointing"
court decision flushed shares of ATH lower.  The stock hit $66.00
midday.  The sector wide profit taking is getting sharp with AET,
OHP and more all falling to huge selling pressures.  ATH's move
was exaggerated even more by a decision from the Kansas Supreme
Court to prevent ATH from acquiring the state's blue cross and
blue shield businesses.  ATH said the court decision was
disappointing but would not impact long-term growth.  It looks
like investors sold first and asked questions later.  There was a
sharp rebound from the $66 mark intraday but the rally failed
under $70.00.  More aggressive traders not willing to call it
quits might want to consider using the $70 mark as a guide to
place their stop.

Picked on August 3rd at $74.49
Change since picked:     -6.09
Earnings Date         07/31/03 (confirmed)
Average Daily Volume:      1.1  million
Chart =


---

The Home Depot - HD - close: 31.32 change: +0.96 stop: 31.35

We knew it was coming.  The last couple of updates we've been
suggesting that conservative traders take profits as HD
approaches potential support at $30.00, especially since we
expected a bounce.  That bounce came today when UBS Warburg said
the sell-off in shares of HD was overdone.  Traditionally, the
market has looked at big home improvement retailers like HD and
LOW and felt that these two did better when interest rates were
low.  The refi-boom helped fuel plenty of home improvement
projects.  UBS felt that HD is no longer that sensitive to
interest rates and still offered investors a "turnaround" play.
We lowered the stop loss to $31.35 on Tuesday, which was pierced
intraday today.

Picked on July 10th at   $32.43
Change since picked:      -1.11
Earnings Date          08/19/03 (unconfirmed)
Average Daily Volume =  9.67 mln

Chart =



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

Kohl's Corporation - KSS - close: 60.64 change: +1.84 stop: 57.25

- Company Description -
Kohl's Corporation operates family-oriented, specialty department
stores, primarily in the Midwest.  The company's stores sell
moderately priced apparel, shoes, accessories and home products
targeted to middle-income customers shopping for their families
and homes.  Kohl's stores have fewer departments than full-line
department stores, but offer customers assortments of merchandise
displayed in complete selections of styles, colors and sizes.  Of
the 420 stores the company operates, 116 are takeover locations,
which have facilitated the entry into several new markets,
including Chicago, Illinois; Detroit, Michigan; Ohio; Boston,
Massachusetts; Philadelphia, Pennsylvania; St. Louis, Missouri,
and the New York region. (source: company press release)

- Most Recent Update (Tuesday, July 29, 2003)-
After 3 failed attempts to break through resistance, KSS finally
succumbed to the bears' assault on Tuesday, sliding back under
$59.  Price weakness continued down to just above $58 before the
stock caught a rebound from the 10-dma ($58.32).  Unfortunately,
KSS couldn't make much headway after that rebound with both the
broad market and the Retail index (RLX.X) breaking down.  The
action in the RLX was particularly bearish, as it continued its
breakdown from the rising channel and closed under the 50-dma
($329.77) for the first time since March 13th.  This is precisely
why we initiated coverage of KSS with a trigger just over the
recent highs.  We're still waiting for that trigger ($60.60) to
be hit, so if the stock succumbs to the weakness all around it
then there's no harm done.  But if it can break out despite all
the bearish influences, then it will confirm the relative
strength we've been focused on.  If our $57.25 stop is hit, then
we'll be dropping the play anyways.  Wait for the breakout!

- Play of the Day Comments -
We've finally seen shares of KSS trade up and through our trigger
point of $60.60.  Volume was almost average but not bad for a
late summer session.  This is a major break in overhead
resistance so we could see some follow through.

Suggested Options:
We're going to suggest the September and October calls with a
preference for the 60 and 65 strikes.  If you can afford it the $55
are probably a decent play as well.

BUY CALL SEP-60 KSS-IL OI=1686 at $3.70 SL=1.85
BUY CALL SEP-65 KSS-IM OI=1471 at $1.60 SL=0.85
BUY CALL OCT-60 KSS-JL OI=2677 at $4.30 SL=2.25
BUY CALL OCT-65 KSS-JM OI=3751 at $2.10 SL=1.10

Annotated chart:




Picked on August 6th at $60.60
Change since picked:     +0.04
Earnings Date         08/14/03 (unconfirmed)
Average Daily Volume =    4.56 mln
Chart link:



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

Stocks End Mixed As Investors Appraise Economic Outlook
By Ray Cummins

A cautious quarterly report from Cisco Systems sent technology
stocks lower while bargain-hunting buyers buoyed the blue-chip
group in today's volatile session.

The NASDAQ Composite fell 20 points to 1,652 as communications
equipment stocks retreated on the heels of comments from Cisco
(NASDAQ:CSCO), the world's largest manufacturer of networking
gear, which said it sees only modest near-term growth.  The
Dow Jones industrial benchmark finished up 25 points at 9,061,
with American Express (NYSE:AXP) and Home Depot (NYSE:HD) among
the best performing components.  The broad S&P 500-stock index
added 1 point to end at 967 as buying pressure in homebuilders,
brokerages, oil & gas services, consumer finance, insurance,
and auto manufacturers overcame selling activity in healthcare,
electronic manufacturing, and steel shares.  Breadth was mixed
with decliners outnumbering advancers 3 to 2 on the technology
exchange while on the Big Board, winners roughly equaled losers.
Trading volume was average at 1.45 billion shares on the NYSE
and 1.65 billion shares on the NASDAQ.  Bond prices rebounded
after the U.S. Treasury sold $18 billion in 5-year notes.  The
sale follows Tuesday's auction of $24 billion in 3-year notes
at a yield of 2.42%.  The 10-year bond finished up 28/32 to
yield 4.27%.

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

SUMMARY OF CURRENT POSITIONS - AS OF 8/5/03

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

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  21.80   $0.70   8.47%   3.63%
ELBO     AUG    22    22.10  25.15   $0.40   4.23%   1.81%
IVGN     AUG    40    39.40  48.67   $0.60   3.97%   1.52%
JCOM     AUG    40    39.30  52.55   $0.70   5.19%   1.78%
NFLX     AUG    20    19.65  24.31   $0.35   4.91%   1.78%
POWI     AUG    22    22.20  28.62   $0.30   4.15%   1.35%
ELBO     AUG    22    22.20  25.15   $0.30   3.99%   1.35%
FWHT     AUG    17    17.00  18.91   $0.50   9.85%   2.94%
GENZ     AUG    42    41.85  45.38   $0.65   5.42%   1.55%
MATK     AUG    40    39.45  46.51   $0.55   4.50%   1.39%
MEDI     AUG    35    34.45  36.73   $0.55   4.76%   1.60%
MOGN     AUG    22    21.90  34.80   $0.60   9.51%   2.74%
NFLX     AUG    20    19.55  24.31   $0.45   8.23%   2.30%
OVTI     AUG    30    29.50  39.91   $0.50   6.01%   1.69%
POWI     AUG    22    22.15  28.62   $0.35   5.32%   1.58%
SNDK     AUG    40    39.45  56.90   $0.55   4.92%   1.39%
UTSI     AUG    30    29.50  41.99   $0.50   5.97%   1.69%
ACDO     AUG    22    21.50  23.41   $0.50   8.82%   2.33%
CECO     AUG    75    74.40  82.73   $0.60   3.01%   0.81%
CYMI     AUG    35    34.55  38.75   $0.45   5.27%   1.30%
ICOS     AUG    35    34.55  39.49   $0.45   5.26%   1.30%
MEDI     AUG    37    36.80  36.73  ($0.07)  0.00%   1.90%
MOGN     AUG    22    21.75  34.80   $0.75  13.72%   3.45%
MNST     AUG    20    19.65  21.94   $0.35   7.11%   1.78%
OSIP     AUG    25    24.60  30.09   $0.40   7.63%   1.63%
UNTD     AUG    25    24.40  33.37   $0.60   9.79%   2.46%
UTSI     AUG    35    34.65  41.99   $0.35   4.89%   1.01%
ZRAN     AUG    20    19.60  25.17   $0.40   8.71%   2.04%
CCMP     AUG    55    54.45  61.30   $0.55   5.54%   1.01%
CYMI     AUG    35    34.60  38.75   $0.40   6.58%   1.16%
IMCL     AUG    35    34.35  38.25   $0.65  12.05%   1.89%
IVGN     AUG    47    46.95  48.67   $0.55   6.16%   1.17%
MATK     AUG    45    44.50  46.51   $0.50   6.08%   1.12%
MNST     AUG    20    19.65  21.94   $0.35  10.64%   1.78%
MSTR     AUG    35    34.60  39.35   $0.40   7.54%   1.16%
OVTI     AUG    35    34.50  39.91   $0.50   8.91%   1.45%
SNDK     AUG    50    49.50  56.90   $0.50   5.78%   1.01%
UNTD     AUG    25    24.70  33.37   $0.30   7.94%   1.21%

A number of issues are on the "exit" list including: Monster
Worldwide (NASDAQ:MNST), MedImmune (NASDAQ:MEDI); $37.50 Put,
Invitrogen (NASDAQ:IVGN); $47.50 Put, Martek Biosciences
(NASDAQ:MATK); $45 Put, Accredo Health (NASDAQ:ACDO) and ICOS
(NASDAQ:ICOS) which plunged lower in "after hours" trading
Tuesday in the wake of a poor earnings outlook.  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  21.81   $0.60    6.82%   2.14%
INTU     AUG    45   46.05  42.70   $1.05    6.80%   2.28%
PHTN     AUG    32   32.85  25.75   $0.35    6.22%   1.07%
PPD      AUG    27   27.85  21.81   $0.35    5.69%   1.26%
BRCM     AUG    27   27.80  20.28   $0.30    6.91%   1.08%
QCOM     AUG    40   40.40  36.02   $0.40    4.74%   0.99%
QLGC     AUG    50   50.70  42.06   $0.70    6.32%   1.38%
FRX      AUG    52   52.95  45.28   $0.45    5.91%   0.85%
NVLS     AUG    37   37.85  35.20   $0.35    5.79%   0.92%
QLGC     AUG    47   47.85  42.06   $0.35    5.00%   0.73%


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

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

AGN     80.83  76.94   AUG   70  75  0.60  74.40  $0.60   Open
CDWC    50.04  47.35   AUG   40  45  0.60  44.40  $0.60   Open
ICST    34.20  29.06   AUG   25  30  0.55  29.45 ($0.39) Closed
IACI    41.28  36.48   AUG   35  38  0.35  37.15 ($0.67) Closed
IVGN    49.48  48.67   AUG   40  45  0.65  44.35  $0.65   Open?
MSTR    42.05  39.35   AUG   30  35  0.60  34.40  $0.60   Open
EBAY   114.14 102.22   AUG  100 105  0.60 104.40 ($2.18) Closed *
EXPE    77.18  70.48   AUG   65  70  0.55  69.45  $0.55  Closed
GENZ    50.71  45.38   AUG   45  48  0.30  47.20 ($1.82) Closed
CB      61.90  64.85   AUG   55  60  0.25  59.75  $0.25  No Play
CEPH    48.70  45.05   AUG   40  45  0.55  44.45  $0.55   Open?
EXPE    76.67  70.48   AUG   65  70  0.60  69.40  $0.60  Closed

Among the "watch" list victims were Integrated Circuit Systems
(NASDAQ:ICST) and eBay (NASDAQ:EBAY), which was closed Monday
for a smaller than published loss.  Other issues with early exit
potential are InterActive (NASDAQ:IACI) and Expedia (NASDAQ:EXPE),
both of which slumped in conjunction with the Internet-related
retreat.  Genzyme (NASDAQ:GENZ) fell Monday after announcing it
would buy SangStat Medical (NASDAQ:SANG) for about $600 million
in cash.  The position was closed during Monday's session for a
smaller than published loss.  Cephalon (NASDAQ:CEPH) was pounded
by investors after reporting that third-quarter earnings will be
$0.02 below the average forecast of analysts.  The activity seems
excessive but it may be prudent to exit the play on any technical
bounce.  With the "bearish" conditions in the market, all of the
remaining stocks in the portfolio should 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  53.20   AUG  60  55   0.50  55.50  $0.50   Open
AVE     52.20  49.74   AUG  60  55   0.65  55.65  $0.65   Open
ATH     75.35  72.26   AUG  85  80   0.60  80.60  $0.60   Open
JNJ     52.60  49.78   AUG  60  55   0.40  55.40  $0.40   Open
CTX     74.29  71.90   AUG  85  80   0.55  80.55  $0.55   Open
OEX    497.54 486.66   AUG 520 515   0.60 515.60  $0.60   Open
APC     42.70  40.49   AUG  48  45   0.30  45.30  $0.30   Open
CHIR    45.50  43.39   AUG  50  48   0.25  47.75  $0.25   Open
PG      87.75  87.53   AUG  95  90   0.40  90.40  $0.40   Open

Positions in Igen (NASDAQ:IGEN) and Lockheed Martin (NYSE:LMT),
which is currently profitable, have previously been closed to
limit potential losses.


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.

**************
ADI - Analog Devices  $38.25  *** Chip Sector Speculation! ***

Analog Devices (NYSE:ADI) is engaged in the design, manufacture
and sales of high-performance analog, mixed-signal and digital
signal processing (DSP) integrated circuits.  The firm's products
play a fundamental role in converting real-world phenomena, such
as temperature, motion, pressure, light and sound, into electrical
signals to be used in an array of electronic equipment, ranging
from industrial process control, factory automation systems, smart
munitions, base stations, office equipment, wireless telephones,
computers, automobiles, computer-aided tomography scanners, DVDs,
and digital cameras.  The company's quarterly earnings report is
due 8/14/03.

ADI - Analog Devices  $38.25

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    ADI TG     884   0.25  34.75   6.9%   0.7% *
SELL PUT  SEP 35    ADI UG   2,294   1.00  34.00   5.2%   2.9%


**************
DIGE - Digene  $33.47  *** New Cancer Screening Product! ***

Digene (NASDAQ:DIGE) develops, manufactures and markets proprietary
gene-based testing systems for screening, monitoring and diagnosis
of human diseases.  Its primary focus is in women's cancers and
infectious diseases.  The firm has applied its proprietary Hybrid
Capture technology to develop a unique diagnostic test for human
papillomavirus, which is the primary cause of cervical cancer and
is found in greater than 99% of all cervical cancer cases.  In
addition to its HPV Test, the company's product portfolio includes
gene-based tests for detecting chlamydia, gonorrhea, hepatitis B
virus and cytomegalovirus.

DIGE - Digene  $33.47

PLAY (sell naked put):

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

SELL PUT  AUG 30    QDG TF      60   0.25  29.75   8.3%   0.8% *
SELL PUT  SEP 30    QDG UF     535   1.10  28.90   6.7%   3.8%


**************
DRIV - Digital River  $22.50  *** Next Leg Up? ***

Digital River (NASDAQ:DRIV) is a provider of electronic commerce
outsourcing solutions.  As an application service provider, the
company enables its clients to access its proprietary electronic
commerce system over the Internet.  The company's technology plat-
form allows it to provide a suite of electronic commerce services,
including Web commerce development and hosting, transaction
processing, fraud screening, digital delivery, integration to
physical fulfillment and customer service.  Digital River also
provides analytical marketing and merchandising services to assist
clients in increasing Web page view traffic to, and sales through,
their Web commerce systems.

DRIV - Digital River  $22.50

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

SELL PUT  AUG 22.5  DQI TX     566   0.80  21.70  27.6%   3.7%
SELL PUT  SEP 17.5  DQI UW     340   0.35  17.15   4.9%   2.0% *
SELL PUT  SEP 20    DQI UD     296   0.85  19.15   7.8%   4.4%


**************
IMCL - ImClone  $38.00  *** Consolidation Underway! ***

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  $38.00

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   5,355   0.70  34.30  18.3%   2.0%
SELL PUT  SEP 25    QCI UE     245   0.35  24.65   3.0%   1.4% TS
SELL PUT  SEP 30    QCI UF     748   1.15  28.85   8.9%   4.0% *


**************
LLTC - Linear Technology  $36.23  *** Range-bound? ***

Linear Technology (NASDAQ:LLTC) designs, manufactures and sells
a broad line of standard high-performance linear integrated
circuits (ICs).  Applications for the company's products include
telecommunications, cellular telephones, networking products,
optical switches, notebook and desktop computers, computer
peripherals, video/multimedia, industrial instrumentation,
security monitoring devices, high-end consumer products, digital
cameras and MP3 players, complex medical devices, automotive
electronics, factory automation, process control and military and
space systems.

LLTC - Linear Technology  $36.23

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    LLQ TG   3,515   0.45  34.55  11.1%   1.3%
SELL PUT  SEP 32.5  LLQ UZ     166   0.75  31.75   4.4%   2.4% *
SELL PUT  SEP 35    LLQ UG     821   1.50  33.50   6.9%   4.5%


**************
MRVL - Marvell Technology  $35.02  *** Consolidation Complete? ***

Marvell (NASDAQ:MRVL) designs, develops and markets integrated
circuits utilizing proprietary communications mixed-signal and
digital signal processing technology for communications-related
markets.  Marvell offers its customers a wide range of integrated
circuit solutions using proprietary communications mixed-signal
processing and digital signal processing technologies.  Marvell's
product groups include: storage products, consisting of a variety
of read channel, system-on-chip and preamplifier products; and
broadband communications products, consisting of a variety of
transceiver products, switching products, internetworking
products and wireless LAN products.

MRVL - Marvell Technology  $35.02

PLAY (sell naked put):

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

SELL PUT  AUG 32.5  UVM TZ   1,130   0.25  32.25   7.2%   0.8% *
SELL PUT  SEP 30    UVM UF     294   0.90  29.10   6.2%   3.1%
SELL PUT  SEP 32.5  UVM UZ      63   1.60  30.90   8.3%   5.2%


**************
OSIP - OSI Pharmaceuticals  $30.86  *** Entry Point? ***

OSI Pharmaceuticals (NASDAQ:OSIP) is a biotechnology firm focused
on the discovery, development and commercialization of oncology
products that both extend life and improve the quality of life
for cancer patients worldwide.  The company has established a
balanced pipeline of oncology drug candidates that includes both
next-generation cytotoxic chemotherapy agents and novel mechanism
based, gene-targeted therapies.  The company's most advanced drug
candidate, Tarceva (erlotinib HC1), is a small-molecule inhibitor
of the epidermal growth factor receptor (HER1/EGFR).  The protein
product of the HER1/EGFR gene is a receptor tyrosine kinase that
is over-expressed or mutated in many major solid tumors.

OSIP - OSI Pharmaceuticals  $30.86

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    GHU TE   1,758   0.40  24.60  19.6%   1.6% *
SELL PUT  AUG 30    GHU TF   1,342   1.80  28.20  45.8%   6.4%
SELL PUT  SEP 25    GHU UE     195   1.40  23.60  12.0%   5.9%


**************
OVTI - OmniVision  $42.21  *** New All-Time High! ***

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  $42.21

PLAY (sell naked put):

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

SELL PUT  AUG 40    UCM TH   1,877   0.80  39.20  17.5%   2.0%
SELL PUT  SEP 25    UCM UE   1,005   0.35  24.65   2.7%   1.4% TS
SELL PUT  SEP 30    UCM UF   1,943   0.85  29.15   6.2%   2.9% *


**************
SINA - SINA Corporation  $31.98  *** Premium Selling Only! ***

SINA Corporation (NASDAQ:SINA), formerly known as SINA.com, is an
online media company and value-added information service provider
for China and the global Chinese communities.  With a branded
network of localized Websites targeting China and overseas Chinese,
the company provides an array of services to its users including
region-focused online portals, search, directory, interest-based
and community-building channels, free and premium e-mail, wireless
short messaging, online games, virtual Internet service provider,
classified listings, e-commerce, e-learning, and enterprise
e-solutions.  In turn, SINA generates revenue through advertising,
fee-based services, e-commerce and enterprise services.

SINA - SINA Corporation  $31.98

PLAY (sell naked put):

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

SELL PUT  AUG 30    NOQ TF   4,538   0.85  29.15  24.6%   2.9%
SELL PUT  SEP 22.5  NOQ UX     398   0.60  21.90   5.8%   2.7% *
SELL PUT  SEP 25    NOQ UE     738   1.05  23.95   9.5%   4.4%


**************
ZRAN - Zoran  $25.46  *** Solid Profit Outlook! ***

Zoran Corporation (NASDAQ:ZRAN) develops and markets integrated
circuits, integrated circuit cores and embedded software used by
original equipment manufacturers (OEMs) of digital video and
audio products for commercial and consumer markets.  The firm's
multimedia product line consists of four major product families:
DVD, comprised of video and audio decompression products based on
MPEG, Dolby Digital and DTS; filmless digital cameras, comprised
of video compression/decompression products; PC Video, comprised
of video compression/decompression products for JPEG technology
and universal serial bus multimedia controllers, and Digital Audio,
comprised of audio decompression products.  Quarterly earnings are
due on 7/24/03.

ZRAN - Zoran  $25.46

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    ZUO TE     253   0.70  24.30  22.7%   2.9%
SELL PUT  SEP 20    ZUO UD     312   0.40  19.60   4.9%   2.0% *
SELL PUT  SEP 22.5  ZUO UX     249   0.90  21.60   7.5%   4.2%


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

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.

***************
KSS - Kohl's  $60.64  *** On The Rebound! ***

Kohl's (NYSE:KSS) operates family-oriented, specialty department
stores.  The company's stores sell moderately priced apparel,
shoes, accessories and home products targeted to middle-income
customers shopping for their families and homes.  Kohl's stores
have fewer departments than traditional, full-line department
stores, but offer customers assortments of merchandise displayed
in complete selections of styles, colors and sizes.  Since 1992,
the company has increased square footage an average of 22% per
year, expanding from 79 stores located in the Midwest to a total
of 420 stores with a presence in six regions.  Of the 420 stores
it operates, 116 are take-over locations, which facilitated the
entry into several new markets, including Chicago, Illinois;
Detroit, Michigan; Ohio; Boston, Massachusetts; Philadelphia,
Pennsylvania; St. Louis, Missouri, and the New York region.

KSS - Kohl's  $60.64

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-50.00  KSS-UJ  OI=324   ASK=$0.45
SELL PUT  SEP-55.00  KSS-UK  OI=1797  BID=$1.05
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$54.40


**************
WHR - Whirlpool  $66.05  *** Safe-Haven Stock! ***

Whirlpool (NYSE:WHR) manufactures and markets a full line of
major appliances and related products, primarily for home use.
The company's principal products are home laundry appliances,
home refrigerators and freezers, home cooking appliances, home
dishwashers, room air-conditioning equipment and mixers and
other small household appliances.  Approximately 10% of the
company's unit sales volume is derived from purchases from
other manufacturers for resale by the firm.  It also produces
hermetic compressors and plastic components, primarily for the
home appliance and electronics industries.

WHR - Whirlpool  $66.05

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-55.00  WHR-UK  OI=147  ASK=$0.40
SELL PUT  SEP-60.00  WHR-UL  OI=79   BID=$1.05
INITIAL NET-CREDIT TARGET=$0.65-$0.70
POTENTIAL PROFIT(max)=15% B/E=$59.35


**************
XAU - PHLX Gold & Silver Index  $82.67  *** Market Hedge! ***

The PHLX Gold & Silver Sector (XAU) is a capitalization-weighted
index composed of the common stocks of 9 companies involved in
the gold and silver mining industry.  The XAU was set to an
initial value of 100 in January 1979; options commenced trading
on December 19, 1983.  For more information on the XAU, go to
www.phlx.com.

XAU - PHLX Gold & Silver Index  $82.67

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-70.00  XAU-UN  OI=808   ASK=$0.45
SELL PUT  SEP-75.00  XAU-UO  OI=1747  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$74.45


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

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.

***************
APC - Anadarko Petroleum  $40.70  *** New Trading Range? ***

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  $40.70

PLAY (sell naked call):

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

SELL CALL  AUG 45    APC HI   14,063  0.25  45.25   6.9%   0.6% *
SELL CALL  AUG 42.5  APC HV    3,089  0.60  43.10  13.4%   1.4%


**************
CVTX - CV Therapeutics  $23.49   *** A Big Down Day! ***

CV Therapeutics (NASDAQ:CVTX) is a biopharmaceutical firm focused
on the discovery, development and commercialization of new small
molecule drugs for the treatment of cardiovascular diseases.  The
company's New Drug Application (NDA) for Ranexa (ranolazine) for
the treatment of chronic angina has been filed at the U.S. FDA.
Tecadenoson (CVT-510), an A1-adenosine receptor agonist, is being
developed for the potential reduction of rapid heart rate during
atrial arrhythmias.  CVT-3146, an A2A-adenosine receptor agonist,
is being developed for the potential use as a pharmacologic agent
in cardiac perfusion imaging studies.  Adentri, an A1-adenosine
receptor antagonist, is being developed by the company's partner,
Biogen, for the potential treatment of acute and chronic congestive
heart failure.  CVTX also has several research and preclinical
development programs designed to bring additional drug candidates
into human clinical testing.

CVTX - CV Therapeutics  $23.49

PLAY (sell naked call):

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

SELL CALL  AUG 27.5  UXC HY     926   0.25  27.75  15.0%   0.9% *
SELL CALL  AUG 25    UXC HE     217   0.60  25.60  23.9%   2.3%


**************
ELX - Emulex  $20.45  *** Earnings Speculation Only! ***

Emulex (NYSE:ELX) is a designer, developer and supplier of a
line of storage networking host bus adapters and application
specific computer chips that provide connectivity solutions for
storage area networks, network-attached storage and redundant
array of independent disks storage.  HBAs are the basic data
communication products that enable servers to connect to storage
networks by offloading processing tasks as information is
delivered and sent to the network.  The company's products are
based on internally developed ASIC and embedded firmware and
software technology, and offer support for a wide variety of
SAN protocols, configurations, system interfaces and operating
systems.  Earnings are due 8/7/03.

ELX - Emulex  $20.45

PLAY (sell naked call):

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

SELL CALL  AUG 22.5  ELX HX    8,709  0.30  22.80  15.8%   1.3% *
SELL CALL  AUG 20    ELX HD    4,489  1.25  21.25  42.8%   5.9%


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

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.

**************
UNH - UnitedHealth Group  $48.79  *** Sector Slump! ***

UnitedHealth Group (NYSE:UNH) forms and operates markets for the
exchange of health and well being services.  Through its family
of businesses, the company helps people achieve optimal health
and well being through all stages of life.  The firm's revenues
are derived from premium revenues on insured (risk-based) products,
fees from management, administrative and consulting services and
investment and other income.  It conducts its business primarily
through operating divisions in the following business segments:
Uniprise; Healthcare Services, which includes the UnitedHealthcare
and Ovations businesses; Specialized Care Services, and Ingenix.

UNH - UnitedHealth Group  $48.79

PLAY (conservative - bearish/credit spread):

BUY  CALL  SEP-57.50  UHB-IY  OI=2721  ASK=$0.20
SELL CALL  SEP-55.00  UHB-IK  OI=4186  BID=$0.45
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$55.25


**************
WLP - WellPoint Health Networks  $76.49  *** Sell-Off Underway! ***

WellPoint Health Networks (NYSE:WLP) serves the health care needs of
more than 13 million medical members and over 49 million specialty
members nationwide through Blue Cross of California, Blue Cross Blue
Shield of Georgia, Blue Cross Blue Shield of Missouri, HealthLink and
UNICARE.  WellPoint offers a broad spectrum of quality network-based
health products, including open access PPO, POS and hybrid products,
HMO and specialty products.  Specialty products include pharmacy
benefit management, dental, medical management, vision, behavioral
health, life and disability insurance, long term care insurance,
flexible spending accounts, COBRA administration and Medicare
supplements.

WLP - WellPoint Health Networks  $76.49

PLAY (conservative - bearish/credit spread):

BUY  CALL  SEP-90.00  WLP-IR  OI=246  ASK=$0.30
SELL CALL  SEP-85.00  WLP-IQ  OI=173  BID=$0.75
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$85.50


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

SEE DISCLAIMER - SECTION 1

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


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

Defense, Media and Drugs

Northrop Gruman - NOC - close: 91.01 change: +0.01

WHAT TO WATCH: The defense sector (DFI) has been doing pretty
well and the index has been able to maintain its bullish
trajectory (for now).  One of its lead components is NOC.  NOC
popped out its sideways trading range on strong earnings in late
July but that rally has failed against a consolidating market
environment.  Old resistance at $90 has become new support.  The
question is whether that support is going to hold.  NOC is one to
watch.

Chart=


---

Viacom Inc - VIA (& VIA.B) - close: $42.60 change: +0.55

WHAT TO WATCH:  We've been eying shares of VIA for a breakdown
below the 200-dma.  Unfortunately for the bears, the stock has
been bouncing off this level all month (July).  During Tuesday's
session the stock actually closed below the 200-dma but paused at
the $42.00 mark.  VIA rebounded today but appears to have failed
at $43 late afternoon.  Will VIA finally break the 200-dma and
support at $42 or will it retest overhead resistance near $46
again?  It's P&F chart suggest support in the $37.00 range.

Chart=


---

AmerisourceBergen - ABC - close: $58.20 change: -1.78

WHAT TO WATCH:  Seems like we may have mentioned this one before
and shares just keep falling.  The stock is cascading lower and
currently down five sessions in a row.  While normally one might
look for a bounce today's close below support at $60.00 and its
simple 200-dma is very negative.  Shares closed at their low for
the day.  We're not suggesting plays on the stock right now
because it feels like a chase.  The daily chart suggests there is
support in the $57.50 area but its P&F chart displays support at
$55.  It will be interesting to see where it bounces.

Chart=


---

Taro Pharmaceuticals - TARO - close: 49.58 change: -1.12

WHAT TO WATCH: It's hard to believe but TARO's P&F chart looks
uglier than its daily.  The stock is showing a big sell-signal
from being very overbought, especially on the Point & Figure
chart.  However, the daily chart is hinting at a potential
reversal.  Today's candlestick looks like a thin "hammer", which
can be a clue pointing towards a change in trend.  Bears will
argue that TARO is still under support of $50 and we agree.
However, nimble traders who can monitor the stock during the day
might want to watch for a bounce back towards its 50-dma or the
$54.00 level.  Whether it rolls back over from there is anyone's
guess.

Chart=


---

Lexmark Intl - LXK - close: 61.30 change: -0.21

WHAT TO WATCH: Shares of LXK were hammered on its earnings
announcement in July.  since then the bounce has failed at its
200-dma, which has coincided with the $65.00-65.50 level.  We're
going to be watching to see if LXK can bounce from $60 and trade
back to $65 again or will it break $60 and start a new leg down.

Chart=



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

Can Support Hold?

To Read The Rest of The OptionInvestor.com Market Watch Click Here
http://www.OptionInvestor.com/marketposture/mp_080603.asp


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