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Daily Newsletter, Wednesday, 10/22/2003

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The Option Investor Newsletter                Wednesday 10-22-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Drug-Induced Decline
Futures Wrap:  Selloff
Index Trader Wrap: 20 down and 10 to go
Traders Corner: Time To Implement Plan B on CPTI SPX Position


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     10-22-2003            High     Low     Volume Advance/Decline
DJIA     9598.24 -149.40  9742.05  9580.24 2.07 bln    766/2055
NASDAQ   1898.07 - 42.83  1923.33  1897.36 1.71 bln    752/2338
S&P 100   521.76 -  8.36   521.76   512.36   Totals   1518/4393
S&P 500  1030.36 - 15.67  1076.03  1028.39
RUS 2000  513.15 - 12.38   525.53   513.15
DJ TRANS 2818.01 - 46.85  2863.90  2817.44
VIX        17.67 +  1.12    17.98    17.10
VXO        19.00 +  1.18    19.59    18.49
VXN        25.68 +  1.33    25.87    25.04
Total Volume 4,136M
Total UpVol  3,094M
Total DnVol    990M
52wk Highs     332
52wk Lows       32
TRIN          1.51
PUT/CALL      0.98
*******************************************************************


Drug-Induced Decline
by James Brown

It proved to be a tough day for bulls on Wall Street.  Major
averages lead a broad-based decline with disappointing earnings
results from three Dow components and a number of drug stocks.
Meanwhile a strong decline in the U.S. dollar, despite Secretary
Snow's attempt to bolster the currency, sent investors into the
safety of bonds and gold.  December gold futures rose $4.80 to
close at $386.80 an ounce.  By the closing bell the DJIA had lost
nearly 150 points (1.53%), the NASDAQ Composite lost almost 43
points (-2.2%) and the S&P 500 dropped more than 15 points
(-1.49%).  Only two out of dozens of major sector indices were
green, specifically the XAU gold & silver index and the UTY
utility index and then both were only up fractionally.

Foreign exchanges were little help today.  Asian stocks were
lower with the Japanese NIKKEI losing almost 142 points (-1.29%)
to 10,889.  The dollar's drop to 1.089 against the yen a likely
culprit.  European equities fared worse.  With the euro rising to
1.182 against the dollar the English FTSE lost 1.53% and the
German DAX dropped 2.5%.  U.S. markets dropped quickly at the
open and volume was rather modest by midday.  Unfortunately, the
sell-off picked up steam as we rolled into the closing bell and
the final volume numbers were heftier than expected indicating
some conviction by the sellers.

The market internals were bearish as one would expect.  Declining
stocks out numbered advancing stocks 20 to 7 on the NYSE and 23
to 7 on the NASDAQ.  Down volume was better than three times up
volume on both exchanges.  Overall volume tipped two billion
shares on the NYSE and 1.7 billion on the NASDAQ.  Professional
traders were not worried by the decline.  Given the strong run up
into the Q3 earnings season some profit taking was expected.
Many are looking for a good pull back to gauge potential new
entries heading into the fourth quarter.

Chart of DJIA:



Chart of NASDAQ: 



It has been weeks since we've seen a triple-digit loss in the
DJIA.  Only three components managed to close in the green today;
those were MCD, MMM and SBC.  Leading the decliners were MRK, JPM
and DD.  It was not a coincident that all three reported their
earnings today.  Dow component DuPont (DD) reported a loss of 88
cents a share but if you exclude a $1 billion asset write-down
then earnings appear to be 13 cents, which were 2 cents above
estimates.  The company did reaffirm its full year outlook for
$1.60 a share, which is in line with analysts but investor's sold
the news.  After consolidating for a month under its 200-dma the
stock hit a new relative low with a 4.27% loss on strong volume
of 8.4 million shares.

Fellow Dow component and second largest bank in the U.S. is
J.P.Morgan (JPM) who announced Q3 earnings of 78 cents a share.
Today's result beat estimates by 2 cents but the company's
revenues of $7.53 billion were significantly under analyst
estimates of $8.6 billion.  Shares fell 4.6% to its simple 50-dma
and led both the BKX and BIX banking indices lower.

The largest drag on the DJIA was drug company Merck & Co (MRK).
Not only did MRK miss estimates of 85 cents by 2 cents but they
missed the revenue number and guided lower.  The drug titan also
announced it would cut 4400 jobs and launch a new distribution
program to U.S. wholesalers.  The stock gapped lower and closed
down 6.5% to a new 52-week low.

MRK wasn't the only drug company to disappoint today.  Schering-
Plough (SGP) announced a Q3 loss of 18 cents with sales falling
16% to $2 billion.  The company blamed a drop in sales for its
Claritin allergy drug and its Intron hepatitis treatment.  Wyeth
(WYE) also reported a Q3 loss.  Formerly American Home Products
Corp, the New Jersey-based Wyeth blamed litigation charges and
increased reserves to handle diet drug fen-phen claims for the 32
cent per share loss.  Excluding charges WYE's income would have
been 65 cents a share.  Investors sold the news and WYE hit its
200-dma by mid afternoon but rebounded off its low for a 5.45%
loss.

The biggest drug maker on the planet, Pfizer (PFE) also reported
Q3 earnings today.  The drug giant earned 47 cents a share, which
is 3 cents better than estimates but only if you discount the
acquisition charges related to its Pharmacia merger.  Probably
more important was PFE's fourth-quarter guidance, which they
lowered from 54 cents a share to 51 cents.  The standout drug
maker to report today was GlaxoSmithKline (GSK).  Britain's GSK
said profits were up 20 percent for the quarter but told analysts
that exchange rates could eat up 4 to 5 percent.  At the end of
the day the DRG drug index had lost 3.26% to close under support
at 310 and its simple 200-dma.

Another major story today was in the Disk Drive sector.  Seagate
Technology (STX) reported earnings that were 4 cents better than
expected with net income rising to 40 cents a share on revenues
that rose 10% for the quarter.  Why then did the stock plummet
almost 25% to $22.28, dragging the entire sector down with it?
Directly affecting investor sentiment for the stock was news that
STX had amended a lock-up agreement that would now allow insiders
to immediately sell more than 20 million shares instead of a
previous date in early 2004.  Secondly, the company disclosed
that the SEC had asked for copies of all analyst reports for the
last 2.5 years.  That's generally not a good thing either.  This
one-two punch hit the DDX for a 7% loss.  Major losers in the
sector besides STX were HTCH (-8.65%), STK (-13.6%) and MXO
(-16.99%).

I could go on with more earnings news but the focus was on the
earnings misses not the successes.  Of the nearly 250 companies
in the S&P 500 that have already reported for the season, 65
percent of them have beaten estimates.  Thomson Financial is
reporting that corporate profits have risen an average of 18.6
percent, which is better than the pre-season estimates for a jump
in the 16 percent range.  That certainly sounds like success to
me and traders are just cashing in on the good news to take some
profits off the table.

Now it looks like we'll be seeing a repeat of today's action
given some of the after hours news.  Chip stock KLA-Tencor (KLAC)
reported earnings after the close with net income at 18 cents or
1 cent better than the estimates.  The bad news was revenues fell
more than 15% and the company is guiding lower for the December
quarter.  Looking ahead KLAC says next quarter could be in the 18
to 19 cent range while analysts had been looking for 23 cents a
share.  KLAC expects next quarter revenues to be in the $320-325
million area, below consensus of $348 million.  KLAC management
said some key sales contracts failed to close in September and
that customers are still cautious about the rest of 2003.  They
hope that the general optimism for next year (2004) will start to
turn into sales but the proof may be in the post-Christmas
pudding (Q1 '04).  Shares were down about $4 in after hours and
the entire chip sector is bound to react negatively to the
conference call.

A heavy SOX is not going to benefit a NASDAQ that closed under
the 1900 level and the next stop for the Composite could be the
simple 50-dma near 1850.  Tomorrow the earnings parade will
continue and the major announcement on the books is Microsoft
(MSFT) who announces after the close.  MSFT management tends to
be cautious and their conference calls almost always tend to be
disappointing (to manage our expectations for next quarter).
However, should they surprise us with an upbeat call then the
mood could change.

Don't look now but that signal in the VXO (old VIX) yesterday is
getting some market confirmation today!


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

Selloff
Jonathan Levinson

Equities attended their much-anticipated appointment with gravity
today, breaking numerous support levels as treasuries and
precious metals rallied against weakness in the US Dollar Index.

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


In a move reminiscent of my Uncle Norm trying to get me to try a
second bite of Christmas cake several decades ago, John Snow
attempted to talk up the US Dollar Index today.  The results are
depicted above.  The US Dollar Index was relieved of more than 10
bps, finding support just below the cliff's edge at 91.15.  Gold,
silver and the HUI rallied, though the CRB gave up its advanced
above 245 despite strength in wheat, cotton and soybean futures,
closing lower by .02 at 244.77.

Daily chart of December gold


It was a disheartening day for gold shorts as the December
contract gapped above the 383 resistance / Fibonacci line,
touching a high at 388.10 and settling in the 387 area.  The
daily chart oscillators have printed confirmed buy signals on
this move from a higher price low, and the 400-420 resistance
level dating back to the mid-1990s is the next significant hurdle
for bulls to clear.  Mining stocks did very well, with the HUI
breaking 215, targeting its alltime high at 220.

Daily chart of the ten year note yield


Money fled to "quality" today, with treasuries joining the list
of winners as the ten year note yield (TNX) dropped another 9.3
basis points to 4.273%.  Fibonacci support held, but the
oscillator and price trends are clearly down.  While a brief
countertrend bounce might otherwise be expected, note that the
price has been gapping lower in ongoing violent moves.  The
buyers aren't waiting for the sellers of treasuries to come to
them, and it continues to look very good for treasuries.


Daily NQ candles


Relatively speaking, the NQ held up reasonably well, printing a
bearish engulfing daily candle and closing within spitting
distance of its lows of the day.  The long-awaited Macd
confirmation was printed with a bearish divergence to boot, and
the 10 day stochastic extended its sell signal into a bear roll.
Fibonacci support at 1386 held, but the bounces was lackluster to
say the least.


30 minute 20 day chart of the NQ


The equity indices opened with bearish breakaway gaps that never
came close to being filled.  Volume was solid at more than 1.7B
Nasdaq shares and 1.6B NYSE shares.  The move left the NQ sitting
on a possible head and shoulders neckline at 1390.  The lack of
moderating bounces throughout the day left the oscillators on the
30 minute chart in oversold bottoming territory, and a
countertrend bounce can be expected here.  With the daily chart
oscillators in bear rolls here, I expect a lower high, followed
by a deeper washout from that bounce high.  I'd look for possible
resistance at either the bottom or top of today's opening gap at
1409 or 1419  A move above 1430 would invalidate the current
interpretation.


Daily ES candles


The daily ES makes the NQ look like a picnic, having broken the
78.6% Fibonacci support line with authority.  The intraday bounce
from 1026.50 was weak, and the best that could be said for it was
that it was unexpected, with little significant support until
1022.  We have the same oscillator sell signals, and the broken
bearish ascending wedge is so far behaving as one might expect.

20 day 30 minute chart of the ES


As with the NQ, the 30 minute ES chart paints what prudent bears
will take to be a warning sign of an imminent countertrend
bounce.  The weakness seen today is for real, in that it is
confirmed by a recent patter of lower oscillator highs and lower
oscillator lows.  Nevertheless, the oscillator settings on the 30
minute charts have been spot on, and the ES has not been this
oversold in weeks.  The quality of the high on the anticipated
bounce could be the final judgment on this rally-  if it fails
from a lower high at or below 1044, (with significant resistance
first at 1034, 1036 and 1042), then we'll have a lower high to
validate the dominance of the downphase in the daily chart
oscillators above.  Support is at 1022, followed by 1014, with
1014 a likely head and shoulders target below the 1034 neckline.


Daily YM candles


The daily YM is a spectacularly bearish chart, an unfilled gap
below the 78.6% fib line.  9500 looks like the next significant
support level, and given the relentless weakness in bellwethers
such as GE, it would be surprising to not see it tested.


20 day 30 minute chart of the YM


Same setup on the 30 minute YM as on the NQ and ES.


The extreme volatility readings yesterday corrected somewhat
today, with a 7% move higher in the VXO as the put to call ratio
jumped to and held the mid .90s level.  A short term corrective
bounce is due, but today's decline felt clearly impulsive.  With
the VXO still at a mere 19.06 even after today's 7% jump, there's
plenty of air underneath current equity valuations.  But if this
rally has taught traders anything, it's to trade what we see.  A
bounce is due, and it must be respected.  For those nimble and
daring enough to try to ride it, use stop losses.  Don't allow
yourself to lose money because of what you think should or might
happen.  If the bounce proceeds as expected, bears should have
plenty of time to enjoy a new trend.


Gold and treasuries shone again today, and once again these
assets confirm the weakness in the dollar and in equities.  Gold
has significant resistance beginning at 400, and while I expect
it to ultimate rally above that level, I expect a significant
battle first.  See you at the bell!



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

20 down and 10 to go

The major indices finished lower as there seemed to be something
cited as a negative, whether it be earnings growth, revenue
growth, future guidance, product pipeline, you name it, which
found a generally-negative reaction to some of today's earnings.

Dow component Alcoa (NYSE:AA) $29.65 -1.59% was the first of the
30 Dow components to report earnings this quarter, and since its
October 7 report date, where the company reported earnings of
$0.33 per share and beat Wall Street's estimates of $0.30, the
stock still holds an impressive 5% gain since its October 7
close.

However, with 20 of the 30 components having reported their
recent quarterly earnings, the Dow Industrials (INDU) 9,598.24
-1.53%, which fell 149 points in today's trade, is now 56-points
below its October 7 close after two-third of its blue chip
components suffered its largest single session point decline
since earnings season kicked into high gear.

Merck (NYSE:MRK) $45.72 -6.52% plunged to a 52-week low after
reporting quarterly earnings of $0.83, which was 2-cents shy of
consensus estimates.  With the stock falling to a 52-week low,
investors seemed little impressed quarterly revenues and bottom
line EPS that grew 6% versus the same quarter a year ago.

While the Dow 30 isn't necessarily indicative of the broader
market, many of the stocks within the Dow are deemed bellwethers
for the various industries they represent.  As such, I thought
I'd take some time tonight to quickly review those quarterly
earnings recently reported by 20 of the 30 components, make some
general observations as to the company meeting or beating
analysts estimates, benchmark current quarter's earnings versus
the same quarter a year ago, and look at similar year-to-year
revenue (top line) and earnings (bottom line) growth and
declines.  Since I've been hearing that analysts are going to be
revising next quarter's earnings higher for the broader market, I
thought we could test those comments, so I've posted some of the
average estimates in place, and over time, we can come back to
tonight's Index Wrap and see if some earnings estimates are being
revised up or down as analysts and market participants continue
to gather more information from various macro/micro economic
reports, and comments from those companies that have reported
quarterly earnings, and those that have yet to report.

Dow Components - Quarterly Earnings Table



Of the 20 components having reported earnings 15 have beat EPS
estimates (green), 3 have reported inline (blue) and 2 have
disappointed on the bottom line.  Only 2 of the components SBC
and T have shown revenue declines compared to the year-ago
quarter, and all be darned if both of those company's are telecom
service providers.

While it would appear that revenue growth has been realized
outside the telecom services space, there is still some work to
be done for bottom line growth, as 12 components show
improvement, while 8 of the components having reported recent
quarter's earnings still have a way to go.

At the far right of the chart, I've used green arrows to
highlight current analysts' estimates that look for growth at the
bottom line (GE, INTC, GM, IBM, CAT, HON), red arrows where
analysts aren't seeing a quarter-to-quarter increase in EPS (JNJ,
MO, UTX, MMM) , and blue where analysts currently predict little
quarter-to-quarter earnings acceleration or decline.

One thing a trader/investor might look to do with the above data
is this, but with observations over time.  SBC and T look like
they've dialed up a wrong number if calling for fundamentals, but
with all but three equity sectors showing declines on my U.S.
Market Watch screen today, the North American Telecom Index
(XTC.X) 531.60 +0.34% actually posted a 1.8-point gain in today's
session.  While this is a short-term observation, to me this may
hint of some short-covering in the sector.

Hold on!  Telecom equipment provider Lucent (NYSE:LU) $2.78
+13.4% is an XTC.X component and this once-favorite technology
stock may be finding its October beaten down tech bid that the
Stock Trader's Almanac discussed on its Monday calendar notes.

To the subscriber that responded to last Friday's 01:00 PM EDT
intra-day update and gave me a list of "old favorites," you had
mentioned CIENA Corp. (NASDAQ:CIEN) $6.27 -3.68% as a tech-stock
that had once been a high flyer.  CIEN sells telecom equipment,
so lets stick an upside alert on CIEN at $6.65, which would mark
a relative high of its current 2-week consolidation.

Getting back to the Dow components.  One thing that a fundamental
investor needs to be aware of when looking at quarter-to-quarter
EPS (Q3 to Q4 as an example) is to account for potential
seasonality.  For instance, 3M (NYSE:MMM) $75.82 +0.42% traded a
52-week high on an intra-day basis today, but you will note that
analysts Q4 estimates are currently at $0.74 per share.  I looked
back at some of MMM's past Q1, Q2, Q3 (which MMM just reported)
and Q4 has consistently shows a decline to Q3 EPS, so I would
have to say MMM is a stock where its finds seasonality slowing in
Q4.

Again... the main reason for posting next quarter estimates at
this point, is so that we can come back in a couple of weeks,
revisit some of the estimates, and see if we can't get a feel for
what analysts are doing with their estimates as they take in
observations from broader economic reports, or various
business/sector specific trends.

Well, I thought I'd post the 30 Dow components and some of their
fundamental data that has been reported.

I still firmly believe the MARKET sniffs out bullish and bearish
fundamentals before they are disclosed by a company, which
eventually will impact the price action of a major market
average.

Case in point is a past bullish profile I made in shares of Merck
(NYSE:MRK) $45.72 -6.52% from $57 and then again at $58 as the
stock gave a spread-triple top buy signal at $58.  The stock
traded as high as $60 (before the Medco spinoff), but somehow
sniffed things out, MRK eventually gave a triple-bottom sell
signal at $51, and may now be on its way to achieving that
bearish count of $39.

Enough on individual stocks, but its these individual stocks,
that one-by-one make up the various sectors and indices you and I
will trade.

Let's take a quick look at the pivot matrix, and we saw some
tests and violations of WEEKLY S1s today, and these were levels
where I was looking for pullback bullish entries earlier in the
week, so I've got some work/analysis to perform.  The Dow
Diamonds (AMEX:DIA) $96.21 -1.42% saw trade at its WEEKLY S2 of
$96.07 before edging back up by its close and would immediately
have me assessing further potential downside to the MONTHLY Pivot
of $94.18.

Pivot Analysis Matrix



Before I start on the matrix, it should be noted that for the Dow
Industrials (INDU), SPX and OEX, today's HIGH posted for the
DAILY is the recorded level of opening trade, but was really
never traded as we had a pretty notable gap lower open, where
that first 5-minute high was pretty much the high of the day in
actual trade.  As such, SHORTER-TERM traders using the DAILY
levels, will want to use the DIA as a INDU replacement and the
SPY as an SPX replacement on the DAILY levels.

With that said, I've highlighted in BLUE for the DAILY levels,
those levels, if traded, I think would be earliest sign of
strength after today's declines.

The BIX.X and NDX.X highs for today accurately depict today's
session high.  As aggressively traded as the NDX/QQQ is, this
morning's opening bar high in the QQQ of $34.93, found selling
50-minutes later at $34.93 again, and this intra-day observation
shows some determination, or still incomplete sell orders from
the open were at this level.

For the QQQ I've "dashed pink" the $34.20 level.  In after-hours
trade, I received a downside alert I had set at this level, I
alerted traders in the Market Monitor, and profiled that short-
term bears close out my profiled from late yesterday bearish
trade at the $34.23 level, or at least lower profit stops to
$34.56.  Last tick on the QQQ is $34.25 and while after-hours
trade is no indication for the next day, it has been my belief,
based on observation, that when a level in the matrix is traded,
it can "turn on" a computer to then buy or sell the level traded.
I've also "dashed pink" tomorrow's DAILY S1 of $34.16.  This is a
level that I think a BULL does NOT want to see violated tomorrow.
My thinking EARLY in the session is that there may be some
jittery BULLS that see another gap down session (if we open at
$34.25, it will be a gap down from the 04:15 PM EDT close of
$34.57) and $34.16 would be the fudge room to the downside for
any computer buying to try and show enough muster to have the QQQ
firm early.  Remember how the QQQ may have overdone things to the
upside when it tested WEEKLY R1 yesterday?  My "overdone on the
downside" on a NEAR-TERM basis would be QQQ $34.16.

The BIX.X's correlative DAILY S2 and WEEKLY S1 near 320 are
considered sector support, that I think major index BULLS (INDU,
SPX, OEX, NDX) need to see support tomorrow in the BIX at 320.
If the BIX.X violates to the Downside, the WEEKLY S2 and MONTHLY
Pivot levels for the major indices are in play!

I want to start with the QQQ tonight, as its chart shows some
DIVERGENCE from the other major indices in its Stochastics
oscillator, which at this point would be strikingly similar to
September 10, 11 and 12.  This may be an IMPORTANT observation
tonight, as a trader would continue to look for SIMILARITY and
history to repeat itself, but if it DOES NOT, then may be a
signal that something has changed!!!!!

NASDAQ-100 Tracking Stock (AMEX:QQQ) - Daily Intervals



I see very similar oscillator setup near-term as we saw back on
September 10, 11 and 12, when the QQQ pulled into its 21-day SMA,
and one of our "cloned trends."  I went back and reread the
September 10 Index Trader Wrap, and wanted to see what we were
thinking in the QQQ that night.  Here's the link to that wrap.
http://members.OptionInvestor.com/Itrader/marketwrap/iw_091003_1.ASP

Take note too that the QQQ, on September 10, closed at $33.26,
and at that time had close 1 penny below its WEEKLY S1 of $33.27.
The next day, September 11, the QQQ opened at $33.27, fell to
$33.01, then closed at $33.63.  The next day, September 12, the
QQQ opened $33.34, traded a low of $33.05, and closed $33.83.
Over the course of the following 4 sessions, the QQQ eventually
traded a new 52-week high.

This recap of history, now becomes a test!  It is my belief that
a good trader continues to trade a profitable tendency, until
DIVERGENCE from the past is found.  It is this thought that had
me alerting shorter-term bearish traders in the QQQ that the
$34.20 level and WEEKLY S1 had been traded.

I think a BULL that does look long the QQQ near-term (next two
days) must honor a stop under WEEKLY R2, or at least have that as
a downside RISK assessment.

Today's trade saw a net loss of 1 stock to a point and figure
sell signal in the NASDAQ-100 Bullish % ($BPNDX).  Still "bear
correction" status at 77%.

Before I move on, I also wanted to point out that the QQQ closed
below its Friday's lows.  I mention this as it relates to eBay
(NASDAQ:EBAY) $55.20 -1.5%, holding its rising 50-day SMA of
$55.10, and still above Friday's low of $53.70.  Remember it was
on Thursday evening of last week that EBAY reported earnings, and
may not have given as bullish of guidance as some market
participants were looking for.  Still, at today's close, I can't
figure out why EBAY is still above Friday's low and even its
session close of $54.79.

Disclosure... I currently hold a bullish position in EBAY stock,
and hold a BEARISH position in an EBAY $55 put.  I consider this
a "neutral" position, but continue to follow EBAY as a pulse
stock that represents what may be considered a lofty valuation.

OK, try "burning" that QQQ chart into your mind and lets look at
the S&P 500 Index (SPX.X) 1,030.36 -1.49%.  I know that it closed
below its WEEKLY S1.  Is there anything in its chart, that would
tie in with the QQQ "zone of support" from $34.20-$34.25?  This
too becomes a test for tomorrow, and next couple of days.

S&P 500 Index Chart - Daily Intervals



A similar "zone" of support shows up in the SPX, but here its is
the MONTHLY R1 of 1,027 and WEEKLY S2 of 1,026, where I would
think institutional computer programs should be set for buying...
IF INSTITUTIONS BELIEVE that the recent earnings reports given in
the past couple of days, AFTER the SPX set a new 52-week high, is
still in play.

A trade scenario for a BULL looking for pullback entry is to BUY
1,027, STOP 1,019, MAX target a bounce back higher to 1,059.
This trade scenario would be very similar to September 10-18 time
table, IF history is to repeat.  A STOP at 1,019 may be used to
allow for any potential filling of a gap from 10/02-10/03.

Today's trade saw a net loss of 5 stocks to new point and figure
sell signals in the S&P 500 Bullish % ($BPSPX) as the bullish %
fell 1% to 80%.  Still "bull confirmed" and would take a reversal
to 76% to achieve "bull correction" status.

Now, burn that chart of the SPX in your mind, and concentrate on
the MONTHLY R1 and 21-day SMA as relative benchmarks.  Ask
yourself "why is the OEX trading...."

S&P 100 Index (OEX.X) Chart - Daily Interval



Do you see the technical weakness in the OEX based not only as it
relates to the MONTHLY R1 and today's close, but also the OEX
closing below its 21-day SMA?  Based on today's trade and
observation of MRK -6.52% and PFE -2.79% getting hit lower, it
once again becomes an observation that the DRUG stocks are having
greater negative impact on the OEX.

This is IMPORTANT observation in my opinion, and near-term an OEX
trader monitors MRK and PFE from time to time, but may also
understand why it becomes VERY important for the financials to
show strength to offset the weakness in DRUG stocks.  This is
also important, but maybe a slightly lesser degree for the SPX.
I feel the OEX is perhaps the WEAKEST looking index right now,
and if breaks much below the 510 level, it would be the major
index that might signal further WEAKNESS to MONTHLY Pivot.

Again... Oscillators VERY similar to September 10, but a trader
cant put food on the table based on an oscillator.  It's PRICE
action that matters most.

Today's trade saw no net change in the narrower S&P 100 Bullish %
($BPOEX).  Still "bull correction" status at 79%.

I didn't notice until after today's close, but our "pulse" stock
in the banks found Washington Mutual (NYSE:WM) $41.77 +3.21%
bucking the broader market trend after reporting earnings today.

Dow Industrials (INDU) Chart - Daily Interval



A 150-point drubbing is not good for a BULL's psychology, and if
simply thinking psychological, a close below 9,500 would only be
more damaging.  Other than that, the INDU along with the NDX/QQQ
have been the more technically strong indices in recent months as
they had always been the first to achieve new 52-week highs.  As
I look for strength when current weakness is found, it would be
the INDU and the MONTHLY R1 to look for support.  I make note in
the above chart that it has been my observation that the INDU has
had a tendency to trade 10-points either side of a WEEKLY pivot
analysis level.  10-points because of the Dow's larger price
scales than the other indices.

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

Jeff Bailey



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

Time To Implement Plan B on CPTI SPX Position

By Mike Parnos, Investing With Attitude

Who Stole Our Premium?
Many readers have brought to my attention that Monday's premiums
reflected that premium in the SPX options were MIA (missing in
action).  Therefore, nobody was able to come close to entering the
posted SPX position based on the position outlined in Sunday's
column.  However, since the market took a dump on Wednesday, a
little of the volatility returned and we were able to create an
alternative SPX position.  Since November is a 5-week option cycle,
there's still plenty of month left.

Alternative "Hypothetical" SPX Position – Iron Condor – 1030.36
Sell 10 contracts of November SPX 985 puts
Buy 10 contracts of November SPX 975 puts
For a credit of $1.10 ($1,100)
Sell 7 contracts of November SPX 1075 calls
Buy 7 contracts of November SPX 1090 calls
For a credit of $1.50 ($1,050).  Total net credit of $2,150.
We've created a maximum profit range of 985 to 1075.  With four
weeks left, that's a reasonable range.

If, on Thursday morning, the SPX gaps in one direction or the
other, it's OK to get creative.  We've been doing these Iron
Condors long enough now that you should be familiar with the basic
criteria.
_____________________________________________________________

Couch Potato Trading Institute Disclaimer

All results reported in this section are hypothetical. While the
numbers represented here may have been achieved or beaten by our
readers we make no representation that any individual investor
achieved these exact results. The tracking for the plays listed in
this section uses closing prices for the day the newsletter is
published and it is not meant to imply that any reader actually
received those prices or participated in these recommendations. The
portfolio represented here is hypothetical and for investment
education purposes only. It is only an illustration of what type of
gains a knowledgeable investor might receive utilizing these
strategies.



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The Option Investor Newsletter                Wednesday 10-22-2003
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: Put - DNA
Spreads, Combinations & Premium-Selling Plays: A Post-Earnings
Slump Already?

Updated on the site tonight: Earnings Movers
Market Posture: Fear and Loathing on Wall Street



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

Genentech Inc - DNA - close: 77.57 change: -1.56 stop: 82.30

-Company Description-
Genentech is a leading biotechnology company that discovers,
develops, manufactures, and commercializes biotherapeutics for
significant unmet medical needs. Sixteen of the currently
approved biotechnology products originated from or are based on
Genentech science. Genentech manufactures and commercializes 11
biotechnology products in the United States. The company has
headquarters in South San Francisco, California, and is traded on
the New York Stock Exchange under the symbol DNA.
(source: company press release)

- Most Recent Update (Tuesday, Oct 21, 2003)-
We knew that when we wrote this play it would be somewhat daring
and DNA is proving to be hard to read.  On Monday the stock broke
down through support and traded through our trigger at $77.50
opening the play.  Actually the stock traded under $77.00
producing a quadruple-bottom sell signal on its Point-and-Figure
chart.  This is usually a successful bearish signal to trade off
of yet now we're wondering if it might become a bear trap.  The
stock rebounded today, which isn't that big of a deal because it
remains under the $80 level.  However, AMGN's earnings after the
bell we're pretty good and they beat estimates by 3 cents.  This
compares to a loss of $2.10 last Q3 for AMGN.  The BTK biotech
index was already up 3 percent today and AMGN's news is just more
fuel for the bounce.  We'll be encouraged if DNA remains under
the $80 mark or its simple 50-dma near $81.  Aggressive bears
could look for any failed rally as a new entry point.  The rest
of us might be better of waiting for a roll over back under $78.

- Play of the Day Comments -
It looks like the widespread weakness in the markets today might
continue into Thursday's session.  For bearish plays we like how
the BTK lost more than 4 percent and closed under support at 450.
AMGN, the biggest biotech stock in the index, could bounce from
$60.  If this occurs then we'd look for new bearish entries in
DNA on failed rallies under $80.  Otherwise, continued weakness
in DNA under the 77.50 mark looks playable.

! This play may not be suitable for all traders.  Please see
Sunday's play description for full details.

- Suggested Options -
Remember we're ONLY suggesting bearish positions if DNA trades at
or below our trigger at $77.50.  We like the November 80's and 75s
for short-term trades and December or January's for longer-
term trades.

BUY PUT NOV 75 DNA-WO OI=2282 at $1.95 SL=0.90
BUY PUT NOV 80 DNA-WP OI=1813 at $4.40 SL=2.20
BUY PUT DEC 75 DNA-XO OI=1925 at $3.30 SL=1.65
BUY PUT DEC 80 DNA-XP OI=3506 at $5.70 SL=3.25

Annotated Chart:




Picked on October 20 at $77.50
Change since picked:    + 0.07
Earnings Date         10/08/03 (confirmed)
Average Daily Volume:      2.5 million
Chart =



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

A Post-Earnings Slump Already?
By Ray Cummins

Stocks plunged today after a trio of market bellwethers offered
mediocre profit forecasts with their quarterly earnings reports.

The majority of Dow issues were in the red with Merck (NYSE:MRK),
J.P. Morgan Chase (NYSE:JPM) and DuPont (NYSE:DD) among the worst
blue-chip losers.  The Dow Jones Industrial Average finished down
149 points at 9,598.  The NASDAQ composite index slid 42 points
to 1,898 as computer hardware, semiconductor equipment, software,
and networking shares fell victim to profit-taking.  The S&P 500
index slumped 15 points to 1,030 with drug-makers taking some of
the biggest losses.  Healthcare, oil & gas services, brokerage,
biotechnology, chemicals, aluminum, airline, and retail shares
were also under pressure.  Losers outnumbered winners by more than
2 to 1 on the New York Stock Exchange and by roughly 3 to 1 on the
NASDAQ.  About 1.6 billion shares changed hands on the Big Board,
while 1.7 billion shares were crossed on the technology exchange.
Treasurys were firmer with the benchmark 10-year note closing up
22/32 at 99 40/32 to yield 4.26%.

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

SUMMARY OF CURRENT POSITIONS - AS OF 10/21/03

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

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

DRIV     NOV    25    24.50  32.10   $0.50   4.78%   2.04%
ERES     NOV    32    31.50  43.44   $1.00   6.89%   3.17%
NTAP     NOV    20    19.50  25.63   $0.50   5.70%   2.56%
BRCM     NOV    27    27.00  31.50   $0.50   4.69%   1.85%
CYD      NOV    17    17.20  25.70   $0.30   4.95%   1.74%
ERES     NOV    35    34.20  43.44   $0.80   6.19%   2.34%
GENZ     NOV    47    46.55  49.32   $0.95   4.34%   2.04%
LRCX     NOV    22    22.20  27.06   $0.30   3.86%   1.35%
NVLS     NOV    35    34.15  39.49   $0.85   5.35%   2.49%
RMBS     NOV    20    19.55  25.28   $0.45   6.20%   2.30%
TXN      NOV    22    22.10  27.28   $0.40   4.23%   1.81%
VECO     NOV    22    22.00  27.02   $0.50   5.04%   2.27%


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

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

FLML     NOV    40   40.80  31.15   $0.80   8.88%    1.96%
IMCL     NOV    45   45.65  35.09   $0.65   6.97%    1.42%
SOHU     NOV    45   45.55  32.86   $0.55   5.85%    1.21%


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

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

CUM     50.77  49.74   NOV  42  45   0.30  44.70  $0.30   Open
JCOM    46.70  33.45   NOV  30  35   0.50  34.50 ($1.05) Closed
CYMI    45.27  46.75   NOV  35  40   0.60  39.40  $0.60   Open
ERTS   103.58 104.64   NOV  90  95   0.55  94.45  $0.55   Open
SYK     78.92  80.64   NOV  70  75   0.45  74.55  $0.45   Open

Shares of J2 Global Communications (NASDAQ:JCOM) plunged Tuesday
after the company said fourth quarter earnings would fall below
consensus estimates.  Conservative traders should consider
closing the bullish spread to limit potential losses.


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

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

MEDI    33.09  29.41   NOV  40  37   0.30  37.80  $0.30   Open
WLP     78.72  84.26   NOV  90  85   0.60  85.60  $0.60   Open
BUD     48.89  49.20   NOV  55  50   0.50  50.50  $0.50   Open
KMX     32.31  31.05   NOV  40  35   0.70  35.70  $0.70   Open
NBR     36.75  37.41   NOV  42  40   0.25  40.25  $0.25   Open

Wellpoint Health Networks (NYSE:WLP) is on the "watch" list and
any further upside activity would signal an exit in the bearish
spread.


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

No Open Positions


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

No Open Positions


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

NEW POSITIONS

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

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

BULLISH PLAYS - NAKED PUTS

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

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered puts entails considerable financial risk,
far more than the initial margin or collateral required to open
a position.  The maximum financial obligation for the sale of a
naked put is the strike price (of the underlying stock) that is
sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of puts should have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  In addition, there is one very important rule when using
this strategy: Don't sell puts on stocks that you don't want to
own!  Why?  Because stocks occasionally experience catastrophic
declines, exponentially increasing the margin maintenance and
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock's price falls.
Many professional traders suggest closing the position when the
underlying share value moves below the sold strike, or using a
"buy-to-close" stop order at a price that is no more than twice
the original premium received from the sold option.

**************
APPX - American Pharma Partners  $27.85  *** Bottom Fishing! ***

American Pharmaceutical Partners (NASDAQ:APPX) is a specialty
drug company that develops, manufactures and markets injectable
pharmaceutical products, focusing on the oncology, anti-infective
and critical care markets.  The company is one of the largest
producers of injectables, with more than 130 generic products in
more than 350 dosages and formulations.  APPX has acquired the
exclusive North American rights to manufacture and market ABI-007,
a proprietary nanoparticle injectable oncology product that has
completed Phase III clinical trials for metastatic breast cancer
and for which the FDA has granted "Fast Track" designation.  The
company also believes that it has established the only commercial
scale protein-engineered nanoparticle manufacturing capability in
the United States.

APPX - American Pharma Partners  $27.85

PLAY (sell naked put):

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

SELL PUT  NOV 22.5  AQO WX    1918   0.45  22.05   7.1%   2.0% *
SELL PUT  NOV 25    AQO WE    1879   1.10  23.90  11.5%   4.6%


**************
CKFR - Checkfree  $25.83  *** Consolidation Complete? ***

Checkfree (NASDAQ:CKFR) is a provider of electronic billing and
payment services.  The company operates its business through 3
independent but inter-related divisions including Electronic
Commerce, Investment Services and Software.  CKFR's electronic
commerce services are primarily targeted to consumers through
financial institutions and Internet portals.  Checkfree is also
a provider of electronic commerce and financial applications
software and services for businesses and financial institutions.

CKFR - Checkfree  $25.83

PLAY (sell naked put):

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

SELL PUT  NOV 22.5  FCQ WX     394   0.30  22.20   4.0%   1.4%
SELL PUT  NOV 25    FCQ WE    1494   1.10  23.90  10.2%   4.6%


**************
CYD - China Yuchai  $26.80  *** Rally Mode! ***

China Yuchai International (NYSE:CYD) is a medium-duty diesel engine
manufacturer in China that also produces diesel power generators and
diesel engine parts.  The company owns a controlling interest in
Guangxi Yuchai Machinery and owns, through six subsidiaries, 76.4%
of the outstanding common shares of Yuchai.  Yuchai primarily makes
and sells diesel engines for medium-duty trucks in China.  Yuchai's
primary products are its 6105QC and 6108 medium-duty engines, which
are principally used in medium-duty trucks with a load capacity of
five to seven tons.  In addition, Yuchai also offers the 4-Series
light-duty engines and the 6112 heavy-duty engines.  Besides diesel
engines, Yuchai produces a limited number of diesel power generators
and diesel engine parts.

CYD - China Yuchai  $26.80

PLAY (sell naked put):

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

SELL PUT  NOV 20    CYD WD     622   0.25  19.75   4.4%   1.3% *
SELL PUT  NOV 22.5  CYD WX     551   0.60  21.90   8.4%   2.7%


**************
ERES - eResearch Technology  $41.76  *** 3-For-2 Split Coming! ***

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  $41.76

PLAY (sell naked put):

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

SELL PUT  NOV 32.5  UDB WZ     136   0.35  32.15   3.9%   1.1% TS
SELL PUT  NOV 35    UDB WG     221   0.80  34.20   7.3%   2.3% *
SELL PUT  NOV 37.5  UDB WU    1315   1.40  36.10   9.9%   3.9%


**************
LEND - Accredited Home Lenders  $25.76  *** On The Move! ***

Accredited Home Lenders Holding (NASDAQ:LEND) is engaged in the
business of making mortgage loans to borrowers across the United
States.  The company's business includes originating, selling and
servicing first and junior-lien mortgage loans primarily secured
by single-family residences.  Accredited Home focuses on borrowers
who don't meet conforming underwriting guidelines because of higher
loan-to-value ratios, the nature or absence of income documentation,
limited credit, high levels of consumer debt or credit difficulties.
The company originates loans primarily based upon the borrower's
willingness and ability to repay the loan and the adequacy of the
collateral.  It has primarily disposed of its loans in whole loan
sales, and, to a lesser extent, in securitizations and loan sales
with retained interests.  Quarterly earnings are due on 10/24/03.

LEND - Accredited Home Lenders  $25.76

PLAY (sell naked put):

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

SELL PUT  NOV 20    QFW WD     555   0.30  19.70   5.4%   1.5% *
SELL PUT  NOV 22.5  QFW WX     551   0.80  21.70  10.0%   3.7%


**************
NCEN - New Century Financial  $32.21  *** Entry Point? ***

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  $32.21

PLAY (sell naked put):

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

SELL PUT  NOV 26.62 NWR WW     628   0.30  26.33   3.9%   1.1% TS
SELL PUT  NOV 30    NWR WF     282   1.10  28.90   9.2%   3.8%


**************
NFLX - Netflix  $52.45  *** A Blockbuster Stock! ***

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  $52.45

PLAY (sell naked put):

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

SELL PUT  NOV 40    QNQ WH    3643   0.55  39.45   4.9%   1.4% *
SELL PUT  NOV 45    QNQ WI    2387   1.50  43.50   9.8%   3.4%


**************
NSCN - NetScreen Technologies  $23.94  *** Trading Range? ***

NetScreen Technologies (NASDAQ:NSCN) develops, markets and sells a
broad family of integrated network security solutions.  The firm's
security solutions provide key security technologies, such as
virtual private networking (VPN), denial of service protection,
firewall and intrusion detection and prevention (IDP), in a line
of easy-to-manage security systems and appliances.  NetScreen's
firewall and VPN systems and appliances deliver integrated firewall,
VPN and denial of service protection capabilities in a single device
using its proprietary application-specific integrated circuits, the
GigaScreen and GigaScreen-II ASICs, and its proprietary security
operating system and applications, ScreenOS.

NSCN - NetScreen Technologies  $23.94

PLAY (sell naked put):

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

SELL PUT  NOV 20    QKN WD     345   0.30  19.70   5.0%   1.5% *
SELL PUT  NOV 22.5  QKN WX    1310   1.00  21.50  10.7%   4.7%


**************
ONXX - Onyx Pharmaceuticals  $24.38  *** Pure Premium-Selling! ***

Onyx Pharmaceuticals (NASDAQ:ONXX) is engaged in the discovery
and development of novel cancer therapies utilizing two primary
technology platforms, small molecules that inhibit the proteins
involved in excess growth signaling, and therapeutic viruses
that selectively replicate in cells with cancer-causing genetic
mutations.  The firm is developing a new small molecule compound,
BAY 43-9006, in collaboration with Bayer Pharmaceuticals.  Using
its proprietary virus technology, the company is also developing
ONYX-411, a second-generation product that targets cancers with
abnormal function of the retinoblastoma tumor-suppressor gene,
and is developing Armed Therapeutic Virus products.

ONXX - Onyx Pharmaceuticals  $24.38

PLAY (sell naked put):

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

SELL PUT  NOV 17.5  OIQ WW     732   0.35  17.15   6.6%   2.0% *
SELL PUT  NOV 20    OIQ WD    1216   0.70  19.30  11.3%   3.6%


**************
PALM - Palm  $25.63  *** Lawsuit Settlement! ***

Palm (NASDAQ:PALM) develops, designs and markets Palm-branded,
hand-held devices, accessories and the Palm operating system.
The firm is organized into two operating segments: the Solutions
Group and PalmSource.  The Solutions Group develops and markets
hand-held devices and accessories to provide the user with a
simple, elegant and useful productivity tool.  PalmSource makes
and licenses the Palm OS and related software, which is referred
to as the Palm platform.  The Palm platform is the foundation for
Palm devices, as well as for devices manufactured by third-party
licensees.  Over 30 million Palm-powered devices have been sold
worldwide.

PALM - Palm  $25.63

PLAY (sell naked put):

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

SELL PUT  NOV 22.5  UPY WX    1425   0.30  22.20   4.0%   1.4% *
SELL PUT  NOV 25    UPY WE     669   1.10  23.90  10.1%   4.6%


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

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.

***************
APOL - Apollo Group  $63.95  *** Uptrend Intact! ***

Apollo Group (NASDAQ:APOL) provides higher education to working
adults.  The company operates through its subsidiaries, The
University of Phoenix, Institute for Professional Development,
The College for Financial Planning Institutes Corporation and
Western International University.  The company offers its many
programs and services at 65 campuses and 111 learning centers
in 37 states, Puerto Rico and Vancouver, British Columbia.

APOL - Apollo Group  $63.95

PLAY (less conservative - bullish/credit spread):

BUY  PUT  NOV-55.00  OAQ-WK  OI=2309  ASK=$0.25
SELL PUT  NOV-60.00  OAQ-WL  OI=1309  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.60-$0.70
POTENTIAL PROFIT(max)=14% B/E=$59.40


**************
BDK - Black & Decker  $45.96  *** Solid Earnings! ***

The Black & Decker Corporation (NYSE:BDK) is a leading maker
and marketer of power tools and accessories, hardware and home
improvement products, as well as technology-based fastening
systems.  The company sells products and services in over 100
countries.  It operates in three business segments: power tools
and accessories, hardware and home improvement and fastening
and assembly systems.  The power tools and accessories segment
manufactures and sells consumer and professional power tools
and accessories, electric cleaning and lighting products and
electric lawn and garden tools.  The hardware/home improvement
segment manufactures and sells security hardware and makes and
sells plumbing products.  The fastening and assembly systems
segment is responsible for the building and sale of fastening
and assembly systems.

BDK - Black & Decker  $45.96

PLAY (moderately aggressive - bullish/credit spread):

BUY  PUT  NOV-40.00  BDK-WH  OI=1538  ASK=$0.15
SELL PUT  NOV-45.00  BDK-WI  OI=635   BID=$0.95
INITIAL NET-CREDIT TARGET=$0.80-$0.85
POTENTIAL PROFIT(max)=19% B/E=$44.20


**************
SEE - Sealed Air  $52.31  *** Bullish Outlook! ***

Sealed Air (NYSE:SEE), operating through its subsidiaries, is
engaged in the manufacture and sale of a wide range of food,
protective and specialty packaging products.  The firm operates
in two business segments: Food Packaging, which provides a wide
variety of flexible films, bags and associated packaging and
absorbent pads, and Protective and Specialty Packaging, which
include its cushioning and surface protection products and also
certain other products.  Sealed Air conducts substantially all
of its business through two direct wholly owned subsidiaries,
Cryovac and Sealed Air Corporation.  These two subsidiaries
directly and indirectly own substantially all of the assets of
the business and conduct operations themselves and through
subsidiaries around the globe.

SEE - Sealed Air  $52.31

PLAY (conservative - bullish/credit spread):

BUY  PUT  NOV-45.00  SEE-WI  OI=381   ASK=$0.25
SELL PUT  NOV-50.00  SEE-WJ  OI=1124  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$49.55


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

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.

***************
BGEN - Biogen  $37.06  *** Bearish Biotech? ***

Biogen (NASDAQ:BGEN) is a biopharmaceutical company principally
engaged in the business of developing, manufacturing and marketing
drugs for human healthcare.  The firm derives revenues from sales
of its Avonex (Interferon beta-1a) product for the treatment of
relapsing forms of multiple sclerosis (MS) and from royalties on
worldwide sales by its licensees of a number of products covered
under patents it controls.  In addition, Biogen has a number of
ongoing research programs and a pipeline of development-stage
products, the furthest along of which, Amevive (alefacept), is
being considered for approval by the United States Food and Drug
Administration and regulatory authorities in the European Union
and Canada for the treatment of moderate to severe psoriasis.

BGEN - Biogen  $37.06

PLAY (sell naked call):

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

SELL CALL  NOV 40    BGQ KH    4758   0.45  40.45   3.6%   1.1% TS
SELL CALL  NOV 37.5  BGQ KU    1446   1.25  38.75   7.8%   3.2%


**************
MGAM - Multimedia Games  $35.34  *** Premium-Selling Only! ***

Multimedia Games (NASDAQ:MGAM) is the leading supplier of
interactive electronic games and player stations to the rapidly
growing Native American gaming market.  The company's games are
delivered through a telecommunications network that links its
player stations with one another both within and among gaming
facilities.  Multimedia Games designs and develops networks,
software and content that provide its customers with a range of
gaming systems.  The company's development and marketing efforts
focus on Class II gaming systems and Class III video lottery
systems for use by Native American tribes throughout the United
States.

MGAM - Multimedia Games  $35.34

PLAY (sell naked call):

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

SELL CALL  NOV 45    QMG KI     213   0.30  45.30   4.0%   0.7% *
SELL CALL  NOV 40    QMG KH     207   0.95  40.95   8.9%   2.3%


**************
NPSP - NPS Pharmaceuticals  $25.78  *** Drug Speculation! ***

NPS Pharmaceuticals (NASDAQ:NPSP) is a biopharmaceutical company
engaged in discovering, developing and commercializing small
molecule drugs and recombinant proteins.  The company's product
candidates are primarily for the treatment of bone and mineral
disorders, gastrointestinal disorders and central nervous system
disorders.  NPS Pharmaceuticals has three product candidates in
active clinical development and several pre-clinical product
candidates.  Two of these product candidates, Preos and AMG 073,
are in Phase III clinical trials.  The company's third product
candidate, ALX-0600, is in a pilot Phase II clinical trial.

NPSP - NPS Pharmaceuticals  $25.78

PLAY (sell naked call):

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

SELL CALL  NOV 35    QKK KG     282   0.25  35.25   4.5%   0.7% *
SELL CALL  NOV 30    QKK KF    5226   0.90  30.90  12.6%   2.9%


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

BEARISH PLAYS - CREDIT SPREADS

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

**************
AMGN - Amgen  $60.30  *** Sell-Off In Progress! ***

Amgen (NASDAQ:AMGN) is a biotechnology company that discovers,
develops, manufactures and markets human therapeutics based on
advances in cellular and molecular biology.  Amgen manufactures
and sells human therapeutic products including Epogen, Neupogen,
Aranesp, Neulasta and Kineret.  Amgen focuses its research and
development efforts on therapeutics delivered in the form of
proteins, monoclonal antibodies and small molecules in the areas
of nephrology, cancer, inflammation and neurology and metabolism.
The company has research facilities in the United States and has
clinical development staff in the United States, the European
Union, Canada, Australia and Japan.  Amgen has acquired Immunex,
a biopharmaceutical firm dedicated to developing immune system
science to protect human health.  Immunex has developed two
major products, Enbrel and Leukine, and has two other products,
Novantrone and Thioplex, which can be used in treating multiple
indications.

AMGN - Amgen  $60.30

PLAY (conservative - bearish/credit spread):

BUY  CALL  NOV-70.00  YAA-KN  OI=14896  ASK=$0.10
SELL CALL  NOV-65.00  YAA-KM  OI=30511  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$65.45


**************
FRE - Freddie Mac  $57.03  *** No More Government Subsidy? ***

Federal Home Loan Mortgage Corporation (NYSE:FRE) or Freddie Mac,
is a stockholder-owned corporation that was established by Congress
in 1970 to support home ownership and rental housing.  Freddie Mac
purchases single-family and multi-family residential mortgages and
mortgage-related securities, which it finances mainly by issuing
mortgage pass-through securities and debt instruments in the
capital markets.  FRE guarantees these securities and mortgage
lenders sell their loans to the company and use the proceeds to
fund new mortgages, which in turn increases the money supply to
homebuyers.  FRE does not make loans directly to homebuyers, but
puts private investor capital to work for homebuyers in general.

FRE - Freddie Mac  $57.03

PLAY (less conservative - bearish/credit spread):

BUY  CALL  NOV-65.00  FRE-KM  OI=2156  ASK=$0.20
SELL CALL  NOV-60.00  FRE-KL  OI=8493  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$60.65


**************
FNM - Fannie Mae  $72.75  *** Freddie's Sister In Trouble Too? ***

Federal National Mortgage Association (NYSE:FNM), commonly known
as Fannie Mae, is a company that works to assure that mortgage
money is readily available for existing and potential homeowners
in the United States.  Fannie Mae does not directly lend money
to homebuyers, but works with lenders to ensure that there is no
shortage of funds available for mortgage loans.  The method in
which Fannie Mae accomplishes this is by purchasing mortgages
from a variety of institutions that make up the primary mortgage
market.  Primary market lenders include mortgage companies,
savings and loans, commercial banks, credit unions and state and
local housing finance agencies. These are the businesses where
the mortgages are originated and the funds are loaned directly
to the borrower.  Fannie Mae then purchases the mortgage, thus
allowing the primary market lender to replenish their funds and
lend more money to homebuyers.

FNM - Fannie Mae  $72.75

PLAY (less conservative - bearish/credit spread):

BUY  CALL  NOV-80.00  FNM-KP  OI=860   ASK=$0.15
SELL CALL  NOV-75.00  FNM-KO  OI=7797  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$75.65


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

SEE DISCLAIMER - SECTION 1

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



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

Netease.com Inc - NTES - close: 60.06 change: +0.56

WHAT TO WATCH: Profit taking in shares of JCOM have brought
fellow oriental internet-related equities like SOHU and NTES
lower.  Shares of NTES closed near support at $60 and its rising
50-dma.  Very aggressive bulls could look to buy the bounce while
bears will be looking to short the breakdown.  Earnings should be
Oct. 29th.  Estimates are 32 cents a share.

Chart=


---

Harman Intl Industries - HAR - close: 121.64 change: +12.39

WHAT TO WATCH: An earnings surge pushes HAR up above the $120
level after beating estimates of 37 cents with net income at 58
cents, announced this morning.  Revenues were up almost 22
percent for the quarter.  The company has a shareholder meeting
on Nov. 12th to vote on and authorize an increase in authorized
shares so they can enact a previously announced 2-for-1 stock
split.

Chart=


---

Allergan Inc - AGN - close: 74.85 change: -0.45

WHAT TO WATCH: After four and a half months of consolidating
sideways between $75 and $82 shares of AGN maybe ready for a
trend change.  The stock has been falling with a trend of lower
highs for two weeks and has broken support at $75.  Now shares
face support near $72.50, which is bolstered by price congestion,
its 200-dma and P&F bullish support.  Investors may defend AGN
there but a breakdown could be disastrous.  Earnings were this 
morning and AGN announced in line with earnings of 57 cents.

Chart=


---

Capital One Financial - COF - close: 60.10 change: -1.68

WHAT TO WATCH: COF has produced a nice bullish trend from its
bounce from $45 in August.  However, the last week has been a
consolidation ahead of its earnings that came out tonight.  The
company beat estimates by 11 cents with net income of $1.17 a
share.  The bad news is COF missed consensus revenue estimates
and it could see some selling.  First level of support is near
$56.00.

Chart=


---

CIENA Corp - CIEN - close: 6.27 change: -0.24

WHAT TO WATCH:  Previous telecom darling Lucent (LU) announced
earnings today and actually produced a profit.  That has many
investors turning their eyes to heyday high-flyer CIEN who
announces in November.  We could see some pre-earnings momentum.
Look for a move over $6.65.

Chart=




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

RKY $53.15 -1.11 - RKY has pulled back from its 52-week high near
$58.00 to a new relative low near its 200-dma.  Earnings are
tomorrow morning.

SYMC $64.49 -2.88 - Company beat estimates by 8 cents this
evening.  Revenues were up almost 32 percent.  SYMC also
announced a 2-for-1 split.

ERTS $101.94 -2.70 - ERTS announces eagerly awaited earnings,
which beat estimates by 6 cents.  Revenues jumped almost 17%.
The company also announced a 2-for-1 split, as predicted in the
MarketMonitor.


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

Fear and Loathing on Wall Street

To Read The Rest of The OptionInvestor.com Market Posture Click Here
http://www.OptionInvestor.com/marketposture/mp_102203.asp


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