Option Investor
Newsletter

Daily Newsletter, Tuesday, 08/26/2003

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                 Tuesday 08-26-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Tale of Two Markets
Futures Markets: Sound and Fury
Index Trader Wrap: See Note
Market Sentiment: Might Think


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      08-26-2003           High     Low     Volume Advance/Decline
DJIA     9340.45 + 22.80  9353.86  9233.08 1.41 bln   1779/1417
NASDAQ   1770.65 +  6.30  1771.22  1737.15 1.35 bln   1699/1467
S&P 100   499.28 +  1.62   500.02   492.75   Totals   3478/2884
S&P 500   996.73 +  3.02   997.93   983.57
W5000    9637.01 + 48.30  9643.41  9510.94
RUS 2000  486.51 +  2.64   486.54   477.51
DJ TRANS 2635.69 +  2.70  2639.47  2605.50
VIX        20.33 +  0.01    21.70    20.25
VXN        29.75 +  0.41    31.52    29.41
Total Volume 3,013M
Total UpVol  1,960M
Total DnVol    972M
52wk Highs  241
52wk Lows    58
TRIN       0.85
NAZTRIN    0.63
PUT/CALL   0.90
************************************************************

Tale of Two Markets

If you had taken a short nap at 1:30PM you would have missed
it. You would have gone to sleep at 9235 and -85 and could have
awakened at 9350 +30 only 90 minutes later. The morning was full
of gloom, doom, rumors and selling but the afternoon shocked
traders with several strong buy programs and a flurry of short
covering. What changed?

Dow Chart



Nasdaq Chart



S&P Chart




Before we get to the Jekyll and Hyde reversal we need to look
at the morning factors. The Weekly Chain Store sales report
was uneventful with a +0.2% gain but it was the third gain in
the last four weeks. Tax checks are being cashed and back to
school specials are benefiting. Wal-Mart raised estimates for
August again on the strength of those sales. All is well in
the retail world it appears. Even Sears raised estimates after
the close. Consumers are not ripping the doors of the stores
trying to get in but they are continuing to spend money.

The Durable Goods numbers for July rose +1.0% and posted the
second consecutive monthly gain. The gain was much slower than
the +2.6% gain in July and that produced a muted acceptance of
the numbers as positive. There was a remarkable change in the
communications component which soared to 11.8 from 0.6 in June.
The communications sector has been the technology black hole
and any improvement there could be a leading indicator for a
real recovery. Inventory levels fell again to 0.9%, which could
be the result of stronger than expected demand. Once that
replenishment cycle begins it could be strong.

New Home Sales declined -2.9% from an upwardly revised 1.2M
in June. That is still a record for June and the drop to 1.165
in July was barely a dent in the pace. Expectations were in
the 1.145M range so they were able to beat that slightly. The
current thought process is that any remaining buyers are
rushing to buy something to lock in interest rates on the worry
that they will continue up. This rate bounce has a historical
precedent and this is typically what happens to those who have
failed to act in time. Analysts expect sales to slow as we move
into fall and rates continue to rise. The available inventory
of houses for sale also fell on a year over year basis.

The most critical report for the day was the Consumer Confidence
which came in at 81.3 compared to estimates of 80.0. This was
a rise from the 77.0 level in July and but there were some real
concerns. The present conditions component fell to 61.6 compared
to the futures expectations component rising to 94.4. Clearly
the consumer is becoming concerned about the next several
months but expects the beginning of 2004 to be better. The
current index of business conditions is still flat at only
30.9 and showing only a minor improvement since the 28.4 in
May. Those thinking jobs are plentiful ranked only an 11.1.

The markets did not know which way to jump this morning with
the conflicting data. On the surface it all appeared good but
each had a negative component. Traders were not helped by the
JPM comments that they were not seeing any PC upgrade cycle.
Michael Dell said that despite their market share gains he
was not seeing any significant increase in business spending.
And for the fourth consecutive day an Intel executive cautioned
that their guidance improvement may only be temporary. Craig
Barrett went on record yet again that the sales rebound may
only be temporary and the small increase they saw in July may
not carry through the current quarter or extend into the 4Q.
He said the gains could have been SARS related because overall
the global economy was still weak. Sales delayed in Q2 due to
SARS concerns were lumped into the first month of this quarter.
Ok, we got it. You have filled the airwaves with the cautions
for four days, now go sell some chips. The SOX, which hit a
high of 459 on Friday after the Intel guidance fell to hit a
low of 425 today before the end of day rebound.

The government announced today that the deficit for 2004 would
be $480 billion but many analysts expect it to be well over
$500 billion before it is over. The deficit for 2003 is now
expected to be $401 billion. Comparing this to the last post
war deficit in 1992 of $290 billion there is a lot of red ink
in our future. The bond market sees this as a lot of supply
coming to market. Bonds crashed on the news and yields on
the ten year note rose to 4.60% again at midday but the
rebound in the equity market produced a rebound in bonds as
well. Still today ranked as the sixth highest yield close
since the bond implosion began.

So what happened to the markets? The morning started off with
a rumor that there was going to be a big sell program released
and traders were cautious about buying the initial good news.
There was a cloud over the market from the open and everybody
kept waiting for the "event" whatever it was. At 10:AM the
good news from New Home Sales and the Consumer Confidence
prompted a huge volume spike to the upside and it was met with
an equally huge sell program. The Dow dropped from 9318 to
9257 in less than 10 minutes. Ok, it is over now let's go back
to work. Sorry but that is when the next rumor hit that Alan
Greenspan had been killed in an accident. Knock off another
-35 points and the Dow is down -85 and the Nasdaq looks like
it is headed for 1700 in a hurry. The negativity eased
somewhat over the next four hours but the trend is still
negative.

In reconstructing the day it appeared the bears were trying
hard at the open to crack the support. Tuesday was technically
the end of the month for those funds who operate on a
"settlement" basis. If they wanted these trades on their
August end of month books they had to be made today. Now, if
you were going to buy a lot of stock today and the markets
started off in free fall you would probably want to wait to
see if the drop was going to continue before pulling the
trigger. The trend continued weak until about 1:PM. There was
no confirmation of the Greenspan rumor and no more massive
sell programs. At 1:PM there was a rumor that Saddam had been
found. The Dow was only one point away from the low of the
day and it quickly bounced about 30 points and while the
bounce was not spectacular the result was. It bounced and
then held its gains. Suddenly a panicked trader somewhere
decided he was not going to buy them any cheaper and the
first buy program fired at 2:21. Chalk up another +35 Dow
points. That gain also held despite attempts by many bears
to short the bounce. About 2:42 the final buy program
triggered and it was strong enough to drag quite a few shorts
with it. With volume on Monday the lowest for the year and the
-270 point drop from Friday's highs there were a lot of shorts.
The short covering was quick and triggered more buy stops in
rapid succession.

The markets reversed an -85 point drop into a +23 point gain
in about 90 minutes. Was it a return to the bullish market
from last week? I doubt it but there are those who believe we
will see another test of resistance tomorrow. That resistance
is very strong between 9350-9400. We closed at 9344 after
struggling to break 9350 for an hour. With no material
economic reports on Wednesday it could be a listless day.
It is still August and volume is still going to be a challenge.
Without volume it may be tough to break this resistance. The
S&P has traded under the 50 DMA (990) twice this week and is
resisting the attempts to close there. The last time it broke
it took two weeks to recover. The Nasdaq rebounded nearly
+30 points from its lows but failed to break strong resistance
at 1772. Everywhere you look there are challenges for the
bulls.

On Friday Greenspan will speak at the conference in Jackson
Hole, Wyoming. He has used this platform in the past to make
more forward looking statements and the markets are not likely
to ramp up into the speech. Also a potential problem is the
economic reports on Thursday. We have the GDP revision for
Q2 and if you remember it surprised to the upside at +2.4%
when it was only expected to be +1.4% on July 31st. Everybody
was shocked then and almost everyone is expecting downward
revision of some sort. How bad is anybody's guess. We also
get the Chicago Fed National Activity Index, Jobless Claims,
Monthly Mass Layoffs and the Help Wanted Index. Not exactly
a passive day. Traders will have to decide tomorrow if they
want to be long or short going into the close with those
reports in front of them. Fortunately only two, GDP and
Jobless Claims are before the bell but the GDP could be the
killer. I would not want to be long over that report with
a potential downward revision in the wings. Choose your
direction carefully and wait for volume to confirm your
plan.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


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

Sound and Fury
Jonathan Levinson

Equities managed to fake out bulls and then bears today, plunging
on what appeared at first glance to be bullish data, and then
breaking north out of a tired range in the afternoon, reversing
all of the day's losses and closing on bullish hammer candle
prints.  Gold and treasuries advanced.


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





10 minute chart of the US Dollar Index





The US Dollar Index saw a great deal of mileage today, advancing
from 3Am until its spike high just before 8AM, followed by a
precipitous decline from 10AM, despite the positive economic data
released at that time.  The drop bottomed at 98.60, from which
point began a so-far minor bounce.  Coincident with this bounce,
however, was a vertical flagpole rally in equities and a slight
advance in bonds.  Gold and the CBR had good days, with the CRB
adding .75 to close at 241.07.

Daily chart of December gold




December gold hit a high of 367 and held it for several ticks
before falling back to close at 365.70, up 3.30 for the session.
HUI added 2.67 to close at 182.75 and XAU added 1.74 to 87.57.
The move was sufficient to bring gold bears face-to-face with the
descending upper trendline on the pennant, reversing the sell
signals that yesterday's decline printed.  Today's bullish
engulfing candle spanned the entire range of the narrowing apex
of the secondary pennant, and while a trading range would not be
out of the question tomorrow, I'm expecting a break soon,
particularly given the tumultuous action in the US Dollar Index.
Note that lower support on the primary pennant is below at 352.

Daily chart of the ten year note yield





It was another tricky day in the treasury market, with trading
mostly flat throughout the session after an initial push higher.
Bonds saw buyers return to close yields lower, the FVX –4.4 basis
points, the TNX –4.1 bps at 4.486% and the TYX –3.  The outlook
remains mixed here, with the TNX caught between trendline support
and resistance, with the oscillators conveying mixed messages for
another session.


Daily NQ candles




NQ added 1.50 today to close at 1308.50.  The enormity of the
statement isn't apparent from the price itself, but the length of
the tail under the day's candle gives a better indication of the
wide range traversed for this lightly positive close.  NQ bounced
from 1280 and ran over 30 points in under one and half hours
before pulling back from its spike high.  The move maintained the
uptrend on the oscillators and actually has the NQ peeking back
above the failed ascending trendline.


30 minute 20 day chart of the NQ




The oscillator downtrend on the 300 minute stochastic is still
intact, but the NQ will have to fail from its closing levels to
maintain it.  The Macd is on a buy signal from deep within
oversold territory.  It appears to have been a short squeeze that
sent prices vertical, and whether there's further firepower left
for bids is unknowable tonight.  The 10 day and 300 minute
stochastics both with up-phases,  we can expect further upside.
The bullish daily hammer print supports this.  However, the move
was feeling tired by the close of the session, and it's difficult
to have any confidence in where the NQ wants to go in the short
term. A print above fib resistance at 1312 will have me watching
or a potential retest of the broken bear flag lower trendline at
1340.

Daily ES candles




The ES bounced from support at the top of the bull wedge on its
daily candle chart, with an intraday low of 982.50.  The
oscillators continue to indicate the potential top of this up-
phase, and the bounce did not reverse the sell signals that
appear to be in the process of printing.

20 day 30 minute chart of the ES




The afternoon upside launch reversed the sell signals on the 30
minute candle oscillators, and appears to have violated the trend
of lower highs on the Macd.  A failure here could set up a
hunchback head and shoulders topping formation with the rising
neckline at 983.  Any further upside past 10000 will target the
bear flag lower trendline.


Chart of the 150-tick ES




The two day chart shows the volume spike and impressive speed
with which the flat rectangle was broken to the upside.  Whether
the end of session pause is a bull flag consolidation or a
distribution top remains to be seen.  The 300 minute stochastic
implies that further upside is likely.


Daily YM candles




The YM added all of 10 points to close at 9330, a significant
confluence zone.  The closing print was on a pullback, and so
this level should act as support.  The oscillators continue to
indicate that this action is within a topping process, but
further upside from here could reverse that.


20 day 30 minute chart of the YM




Note that the stochastic downtrend was violated.

Tomorrow will bring us closer to a resolution on the gold
question, as well as the afternoon rally in equities.  With
volume light today, it's tempting to dismiss the afternoon gains,
except that this week promises lighter volume as we approach the
holiday weekend.  End-of-month window-dressing further muddies
the waters.  The potential for violent moves will be with us for
the next three sessions.  Use stops always, and be careful.


------------------------------------------------------------
 optionsXpress has "...a lot of bang for the buck."--Barron's

  $1.50 /contract (10+ contracts) or $14.95 Min. No hidden fees
  Easy screens for spreads, collars, or covered calls!
  Contingent, Stop Loss, Trailing stop, or OCO
  8 different online tools for options pricing, strategy, and charting

Go to http://www.optionsxpress.com/marketing.asp?source=oetics25

Note: Options involve risk. Risk disclosure:

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


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_082603_1.asp


------------------------------------------------------------
WINNER of Forbes Best of the Web Award
  optionsXpress voted Favorite Options Site by Forbes
  Easy screens for spreads, collars, or covered calls
  Free streaming quotes
  Real-time option chains, charts + calculators

Go to http://www.optionsxpress.com/marketing.asp?source=oetics21

Note: Options involve risk. Risk disclosure:

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


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

Might Think
-James Brown

One might think that by looking at the "bearish" rollover in the
VIX and VXN today coupled with the intraday bounces by the Dow
Jones Industrial average and the NASDAQ that we still have some
more upside left in this market.  The bulls on Wall Street have
to be feeling pretty good about the markets thus far this summer.
The traditional post-July earnings season sell off has refused to
show up.  We continue to get bits and pieces of the economic
picture that strengthens everyone's expectation that "yes, the
economy is improving."  If we keep this up then maybe September,
historically the worst month of the year, won't be so bad.
(Psst.. just don't look at the bullish percent charts for the
major indices.  They're all still near record highs and that
should give bulls vertigo.)

Keep an eye on the S&P 500 as buyers need to be able to push
through several levels of resistance at 1000, 1010 and 1015.
Should this occur then Wall Street might see a bear stampede
instead of a bullish one.  Also keep in mind that many veterans
discount this entire period of the market with most of the
professional traders gone on vacation and the retail investor
more focused on getting the kids back to school than where the
markets are headed.  The low volume is testament to the lack of
participation.


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

Market Averages

DJIA ($INDU)

52-week High:  9499
52-week Low :  7197
Current     :  9340

Moving Averages:
(Simple)

 10-dma: 9357
 50-dma: 9190
200-dma: 8599



S&P 500 ($SPX)

52-week High: 1015
52-week Low :  768
Current     :  996

Moving Averages:
(Simple)

 10-dma:  995
 50-dma:  990
200-dma:  919



Nasdaq-100 ($NDX)

52-week High: 1342
52-week Low :  795
Current     : 1309

Moving Averages:
(Simple)

 10-dma: 1286
 50-dma: 1255
200-dma: 1111



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


The VIX rolled over under the 22 level while the VXN produced a nice
doji candlestick after touching its 50-dma.  While investors don't
trade these like stocks they still tend to forecast direction and
both of them look ready for more weakness.  That means less "fear"
in the markets and potentially more short-term upside before the
inevitable top.

CBOE Market Volatility Index (VIX) = 20.33 +0.01
Nasdaq Volatility Index (VXN)      = 29.75 +0.41

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.90        443,079       399,275
Equity Only    0.68        329,154       224,525
OEX            1.25         20,051        24,977
QQQ            5.66         10,569        59,862


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

Bullish Percent Data

           Current   Change   Status
NYSE          70.0    + 0     Bull Confirmed
NASDAQ-100    73.0    - 2     Bear Correction
Dow Indust.   80.0    + 0     Bull Correction
S&P 500       77.0    + 0     Bull Correction
S&P 100       82.0    - 2     Bull Confirmed


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

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

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

 5-Day Arms Index  1.04
10-Day Arms Index  0.95
21-Day Arms Index  1.01
55-Day Arms Index  1.08


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

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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    1616      1617
Decliners    1196      1441

New Highs      52        82
New Lows        9         8

Up Volume    880M      869M
Down Vol.    480M      453M

Total Vol.  1400M     1363M
M = millions


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

Commitments Of Traders Report: 08/19/03

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.

S&P 500

There is nothing eye opening to report in the large S&P futures
contracts today.  Commercials remain slight more short than long
and small traders are significantly long the market.


Commercials   Long      Short      Net     % Of OI
07/29/03      405,429   445,114   (39,685)   (4.7%)
08/05/03      395,633   450,988   (55,353)   (6.5%)
08/12/03      399,414   456,767   (57,353)   (6.7%)
08/19/03      404,665   455,381   (50,716)   (5.9%)

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

Small Traders Long      Short      Net     % of OI
07/29/03      155,216    73,030    82,186    36.0%
08/05/03      159,971    72,951    87,020    37.4%
08/12/03      158,821    71,040    87,781    38.2%
08/19/03      162,034    87,064    74,970    30.1%

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


E-MINI S&P 500

Meanwhile for the e-mini contracts commercial traders are
still net long.  Small traders are still net short but we
saw a big increase in long positions.


Commercials   Long      Short      Net     % Of OI
07/29/03      272,659   216,166     56,493    11.6%
08/05/03      310,662   249,004     61,658    11.0%
08/12/03      306,014   217,233     88,781    17.0%
08/19/03      296,971   235,779     61,192    11.5%

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:   88,781   - 08/12/03

Small Traders Long      Short      Net     % of OI
07/29/03       44,437    93,144   (48,707)  (35.4%)
08/05/03       56,663    95,919   (39,256)  (25.7%)
08/12/03       62,534   106,403   (43,869)  (26.0%)
08/19/03       90,428   125,980   (35,552)  (16.4%)

Most bearish reading of the year: (48,707)  - 07/29/03
Most bullish reading of the year: 449,310   - 06/10/03


NASDAQ-100

Hmm... interesting development here.  Commercial traders
are still net short the NDX so that's not a surprise but
the extreme just brushed a new "high" so to speak.  Retail
traders are still net long but there was a big bump in
short positions.


Commercials   Long      Short      Net     % of OI
07/29/03       31,456     50,294   (18,838) (23.0%)
08/05/03       32,813     52,383   (19,570) (23.0%)
08/12/03       34,374     53,015   (18,641) (21.3%)
08/19/03       32,107     53,665   (21,558) (25.1%)

Most bearish reading of the year: (21,558)  - 08/19/03
Most bullish reading of the year:   9,068   - 06/11/02

Small Traders  Long     Short      Net     % of OI
07/29/03       25,691     7,810    17,881    53.4%
08/05/03       22,188     7,783    14,405    48.1%
08/12/03       23,957     7,871    16,086    50.5%
08/19/03       25,607    10,134    15,473    43.3%

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

DOW JONES INDUSTRIAL

Wow!  We see a big change in sentiment by the commercial
traders in the DJ futures.  Short positions doubled indicating
a growing expectation that the market could rollover.
Right on cue the retail trader is picking the wrong direction
and more than doubled their long positions while slashing
their shorts.  This sort of extreme flip-flop would indicate
a market reversal in the making.


Commercials   Long      Short      Net     % of OI
07/29/03       23,696     9,572   14,124      42.5%
08/05/03       23,981     9,264   14,717      44.3%
08/12/03       24,942     9,878   15,064      43.3%
08/19/03       21,088    18,984    2,104       5.3%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
07/29/03        5,744    11,601   (5,857)   (33.8%)
08/05/03        5,716    10,422   (4,706)   (29.2%)
08/12/03        6,933    13,248   (6,315)   (31.3%)
08/19/03       15,717     9,143    6,574     26.4%

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   6,574  -  8/19/03

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


------------------------------------------------------------
VOTED one of "Best Online Brokers" (4 stars)--Barron's
  optionsXpress's "order-entry screens...go far beyond...
   other online broker sites"--Barron's
  8 different online tools for options pricing, strategy, and charting
  Access to options specialists via email, phone or live chat online
  Real-Time Buying Power, Account Balances or Cancels

Go to http://www.optionsxpress.com/marketing.asp?source=oetics22

Note: Options involve risk. Risk disclosure:

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


FREE TRIAL READERS
******************
If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is $49.95. The quarterly
price is $129.95 which is $20 off the monthly rate.

We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


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

Please read our disclaimer at:



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

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

Contact Support
The Option Investor Newsletter                  Tuesday 08-26-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: None
Call Play Updates: BSX, EBAY, GILD, LLL, OMC, SPW
New Calls Plays: None
Put Play Updates: ESRX, LEH, WLP, XL
New Put Plays: None


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

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


CALLS:
*****

None


PUTS:
*****

None


------------------------------------------------------------
VOTED one of "Best Online Brokers" (4 stars)--Barron's
  optionsXpress's "order-entry screens...go far beyond...
   other online broker sites"--Barron's
  8 different online tools for options pricing, strategy, and charting
  Access to options specialists via email, phone or live chat online
  Real-Time Buying Power, Account Balances or Cancels

Go to http://www.optionsxpress.com/marketing.asp?source=oetics22

Note: Options involve risk. Risk disclosure:

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


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

Boston Scientific - BSX - cls: 65.38 chg: -0.37 stop: 61.99

Strong words from Prudential for stent-rival Guidant (GDT) didn't
do much for (or apparently against) shares of BSX.  The brokerage
came out with a recommendation to buy GDT ahead of its new stent
program, claiming that GDT was undervalued compared to BSX.
Considering how fast the stent market is supposed to grow and the
new models set to hit the U.S. markets the whole industry should
do pretty well.  We did witness a bounce from the $65.00 (okay,
really $64.90) level on Monday but BSX couldn't trade back above
$66.00.  We suggest traders looking for new entries continue to
look for bounces from $64-65 or moves above $66.00.

Picked on August 21 at $66.50
Change since picked:    -1.12
Earnings Date        07/22/03 (confirmed)
Average Daily Volume:    2.78 million
Chart =


---

eBay, Inc. - EBAY - close: 112.16 change: +0.67 stop: 110.50

Time is running out, but it looks like the bulls want to make one
more run at the high's before EBAY's scheduled 2-for-1 split on
Friday.  We aggressively tightened our stop to $110.50 last
weekend and despite a couple intraday dips slightly below that
level so far this week, the bulls have vigorously defended that
level.  Last week's rally was turned back at the upper Bollinger
band, as the sharply rising price collided with the declining
band near $114.  But now the band has turned back up and there
should be room for the bulls to challenge the $115 level and hit
our final exit target.  Let's be clear.  If the $115 level is
traded over the next two days, that should be used as an
automatic exit from the play.  We're still not advocating new
entries at this time due both to the proximity of our exit target
and the company's split.  Regardless of price action, we'll be
dropping the play on Thursday to avoid getting caught in any
post-split depression.  So for those of you in the play, polish
up those exit plans.  We're maintaining our stop at $110.50.

Picked on August 12th at   $103.43
Change since picked:         +8.73
Earnings Date             10/23/03 (unconfirmed)
Average Daily Volume =    6.67 mln
Chart =


---

Gilead Sciences - GILD - cls: 64.02 chg: -0.40 stop: 62.49

Could it be over already?  We worried over the weekend that
Friday's bearish engulfing candlestick could be pointing to a
trend change in shares of GILD.  We have seen some profit taking
in the stock since but it has been mild and on low volume.  With
the intraday bullish reversal in today's session (okay, we're
being optimistic) maybe the "trend change" forecasted by Friday's
move is already over.  Of course we have to note that the lows
today almost took us out at our stop of $62.49.  Fortunately, we
did not get triggered and we're currently still (hypothetically)
in the play.  As a matter of fact, traders who like to target
shoot entries on dips might find today's action entertaining and
might want to consider opening new positions tomorrow.  The rest
of us, who like to see a little more momentum, might want to wait
for GILD to trade back above $65 or even $66 before evaluating a
new long position.

Picked on August 19 at $65.32
Change since picked:    -1.30
Earnings Date        07/31/03 (confirmed)
Average Daily Volume:    3.31 million
Chart =


---

Hartford Fin. Svcs - HIG - close: 53.25 change: +0.18 stop: 51.75

Well, it looks like we were right in our call last weekend for
HIG to test support before making another stab at resistance.
Shares of the company drifted a bit lower on Monday, rebounding
from an intraday low of $52.40.  Not only was that the site of
the 20-dma ($52.66), but it was very near the top of the August
7th gap, that we had expected to act as support on this pullback.
Tuesday's action saw the stock test and rebound from the 20-dma
yet again and close fractionally higher in a mixed market.
Traders that took our advice to enter on the rebound from support
got a solid entry and now we'll see if the bulls have enough
strength to give us a real breakout over the $54 level.  Traders
waiting for confirmation before playing will want to see HIG
clear $54.50 (just above the intraday high from last Monday)
before playing.  For now, we'll maintain our stop at $51.75.

Picked on August 14th at    $54.14
Change since picked:         -0.89
Earnings Date             11/05/03 (unconfirmed)
Average Daily Volume =    2.13 mln
Chart =


---

L-3 Communications -LLL - close: 50.13 change: +0.75 stop: 48.90

It certainly hasn't set any speed records, but LLL looks like it
is going to take another run at the $50.60 resistance level, and
Tuesday's close back over $50 certainly looks encouraging.  While
so far unable to manage a real breakout, it has been encouraging
to see how the stock has continued to post higher highs (just
barely) and higher lows in a classic bullish wedge formation.
Aggressive traders can buy rebounds from the area of the 20-dma
(currently $49.10), as that level has provided critical support
both days this week.  But our preferred entry strategy is to wait
for a breakout over the $50.60 level before playing.  Look for
confirmation of strength on the breakout in the form of
increasing volume and maintain stops at $48.90 just in case the
bulls lose their nerve.

Picked on August 3rd at    $49.90
Change since picked:        +0.23
Earnings Date            10/22/03 (unconfirmed)
Average Daily Volume =      898 K
Chart =


---

Omnicom Group - OMC - close: 76.03 chg: -0.22 stop: 72.99

Stocks move in cycles, it's a fact of life.  Investors focus on
long-term cycles and traders focus on short-term cycles.  We
think it's time for OMC to product its next short-term up cycle.
The stock had broken out above the $75-76 level.  It has now
pulled back in profit taking to retest the $75 area as support
and bounced.  After just over two weeks of steadily trading
higher shares of OMC were due for a pull back.  The last three
sessions have produced a 50 percent retracement of the early
August to last Friday's high.  Now that the stock has bounced
this looks like an entry point for new positions.  Our first
target is $80.00.  More conservative investors can probably get
away with a tighter stop near $74.00 or even 74.50.  We're going
to leave ours at $72.99 for the moment.

Picked on August 19 at $76.67
Change since picked:    -0.64
Earnings Date        07/29/03 (confirmed)
Average Daily Volume:     881 thousand
Chart =


---

SPX Corporation - SPW - close: 48.60 change: +0.93 stop: 46.75

Believe it or not, bullish sentiment is still alive and well, and
that is certainly seen by the pattern building on the daily chart
of SPW.  With the rebound from just above $47.50 this morning, we
can see that the bulls are defending a steeper trendline than we
had initially looked at.  This one connects the 7/23 and 8/07
intraday lows and currently rests at $47.40, just below today's
intraday low before the stock rebounded strongly into the
afternoon to end the session with a 1.95% gain.  The pattern of
higher lows and higher highs is still being formed and traders
that took advantage of Tuesday's dip to initiate new positions
look to have caught a solid entry, albeit just a bit above our
expected $47.00-47.50 rebound zone.  Remember, there's still a
lot of congestion near the $50 level (the primary reason that we
haven't been advocating entries on a break above the recent
highs), so buying dips still appears to be the best approach.
Aggressive traders can consider new positions on a breakout over
$50, but need to watch for a failed breakout.  Next solid
resistance comes in near $53.

Picked on August 14th at    $48.14
Change since picked:         +0.45
Earnings Date             10/27/03 (unconfirmed)
Average Daily Volume =       896 K
Chart =



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

None


------------------------------------------------------------
We got trailing stops!
  Trade online with trailing stops at optionsXpress, at no extra cost
  Trailing stops based on the option price or the stock price
  Also place Contingent, Stop Loss, and "One Cancels Other" orders
  $1.50 /contract (10+ contracts) or $14.95 Minimum--NO Hidden Fees!

Go to http://www.optionsxpress.com/marketing.asp?source=oetics23

Note: Options involve risk. Risk disclosure:

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


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

Express Scripts - ESRX - close: 62.54 change: +0.46 stop: 65.75

Was that a breakdown and oversold bounce, or was it a false
breakdown and subsequent bear trap.  Given the heavy volume
yesterday, it looks like a real breakdown, but there was pretty
decent volume (although still 30% below the ADV) accompanying
Tuesday's gain.  Well, there are a couple of easy technical
levels to monitor to give us a more objective answer to the
question.  First up is the combined 10-dma and 20-dma at $63.91
and $63.76, respectively.  If this is just an oversold bounce
following a true breakdown under $63 support, then ESRX shouldn't
be able to push back over those moving averages with any
conviction.  So a failed rally in the $63.50-64.00 area looks
like a good place to test the waters with new entries.  Remember
there's still support resting at $60 (the site of the early
August lows) and just over $58 at the 200-dma.  For that reason,
we're really not excited about chasing a breakdown lower, as we'd
prefer to focus on selling into the failed rally.  Maintain stops
at $65.75, just over the mid-August intraday high.

Picked on August 24th at   $63.48
Change since picked:        -0.94
Earnings Date            10/22/03 (unconfirmed)
Average Daily Volume =   1.37 mln
Chart =


---

Lehman Brothers - LEH - close: 64.54 change: +0.91 stop: 67.25

Just when it looked like we might get some downside continuation,
the Financial sector held firm and prevented a serious breakdown.
We had anticipated the $63 level would be an important level of
support and indeed it was on Tuesday, with the stock printing an
intraday low of $62.91 before rebounding into the close.  What's
so special about $63?  Only that it is the 50% retracement of the
entire March to June rally, and it has been acting as a price
magnet for over a month now.  We're still expecting price to
break down, due in large part to the stock's continued weakness
relative to the Broker/Dealer index (XBD.X).  Since LEH was up
today while the XBD was down, that is a bit of divergence from
the past few month's action, but this feels like the prelude to
another entry point.  Another rollover near the $66 resistance
level, backed up by the 50-dma ($65.81) looks like the ideal
entry point.  More conservative traders will want to see more
weakness before playing, and a break back under $62.50 would seem
to do the trick, especially if accompanied by renewed weakness
(below $550) in the XBD index.  Maintain stops at $67.25.

Picked on August 24th at    $64.41
Change since picked:         +0.13
Earnings Date             09/18/03 (unconfirmed)
Average Daily Volume =    2.97 mln
Chart =


---

Wellpoint Health Ntwk - WLP - cls: 76.28 chg: +0.95 stop: 77.51

This is suddenly looking pretty DANGEROUS.  Shares of WLP quickly
followed through on recent weakness and early Monday morning it
traded through our trigger of $74.95.  However, by late Monday
morning shares had bounced and the stock closed back above the
$75 mark while remaining below its 200-dma.  Today's session
looks even worse for the bears as WLP has continued to bounce and
is now above both the $76 mark and its 200-dma.  Shares were due
for a bounce but we expected any bounce to occur above the $75
mark without being triggered.  We would now expect WLP to retest
its simple 10-dma before rolling over again.  Unfortunately,
that's awfully close to our current stop near $77.51.  We are NOT
SUGGESTING new bearish entries at this time.  More aggressive
players might want to look for a failed rally under $78 as a new
entry point.  Very conservative traders might want to consider
cutting their losses now and watching for another bearish entry
point.

Picked on August 25 at $74.95
Change since picked:    +1.33
Earnings Date        07/22/03 (confirmed)
Average Daily Volume:     1.3 million
Chart =


---

XL Capital Ltd. - XL - close: 75.51 change: +0.26 stop: 78.25

Well, those bulls certainly don't give up easily do they?  XL
finally gave us that breakdown under $75 late last week and
followed through to the downside Monday morning.  But the dip
buyers were lying in wait at the top of that unfilled gap from
early April and the stock rebounded back to above $75, a level
that held up on Tuesday as well.  While it is disconcerting to
see a rebound so soon, it was not unexpected, as that gap in the
$72.50-73.50 area was likely to provide near-term support. Now we
need to see where this rally fails.  Resistance should be strong
in the $76.50-77.00 area and a rollover there should make for a
favorable entry into the play.  Watch the action near the 10-dma
($76.41) and then the 20-dma ($77.28) as reversals at those
averages may provide favorable action points.  Maintain stops at
$78.25, and look for renewed weakness in the Financial sector to
confirm new bearish entries into XL.

Picked on August 21st at   $75.92
Change since picked:        -0.41
Earnings Date            10/30/03 (unconfirmed)
Average Daily Volume =      827 K
Chart =



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

None


------------------------------------------------------------
Quit paying fees for limit orders or minimum equity
   No hidden fees for limit orders or balances
   $1.50 /contract (10+ contracts) or $14.95 minimum.
   Zero minimum deposit required to open an account
   Free streaming quotes

Go to http://www.optionsxpress.com/marketing.asp?source=oetics24

Note: Options involve risk. Risk disclosure:

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


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

Please read our disclaimer at:



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

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

Contact Support
The Option Investor Newsletter                  Tuesday 08-26-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: CALL - OMC


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

Omnicom Group - OMC - close: 76.03 chg: -0.22 stop: 72.99

Company Description:
Omnicom is a leading global marketing and corporate
communications company. Omnicom's branded networks and numerous
specialty firms provide advertising, strategic media planning and
buying, direct and promotional marketing, public relations and
other specialty communications services to over 5,000 clients in
more than 100 countries. (source: company press release)

Most Recent Update (Tuesday, August 26, 2003):
Stocks move in cycles, it's a fact of life.  Investors focus on
long-term cycles and traders focus on short-term cycles.  We
think it's time for OMC to product its next short-term up cycle.
The stock had broken out above the $75-76 level.  It has now
pulled back in profit taking to retest the $75 area as support
and bounced.  After just over two weeks of steadily trading
higher shares of OMC were due for a pull back.  The last three
sessions have produced a 50 percent retracement of the early
August to last Friday's high.  Now that the stock has bounced
this looks like an entry point for new positions.  Our first
target is $80.00.  More conservative investors can probably get
away with a tighter stop near $74.00 or even 74.50.  We're going
to leave ours at $72.99 for the moment.

- Play of the Day Comments -
Shares of OMC were due for a pull back and it bounced just where
we thought it might.  Traders can pick how tight they want their
stop loss and aim for the $80 level.

Suggested Options:
Currently OMC has September, October and January calls to choose
from.  Our preference is for the September 75s and 80s.

BUY CALL SEP-75 OMC-IO OI= 1384 at $2.70 SL=1.45
BUY CALL SEP-80 OMC-IP OI= 1566 at $0.65 SL= --
BUY CALL OCT-75 OMC-JO OI= 1437 at $4.00 SL=2.00
BUY CALL OCT-80 OMC-JP OI= 1808 at $1.70 SL=0.90

Annotated chart:





Picked on August 19 at $76.67
Change since picked:    -0.64
Earnings Date        07/29/03 (confirmed)
Average Daily Volume:     881 thousand
Chart =



------------------------------------------------------------
WINNER of Forbes Best of the Web Award
  optionsXpress voted Favorite Options Site by Forbes
  Easy screens for spreads, collars, or covered calls
  Free streaming quotes
  Real-time option chains, charts + calculators

Go to http://www.optionsxpress.com/marketing.asp?source=oetics21

Note: Options involve risk. Risk disclosure:

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


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

Please read our disclaimer at:



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

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

Contact Support

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives