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Daily Newsletter, Thursday, 11/06/2003

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The Option Investor Newsletter               Thursday 11-06-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: New Highs Before New Jobs
Futures Markets: Unidirectional Market
Index Trader Wrap: 100K could equate to 10K
Market Sentiment: The Markets Wait


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      11-06-2003           High     Low     Volume Advance/Decline
DJIA     9856.97 + 36.10  9870.60  9773.12 1.77 bln   1848/1341
NASDAQ   1976.37 + 17.00  1977.91  1953.34 2.14 bln   1782/1325
S&P 100   523.84 +  3.59   524.27   518.14   Totals   3630/2666
S&P 500  1058.05 +  6.24  1058.94  1046.93
W5000   10324.30 + 61.20 10330.54 10220.74
RUS 2000  542.94 +  4.03   542.95   537.08
DJ TRANS 2985.49 + 52.80  2985.49  2924.50
VIX        16.74 -  0.12    17.37    16.62
VXO VIX-O  17.58 +  0.02    18.60    17.58
VXN        25.35 +  0.15    26.14    25.27
Total Volume 4,279M
Total UpVol  2,910M
Total DnVol  1,322M
52wk Highs  854
52wk Lows    23
TRIN       0.77
NAZTRIN    0.63
PUT/CALL   0.77
************************************************************

New Highs Before New Jobs

Bullishness breaking out all over on positive economic news
and hopes for good news tomorrow. The Nasdaq led the day on
the strength of Cisco earnings and it rescued the Dow from
a sure sell off. Traders bought the rumor of a good Jobs
report tomorrow morning and the indexes closed near the
highs of the day.

Dow Chart


Nasdaq Chart



Starting the day off was the Chain Store Sales for October
at +3.2% and nearly half the +5.9% rate for September. The
same store sales rates across various retailers painted a
picture of weather related slowness with warmer weather
delaying the purchase of winter clothes. Halloween goods
were reportedly strong but seasonal apparel was weak. The
Bank of Tokyo is currently projecting a rebound to +5%
growth in November and +4% in December as the economy
continues to recover and comparisons with a weak 2002
become easier.

The biggest surprise for the day was the huge drop in the
Jobless Claims. The claims for last week dropped -43,000
from the prior week which was revised up to 391K just as
we expected. The very unexpected drop was well below the
consensus estimates of 376,000. This dropped the four-week
moving average to 380,000 and its lowest level since Jan
2001. Any level under 400,000 signifies a stabilizing
labor market and a number under 350,000 indicates a
recovering labor market. Continuing claims have also
fallen below 3.6 million for the last three weeks.
This huge drop in claims is similar to the drop in 1992
when the economy was recovering from that recession and
the Iraq war. Hopefully this is the start of a new trend.
You know I cannot let this extreme deviation from the norm
pass without expressing doubts about the numbers. Of the
52 states/territories that report claims ONLY SEVEN actually
reported a drop in claims. 45 reported a rise in claims.
Initially I immediately thought California must have had
an impact on the drop due to the fires but they actually
reported an increase of +13,539 for the week. I cannot
find anything that would explain the drop given the state
ratios but I would still be skeptical until next weeks
revision. The market was also skeptical. There was a very
small spike on the announcement which immediately sold off
and no gains for the entire morning.

Other bullish data that was also ignored was the Productivity
for Q3 which increased at a whopping +8.1%. This was the
biggest jump since Q1-2001. Helping fuel this gain was an
increase in the hours worked. This increase in productivity
was also due to the continued trimming of the work force.
Fewer workers, longer hours, restructured manufacturing
plants and more orders produced more output. The constant
pressure to raise earnings in a down economy has forced
employers to do more with less. The faster the order demand
increases the more productivity will jump as the basic lines
are in place and capacity utilization is still only in the
75% range.

Last night Cisco beat estimates and soared in after hours
trading. Overnight the futures sold off substantially from
those highs after the Nikkei dropped -285 points despite
the reasonably good tech news. After the very good Jobless
Claims and high Productivity numbers this morning there was
no bounce at the open and the Dow sank to support at 9780
right out of the gate. Traders were in shock again. Just
like the very bad Layoff report earlier in the week they
just did not know what to do with the numbers. If they were
ready to sell good news it was more good news than they were
ready to accept. The Dow hugged support at 9780 until just
after noon and actually absorbed a very large amount of
selling in that range. The volume was very strong until
about 11:30 as the battle for control was fought and then
it just suddenly stopped. The markets remained soft but
slowly saw a pickup in the buying as the afternoon
progressed as bulls bought the jobs rumor and shorts
covered just in case the rumor was true.

The rumor is of course the Nonfarm Payrolls on Friday. The
consensus estimates run from +50,000 to +63,000 jobs. The
whisper numbers run from +125,000 to a whopping +200,000
jobs. Helping to fuel this rumor were comments from both
Greenspan and Bernanke on jobs growth. Sound familiar?
Remember last month when five Fed heads hit the airwaves
the day before the Payroll report with strong comments on
the jobless recovery? The various comments led investors
to believe that the jobs number was going to be a disaster
and everyone was shorting heavily ahead of the number. The
actual number was for a gain of +57,000 jobs and the market
exploded on short covering after the news. Of course the
Fed heads already knew the number when they went on their
speaking binge. It was a perfect setup and the markets
fell for it completely.

Using the same thought process we discussed on the monitor
today what we should expect after the Greenspan/Bernanke
two step on jobs. Adding in the -43,000 drop in jobless
claims and traders were thinking moon shot. First, the
Jobless Claims were for last week and are only an advance
number and will not be a factor in the payroll number.
The payroll number is based on a survey done around the
third week of the month. The jobless claims were in the
391,000 range for that week. This produces a potential
for a disappointment on Friday. The +57,000 gain last
month was the first gain in seven months and well over
the consensus estimate of -25,000. Now, since the dynamic
duo knew the outcome before they started speaking today
were they trying to give investors hope because the number
is going to disappoint or were they just trying to jump
on the popularity wagon to push a positive release to
even better heights? We will not know until tomorrow but
the markets are setup for a potential disappointment if
the consensus numbers are not beaten.

Still what will a disappointment mean to the markets. With
the rally on the bad layoff news this week it appears the
markets are bad news driven more than good. We sold off on
the good Jobless and Productivity and rallied on the layoffs.
Everyone believes there is a recovery in progress and every
piece of bad news we get now will just keep the Fed on the
sidelines longer. It is a bad news/good news joke in
progress. Despite the positive reports this morning the Fed
Funds futures are still not predicting any change until May.
This and the "considerable period" comments from the Fed
have taken the risk out of the bond market for the near term
and should continue to fuel the recovery. The first quarter
will see another round of tax checks to help the consumer
sector and that should be the final shot that the Fed will
ignore before the rate hike cycle begins. If they could
I am sure they would like to wait until Q3-2004 and give
the home builder sector one more massive injection of
liquidity before the lid slams shut. The Fed Funds rate
is not the real controlling factor for consumer interest
but the bond market controls that sector. The bond rates
are already rising and that will put pressure on the
recovery but they cannot get too far ahead with the Fed
funds at one percent.

A bigger challenge to the market this month is the mutual
fund trading scandal. Every day the number of funds under
investigation grows and now the investigation is moving
into the brokers who recommended those funds. The NASD
said today they had found problems with a dozen major
brokers and were expanding their probe. The evidence of
the impact of the scandal came in the cash flow numbers
today. Remember two weeks ago when TrimTabs was saying
that October could go down as a record month for inflows
with an estimated $30 billion? Surprise, October flows
slowed dramatically with the advent of the probes and the
current tally shows October ending with only $17 billion
in inflows. That $13 billion drop from the estimates could
easily have been a result of offsetting outflows or simply
a hesitance to put more money into funds that may be guilty.
Two weeks ago funds saw $4 billion in inflows, last week
only $1.2 billion. If the spigot is tightening until the
scandal is over then we could be in for a long dry spell.
There are rumors of an impending settlement with funds but
we are far too early in the process to know how each fund
may be impacted by the settlement. It could literally be
in the billions and it could cause some funds significant
cash flow problems. I think this may be the sleeping
giant that could awaken to bite us.

We got some more good news today from the Semiconductor
Industry Association. They upgraded their estimates for
revenue growth for 2003 to +15.8% and to +19.4% for 2004.
To put this into perspective the 2002 growth was only
+1.3%. This is good news for tech stocks and chips in
general as it means the top line is increasing. This
helped push the Nasdaq to close at 1976 and only a stones
throw from 2000. This was another new 52-week high for
the index. The semiconductor index hit a new high of 525
on the news.

The stage is set for Friday. Dow 10,000 and Nasdaq 2,000
are just one strong move above us. A blowout Jobs number
could cause massive short covering and bullish buying and
we could easily hit those numbers at the open. EXCEPT
that this would be too easy. There was some short covering
into the close but it was limited. Very few people appear
to be either short or concerned about being short. The
Jobless Claims this morning should have sent the indexes
to news highs at the open and it fizzled well before the
open. Blowout good news could actually have a reverse
impact on the markets. If jobs suddenly rocketed to +200K
as some whisper numbers expect then bonds would get killed
as well as stocks based on an acceleration of the rate
hike time table. You saw it this morning. Great news and
no positive market reaction.

That leaves us with a quandary. If the number is good and
the market sells off do we buy the dip? Worked every week
since March. If the number is bad do we buy the dip? I
believe that whatever happens the indexes are still shooting
for the 10000/2000 mark and traders will find some way to
justify buying stocks this close to the psychological
target. This could actually be investor suicide but bulls
are not interested in that concept. The general consensus
among traders (not investors) is the plan to short 10K/2K
with both hands. Regardless of what scenario pushes it to
that level the plan is no secret.

Now, we all know what happens when the entire trading
community agrees on a single plan? Disaster. It could be
a monster bear trap. The Fed has already shown that is has
no fear of doing whatever is required to juice the markets.
If ever there was an opportunity to catch traders off guard
this could be it. They could be feeding the market just
enough to keep the bullishness going until we get to that
level. Once all the bears load up on shorts the Fed could
trigger a massive support program and we blow out the top
to new highs well over 10K. I know there are a lot of
readers that think this is heresy. However one of the
Fed mandates is to power the economy and one way to do
that is the juice the markets. Governments buying securities
happens all the time and it would be no stretch of the
imagination to have Greenspan strike a deal with an Asian
country that is hoarding dollars. They could easily put
those dollars to work in our markets when signaled and
actually make a profit on the deal. The Fed intervenes in
markets for them on request so turnabout is fair play.
Obviously this is just speculation but there have been so
many unexplained buy programs at key turning points in the
past that it would be easier to believe this scenario than
one where millions of investors suddenly decided to invest
their life savings in the market at the same exact moment.
Don't fight the Fed. That axiom did not just appear over
night. It has been around far longer than most of us have
been trading.

The bottom line tonight is uncertainty. Nobody knows what
will happen at the open but I would expect the better odds
are for a sell the news event than an explosion on good
news. Either way if we do not have a big market move by
noon trading will probably go dormant and attention will
shift to the Richmond and Kansas City Fed reports on
Monday. We are at the highs and earnings are over. The
VXO is still around 17.50. Funds are in trouble and traders
could be disappointed by the Jobs report. Tomorrow may
be a tossup but next week could be a challenge.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


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

Unidirectional Market
Jonathan Levinson

Equities went higher today, as if such were still reportable news
in what has become a market that goes but one way.  Treasuries
sold off, gold corrected, and the US Dollar Index rose.

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.

10 minute chart of the US Dollar Index


The US Dollar Index set a higher low, approaching 94 in a steep
ascending triangle.  The move off the lows has been sharp and is
accelerating, and it will take some steep selling tomorrow to
avoid a weekly candle print confirming last week's reversal.
Gold and the CRB declined.

Daily chart of December gold


December gold sold off with the dollar's rise on the 8:30 AM
release of very encouraging employment data.  It appears that a
pugilistic and possibly violent resolution of what now appear to
be intractable differences of fact and opinion between Elaine
Chao and John Challenger is imminent.  That said, gold appears to
be coiling into a wedge, and if the weakness in gold equities is
any indication, the break should be to the south, with HUI
dropping 5.04 to close at 207.05, XAU –1.83 to 94.97.  Unlike
equities, it appears that mining stocks are not aggressively
defended, and so while my bullishness in commodities is exceeded
only by my bearishness for broad equities at these levels, I'd
not be surprised to see the Dow and particularly the trashiest of
the Nasdaq issues outperform the HUI in the coming sessions.


Daily chart of the ten year note yield


A flight from quality would not be complete without a selloff in
treasuries, and so the TNX added 6.8 bps to close at 4.418%,
right on the upper pennant resistance line.  A breakout will do
it, and a gap up on bullish 8:30 economic data would certainly do
the trick.  Ben Bernanke, the inflationist architect of the
current Alice-in-Repoland environment for bonds and most
egregiously, equities, attempted to talk down the yield today,
praising the decreasingly-jobless recovery and noting that the
Fed should keep rates low.  He was, unfortunately, shown an utter
lack of respect from the treasury market, and despite his bullish
words for bonds, the selling actually picked up in ten year note
futures.


Daily NQ candles


The NQ had a good day, adding another notch to its strengthening
daily cycle upphase.  Traders' disbelief became extremely
overbought as a routine, textbook intraday cycle downphase was
Steve-McQueened into a long-tailed doji hammer.  The move was
sufficiently sharp to not permit any candle body to draw on the
daily chart, but if you squint, a long green slash is apparent.
The rally only grew in strength as the session progressed,
booming into the cash close to turn all the indices positive,
with the ES outpacing the NQ.  While the chart pattern is clearly
a bearish ascending wedge that should, by all rules of logic,
geometry and decency, break to the downside, it appears that the
holy grails of Dow 10,000 and Nasdaq 2,000 have been legislated
onto the tape.  For this reason, I will cite those levels as next
resistance, and name no others.

In all seriousness, the rally is difficult to explain, given that
it launched countercyclically to those oscillators that had
carried the price thus far.  The secondary launch could have been
short covering except that it was so solid and steady, and
focused lopsidedly in the ES and YM issues.  As well, it launched
from just past 2:30PM.  Was it the Fed's repo money landing in
the pits?  I only know that I saw no particular reason for so
sharp a spike to occur at the instant that it did.


30 minute 20 day chart of the NQ


The aborted downphase is visible here on the 30 minute NQ chart,
following a truncated upphase.  That early end to the CSCO
upphase would normally be quite bearish, but apparently not so
today.  I've identified two critical levels to watch for tomorrow
at 1448 and 1450-3, with this general area forming the possible
neckline of a massive reverse head and shoulders.  A break above
that level could imply an approximately 105 point rally, which
would be the reverse head and shoulders projection from a
neckline at that level.  I note further that, by hook or by
crook, today's buying brought the 30 minute and daily cycle
oscillators into upside harmony, with only the overbought
intraday oscillators as potential cycle resistance.


Daily ES candles


The daily ES is looking bullish in the extreme, but always within
that bear wedge formation.  It's difficult to take that
seriously, as much of the 2003 rally has been erected on bear
wedges, each break of which fulfilling only partially before the
next flagpole rally off Fibonacci support.  Nonetheless, 1064 is
"resistance", with support at 1043.  Easier to watch Dow 10,000,
however.


20 day 30 minute chart of the ES


The 30 minute ES displays the same reverse head and shoulders
neckline, potentially between 1060 and 1064, projecting roughly
50 ES points higher if it plays out.  However, we see here that a
head and shoulders has yet to be invalidated, with the afternoon
strength merely distorting the right shoulder, but not yet
canceling it out.  The lopsided strength that favored YM and ES
reflects itself here in a toppier 300 minute stochastic, but it
too has room to run to the upside in gear with the upphasing
daily cycle above.


150-tick ES


Not all was lost for the bears, with the VXO advancing all of .02
to close at 17.58.  I don't believe that my use of the term
"mania" would be excessive to describe the persistence of the VXO
below 19, as caution appears to have been not just thrown to the
wind but launched into deep space.  The volatility indices
continue to indict the waves of buying, but the intraday 150-tick
ES chart shows a steady sequence of failed head and shoulders
patterns all the way up to the day highs.  Citing the VXO these
days makes me feel like a grade-school crossing guard at a NASCAR
speedway.


Daily YM candles


YM resembles ES most closely here, nothing further to add.


20 day 30 minute chart of the YM


For the past weeks, conventional technical analysis has served to
keep traders out of trouble, but one has had to be very quick to
take profits when they appear.  With the VXO this low and
memories of March 2000 fresh in our minds, it's awfully difficult
to enthusiastically buy dips, whether it's to go long or cover
shorts.  Yet the relentlessness of the bids is a sight to behold,
and one that makes some of us question our assumptions about
technicals and fundamentals.  It's obvious that there's great
downside risk at current levels- perhaps too obvious.  But the
VXO and Investor's Intelligence and other sentiment data reveal
an absence of bears, an absence of caution, and a proliferation
of bullish optimism that is difficult to reconcile with either
history or current news.

The trend remains up.  That means that bearish trades, however
clever or compelling they may seem, are against the trend.  I
believe that a correction is coming, but I see that price keeps
going up.  Where it will go after the bulls capture the
proverbial flag at Dow 10,000 / Naz 2,000 is anyone's guess.  I
guess Down! with an exclamation point, but the charts will tell
us.  They are telling us Up now.  If anyone doubts it, then they
must have missed the wave of bids right at the high of the day on
ES, sustaining the price above my upper Keltner Band on the wide,
generous setting that I use.  The high of the day was held above
that band near half an hour cumulatively this afternoon.  Short
covering or Fed robot jamming, it makes no difference.

I doubt that tomorrow will be boring, and so as traders we'll
have all we need.  It's looking like bonds are vulnerable to a
gap down and equities to a gap up.  See you at the bell.


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

100K could equate to 10K

After a surprising 57,000 gain in new jobs for September, bulls
staged another late session rally to push the indices back near
or to new 52-week closing highs ahead of tomorrow's October
nonfarm payrolls data, where economists look for the economy to
have added an additional 65,000 workers to corporate payrolls.

With the Dow Industrials (INDU) 9,856.97 +0.36% just 143.03
points from the psychological 10,000 level, a nice round 100,000
nonfarm payrolls number might be what it takes to get the Dow
back to 10,000.

The S&P Retail Index (RLX.X) 386.45 +0.78% shrugged off some
mixed October retail sales numbers earlier this morning.  Sector
analysts said much of the weaker numbers were attributed to
record high temperatures, with the wild fires in Southern
California keeping shoppers out of the mall.  Ross Stores
(NASDAQ:ROSS) $53.75 +3.12% is reported to derive nearly 20% of
its sales in Southern California markets, but still managed to
close at a new 52-week high and today's 8th-best performer in the
NASDAQ-100 Index (NDX.X) 1,440.08 +0.73%.

James Brown compiled some of today's same store sales data for
various retailers and posted them in the Market Monitor.

Various October Same Store Sales reports



While investors poured through some of the October sales
comparisons, transportation bulls were hauling away profits.

The economically sensitive Dow Transportation Average (TRAN)
2,985.49 +1.79% shifted into higher gear today, despite oil
prices still hovering at the $30.00 per barrel level.  Market as
well as economic theory is that transports and deeper cyclicals
will lead an economic advance.  Theory also says that job growth
is the last economic indicator to show improvement when an
economy recovers and has tomorrow's nonfarm payrolls data being
closely monitored.

Dow Transportation Average (TRAN) - Weekly Interval



Fasten your seatbelts and hold on for the ride.  While Cisco's
(NASDAQ:CSCO) $22.90 +5.04% grabbed headlines, it was the Dow
Transportation Average (TRAN) that took today's top spot among
sector winners.  While I'm sure there's some shorts getting
steamrolled in the transports, today's gains from a very
economically sensitive sector could be the breakthrough sector to
monitor in coming sessions if the major indices are going to make
bold moves higher.

A quick check of Dorsey/Wright and Associates' sector bullish %
shows the Transport/Non Air Bullish % (BPTRAN) "bull confirmed"
at 85.37%.  It would take a reading of 82% to reverse lower to
"bull correction" status.  In August of 1997, this sector bullish
% reached 90% before reversing lower.  The PnF chart shows the
bullish % recently reaching 88%.  Very BULLISH, but VERY
overbought longer-term.

S&P 500 Index Chart - Weekly Intervals



Market theory is that the transports and deeper cyclical stocks
will lead an advance.  By taking retracement on the SPX from the
benchmark weeks of 12/31/00 and 09/16/01, it sure looks like the
TRAN has been a steadier, if not stronger performer and has been
showing leadership.

We should probably keep tabs on the TRAN as it approaches what
looks to be a past zone of resistance.  I would think if the TRAN
can tear down the wall, it should lead to gains in the SPX.

I marked some past relative weekly lows on the SPX at 1,049 and
1,074, where for some reason, buyers were able to get a short-
term bounce.  The thought is, that these levels should provide
some type of resistance.  The 1,049 level is broken, and 1,074
level looks to be in play, perhaps corollary with TRAN 3,050.

Pivot Matrix -



After seeing a stop loss triggered by 2-cent in a profiled SPY on
October 24 by 2-cents, I may have smashed my trading terminals if
the QQQ had traded my bullish stop of $34.33 by today's close.

Ooooeeee!  I looks like there's a lot of correlative resistance
levels stacked higher, but by golly, if the transports can smash
through the 3,000 level (on a strong nonfarm number) then the
major indices, should be able to break above their WEEKLY R1's
and challenge their WEEKLY R2's into the weekend.

Let us not forget though, at 10:00 AM EST, September wholesale
inventories will be released.  Economists' expect inventories to
rise 0.2% after a decline of 0.2% in August.  Traders and
investors should remember that a DECLINE in inventories is viewed
as positive (demand pulling inventory off the shelf), and a RISE
in inventories more negative (not enough demand for product).
Then at 03:00 PM EST, September consumer credit is expected to
come in at $5.3 billion, down from August's $8.2 billion.

As we begin looking at some of the major indices, a quick check
of S&P futures (sp03z) shows today's settlement at 1,058.50 and
above our bullish bias level of 1,051.20.  Today's 1,058.50
settlement is a 52-week settlement high.

S&P 100 Index Chart - Daily Intervals



A bull's hopes for a bullish session were in the gutter early
this morning as Cisco's earnings and positive economic data
didn't seem to be catching hold.  But when the lunchtime crowd
returned and the major indices had clawed back to unchanged
levels, bulls looked to be grazing ahead of tomorrow's nonfarm
payrolls data.

I've always felt the MARKET always knows the news before it is
announced, and it just doesn't make sense that the transports
would be at the top of the sector's winner list, if there wasn't
some type of good news coming.

I've placed what I think would be TRAN equivalents on the OEX
chart at its WEEKLY R1 and WEEKLY R2 levels.

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

The broader S&P 500 Bullish % ($BPSPX) saw a net gain of 1 stock
to a point and figure buy signal.  Still "bull confirmed" at
80.6%.

Dow Industrials Chart - Daily Intervals



"I think I can, I think I can, I think I can" said the little
train that could.  Heavyweight Procter & Gamble (NYSE:PG) $97.56
+0.25% is still close to the $100.00 level, where a trade there
might help the INDU reach the 10,000 level.

When we look at the Dow's bar chart, we have never seen a "spike"
high on a relative high be broken back to the upside without a
nice pullback.  So far, the INDU hasn't had a "nice" pullback and
a break to new highs would be DIVERGENCE from the past, and I
think be a signal that 10,000 is in the cards.

Today's trade saw no net change in the very narrow Dow
Industrials Bullish % ($BPINDU).  Still "bull correction" at 80%.

NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals



It is impossible to say for sure, but some of my "short-covering"
stock, or stocks I think should find support from short covering
bears did not perform well today.  I'm left with the impression
that today's buying was largely from bulls, not bears.  It may
take a strong nonfarm payrolls number to get the QQQ above $36.15
and have shorts panicking for a QQQ rally to the $36.65 level.

Today's trade saw no net change in the NASDAQ-100 Bullish %
($BPNDX).  Still "Bear correction" status at 74%.

Jeff Bailey


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

The Markets Wait
- J. Brown

The sentiment will be brief tonight because investors are all
waiting on one thing - the Jobs report tomorrow.  Or more
specifically the non-farm payrolls report.  The general estimate
is for an increase of 67,000 jobs but several big analyst firms
have estimates in the 120,000 to 125,000 range.  There is even a
whisper number closer to 200,000.  Should the report disappoint
it could be very painful for the bulls.  Jim does an excellent
job discussing the jobs report in his wrap tonight.

The CSCO report last night had set up tech traders with
expectations for a rally today so the early morning weakness came
as a surprise.  Yet by the close most stocks were higher with the
heaviest buying in technology (software, semiconductors, biotech)
and the heaviest selling in gold.  The market internals were
pretty bullish and are much more revealing than the closing
numbers on the DJIA or the COMPX.

Advancing issues outpaced decliners 17 to 11 on the NYSE and 17
to 12 on the NASDAQ.  Up volume was about double down volume on
the NYSE and the NASDAQ.  Total volume was decent.

Trade carefully.  There are a lot of traders just waiting for the
indices to hit the psychological markers at 10,000 and 2,000 on
the Dow and NASDAQ.  Whether that proves to be a top or the
beginning to our next surge higher is up for grabs but I'd be
extra cautious about betting on the bulls.  They're looking
mighty tired.


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

Market Averages

DJIA ($INDU)

52-week High:  9896
52-week Low :  7197
Current     :  9856

Moving Averages:
(Simple)

 10-dma: 9767
 50-dma: 9604
200-dma: 8855



S&P 500 ($SPX)

52-week High: 1061
52-week Low :  768
Current     : 1058

Moving Averages:
(Simple)

 10-dma: 1047
 50-dma: 1030
200-dma:  950



Nasdaq-100 ($NDX)

52-week High: 1445
52-week Low :  795
Current     : 1440

Moving Averages:
(Simple)

 10-dma: 1416
 50-dma: 1380
200-dma: 1196



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

There is little change here.  The fear indices were little
changed as the broader markets crawled higher.

CBOE Market Volatility Index (VIX) = 16.74 -0.12
CBOE Mkt Volatility old VIX  (VXO) = 17.58 +0.02
Nasdaq Volatility Index (VXN)      = 25.35 +0.15


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.77        669,108       512,323
Equity Only    0.61        548,140       336,513
OEX            1.03         15,694        16,108
QQQ            0.73         22,150        16,076


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.7    + 0     Bull Confirmed
NASDAQ-100    74.0    - 2     Bear Correction
Dow Indust.   80.0    + 0     Bull Correction
S&P 500       80.6    + 1     Bull Confirmed
S&P 100       79.0    + 0     Bull Correction


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

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

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

 5-dma: 1.08
10-dma: 1.06
21-dma: 1.06
55-dma: 1.10


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

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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    1704      1782
Decliners    1101      1261

New Highs     291       296
New Lows       14        12

Up Volume   1115M     1426M
Down Vol.    591M      646M

Total Vol.  1725M     2086M
M = millions


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

Commitments Of Traders Report: 10/28/03

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

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

S&P 500

It's been a long week since last we looked at the COT data
and we're still not seeing any big moves by the Commercial
traders.  The same holds true for small traders but they did
reduce some of their short positions.


Commercials   Long      Short      Net     % Of OI
10/07/03      390,232   402,964   (12,732)   (1.6%)
10/14/03      391,972   410,299   (18,327)   (2.3%)
10/21/03      394,176   411,246   (17,070)   (2.1%)
10/28/03      391,596   412,498   (20,902)   (2.6%)

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

Small Traders Long      Short      Net     % of OI
10/07/03      138,644    88,018    50,626    22.3%
10/14/03      133,940    86,418    47,522    21.6%
10/21/03      136,643    88,290    48,343    21.5%
10/28/03      137,791    76,791    61,000    28.4%

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


E-MINI S&P 500

Hmm... we are seeing some movement in the e-minis.  Commercials
have upped their short positions by 24K contracts.  Small Traders
may have gotten the hint too.  Short interest is up but the real
change is the 45K drop in long contracts.


Commercials   Long      Short      Net     % Of OI
10/07/03      212,273   225,377    (13,104)  ( 3.0%)
10/14/03      221,897   233,066    (11,169)  ( 2.5%)
10/21/03      226,985   236,906    ( 9,921)  ( 2.2%)
10/28/03      220,171   260,644    (40,473)  ( 8.4%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  133,299   - 09/02/03

Small Traders Long      Short      Net     % of OI
10/07/03      134,990    63,560    71,430    36.0%
10/14/03      161,208    59,213   101,995    46.3%
10/21/03      168,236    56,564   111,672    49.7%
10/28/03      123,569    59,742    63,827    34.8%

Most bearish reading of the year: (77,385)  - 09/02/03
Most bullish reading of the year: 449,310   - 06/10/03


NASDAQ-100

This time it's the Small Traders making a move in the NDX
futures.  Long contracts are up nearly a third to more than
21K.  Commercials are still comatose but the trend is growing
slowly more bearish with a small bump in short positions.


Commercials   Long      Short      Net     % of OI
10/07/03       33,253     40,861   ( 7,608) (10.3%)
10/14/03       34,639     41,880   ( 7,241) ( 9.5%)
10/21/03       36,314     43,305   ( 6,991) ( 8.8%)
10/28/03       36,168     46,272   (10,104) (12.3%)

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:   9,068   - 06/11/02

Small Traders  Long     Short      Net     % of OI
10/07/03       18,182     9,688     8,494    30.5%
10/14/03       16,822     9,046     7,776    30.1%
10/21/03       16,917     9,750     7,167    26.9%
10/28/03       21,640     8,830    12,810    42.0%

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

DOW JONES INDUSTRIAL

There is very little change here for the Small Trader but
Commercial Traders have upped both their longs and their shorts.


Commercials   Long      Short      Net     % of OI
10/07/03       16,277     9,528    6,749      26.2%
10/14/03       16,595     9,433    7,162      27.5%
10/21/03       16,876     9,037    7,839      30.3%
10/28/03       20,504    11,366    9,138      28.7%

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

Small Traders  Long      Short     Net     % of OI
10/07/03        7,392     7,910   (  518)   ( 3.4%)
10/14/03        6,427     8,495   (2,068)   (13.9%)
10/21/03        5,392     8,842   (3,450)   (23.1%)
10/28/03        5,295     8,864   (3,569)   (25.2%)

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   8,523  -  8/26/03

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


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The Option Investor Newsletter                  Thursday 11-06-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: None
Call Play Updates: APA, COO, FD, JBL, JCI, LOW, QLGC, VRTS
New Calls Plays: PGR
Put Play Updates: JBLU
New Put Plays: ATH


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

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


CALLS:
*****

None


PUTS:
*****

None


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option* and futures traders. The combination of the proven Man
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********************
PLAY UPDATES - CALLS
********************

Apache Corp. - APA - close: 70.00 change: +0.70 stop: 66.25

It didn't get off to the bullish start we were hoping for,
dropping sharply early in the week, but APA is playing catchup
now, with energy prices bouncing back.  After dipping below both
the midline of its rising channel and the 50-dma (now at $69.18),
the stock was defended by the bulls and has had a nice upward
move over the past couple sessions, coming to rest tonight right
at $70 and just below our entry trigger of $70.50.  Despite the
delay of a few days, our action plan remains the same.  Once APA
trades that level, it will be above the recent intraday
resistance and above the 30-dma ($70.12), which is the last of
its moving averages currently posing as resistance.  The best
entry will likely to be to enter on the initial breakout,
providing that it doesn't occur on a gap.  Our initial target for
the play will be $73, which would constitute a retest of the
recent highs.  But we're expecting to see the stock maintain its
pattern of higher highs and higher lows, and that means we ought
to see a run towards the top of the channel at $76.  Maintain
stops at $66.25 for now.

Picked on November 2nd at    $69.72
Change since picked:          +0.28
Earnings Date               1/22/04 (unconfirmed)
Average Daily Volume =     1.37 mln
Chart =


---

Cooper Cos - COO - close: 43.95 chg: +0.20 stop: 41.75 *new*

Bulls continue to experience a slow drift higher in shares of COO
but we have yet to see the stock break out above resistance at
$45.00.  We are encouraged by the bounce from $43.00 but do not
suggest new bullish positions until COO can show more strength.
Short-term traders can plan on exiting when the stock hits our
initial target at $45.00.  We are inching our stop up to 41.75,
just under the 50-dma.

Picked on October 12 at $41.40
Change since picked:    + 2.55
Earnings Date         09/03/03 (confirmed)
Average Daily Volume:      391 thousand
Chart =



---

Federated Dep Store - FD - cls: 48.26 chng: +1.21 stop: 46.30*new*

After more than a week of failed attempts, FD finally broke out
over the $48 resistance level on Thursday, playing a bit of
catchup with the overall Retail index (RLX.X), which is
continuing to channel its way higher.  When we initiated coverage
of FD, we were looking for a rally to the $50 level ahead of the
company's earnings report on November 12th, and with today's
breakout, it looks like we just might get there.  With only 3
more trading days until we need to drop the play ahead of
earnings, only aggressive traders should be considering new
positions.  FD is not a fast-moving stock and as we move into the
final stretch, our focus needs to turn to managing exits for
optimum profitability.  Conservative traders should be looking to
harvest gains into further strength in the $49-50 area, and we
got really close to that today, printing an intraday high of
$48.90.  As we get closer to both our profit target and the
temporal end of the play, it is time to get more aggressive with
our stop, being less willing to give back our hard-won gains.
Raise stops to $46.30 tonight, which is just below the intraday
lows of the past 8 sessions.

Picked on October 9th at     $45.60
Change since picked:          +2.66
Earnings Date              11/12/03 (confirmed)
Average Daily Volume =     1.88 mln
Chart =


---

Jabil Circuit - JBL - close: 30.93 chg: +0.81 stop: 27.99 *new*

Our new call play from Tuesday experienced some profit taking the
following session but dip buyers stepped in to defend the stock
near the $29.50 level.  By the closing bell it was back above the
$30 mark.  The positive market environment today allowed JBL to
power higher with another 2.68% gain.  We're very encouraged by
the strong volume on the last three sessions.  More conservative
traders may want to place there stop under the $29.00 level,
which should now act as support.  We're going to inch ours up to
27.99.  Keep an eye on the SOX.  The chip sector has been very
strong but looks over due for some profit taking.

Picked on November 04 at $30.11
Change since picked:     + 0.82
Earnings Date          09/18/03 (confirmed)
Average Daily Volume:      1.4 million
Chart =


---

Johnson Controls - JCI - cls: 108.86 chg: -0.94 stop: 104.99

After surging higher on Tuesday above the $110 level we're seeing
some mild profit taking in JCI the last two sessions.  The stock
is confidently in its up trend but traders may want to wait and
see if shares bounce from the $107.50-108.00 region.  This may be
the next entry point for short-term bulls.  There is no new news
and we are leaving our stop loss unchanged at 104.99.

Picked on October 30 at $107.07
Change since picked:     + 1.79
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      432 thousand
Chart =


---

Lowe's Companies - LOW - close: 59.17 change: +0.37 stop: 58.00

LOW started out the week on a high note, tagging a fresh all-time
high over $60.  Since then it has been a bit of a rough road as
the stock has suffered a bit of profit taking.  The start of
today's session did not look encouraging, with the stock falling
as low as $58.10 by midday.  Fortunately, the bulls were waiting
and pounced on the perceived bargain just above our $58 stop.
That was the dip-buying opportunity for those that chose to take
it and now we'll see if there are new highs in store.  Remember
we're following the rising channel as our guide for an upside
price target and with the top of that channel now just over $62,
that would make a good level for conservative traders to harvest
some gains.

Picked on October 23rd at    $58.65
Change since picked:          +0.52
Earnings Date              11/17/04 (unconfirmed)
Average Daily Volume =     3.85 mln
Chart =


---

QLogic Corp. - QLGC - close: 57.70 change: -0.73 stop: 55.50

Still see-sawing its way higher, QLGC has solidified its breakout
over the $56 level and has spent this week tracing out a pattern
of higher lows and higher highs.  The $58.00-58.50 area is still
presenting some resistance to the bulls' progress, but with the
continued strength in the Semiconductor index (SOX.X) and the
NASDAQ Composite making consistent progress on its way to 2000,
we're still looking for QLGC to make a run into the $60-61 area.
A foray into that zone should be used for locking in gains in the
play.  Intraday dips near $57 can be used for aggressive entries,
but after the sharp rise in the past couple weeks, such a
strategy does carry increased risk.  To mitigate that risk
somewhat, we're using a tighter stop at $55.50, just under the
intraday lows of the past week and the 10-dma ($56.17).

Picked on October 21st at    $54.21
Change since picked:          +3.50
Earnings Date               1/14/04 (unconfirmed)
Average Daily Volume =     4.46 mln
Chart =


---

Veritas Software -VRTS - cls: 38.61 chng: +0.25 stop: 35.50*new*

Traders wondering if VRTS was ever going to follow through on its
breakout over the $37 level got their answer yesterday as the
stock powered higher and closed above $38 for the first time since
April of 2002.  There's still a fair amount of resistance all the
way up the chart, but it looks like the bulls are intent on taking
the stock up to the $40 level.  And if they're able to crest that
obstacle, we'll be looking for a potential run towards $45, which
should be strong resistance.  VRTS has been finding intraday
support at the 10-dma ($36.95) over the past two weeks, so an
intraday dip and rebound from that average looks like the ideal
entry setup.  Each breakout to new highs has been followed by a
brief pullback to confirm old resistance as new support, so we're
not enthusiastic about taking momentum entries on this play.  Note
that we've raised our stop to $35.50 tonight, which is below what
should be strong support now, as well as below last week's
intraday dip to $35.95 and the 20-dma ($35.85).

Picked on October 28th at    $37.27
Change since picked:          +1.34
Earnings Date               1/21/04 (unconfirmed)
Average Daily Volume =     6.14 mln
Chart =



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

Progressive - PGR - close: 76.01 chg: +0.83 stop: 72.75

Company Description:
The Progressive group of insurance companies ranks third in the
nation for auto insurance based on premiums written, offering its
products by phone at 1-800-PROGRESSIVE, online at progressive.com
and through more than 30,000 independent insurance agencies.
(source: company press release)

Why We Like It:
In our search for profitable bullish play candidates we've had
our eyes on PGR for a while.  The stock has slowly been
consolidating higher under resistance near $76.00-76.20 and
today's action looks like it is finally ready to hit new highs.
The stock has been out performing its peers per the IUX insurance
index and we really like the trend of higher lows.  The stock's
P&F chart also shows a bullish catapult breakout pattern that
further solidifies the bullish bias.

The company recently announced earnings on October 22nd and beat
estimates by 8 cents.  PGR's earnings announcement ended the mid-
October down turn and ignited the two-week rally from the $71
level. A few days after PGR's earnings announcement Warren
Buffett was interviewed and he said there weren't many
opportunities in stocks, bonds or corporate debt these days but
he was encouraged by signs in the insurance sector.  He
specifically complimented PGR for its "strong systems".  Whether
or not you agree or disagree with Buffett doesn't matter here.
He is a very long-term investor.  We're short-term trading.  The
short-term outlook for PGR looks bullish but we're going to
protect ourselves and only go long the insurance stock on a fresh
breakout.  We will use a TRIGGER at 76.25 to open the play.  Once
initiated we'll start with a stop loss at 72.75, just under the
simple 50-dma.

Suggested Options:
Short-term traders can choose from the November or December
options while longer-term traders can look over the February or
May strikes.  We like the 75's and 80's.  Keep in mind that the
Novembers only have two weeks left and the 80s are a bit risky.

BUY CALL NOV 75 PGR-KO OI= 831 at $1.95 SL=1.00
BUY CALL NOV 80 PGR-KP OI= 266 at $0.25 SL= --
BUY CALL DEC 75 PGR-LO OI=  28 at $3.00 SL=1.50
BUY CALL DEC 80 PGR-LP OI=  14 at $0.85 SL= --

Annotated Chart:



Picked on November xx at $xx.xx
Change since picked:     + 0.00
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      654  thousand
Chart =



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

JetBlue Airways - JBLU - cls: 55.20 chg: -0.44 stop: 58.51 *new*

The XAL airlines index has been trading sideways the past couple
of sessions and JBLU is following suit.  The very narrow range
could merely be a consolidation of the recent declines before its
next leg down but traders should be careful.  We're lowering our
stop loss to 58.51 but conservative traders could eye the simple
10-dma (56.74) for stop guidance.  We're a little surprised that
the airlines didn't move higher today, especially JBLU after
positive traffic numbers.  JBLU said October traffic rose 62.7%
with load factor, or percentage of seats filled, rising to 85.5%.
Momentum traders may want to use a trigger under $54 to launch
any new bearish positions.  Meanwhile a failed rally under the
10-dma should appeal to more nimble traders.

Picked on November 02 at $57.67
Change since picked:     - 2.47
Earnings Date          10/23/03 (confirmed)
Average Daily Volume:      1.5 million
Chart =



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

Anthem, Inc. - ATH - close: 72.54 change: -0.89 stop: 70.05

Company Description:
Anthem is a health benefits company serving over 7 million
members, primarily in Indiana, Kentucky, Ohio, Connecticut, New
Hampshire, Colorado and Nevada.  The company owns the exclusive
right to market its products and services using the Blue Cross
Blue Shield (BCBS) names in these states under license agreements
with the Blue Cross Blue Shield Association.  ATH's product
portfolio includes a diversified mix of managed care products,
including health maintenance organizations (HMOs), preferred
provider organizations (PPOs) and point-of-service (POS) plans,
as well as traditional indemnity products.  The company's managed
care plans and products are designed to encourage providers and
members to select cost-effective healthcare by utilizing the full
range of its medical management services.

Why we like it:
While the Health Care index (HMO.X) has been steadily marching
higher with the rest of the market and is currently just below
its all-time highs, ATH has been lagging badly in recent weeks.
After dropping sharply from the $82 level in early August and
then traded sideways below $75 resistance right up until a bull-
trap breakout ahead of earnings on 10/27.  While the numbers came
in as expected, there was no upside guidance and that combined
with news that the company would be acquiring WLP didn't sit well
with investors, sending the stock reeling over the next week.
Both the drop in early August and the one following earnings
bounced from just above $66.  While the August bounce had some
life in it, this one is already rolling over and it looks like
the bears will be victorious.  The line in the sand will be that
$66 support -- if it gives way, then we ought to see
significantly lower levels in the not-too-distant future.

The PnF chart is already on a big Sell signal, with a bearish
price target of $56, and the trade at $67 actually punctured the
bullish support line.  A trade below $66 will solidify that
breakdown, so we're using a trigger of $66 on the play.
Aggressive traders can enter on the initial break, while those
using a more cautious approach can look for a failed rebound
below $68.50, which should now be very solid resistance.  There
may be some mild support found near $63.50, but we expect that to
be short-lived.  We're targeting a drop to stronger support near
$60.  With the 10-dma ($69.45) diving to meet price action,
momentum is definitely on the bears' side right now.  We're
setting our stop initially at $70.05, which is just above recent
resistance, the 10-dma and the 200-dma ($70.00).

Suggested Options:
Aggressive short-term traders will want to focus on the November
65 Put, as it will provide the best return for a short-term play.
Longer term traders will want to look to the December 65 Put, as
it should provide ample time for ATH to move in our favor without
time decay becoming a major factor.

BUY PUT NOV-70 ATH-WN OI= 540 at $3.40 SL=1.75
BUY PUT NOV-65 ATH-WM OI=2085 at $0.80 SL=0.40
BUY PUT DEC-65 ATH-XM OI=2447 at $1.85 SL=0.90

Annotated Chart of ATH:



Picked on November 6th at    $67.22
Change since picked:          +0.00
Earnings Date               1/26/04 (unconfirmed)
Average Daily Volume =     1.63 mln
Chart =



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The Option Investor Newsletter                 Thursday 11-06-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: CALL - VRTS
Traders Corner: Trust Allah, But Tie Up Your Camel


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

Veritas Software -VRTS - close: 38.61 change: +0.25 stop: 35.50

-Company Description-
As an independent supplier of storage management software, VRTS
develops and sells products that protect against data loss and
file corruption, allowing rapid recovery after disk or computer
system failure.  The company's products provide continuous data
availability in clustered computer systems with shared resources.
This enables IT managers to work efficiently with large file
systems, making it possible to manage data distributed on large
computer network systems without harming productivity or
interrupting users.  VRTS provides products for most popular
operating systems, including UNIX and Windows NT, as well as a
full range of services to assist its customers in planning and
implementing their storage management solutions.

- Most Recent Update (Thursday, Nov 6, 2003)-
Traders wondering if VRTS was ever going to follow through on its
breakout over the $37 level got their answer yesterday as the
stock powered higher and closed above $38 for the first time since
April of 2002.  There's still a fair amount of resistance all the
way up the chart, but it looks like the bulls are intent on taking
the stock up to the $40 level.  And if they're able to crest that
obstacle, we'll be looking for a potential run towards $45, which
should be strong resistance.  VRTS has been finding intraday
support at the 10-dma ($36.95) over the past two weeks, so an
intraday dip and rebound from that average looks like the ideal
entry setup.  Each breakout to new highs has been followed by a
brief pullback to confirm old resistance as new support, so we're
not enthusiastic about taking momentum entries on this play.  Note
that we've raised our stop to $35.50 tonight, which is below what
should be strong support now, as well as below last week's
intraday dip to $35.95 and the 20-dma ($35.85).


- Play of the Day Comments -
We're going to try again.  VRTS hit some early morning profit
taking on Thursday but by midday had already started its rebound.
Volume has been stronger on the rallies than the declines and if
the jobs report doesn't crater the markets then VRTS could surge
higher into the weekend.


- Suggested Options -
Shorter Term: The November 35 Call will offer short-term traders
the best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the December 40 Call.  This
option is currently out of the money, but should provide
sufficient time for the stock to move higher without time decay
becoming a dominant factor over the short run.  More conservative
long-term traders will want to use the December 35 Call.

BUY CALL NOV-35 VIV-KG OI=15983 at $4.00 SL=2.20
BUY CALL NOV-40 VIV-KH OI= 6992 at $0.85 SL= --
BUY CALL DEC-35 VIV-LG OI= 1425 at $4.80 SL=2.50
BUY CALL DEC-40 VIV-LH OI= 5883 at $1.60 SL=0.80

Annotated Chart:




Picked on October 28th at    $37.27
Change since picked:          +1.34
Earnings Date               1/21/04 (unconfirmed)
Average Daily Volume =     6.21 mln
Chart =



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

Trust Allah, But Tie Up Your Camel
By Mike Parnos, Investing With Attitude

The mutual fund industry is under attack.  Brokers and fund
managers are being charged with illegal trading practices – and
this is probably just the tip of the iceberg.  It's like the
cockroach theory.  If you see one cockroach, you know there are
hundreds of others lurking nearby.  And these cockroaches are
absconding with your money.  Where's a good exterminator when you
need one?

With new allegedly illegal trading and accounting practices being
exposed on a weekly basis, investors are heading for the hills.
Someone yelled "fire" and mutual fund dollars are heading for the
exits by the millions.  More millions will surely follow.  Where
do these millions go?  Into the bank, or brokerage account of Mr.
or Mrs. middle America?  And what do Mr. & Mrs. Middle America
have in common?  They're struggling with the timeless question:
Who Do You Trust?

Unfortunately, we live in a society where most people take as
little responsibility as possible.  So, they search for someone
they can trust to do all the tasks they don't want to, or don't
have the time to, do themselves.  There's the kid who cuts the
lawn.  He's OK.  After all, how much damage can he do?  There's
the guy who makes their pizza.  He's got a recipe and all he has
to do is count out and place the pepperoni.  Not much risk there.
The same can be said for dealing with your dry-cleaning an oil
change and maybe the guy who fixes your toilet.

It seems that Mr. and Mrs. Middle America have yet to learn to
prioritize.  Curiously, they place the management of their
financial future into the same category as fixing their toilet.
They accord it the same amount of thought.  They want the best
plumber the Yellow Pages can cough up.   But, if their toilet
explodes, you can run to Home Depot, with $100, and be back with a
new toilet in an hour.   If you suffer severe financial losses in
a mutual fund or with a mediocre advisor (salesman), you can't run
to the bank and, for $100, come home with a new portfolio in
perfect working order.

There's no simple solution, but it seems to me like Mr. & Mrs.
Middle America should spend a lot less time in front of the boob
tube and more time learning about money.  There are hundreds of
books that go into great detail on how and where to invest,
diversify your investments, etc.  For those who are a few
sandwiches short of a picnic, these books are written in lay terms
that even Bart Simpson can understand.  It just takes some effort.

Considering what's at stake, it seems to be well worth the daily
sacrifice of a few "Seinfeld" reruns to study a little and
eventually put your financial house in order – and safe.  What do
you do in the meantime?  CDs, Treasuries, etc. are safe.  They
won't make you a fortune, but it's safer than arbitrarily giving
it to fund managers, brokers and advisors with mail-order diplomas
displayed prominently on their cubicle wall.

So, the bottom line is:  Trust Allah, but tie up your camel.   The
view is a lot better riding ON the camel than walking BEHIND it.

You Can Lead A Camel To Water . . .
How do options relate to keeping your investments safe?  CPTI
students know from past columns that protective puts are just one
of the effective methods.  But you'd be surprised how many
investors/traders, even after being taught how to insure their
investments, don't put the knowledge to good use.

Over the years I've taught students various protective strategies
only to have them abandon the conservative approach and jump on
the momentum train.  Some got off in time while others were still
on board when the market derailed, which falls into the category
of TS.

Don't come to me for sympathy.  I learned a lot of lessons the
hard (expensive) way.  CPTI students are here to learn.  I
certainly don't have all the answers – far from it.  But all we
can do is know how to limit our exposure and give ourselves a good
chance to make a profit – and we have to do it one trade at a
time.
_________________________________________________________________

NOVEMBER AND ONGOING POSITIONS
Position #1 – SPX Iron Condor – Trading @ 1058.05
We sold 10 contracts of November SPX 985 puts and bought 10
contracts of November SPX 975 puts for a credit of $1.10 ($1,100).
Then we sold 7 contracts of November SPX 1075 calls and bought 7
contracts of November SPX 1090 calls for a credit of $1.50
($1,050) and a total net credit of $2,150.
We've created a maximum profit range of 985 to 1075.  With two
weeks left, anything can happen.  A pullback would be nice.

Position #2 – AFCI Iron Condor – Position closed for $700 loss.
Que sera, sera.

Position #3 – OEX Iron Condor (By Request) – 523.84
We sold 10 contracts of the OEX November 490 puts and bought 10
contracts of the OEX November 480 puts for a credit of about $.90.
Then, sold 10 contracts of the OEX November 545 calls and buy 10
contracts of the OEX November 555 calls for a credit of about
another $.90.  Our total net credit will be about $1.80.  Our
maximum profit range is 490 to 545.

Position #4 – BBH – Siamese Condor - $128.93
Sell 10 contracts of the BBH November $130 puts and 10 contracts
of the BBH November $130 calls for about $8.50.  Then, buy 10
contracts of BBH November $140 calls and 10 contracts of the BBH
November $120 puts for about $2.40.  The net credit should be
about $6.10.  Our profit range is $123.90 to $136.10 and those are
also our exit parameters.  The closer BBH finishes to $130, the
more we can make.  Looking very good.

Position #5 – QQQ Put Calendar Spread – Trading @ $35.93
We decided to risk a buck.  Since many folks think the market is
due to correct.  We created a cheap play that will let us take
advantage of a nice down move.  Meanwhile, we will continue to
sell against the January put while we wait.

We bought 10 contracts of January 04 QQQ $32 puts and sold 10
contracts of October 03 QQQ $32 puts for a total debit of $1.00
($1,000).
The October $32 puts expired worthless and we rolled out to the
November $32 and took in a $.30 credit.  We now have a new cost
basis of $.70.

OEX – Bearish Calendar Spread – OEX @ $523.84
We own 8 contracts of OEX November 470 puts @ $10.60 and sold 8
contracts of OEX September 470 puts @ $2.20 for a total debit of
$8.40.  The Sept. 470 puts obviously expired worthless.  We sold
the October 490 puts, took in another $3.10 and those also expired
worthless.  On Thursday we sold the November 485 puts for $2.60.
Our cost basis is now $2.70.

QQQ ITM Strangle – Ongoing Long Term -- $35.93
We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts
of the 2005 QQQ $29 calls for a total debit of $14,300.  Then we
sold 10 contracts of the QQQ Oct. 33 puts and 10 contracts of the
QQQ Oct. 34 calls for a total credit of $1,900.  We bought back
our $33 puts and $34 calls and rolled out to November $34 puts and
$34 calls, taking in another $1.15 ($1,150).  So far, so good,
but, again, a pullback would be nice.

HPQ (Hewlett Packard) Bear-Put Spread – HPQ at $23.48
This is a directional bet.  We anticipate HPQ may return to the
$15 range.  We own 10 contracts of the HPQ Feb. 2004 $20 puts @
$2.25 and we sold 10 contracts of the HPQ Feb. 2004 $15 puts @
$.40.  Total debit of $1.85.   Potential max profit of $3.15.
This is a long-term position – thank goodness.
__________________________________________________________

New To The CPTI?
Are you a new Couch Potato Trading Institute student?  Do you have
questions about our educational plays or our strategies?  To find
past CPTI (Mike Parnos) articles, look under "Education" on the OI
home page and click on "Traders Corner."  They're waiting for you
24/7.
___________________________________________________________

Happy Trading!
Remember the CPTI credo: May our remote batteries and self-
discipline last forever, but mierde happens. Be prepared! In
trading, as in life, it’s not the cards we’re dealt. It’s how we
play them. Your questions and comments are always welcome.

Mike Parnos
CPTI Master Strategist and HCP
_____________________________________________________________

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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