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Daily Newsletter, Wednesday, 10/08/2003

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The Option Investor Newsletter                Wednesday 10-08-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: A Little Overdue
Futures Wrap: Distribution or Consolidation
Index Trader Wrap: Take a peek and see what's there
Traders Corner: Real Importance


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     10-08-2003            High     Low     Volume Advance/Decline
DJIA     9630.90 - 23.71  9672.02  9595.28 1.51 bln   1213/1582
NASDAQ   1893.78 - 14.07  1914.33  1888.53 1.78 bln   1257/1839
S&P 100   516.54 -  3.10   520.02   515.03   Totals   2470/3421
S&P 500  1033.78 -  5.47  1040.06  1030.96
RUS 2000  515.68 -  5.09   521.05   514.56
DJ TRANS 2791.62 -  8.76  2803.04  2782.62
VIX        19.18 -  0.23    19.61    19.08
VXN        29.16 -  0.14    29.46    28.94
Total Volume 3,606M
Total UpVol  1,503M
Total DnVol  2,058M
52wk Highs     752
52wk Lows       18
TRIN          1.34
PUT/CALL      0.81
*******************************************************************

A Little Overdue
by James Brown

U.S. markets closed in the red for the first time this October 
ending a five-day winning streak for the bulls.  The general mood 
on Wall Street was nonchalant since stocks were over due for some 
profit taking.  The NASDAQ composite managed to tag a fresh 52-
week high near the opening bell before slipping back and the Dow 
Industrials traded in a narrow 80-point range all day.  
Contributing to the market's weakness was a one-two punch for 
telecom stocks but overall the session was a patchwork of 
individual news.

Overseas markets were mixed.  The British FTSE dropped less than 
four points while the German DAX added almost 40.  Hong Kong's 
Hang Seng index inched down 3 points but the Japanese NIKKEI 
index posted its first loss in six days and it was a big one.  
The NIKKEI dropped 278 points or 2.57% to 10,542 as the dollar 
continued to weaken against the yen.  We keep hearing about the 
new "line in the sand" where the Bank of Japan is going to defend 
the yen.  First it was 111, then it was 110.  The U.S. dollar 
slipped to 109.58 against the yen, just barely above its three-
year low at 109.38.  Some currency traders are expecting the BoJ 
to intervene soon despite the G7's statement two weeks about 
arguing against currency manipulations.  A stronger yen makes 
Japanese exports more expensive overseas and impacts corporate 
profits.  The dollar also happens to be trading near all-time 
lows against the euro.

Fortunately, the profit taking here at home was much more mild.  
The DJIA only lost 23 points closing at 9630.  The NASDAQ 
Composite fell 14 points to 1893 and the S&P 500 dropped just 
over 5 points to close at 1033.  Market internals were negative.  
Declining stocks outnumbered advancing issues almost 16 to 12 on 
the NYSE and 18 to 12 on the NASDAQ.  Down volume outpaced up 
volume on both exchanges but overall volume remained modest.

Chart of the DJIA:


 

Chart of the NASDAQ:


 

Telecom Weakness

U.S. telecom companies Verizon Communications (VZ), SBC 
communications (SBC) and BellSouth Corp (BLS) joined wireless 
companies AT&T Wireless (AWE), Nextel Communications (NXTL) and 
Sprint PCS Group (PCS) in contributing to the S&P 500 weakness.  
Local-telephone companies lost ground after the FTC won an 
appeals court decision in the national "do not call" list debate.  
The national "do not call" list has ballooned to more than 51 
million consumers and the vast majority of telemarketers would be 
barred from calling consumers on the list.  The appeals court win 
late Tuesday means the FTC can begin to enforce the list 
immediately.  This could certainly put a dent in telephone 
traffic for the larger networks.  Meanwhile, wireless companies 
now have to deal with the new FCC rule effective Nov. 24th that 
will allow customers to keep their mobile phone numbers when they 
change carriers.  If wireless service wasn't a commodity business 
already it just took a big step that direction today as 
everything begins to boil down to price.  This is going to 
increase customer turnover, which raises expenses for these 
wireless companies.

Software Stronger

Swimming up stream today was the GSO software index.  It marked a 
fresh 52-week high on positive news from SAP.  Shares of SAP 
soared 14 percent to $38.55 after the German-based software 
developer pre-announced stronger than expected earnings.  The 
company is expected to report on October 16th but SAP told Wall 
Street that Q3 sales should come in around $1.95 billion(US), 
stronger than the consensus estimates of $1.8 billion.  SAP said 
it was enjoying a stronger contract closure rate in the U.S.  
This news also boosted rival software developer Oracle (ORCL).  

News Worthy

Making headlines today was news that General Electric (GE) had 
finally reached an agreement with Vivendi (V) to merge GE's NBC 
unit with V's Universal Entertainment division.  GE will fork out 
$3.8 billion to own 80 percent of the joint venture creating a 
combination movie studio-television network giant.  The new GE 
division will be named NBC Universal.  Investors are also 
watching GE because the behemoth announces earnings on Friday and 
estimates are for 40 cents a share.  

Unfortunately, not all the earnings news was good today.  Big 
Lots (BLI) doesn't announce earnings until next month but the 
stock was hit for a 7 percent loss on negative guidance.  The 
latest guidance put BLI's Q3 numbers in the -3 cents to +1 cent 
per share range.  This morning's press release said comparable 
store sales were actually up more than 5 percent but earnings 
would be near the low end of forecasts due to an unexpected slow 
down in higher-margin items.  

Another retailer feeling the heat was Winn-Dixie Stores (WIN).  
The company reported earnings that beat estimates by a penny but 
shares lost almost six percent.  WIN reported a 96% drop in 
profits for its fiscal Q1 for 2004 blaming increased promotional 
costs.  Also falling flat were shares of Papa John's Intl. Inc 
(PZZA), which lost 7.6% after warning that earnings would be much 
worse than expected.  The news actually came out late yesterday.  
PZZA said comparable same store sales dropped 6.7% in September.  
The company is expected to report at the end of October and 
estimates had been for $2.19 a share.  Now PZZA expects earnings 
to fall between $1.75 and $1.65 a share.

YHOO Beats!

Thankfully, earnings news from BLI, WIN and PZZA just don't carry 
a lot of weight and the markets will likely over look them as 
company-specific potholes.  But high-flyers of yesteryear like 
Yahoo! Inc (YHOO) capture the imagination of bulls and bears 
alike.  The company reported earnings after the bell this evening 
and the numbers were good.  YHOO turned in its eighth profitable 
quarter and beat estimates by a penny with 10 cents a share.  
More importantly, revenues were up strongly from $249 million 
last year to $356 million in the third quarter, passing estimates 
of $337.8 million.  The stock was trading up in the after hours 
session and is likely to fuel positive moves for fellow Internet 
stocks Amazon.com (AMZN) and Ebay (EBAY).  

Tomorrow

Assuming there aren't any pre-market earnings implosions then the 
YHOO news could certainly power a surge in the tech sector.  
Fortunately, the bond market is holding steady after today's $16 
billion auction of 5-year notes and we'll see another $9 billion 
sold in 10-year notes tomorrow.  In the last two days we've heard 
from three Federal Reserve speakers and the message has been a 
positive one.  Now if we can get another good weekly jobless 
claims report and some stronger same store sales data tomorrow 
morning then bulls might continue their October stampede.


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

Distribution or Consolidation
Jonathan Levinson
 
Equity bulls were treated to higher highs and higher lows on a 
light pullback today.  Bonds gained slightly, gold declined 
slightly, and the US Dollar Index set new lows.
 
Daily Pivots (generated with a pivot algorithm and unverified):



Note regarding pivot matrix:  The support, pivot and resistance 
levels above are derived from the high, low and closing price 
levels by a simple mathematical formula.  They are not intended 
to be predictive of market turning points or to serve as targets, 
but rather represent the range retracement levels as generated by 
the pivot algorithm.  Do not think of them as market "calls" 
or predictions.  Like any technically-derived indicator or price 
level, the pivot matrix values should be regarded as decision 
points at which to evaluate current market conditions.  Visit us 
in the Futures Monitor for our realtime views of the various 
markets covered here.
 
15 minute chart of the US Dollar Index

 
The US Dollar Index got sold to a new low last night, touching 
91.50 before beginning a feeble rebound that weakened as the 
session wore on.  The 92 level was never touched, with the USD 
Index spending most of the day below 91.80.  Despite the dollar 
weakness, Dec gold and silver both traded most of the session in 
the red, while the CRB dropped .73 to close at 243.40 with 
strength in lean hogs, cotton and live cattle futures, as well as 
platimum, which printed a 23 year high intraday.
 
Daily chart of December gold


 
December gold managed a loss for the day, dropping to an intraday 
low of 375.10  but still well above its spike low below 365 
during Friday’s one-hour mystery selloff.  The downphase on the 
oscillators remains intact, and today qualified as a sideways 
move for gold, although it did set a higher high (379) and higher 
low over yesterday’s levels.  Despite the weakness in gold and 
silver, the indices of mining stocks, the HUI and XAU, both had 
bullish days, with HUI adding 1.14 and XAU .68 to finish at   
197.87 and 91.38 respectively.
 
 
Daily chart of the ten year note yield


 
The US treasury completed an auction of 16B worth of 5-year notes 
at a yield of 3.139%.  The auction generated a solid bid-to-cover 
ratio of 2.25, and five year notes finished in the green, with 
the FVX –1.8 bps at 3.095%.  The TNX closed lower by 0.2 basis 
points at 4.242% after trading positive by over 9 bps earlier in 
the session.  The Fed replaced yesterday’s expiring 4.5B 
overnight repo with an overnight repo of 4.75B for a net addition 
of 250M, a relatively small amount.  As with gold, today was a 
throwaway, with the TNX running the clock at yesterday’s levels.   
The oscillator uptrend remains intact, and until the US Dollar 
Index strengthens considerably, the outlook will continue to be 
bleak for US treasury bonds.
 
 
Daily NQ candles


 
Today was a bullish day for the NQ despite its negative close, 
insofar as it printed a higher high and higher low.  If the 
current action at the 52 week highs is a distribution top, I 
would venture that the sellers are indeed professionals of the 
highest calibre, as volume continues to churn out just below the 
year highs.  An equally compelling argument can be made, however, 
for today’s trading being a consolidation of substantial recent 
gains, a much-needed pullback after 5 consecutive positive 
sessions.  Volume roughly matched that of yesterday, with 1.81B 
Nasdaq shares and 1.24B NYSE shares changing hands.
 
The opening spike brought the NQ back above its daily lower wedge 
trendline, but the high above 1400 could not hold for longer than 
a few minutes.  It continues to look like a failed attempt to 
regain the broken wedge, but with the daily oscillators back on 
buy signals, the bulls continue to have this timeframe on their 
side.  It will take a solid selloff to reverse these oscillators, 
and given the hesitant, uncertain feel to today’s selling, it’s 
not looking bad for the bulls here.
 
 
30 minute 20 day chart of the NQ


 
As noted last night, the bears needed a solid downphase on the 30 
minute chart oscillators with good price traction.  They got the 
downphase, but price could not get near yesterday’s low, and 
there was not nearly enough traction to gain significant ground 
from the bulls.  The 61.8% Fibonacci line at 1366 appears as 
critical support here, above which lies bull territory, below 
which is the airball zone.  However, given the mid-afternoon 
bounce and the beginnings of a 30 minute oscillator upphase, it 
appears that the short term bias is to the upside.
 
That said, the bulloney bullhorn expanding wedge was broken and 
not regained today.  Any immediate downside reversal would start 
the oscillators on this timeframe trending in oversold.  As 
always, the oscillators are trend followers.  Until either the 
rally highs or the broken trendline (both in the 1400 area) are 
taken to the upside, bulls have to deal with a difficult 
risk/reward balance so close to major resistance.  
 
If I sound ambivalent here, it’s because I am.  The weakness in 
the US Dollar Index continues to be blissfully ignored as we 
approach earnings season.  My gut feeling is that this is a huge 
distribution top being printed, cleaning out the bears before it 
mauls the bulls.  Unfortunately, the charts I follow look bullish 
in the short term, and despite the weekly downphases underway, 
those buy signals on the daily chart oscillators are worrisome.  
I continue to wonder if the Fed, by printing an endless sea of 
dollars, has not effectively dip-proofed the market.  My 
instincts continues to say “sell”, but the arguments are growing 
tired as price remains endlessly elevated.
 
 
Daily ES candles


 
The ES printed an equivalent return to the scene of the crime, 
spiking as high as 1039.75 but never touching the 1040 level at 
which were no doubt parked a legion of stops.  The net 1.75 point 
drop on the day (0.17%) was negligible, and the bounce from 1029 
set that confluence area as a higher low and significant support.  
The oscillator upphases are in full swing, with the Macd 
hesitating only the slightest bit.  Obviously, bulls need 1040 
fall, bears 1029.  Until that range is broken, there will be 
maximum potential for short term traders to get whipped around 
unpredictably in this 11 point range, but then, at least we know 
where to place our outside stops.
 
20 day 30 minute chart of the ES


 
We have the same bulloney bullhorn break on the ES, with today’s 
bounce coming just ahead of 1028 fib support.  A break above 1036 
will set the bulls up for their shot at the highs, and, never one 
to scrimp on drama, the market closed at 1035.50.  As with the 
NQ, the 30 minute chart oscillators are at the early beginning of 
an upphase, and with the daily oscillators also on buy signals, 
bears do not want to be short on a break of 1040.
 
Daily YM candles


 
Same story on the YM.
 
20 day 30 minute chart of the YM


 
It appears that today was consolidation day, with slight 
pauses/reversals in the larger trends we’ve been following.  
Equities dipped, treasuries gained, gold dipped and the US Dollar 
Index sunk, but only slightly for a change.  The move in gold 
continues to confuse me, mostly because of the distortion caused 
by what I believe to be an entirely aberrant selloff on Friday.  
When it was Ben Bernanke and his clique of central bankers or 
commercials adding to their shorts, we can only guess, but in any 
event, the chart and short term price trends have been mauled for 
the time being.
 
For tomorrow, we’ll continue to watch these trends and 
particularly equities for signs of either a breakout or a 
breakdown.  Hopefully, resolution will come quickly.  See you at 
the bell!


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

Take a peek and see what's there

If it were October 31 and Halloween, I'd have thought the major 
indices had dressed up like a groundhog named Punxsutawney Phil, 
stuck its head above yesterday's highs to see what was there, and 
went back in a shallow hole the remainder of the session to wait 
out some earnings reports and tomorrow morning's release of 
weekly jobless claims and September import/export price data.

The tradition of Groundhog Day dates back to 1887 and was 
originated in Europe.  The first official trek to Gobbler's Knob 
in 1887 had Punxsutawney Phil seeing his shadow, crawling back in 
his hole, and predicting six more weeks of bad weather.

Only a twisted mind like mine could come up with such an analogy, 
but a 2.5% decline from Japan's Nikke-225 on concerns for the 
weakening dollar having a negative trade from the land of the 
rising sun, weighing on the major indices here in the U.S.

That's right.  The major indices popped their head above just 
above breakeven, perhaps saw a shadow of weakness out of Japan, 
and decided to wait things out in today's trade.  

An upside earnings report from Dow component Alcoa (NYSE:AA) 
$28.67 +1.70% after yesterday's closing bell did see the stock 
jump to a session high of $29.21, but short of its 52-week set on 
September 15, as top line revenues of $5.32 billion were slightly 
below consensus of $5.55 billion.  While AA said it saw 
increasing demand for aluminum products, there's still some 
wonderment when top line growth shows more than a 3.1% year-to-
year increase.

In today's after-hours trade, shares of Yahoo! Inc. (NASDAQ:YHOO) 
$38.79 -0.35% sees after-hours trade at $39.50 after the global 
Internet company reported Q3 (September) earnings of $0.10 per 
share, which was a penny better than Wall Street's estimates.  
Revenues grew 43.4% year-over-year to $356.8 million, which was 
above estimates for $337.2 million.  Looking forward to Q4, YHOO 
said it sees revenues between $462-$502 million, which includes 
an anticipated $105 million contribution from its recent Overture 
acquisition.  Consensus estimates for Q4, which do not included 
Overture's contribution are at $371.95 million, and by my 
calculation would have YHOO's comparable to consensus guidance 
being between $357-$397 million and a range that is inline with 
consensus.

Today's trade saw the CBOE Internet Index (INX.X) 165.50 -0.24% 
slipped 0.41 points in today's trade, while the Internet HOLDRs 
(AMEX:HHH) $46.50 +0.49% edged up 23 cents to close at a new 52-
week high.  In extended hours, the HHH gained an additional 37 
cents to $46.87.

The U.S. Dollar Index (dx00y) 91.63 -0.28% continued to show 
dollar weakness in today's session with December euro futures 
(eu03z) 1.1781 +0.24% and December yen futures (jy03z) 0.9141 
+0.21% both gaining ground against the dollar.

Treasuries finished mixed in today's session after the Treasury 
auctioned off $16 billion in new 5-year notes that brought a 
yield of 3.139% and drew a bid to cover ratio of 2.25, which was 
slightly stronger than the 2.2 average of the previous four 
sales.

Comments from the auction had Drew Matus, senior financial 
economist at Lehman Brothers saying, " This was a pretty good 
auction.  A five-year at 3.14% is not such a bad deal when you 
look out at the inflation forecasts and the fact that the Fed 
seems willing to leave rates alone."  Federal Reserve Governor 
Susan Bies seemed to echo Matus' comments when saying she did not 
see a large risk of inflation pick-up any time soon.

The 5-year YIELD ($FVX.X) finished down 1.8 basis points to 
3.095%, while the benchmark 10-year YIELD ($TNX.X) edged down a 
fractional 0.2 basis points at 4.242%.  The longest dated 30-year 
YIELD ($TYX.X) rose 2 basis points to 5.167%.

Pivot Matrix


 

There was little action or range in today's trade, and while the 
BIX.X did lead in the WEEKLY pivot with a kiss of its WEEKLY R1, 
buyers in the group (bulls or jittery bears) didn't feel an urge 
to get a breakout to new highs going in today's trade.  Tomorrow, 
an upside trigger would be present at DAILY R1 (highlighted in 
PINK) which could then set the stage for a sector leading rally 
to the BIX's MONTHLY R2 as this would be the last level in the 
matrix where I would look for resistance.

I've also highlighted the QQQ's DAILY S1 at $34.15 as a level 
where we would see some correlation with its WEEKLY 38.2% 
retracement, but with MONTHLY R1 at $34.07 and Tuesday's 
"suspicious" low at $34.01, I'd still hold a shorter-term bullish 
bias above $34.00.

All I'm trying to do with the BIX.X and perhaps the DAILY S1's is 
observe a rather tight collar on the major indices at this point, 
after a rather impressive run the past several days, where our 
Stochastics on the daily interval charts are at "overbought" 
levels, but where MACD's still present the observation that 
bullish momentum exists.

S&P Banks Index (BIX.X) Chart - Daily Interval


 

I think I lost some subscribers with the comment that the BIX.X 
was showing strength in its Pivot Matrix, relative to the major 
indices.  When we look at the SPX chart, the BIX.X looks similar 
in that it too is challenging 52-week highs, but its is the FIRST 
to test its WEEKLY R1 this week, and it was the FIRST to test and 
move through WEEKLY levels last week, which may have hinted of 
further bullishness for the major indices.

If the BIX.X can make the move to knew highs, this SECTOR has 
good upside potential to its WEEKLY R2 of 323.41 in my opinion, 
and the more "ramping higher" MACD gives the look that there's 
still some upside momentum to be had.  

I did get an upside alert on Washington Mutual (NYSE:WM) $40.33 
+0.95% today, where $40.00 had been resistance the past two 
months.  While WM is NOT a component of the BIX.X, it is a 
component of the more super-regional and multi-nation KBW Banks 
Index (BKX.X) 915.53 -0.4%.  What I take away from WM is one of 
two things.  Either some shorts are giving up on WM as a bearish 
play as mortgage rates have eased back lower in recent weeks, or 
some "value" bulls got a little more aggressive with the stock 
today, as it has lagged the move higher in the broader banking 
sector.  One clue we might take away from this is that the MARKET 
might have some type of confidence to buy a lagging or weaker 
bank, on thoughts that there is some good news coming soon.  I 
can think of no other reasons for the stock finally breaking 
above the $40.00 level.

In the above chart, I make an "eyeball approach" to thinking that 
WM trades at a BIX.X equivalent, with the benchmarking 
observation back to WM's 52-week high set on June 17, when the 
BIX.X was trading around 315.00.

S&P 500 Index (SPX.X) Chart - Daily Interval


 

I've place some BIX.X levels on the SPX.X chart, which is my 
mindset as to how the banks should impact the SPX.  I'm going to 
remain positive/bullish here after our weaker Washington Mutual 
(WM) showed some strength from the bottom, but I still think it 
would benefit the SPX if the banks bust the vault open and sprint 
to new highs.  

Economic data due out before the opening bell have economists 
forecasting weekly jobless claims at 394,000, compared to prior 
week's 399,000.

I don't see any economists' forecast for September Import/Export 
prices.  In August, import prices (excluding oil) fell 0.2%, 
while export prices (excluding agriculture) were flat at 0.0%.

Today's trade saw the broader S&P 500 Bullish % ($BPSPX) see a 
net gain of 5 stocks to point and figure buy signals as the 
bullish % edges up 1% to 79.4%.  Still bull confirmed.

The narrower S&P 100 Bullish % ($BPOEX) saw no net change and 
status remains "bull correction" status at 78%.

NASDAQ-100 Tracking Stock (QQQ) Chart - Daily Interval


 

QQQ tried to take a peek at its 52-week highs set on 09/18 and 
09/19 of $34.86.  Unfortunately for QQQ bulls, German software 
maker SAP Aktiengesell (NYSE:SAP) $38.55 +14% doesn't have 4-
letters in its stock symbol and isn't a component of the QQQ.  
MACD has been above Signal for 2-days now and QQQ shows some 
intra-day new highs as a result.  I would think it wise to snug a 
bullish stop at $33.97.  This would be juuuust enough under 
MONTHLY R1 and yesterday's lows, where even slight clearing out 
of bullish stops at $33.99 might still keep a bull in the stock, 
but where $33.97 may be the loss of near-term momentum that has 
the QQQ slipping back to fill its recent gap higher back lower 
again.

Today's trade saw no net change in the narrower NASDAQ-100 
Bullish % ($BPNDX) and status remains "bear confirmed" at 74%.

Dow Industrials Chart - 50-point box


 

With the Dow having traded in a tight range today, I wanted to 
take a moment tonight to look at the Dow's PnF chart with WEEKLY 
and MONTHLY levels overlaid.  From last night's bar chart, we can 
perhaps see how the MONTHLY 19.1% retracement is matching the 
recent highs of 9,650 on the PnF chart, and how this WEEK's S1 
and MONTHLY Pivot give the only "zone of support" that would tie 
in with the INDU's PnF chart, which eventually had the Dow giving 
a spread-triple-top buy signal at 9,400, where the 9,350 area 
looks to be more of a zone of support right now.  The MONTHLY 
levels will be with us for another 3-weeks, while the WEEKLY's 
will change.  But lets look at the Nikkei-225, and see how the 
INDU and NIkkei or oscillating back and forth, where the Dow 
tries to lead and the Nikkei tries to follow, with the yen/dollar 
being a common demonator, that the MARKETs seem to be trying to 
sort out.

Nikkei-225 ($NIKK) Chart - 50-point box


 

The $NIKK got drilled lower after giving a double-bottom sell 
signal at 10,850 and fell to 10,150 before a recent reversal back 
higher to 10,900, and has reversed back lower, very close to 
where the double bottom sell signal was given.

I've marked a column of X, which came during Japan's "tankan" 
survey, which had Japan-based companies saying they held a 
positive outlook on the economy, as long as the yen didn't 
strengthen too much against the dollar.  During that time, it was 
also disclosed that the Bank of Japan has been intervening in the 
currency markets and selling yen and buying dollar to try and 
stem the yen's rise against the dollar.

However, in recent sessions, the yen continues to show strength 
against the dollar, and this now has me putting some emphasis on 
the Nikkei-225 needing to find support above 10,100, or we might 
be alert for weakness in the Nikkei-225 below that level to have 
U.S. markets softening.  A break below Nikkei-225 gets as much 
attention as did the break above 10,000 in the Nikkei-225 as it 
relates to investor optimism in Asia.

As I conclude tonight's wrap, the Nikkei-225 is open for trading 
and currently trades higher by 16 points at 10,558.51.  So far, 
its high/low has been 10,561-10,485, so a PnF chartist would 
chart an additional "O" to the above chart.

Today's trade in the Dow Industrials saw no change in the very 
narrow Dow Industrials Bullish % ($BPINDU).  Still "bull 
correction" status at 83.33%.

Jeff Bailey


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

Real Importance
by Mark Phillips
mphillips@OptionInvestor.com

As I get closer and closer to the arrival of my first child, I 
have found it more and more difficult to focus on the daily action 
in the market.  Between all the last minute tasks to get ready for 
the blessed event, the myriad doctor's appointments (both expected 
and unexpected) and all of the special attention the mom-to-be now 
requires, focus has been fleeting at best.  I'm running further 
behind in my reading, responding to email and I'd be mortified to 
think anyone could see my office!

I think we're typical of mid-30's first time parents, obsessed 
with trying to do everything right and frequently losing sight of 
what a good job our parents did several decades ago with so much 
less.  I wouldn't say that the "obsessive" approach of many others 
like us is right or wrong.  It is what it is.  Just as there is no 
canned strategy that will work for traders, either in terms of the 
overall trading approach or in the way the business plan is laid 
out, I don't think there is any one cut-and-dried approach to 
becoming a parent.  You do the best you can up front and then make 
adjustments as necessary.  The key point is to always make sure 
that any changes made are well thought out and take us in the 
direction of being better traders (or parents) and not in the 
other direction.

Where am I going with this?  Sadly for those of you that have been 
with me awhile, this will not be new terrain, as I'm going to 
revisit some material from the past.  And it will have nothing to 
do with the latest technical analysis indicator.  You see, as I've 
moved closer to being a parent, and I've found myself losing 
focus, I've had the good fortune to have a couple readers suggest 
to me that I go back and re-read my own articles on 
"distractions".  Thanks guys!  I can't tell you how useful it has 
been to keep my priorities in balance and looking at what is 
important.  The key point in a nutshell is that it is absolute 
foolishness to even consider trading when you can't give it your 
undivided attention.  That goes for position trades intended to 
last for weeks and intraday trades intended to last for 90 
minutes.

So this week, as I get set to be completely out of the loop for a 
few days, I want to suggest you take a look at the following 
articles written back in July of 2002.  I think it is a good 
reminder for all of us about keeping the important things attended 
to, which does an excellent job of greasing the wheels in the rest 
of our lives.  Here's the first article from last July.

Options, Priorities and Balance
http://members.OptionInvestor.com/options101/opt_070302_1.asp

Remember how happy and smooth life is when your spouse is happy?  
As one of my best friends has told me for many years, "A happy 
wife is a happy life!"  Additionally, I think it is imperative for 
anyone (especially me!) to be very careful to not actively trade 
when there is any sort of life transition in progress.  It doesn't 
matter if it is marital changes, a new job, new additions to the 
family or something less pleasant like a death or serious illness 
in the family.  When life is disrupted, it can have a very 
tangible impact on our ability to trade profitably.  Hopefully 
this second article will be useful to those of you that are going 
through transitions of your own.

Odds and Ends
http://members.OptionInvestor.com/options101/opt_071002_1.asp

As you may infer from my commentary and focus today, I've been in 
the process of pulling back from my day-to-day trading over the 
past week and have now reached the point where I will only be 
watching as an interested spectator for the next couple weeks.  I 
firmly believe that in using this approach, I will derive maximum 
enjoyment from the process of helping my wife to bring our first 
son into the world, without feeling like I "should" be doing 
something else.  At the same time, when I get ready to re-enter my 
day-to-day trading activities, I won't feel like I'm cheating my 
family, because I will know that I gave them my full and undivided 
attention when it was appropriate.

I hope my personal reflections help you to maintain the proper 
balance in your trading lives as well.

Mark

P.S. For all those that have asked, the arrival date is now known.  
The "coming out party" has now been scheduled for Wednesday, 
October 15th.  If you're wondering how I know so precisely, let's 
just say the 'little' tyke is going to need a bit of help entering 
the world.  I'm 6'5" and 220 pounds and my wife is a whopping 5'2" 
in heels.  With the baby already pushing 10 pounds, the doctor 
doesn't want to risk a normal delivery.  I'll be engaged in my 
normal writing duties through next Tuesday and then I'll disappear 
from the usual lineup, reappearing again on Monday, October 20th.


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The Option Investor Newsletter                Wednesday 10-08-2003
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: None
Play of the Day: Call - UTX 
Spreads, Combinations & Premium-Selling Plays: "Entry Point" or 
     "Time to Sell"?
Watch List: No Weakness Here

Updated on the site tonight:
Market Posture: And on the Sixth Day, She rested


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 • Trade online with trailing stops at optionsXpress, at no extra cost 
 • Trailing stops based on the option price or the stock price
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Note: Options involve risk. Risk disclosure: 
http://www.optionsxpress.com/welcome_risk_index.htm
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STOP-LOSS UPDATES
*****************

None


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

None


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

None


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

United Technologies - UTX - cls: 82.00 chg: +0.23 stop: 77.50

-Company Description-
United Technologies Corp., based in Hartford, Connecticut, is a 
diversified company that provides a broad range of high 
technology products and support services to the building systems 
and aerospace industries.  Its four main business segments are 
Otis, Carrier, Pratt and Whitney, and Flight Systems.
(source: company press release)

- Most Recent Update (Tuesday, Oct 7, 2003)-
Shares of UTX, a Dow component, have not quite been enjoying the 
same success the index has.  The stock has spent the last two 
sessions consolidating some of its recent gains.  We're 
encouraged that it seems to have found new support near the $81 
mark and traders can use future bounces from $81 as an entry 
point.  There has not been any stock-moving news to report but 
the general fervor regarding Q3 earnings should keep things 
positive.  Traders need to keep in mind that there are only six 
trading days left before UTX's Q3 earnings announcement and we 
will probably close the play before they report.  

- Play of the Day Comments -
The positive earnings announcements after the close is likely to 
have the markets back in the green tomorrow.  We're selecting UTX 
as our play-of-the-day for Thursday in an effort to capture in 
rally in the $INDU.  Shares of UTX have been consolidating 
sideways after their breakout above the $80 level and with just a 
week before the company's earnings report we might see a pre-
announcement ramp up.


- Suggested Options - 
There are just two weeks before UTX's earnings and we don't plan 
to hold over the report, which means traders could use the 
October calls, but they remain higher risk. We're going to 
suggest trading the Novembers.

BUY CALL OCT 75 UTX-JO OI= 518 at $7.50 SL=5.00
BUY CALL OCT 80 UTX-JP OI=2503 at $2.90 SL=1.55
BUY CALL OCT 85 UTX-JQ OI=1231 at $0.45 SL= -- very risky
BUY CALL NOV 75 UTX-KO OI=2144 at $8.00 SL=5.50
BUY CALL NOV 80 UTX-KP OI=1604 at $4.00 SL=2.00
BUY CALL NOV 85 UTX-KQ OI= 589 at $1.45 SL=0.75

Annotated Chart of UTX:


 


Picked on October 2 at $80.45
Change since picked:   + 1.55
Earnings Date        10/16/03 (confirmed)
Average Daily Volume:    1.9 million 
Chart =



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

"Entry Point" or "Time to Sell"?
By Ray Cummins

Stocks retreated today for the first time in October as concerns
over share valuations and the falling dollar weighed heavily on
investors.

Despite Alcoa's (NYSE:AA) better than expected earnings report
and a strong September for McDonald's (NYSE:MCD), the Dow Jones
Industrials Average fell 23 points to 9,630.  The NASDAQ slid 14
points to 1,893 amid profit-taking in semiconductor, networking,
and computer hardware shares.  The S&P 500 gave back 5 points to
finish at 1,033 as losses in drug and biotechnology issues led
the broader market lower.  Declining issues outpaced advancers
by roughly 3 to 2 on both the NYSE and the NASDAQ.  Trading was
average with 1.2 billion shares changing hands on the Big Board
and 1.8 billion shares crossed on the technology exchange.  The
bond market was mostly unchanged in the face of heavy new debt
issuances.  The yield on the benchmark 10-year Treasury stayed
close to its three-week high of 4.24%.

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

SUMMARY OF CURRENT POSITIONS - AS OF 10/07/03

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

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

CELL     OCT    25    24.40  37.82   $0.60   8.23%   2.46%
CEPH     OCT    40    39.15  47.43   $0.85   6.73%   2.17%
CVTX     OCT    20    19.70  21.30   $0.30   4.92%   1.52%
DIGE     OCT    35    34.60  44.00   $0.40   4.06%   1.16%
LLTC     OCT    35    34.30  39.70   $0.70   5.35%   2.04%
NFLX     OCT    27    27.15  44.05   $0.35   4.44%   1.29%
RIMM     OCT    27    26.90  43.95   $0.60   6.95%   2.23%
AMHC     OCT    35    34.50  40.68   $0.50   6.10%   1.45%
ELAB     OCT    35    34.50  39.40   $0.50   5.51%   1.45%
FLML     OCT    30    29.60  37.99   $0.40   5.85%   1.35%
MATK     OCT    50    49.30  53.97   $0.70   5.03%   1.42%
NFLX     OCT    32    31.90  44.05   $0.60   7.09%   1.88%
RIMM     OCT    27    27.20  43.95   $0.30   5.00%   1.10%
RIMM     OCT    30    29.35  43.95   $0.65   8.18%   2.21%
VIP      OCT    55    54.40  68.80   $0.60   3.99%   1.10%
AMHC     OCT    35    34.75  40.68   $0.25   4.49%   0.72%
ERES     OCT    30    29.70  38.50   $0.30   5.35%   1.01%
HELE     OCT    22    22.00  23.77   $0.50  10.65%   2.27%
JCOM     OCT    32    32.15  44.29   $0.35   6.05%   1.09%
MSTR     OCT    40    39.40  49.65   $0.60   7.80%   1.52%
NFLX     OCT    27    27.15  44.05   $0.35   8.16%   1.29%
RIMM     OCT    32    32.25  43.95   $0.25   4.26%   0.78%
USG      OCT    15    14.75  17.68   $0.25   9.14%   1.69%
YHOO     OCT    32    32.15  38.93   $0.35   5.37%   1.09%

As noted last week, a number of issues were candidates for
early exit during the recent sell-off.  Among the positions
closed were: American Pharmaceutical Partners (NASDAQ:APPX),
Hollis Eden Pharmaceuticals (NASDAQ:HEPH), Verint Systems
(NASDAQ:VRNT), and United Online (NASDAQ:UNTD).


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

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

APC      OCT    45   45.34  43.02   $0.45   3.14%    0.99%
TRMS     OCT    40   40.40  28.24   $0.40   5.74%    0.99%
BRCM     OCT    30   30.50  30.85  ($0.35)  0.00%    1.64% *
IMCL     OCT    50   50.45  40.39   $0.45   6.53%    0.89%
PCLN     OCT    35   35.50  32.43   $0.50   8.64%    1.41%
ZRAN     OCT    25   25.35  19.64   $0.35   9.44%    1.38%
CVTX     OCT    27   27.70  21.30   $0.20   7.35%    0.72%
IMCL     OCT    45   45.45  40.39   $0.45   8.97%    0.99%
SINA     OCT    45   45.40  40.71   $0.40   9.07%    0.88%

Broadcom (NASDAQ:BRCM) has rallied with the semiconductor
group and conservative traders should consider closing the
bearish position to limit potential losses.  The "watch"
list candidate this week is Sina (NASDAQ:SINA).


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

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

ANF     30.49  30.22   OCT  25  27   0.30  27.20  $0.30   Open
CFC     75.19  84.37   OCT  65  70   0.50  69.50  $0.50   Open
MO      44.65  45.14   OCT  40  42   0.30  42.20  $0.30   Open
OHP     38.60  41.93   OCT  32  35   0.25  34.75  $0.25   Open
AMZN    49.61  54.91   OCT  42  45   0.35  44.65  $0.35   Open
AZO     94.51  93.65   OCT  85  90   0.65  89.35  $0.65   Open
NE      33.98  35.10   OCT  30  32   0.25  32.25  $0.25   Open
HOV     69.16  73.81   OCT  60  65   0.55  64.45  $0.55   Open
KBH     64.20  64.71   OCT  60  55   0.45  54.55  $0.45   Open
RJR     40.32  41.37   OCT  35  37   0.10  37.40  $0.10  No Play

There was no viable credit available for the bullish position in
R.J. Reynolds (NYSE:RJR).


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

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

FRX     49.56  47.50   OCT  60  55   0.60  55.60  $0.60   Open
KO      43.01  44.66   OCT  47  45   0.30  45.30  $0.30   Open
MEDI    37.03  33.32   OCT  42  40   0.25  40.25  $0.25   Open
LXK     65.14  66.72   OCT  75  70   0.55  70.55  $0.55   Open
NOC     86.00  86.29   OCT  95  90   0.50  90.50  $0.50   Open
WTW     43.15  40.37   OCT  50  45   0.40  45.40  $0.40   Open
DNA     79.72  79.50   OCT  90  85   0.50  85.50  $0.50   Open
SNPS    30.71  28.07   OCT  35  32   0.15  32.65  $0.15  No Play
XLNX    27.99  30.54   OCT  32  30   0.25  30.25 ($0.29)  Open?

There was no viable credit available for the bearish position in
Synopsys (NASDAQ:SNPS).  Xylinx (NASDAQ:XLNX) has rallied with
the semiconductor group and conservative traders should consider
closing the bearish position to limit potential losses.


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

No Open Positions
 

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

Stock   Pick   Last   Exp.   Long  Long  Initial   Max     Play
Symbol  Price  Price  Month  Call  Put    Debit   Value   Status
  
ABC     60.00  55.45   NOV    60    60    7.25    8.00     Open?

Amerisourcebergen (NYSE:ABC) achieved profitability soon after it
was offered and last week, the bearish portion (NOV-$60 Put) of
the position paid for the entire cost of the straddle.  Traders
should consider "legging-out" of the straddle to lock-in gains or
preserve capital.

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.

**************
AMHC - American Healthways  $42.50  *** Near All-Time Highs! ***

American Healthways (NASDAQ:AMHC) is the nation's leading and
largest provider of specialized, comprehensive care enhancement
services to hospitals, physicians and health plans.  In addition,
American Healthways is the only company in its industry whose
programs are designed to meaningfully address the needs of 100%
of its customer populations.  The clinical excellence of the
firm's programs have been reviewed and approved by Johns Hopkins,
and their quality has been recognized by the National Committee on
Quality Assurance, the Joint Commission on Accreditation of Health
Care Organizations, and the American Accreditation Health Care
Commission, making American Healthways the first and only care
enhancement provider in the nation to be accredited or certified
by all three organizations.  American Healthways contracts to
provide disease and care management programs to health plans with
members in all 50 states, the District of Columbia and Puerto Rico.
The company also operates diabetes management programs in hospitals
nationwide.

AMHC - American Healthways  $42.50

PLAY (sell naked put):

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

SELL PUT  OCT 35    QMH VG     419   0.30  34.70   9.3%   0.9% *
SELL PUT  OCT 40    QMH VH     605   1.15  38.85  22.4%   3.0%


**************
AMZN - Amazon.com  $55.70  *** New Multi-Year High! ***

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

AMZN - Amazon.com  $55.70
  
PLAY (sell naked put):

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

SELL PUT  OCT 50    ZQN VJ   17,417  0.30  49.70   5.4%   0.6% *
SELL PUT  OCT 55    ZQN VK    8,329  1.40  53.60  18.5%   2.6%


**************
BRCM - Broadcom  $30.24  *** New Trading Range? ***

Broadcom (NASDAQ:BRCM) is a leading provider of highly integrated
silicon solutions that enable broadband communications and the
networking of voice, video and data services.  Using proprietary
technologies and advanced design methodologies, Broadcom designs,
develops and supplies complete system-on-a-chip solutions and
related hardware and software applications for all broadband
communications markets.  Their diverse product portfolio includes
solutions for digital cable and satellite set-top boxes; cable
and DSL modems and residential gateways; high-speed transmission
and switching for local, metropolitan, wide area and storage
networking; home and wireless networking; cellular and terrestrial
wireless communications; Voice over Internet Protocol (VoIP)
gateway and telephony systems; broadband network processors; and
SystemI/O(TM) server solutions.

BRCM - Broadcom  $30.24
  
PLAY (sell naked put):

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

SELL PUT  OCT 27.5  RCQ VY   15,145  0.25  27.25   7.9%   0.9% *
SELL PUT  OCT 30    RCQ VF    4,331  1.00  29.00  23.7%   3.4%


**************
DRIV - Digital River  $32.83  *** 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  $32.83

PLAY (sell naked put):

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

SELL PUT  OCT 30    DQI VF     340   0.35  29.65  10.0%   1.2%
SELL PUT  NOV 25    DQI WE     107   0.50  24.50   4.8%   2.0% *


**************
EBAY - eBay Inc.  $58.47  *** New "All-Time" High! ***

eBay (NASDAQ:EBAY) is a Web-based community in which buyers and
sellers are brought together to browse, buy and sell items such
as collectibles, automobiles, high-end or premium art items,
jewelry, consumer electronics and a host of practical and other
miscellaneous items.  The eBay trading platform is an automated,
topically arranged service that supports an auction format in
which sellers list items for sale and buyers bid on items of
interest, and a fixed-price format in which sellers and buyers
trade items at a fixed price established by sellers.  Through
its wholly owned and partially owned subsidiaries and affiliates,
the Company operated online trading platforms directed towards
the United States, Australia, Austria, Belgium, Canada, France,
Germany, Ireland, Italy, Japan, the Netherlands, New Zealand,
Singapore, South Korea, Spain, Sweden, Switzerland and also the
United Kingdom.

EBAY - eBay Inc.  $58.47

PLAY (sell naked put):

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

SELL PUT  OCT 55    QXB VK   16,960  0.40  54.60   6.0%   0.7% *
SELL PUT  OCT 57.5  QXB VT   12,629  1.05  56.45  13.6%   1.9%


**************
ERES - eResearch Technology  $39.49  *** Rally Mode! ***

eResearch Technology (NASDAQ:ERES) is a provider of technology and
services that enable the pharmaceutical, biotechnology and medical
device industries to collect, interpret and distribute cardiac
safety and clinical data more efficiently.  The company offers a
range of products and services, including Diagnostics Technology
and Services and Clinical Research Technology.  Their Diagnostics
Technology and Services include centralized diagnostic services
and clinical research operations, including clinical trial and
data management services.  Their Clinical Research Technology and
Services include the developing, marketing and support of clinical
research technology and services.

ERES - eResearch Technology  $39.49

PLAY (sell naked put):

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

SELL PUT  OCT 37.5  UDB VU     36    0.65  36.85  13.7%   1.8%
SELL PUT  NOV 30    UDB WF     97    0.50  29.50   4.0%   1.7% TS
SELL PUT  NOV 32.5  UDB WZ     75    1.00  31.50   6.9%   3.2% *


**************
NFLX - Netflix  $43.00  *** Solid Subscriber Outlook! ***

Netflix (NASDAQ:NFLX) is an online entertainment service in the
United States that provides more than 600,000 subscribers access
to a comprehensive library of more than 11,500 movie, television
and other filmed entertainment titles.  The company's standard
subscription plan allows subscribers to have three titles out at
the same time with no due dates, late fees or shipping charges.
Subscribers can view as many titles as they want in a month and
they select these titles at the firm's Website (www.netflix.com)
aided by its proprietary CineMatch technology.  They receive them
on DVD by first-class mail and return them to the company at their
convenience using prepaid mailers.  Once a title has been returned,
Netflix mails the next available title in a subscriber's queue.

NFLX - Netflix  $43.00

PLAY (sell naked put):

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

SELL PUT  OCT 37.5  QNQ VU     567   0.35  37.15   8.8%   0.9% *
SELL PUT  OCT 40    QNQ VH   1,487   0.80  39.20  16.2%   2.0%


**************
RMBS - Rambus  $26.77  *** Infineon Who? ***

Rambus (NASDAQ:RMBS) designs, develops and markets "chip-to-chip"
interface solutions that enhance the performance and effectiveness
of its client's chip and system products.  These solutions include
multiple chip-to-chip interface products, which can be grouped into
two categories: memory interfaces and logic interfaces.  Rambus'
memory interface products provide an interface between memory chips
and logic chips.  In addition, the firm's logic interface products
provide an interface between two logic chips.  Rambus has two major
memory interface products: Rambus dynamic random access memory and
Yellowstone.  Additionally, it offers a logic interface product for
high-speed serial chip-to-chip communications between logic chips
in a range of computing, networking and communications applications.

RMBS - Rambus  $26.77

PLAY (sell naked put):

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

SELL PUT  OCT 22.5  BNQ VX    2,034  0.30  22.20  13.5%   1.4% *
SELL PUT  OCT 25    BNQ VE    3,375  0.95  24.05  29.2%   4.0%


**************
NCEN - New Century Financial  $31.45  *** Testing Recent Highs! ***

New Century Financial Corporation (NASDAQ:NCEN) is one of the
nation's largest specialty mortgage companies, providing first
and second mortgage products to borrowers nationwide through its
operating subsidiaries.  It offers mortgage products to borrowers
who generally do not satisfy the credit, documentation or other
underwriting standards prescribed by conventional mortgage lenders
and loan buyers, such as the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation.  New Century is
committed to serving the communities in which it operates with
fair and responsible lending practices.

NCEN - New Century Financial  $31.45

PLAY (sell naked put):

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

SELL PUT  OCT 30    URE VF     656   0.60  29.40  15.6%   2.0%
SELL PUT  OCT 26.6  NWR WW     648   0.65  25.98   5.2%   2.5% *


**************
NTAP - Network Appliance  $24.29  *** Entry Point? ***

Network Appliance (NASDAQ:NTAP) is a provider of enterprise
network storage and data management solutions.  NetApp network
storage solutions and service offerings provide data-intensive
enterprises with consolidated storage, improved data center
operations, economical business continuance and efficient remote
data access.  The company's solutions meet the needs of archive,
reference, departmental/remote office, business internal and
business operations, and business-critical data with a common
product architecture and data management methodology.

NTAP - Network Appliance  $24.29

PLAY (sell naked put):

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

SELL PUT  OCT 22.5  NUL VX    3,714  0.20  22.30   7.5%   0.9%
SELL PUT  NOV 20    NUL WD      630  0.50  19.50   5.7%   2.6% *
SELL PUT  NOV 22.5  NUL WX      171  1.15  21.35   8.6%   5.4%


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

BULLISH PLAYS - CREDIT SPREADS

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

***************
CUM - Cummins  $50.77  *** A Great Name -- If Nothing Else! ***

Cummins (NYSE:CUM), a global power leader, is a corporation of
complementary business units that design, manufacture, distribute
and service engines and related technologies, including fuel
systems, controls, air handling, filtration, emission solutions
and power generation systems.  Headquartered in Columbus, Indiana,
Cummins serves its customers through more than 500 company-owned
and independent distributor locations in over 130 countries and
territories, and employs nearly 24,000 people worldwide.

CUM - Cummins  $50.77

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-42.50  CUM-WV  OI=0   ASK=$0.55
SELL PUT  NOV-45.00  CUM-WI  OI=13  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$44.70


**************
JCOM - j2 Global Communications  $46.70  *** Another New High! ***

j2 Global Communications (NASDAQ:JCOM) provides outsourced value
added messaging and communications services to individuals and
businesses throughout the world.  The company offers faxing and
voicemail solutions, Web initiated conference calling, document
management solutions and unified messaging services.  j2 Global
markets its services principally under the brand names eFax and
jConnect.  The company delivers its services through its global
telephony/Internet protocol network, which spans more than 600
cities in 18 countries across five continents, including four
capital cities in Latin America where j2 Global is in the process
of launching its unique service.

JCOM - j2 Global Communications  $46.70

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-30.00  JQF-WF  OI=131  ASK=$0.35
SELL PUT  NOV-35.00  JQF-WG  OI=241  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$34.45


**************
NTES - NetEase.com  $67.85  *** Hot Sector! ***

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

NTES - NetEase.com  $67.85

PLAY (less conservative - bullish/credit spread):

BUY  PUT  OCT-55.00  NQG-VK  OI=3510  ASK=$0.35
SELL PUT  OCT-60.00  NQG-VL  OI=2648  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.40-$0.45
POTENTIAL PROFIT(max)=8% B/E=$59.60


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

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.

***************
GPRO - Gen-Probe  $23.25  *** Post-Split Slump? ***

Gen-Probe (NASDAQ:GPRO) is a leader in the development, manufacture
and marketing of rapid, accurate and cost-effective nucleic acid
testing products used for the clinical diagnosis of human diseases
and for screening donated human blood.  Using its patented NAT
technology, Gen-Probe has received FDA approvals or clearances for
over 60 products that detect a variety of infectious microorganisms,
including those causing sexually transmitted diseases, tuberculosis,
strep throat, pneumonia and fungal infections.  Additionally, the
company developed and manufactures the only FDA-approved blood
screening assay for the simultaneous detection of HIV-1 and HCV,
which is marketed by Chiron Corporation.  Gen-Probe and Bayer
Corporation have formed a collaboration to develop, manufacture and
market nucleic acid diagnostic tests for certain viral organisms,
and under the agreement Bayer has the right to distribute these
tests.  Gen-Probe has 20 years of nucleic acid detection research
and product development experience, and its products are used daily
in clinical laboratories and blood collection centers throughout the
world.

GPRO - Gen-Probe  $23.25

PLAY (sell naked call):

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

SELL CALL  OCT 27.5  PSU JY     671   0.25  27.75  14.0%   0.9% *
SELL CALL  OCT 25    PSU JE     360   0.40  25.40  15.0%   1.6%


**************
IMDC - Inamed  $70.87  *** Premium-Selling Only! ***

Inamed (NASDAQ:IMDC) is a global medical device company that
develops, manufactures and markets a diverse line of products
that enhance the quality of people's lives.  The company has
three principal product lines: breast aesthetics, consisting
primarily of breast implants and tissue expanders sold largely
for use in plastic and reconstructive surgery; facial aesthetics,
consisting primarily of collagen and other dermal fillers sold
largely to dermatologists and plastic surgeons, and obesity
intervention, consisting of products for use in treating severe
and morbid obesity.  The company also offers collagen products
for use by medical manufacturers.

IMDC - Inamed  $70.87

PLAY (sell naked call):

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

SELL CALL  OCT 80    UZI JP     362   0.50  80.50   7.7%   0.6% *
SELL CALL  OCT 75    UZI JO     327   1.65  76.65  19.4%   2.2%


**************
UNTD - United Online  $30.12  *** A Big "Down" Day! ***

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

UNTD - United Online  $30.12

PLAY (sell naked call):

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

SELL CALL  OCT 35    QAB JG   1,287   0.35  35.35  14.2%   1.0% *
SELL CALL  OCT 30    QAB JF     196   1.85  31.85  40.1%   5.8%


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

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.

**************
MEDI - MedImmune  $33.09  *** Downtrend Intact! ***

MedImmune (NASDAQ:MEDI) is a biotechnology company with a range of
unique products on the market and a diverse product pipeline.  The
firm is focused on using advances in immunology and other biological
sciences to develop new products that address significantly unmet
medical needs in areas of infectious disease, immune regulation and
cancer.  MedImmune actively markets four products, Synagis, Ethyol
and CytoGam and FluMist.  MedImmune co-markets the FluMist vaccine
with Wyeth and the company plans an initial product run of 4 to 5
million doses of FluMist for the 2003-2004 flu season.

MEDI - MedImmune  $33.09

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-40.00  MEQ-KH  OI=3382  ASK=$0.40
SELL CALL  NOV-37.50  MEQ-KU  OI=449   BID=$0.65
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$37.80


**************
WLP - WellPoint Health Networks  $78.72  *** Trading Range? ***

WellPoint Health Networks (NYSE:WLP) serves the health care needs
of over 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/disability insurance,
long term care insurance, flexible spending accounts, COBRA
administration and Medicare supplements.

WLP - WellPoint Health Networks  $78.72

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-90.00  WLP-KR  OI=3    ASK=$0.35
SELL CALL  NOV-85.00  WLP-KQ  OI=137  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$85.60


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

SEE DISCLAIMER - SECTION 1


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

No Weakness Here

Barr Labs Inc - BRL - close: 70.71 change: +0.31 

WHAT TO WATCH: We mentioned BRL in the MarketMonitor this morning 
and the stock was able to buck the overall weakness in both the 
drug sector and the biotech sector.  Shares are slowly climbing 
higher after finding support at their simple 50-dma.  While 
stochastics, RSI and momentum are all positive and its MACD is 
about to turn positive BRL could still see another small dip back 
to the $70 mark.  That could be an entry point for a run up 
towards the old highs near $75.

Chart=


---

Corinthian Colleges - COCO - close: 57.83 change: -1.16

WHAT TO WATCH: We also mentioned COCO in the MarketMonitor today.  
The rising channel from its March lows has been very faithful.  
Twice the stock has bounced from its simple 50-dma and shares are 
approaching that technical level again.  Traders who have faith 
in the trend can use a bounce from the 50-dma as an entry point.  
The previous two bounces resulted in $5-$6 moves.  Use a tight 
stop.  Earnings are near the end of the month.

Chart=


---

Gilead Sciences - GILD - close: 59.44 change: +0.96

WHAT TO WATCH: Shares of GILD continue their bounce off support 
in its Point-and-Figure chart and the stock out performed the 
biotech index and the broader indices today.  Bear Stearns 
upgraded GILD to an "out perform" this morning but GILD is still 
fighting with resistance at the $60 level.  Should the stock 
breakout higher watch for trouble at its simple 50-dma.  Earnings 
are at the end of the month.

Chart=


---

Harman Intl - HAR - close: 107.60 change: -0.42

WHAT TO WATCH: Shares of HAR just continue to climb, although 
they were down fractionally today.  The stock does have an 
upcoming 2-for-1 stock split and that could be keeping the 
momentum going.  Traders might want to watch for a dip back to 
the $105 level if interested in bullish positions, although a 
bounce from $102.50 would be even more tempting.

Chart=




----------------------------------
RADAR SCREEN: more stocks to watch
----------------------------------

MTB $91.51 +0.32 - Bucking the overall weakness today in the 
markets, shares of MTB hit a new all-time high just under the $92 
mark.  Earnings are on Friday so could be one to watch for some 
volatility.

RE $79.81 +1.13 - Another stock ignoring the market weakness 
today is insurer RE.  The stock has broken out to new highs and 
is just under round-number resistance at $80.  Earnings should be 
near the 20th this month.

NDN $29.44 -3.96 - Ouch!  Shares of 99-cent Only Stores were 
hammered today.  Yesterday the company pre-announced stronger 
revenues for its third quarter but two brokers downgraded the 
stock today, one citing concerns over lower margins and higher 
operating costs.  The drop today was on very big volume and broke 
support at $30 and its simple 200-dma.


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

And on the Sixth Day, She rested

To Read The Rest of The OptionInvestor.com Market Posture Click Here
http://www.OptionInvestor.com/marketposture/mp_100803.asp


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