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Daily Newsletter, Sunday, 11/09/2003

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The Option Investor Newsletter                   Sunday 11-09-2003
Copyright 2003, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Too Much Good news
Futures Market: Reach for the Top, Race to the Bottom
Index Trader Wrap: New Highs, Bullish Data
Editor's Plays: Cheap Trick
Market Sentiment: Confused Yet?
Ask the Analyst: Sector bullish percent updates
Coming Events: Earnings, Splits, Economic Events


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
       WE 11-07        WE 10-31        WE 10-24        WE 10-17
DOW     9809.79 +  8.67 9801.12 +218.66 9582.46 -139.33 + 47.11
Nasdaq  1970.74 + 38.53 1932.21 + 66.62 1865.59 - 46.77 -  2.95
S&P-100  520.70 +  0.72  519.98 +  9.73  511.25 -  6.87 +  0.07
S&P-500 1053.21 +  2.50 1050.71 + 21.80 1028.91 - 10.41 +  1.26
W5000  10289.76 + 65.24 10224.5 +241.02 9983.50 -114.88 + 13.06
RUT      542.96 + 14.74  528.22 + 21.79  506.43 - 13.93 +  1.30
TRAN    2979.29 + 66.18 2913.11 + 85.86 2827.25 - 20.03 + 23.73
VIX       16.93 +  0.83   16.10 -  1.61   17.71 +  0.09 -  0.83
VXO       17.56 +  0.41   17.15 -  1.78   18.93 -  0.26 -  0.05
VXN       25.20 +  0.31   24.89 -  0.56   25.45 +  0.12 -  2.29
TRIN       1.21            1.02            1.44            1.59
Put/Call   0.78            1.12            0.91            0.64
******************************************************************


Too Much Good news
by Jim Brown

Can you have too much good news? Apparently too much good news
is not good medicine for the markets. After a week of constant
increases in various economic reports the Dow finished down
-47 points for the day and up only +8 for the week. The Nasdaq
rose +38 for the week and came within 8 points of N2K but also
sold off Friday on the economic overdose.

Dow Chart




Nasdaq Chart




While the Jobs Report was the economic home run on Friday there
were other base hits. The Wholesale Trade numbers rose +0.5%
when expectations were for a drop of -0.2%. Inventories rose
+0.4% and Sales rose +0.5%. This put the inventory to sales
ratio is at an all time low of 1.20. This continues to paint
a picture of a coming boom from inventory replenishment once
demand increases. The increase in sales by +0.5% is providing
hope that we are entering that cycle.

Also adding to the recovery was a huge bounce in consumer
credit of +$15.1 billion when estimates were for only +$5.5B.
Despite a slowdown in auto sales the non-revolving debt was
the fastest grower. No signs of a consumer slowdown here.
This jump was a nearly +10% annualized rate and the fastest
pace since January. This buoyed the hopes of analysts that
the 4Q holiday season could be strong.

By far the biggest dose of reality came from the Jobs Report.
The economy added +126,000 jobs in October and double the
consensus estimate of +60K. If that was not good enough the
+57K gain for September was revised upward to +125,000 and
the -41K for August was revised up to +35K. This was clearly
an out of the park homer with the bases loaded. The net job
gain over the last three months was a whopping +286,000.
Suddenly the jobless recovery became a jobs recovery and
analysts could not raise estimates fast enough. This was the
strongest one month gain since January. The majority of gains
were in service sectors with manufacturing still losing -91K
jobs over the last three months.

While the gain of +286,000 jobs was great it still has not
put a dent in the unemployment rate which is still 6.0%.
Over 8.8 million workers are still unemployed. A sustained
jobs growth of 150,000 per month is needed to overcome the
normal growth in the workforce. I am not complaining but
just explaining. The +286K is light years ahead of the trend
for the last year and a solid foundation for the current
economic recovery. Analysts and traders have constantly
claimed that the recovery would not be official until the
job creation caught up and this is a significant step. Add
in the huge drop in Jobless Claims to 348,000, the jump in
Productivity by +8.1%, GDP to +7.2%, ISM to 57, ISM Services
at 64.7 and a +6.5% jump in semiconductor billings and you
have clearly the best economic news in months if not the
entire year. What did the markets do with this news? They
traded mostly sideways with the Dow gaining only +8 points
for the week.

Ok, now what happened? Why did the indexes suddenly swoon on
the good news? As I explained in my commentary on Thursday
the news is simply too good for investor sentiment. The Fed
has said repeatedly said it would remain on the sidelines
for a "considerable period" of time to allow the economy to
ramp up before adjusting rates. Before Friday's reports the
futures were not predicting the first rate hike until May
with the second one not until the 4Q-2004. A considerable
period of time considering the extremely low rates. After
Friday's reports the futures are now showing an 85% chance
of a hike in March. The jump in the date by a couple months
is very material and is causing a rethinking of market
planning.

The next Fed meeting is four weeks away and the worry now
is that the Fed will take the "considerable period" statement
out of their announcement and possibly change their bias
to tightening. This is a major change of direction and
institutional investors will have to rethink their bond
and equity allocations. I hate to keep repeating this but
markets typically discount 3-6 months ahead and the flat
Fed until May had already been priced into the market.
Shortening that period by 30% puts the next rate hike and
the changing of bias by the Fed well into that six month
window.

Now investors will be buying stocks based on the expectations
of rates rising quickly if the economics continue to be strong.
Any potential rate hike will be offset by an increase in
earnings IF the recovery continues. In the early stages of
an economic recovery rates do rise and investors are used to
that model. The big difference here is that they could rise
much earlier and much quicker than expected just a week ago.

I know this kind of economic double talk is boring and many
readers just skip these paragraphs. I wish I could too but
we need to know what may be in front of us. The Dow drop on
Friday of -47 points is meaningless. More critical to me is
the lack of an advance for the week. We tested the 52-week
highs at 9900 twice during the week but the market seems
very heavy. I know "seems" is a vague word but that is what
I see. The internals are still strong with 1066 new 52-week
highs on Friday. Definitely no weakness there. Advancers
beat decliners and volume was decent. There is nothing to
reach out and touch but the upward momentum is definitely
slowing.

I got a kick out of one reporter on CNBC Friday night saying
the market was not moving higher because there was no catalyst
to give investors a reason to buy. Give me a break! If you
were an investor looking for a reason to buy stocks the last
week was a banner week full of catalysts. If anything there
were too many buy signals and there are simply no buyers
left. Another problem is still the mutual funds. In the last
week $4.4 billion was withdrawn from Putman with as much as
$10 billion withdrawn from the other top five funds under
investigation. This is a huge amount of money to leave the
market in only once week. Considering there was a $15B
withdrawal I think the market did rather well.

Other factors weighed on the markets for the week with 20+
soldiers killed in Iraq and drawing lots of attention and
negative press. A post office in Washington tested positive
for Anthrax and 11 post offices were closed for further
tests. Homeland Security said Al Queda was planning to use
cargo planes to attack the U.S. and "specific and credible"
threats prompted embassy closings for the weekend. Taking
all these items into consideration it is a wonder the Dow
was not down -247 instead of just -47.

For those expecting a bullish week to start November and
historically the two best months of the year then you
may have been disappointed. We closed almost exactly where
we started with tech stocks the only winners. If you are
looking for a week with catalysts to inspire traders it
will not be next week. There are only two major reports
on Monday and then nothing of importance until Friday. The
two reports on Monday are the Richmond Fed and Kansas City
Fed surveys. These chart manufacturing growth and outlook
for those regions and are seen as proxies for the rest of
the country. They are expected to show growth but nothing
exciting. This leaves traders with no news for four days.
Considering the fade on fantastic news Friday this may not
be a bad thing.

Technically the Dow pulled back from the highs to rest on
support at 9800 which had been resistance since early
October. You cannot call that a bad performance. Since
early October we have been trading in a narrow range with
only a slight uptrend as we waded through earnings. With
earnings and economics over for the time being the next
level Dow support at 9700 could be tested soon. The Dow
did not make any attempt to touch 10,000 and several analysts
have expressed doubt we will see it before seeing 9500 again.

The Nasdaq has a better uptrend in place and came very
close to 2000. The drop at the close only brought it back
to uptrend support at 1970 and it was quickly bought. The
continuing good news on semiconductor stocks has put a floor
under techs that will be difficult to break. Add in the CSCO
news that IT spending is starting to increase and all the
feeder stocks that supply Cisco saw a huge pop. It was a
good week for techs despite the Wednesday profit taking.
The Nasdaq is well above strong resistance at 1950 and it
would take a serious sentiment change to move it below even
stronger support at 1900.

Can these indexes reach those support points at 9700/1900?
Sure, if investors decide that potential rate hikes outweigh
the potential gains created by an exploding economy. While
I had been expecting a stronger correction soon I have just
about decided that changing conditions have negated that
possibility. My capitulation is a sure sign that a drop is
near. The VXO remains trapped in the 17.50 range despite
the end of day sell off. The total lack of fear in the
market is the only thing that keeps me hanging on to an
outlook that is filled with caution. I am not going into
all the reasoning again but there is reason to be concerned.

Dollar Chart




Bonds will be under pressure next week with $57 billion
coming to market to finance the deficit. The dollar got
crushed on the employment numbers and there is going to
be more stress next week. The economics and potential
rate changes will cause currency fluctuation until traders
the world over balance their risk profiles to the new
paradigm.

The biggest news of the week was actually the Greenspan
warning shot about the deficit and the coming Social
Security problem. According to Greenspan the first baby
boomer retirees will begin retiring in five years and
accelerate sharply from there. He said the Social Security
and Medicare benefits promised under current law for these
retirees CANNOT be financed with current tax rates. No
surprise there since this warning has been present for the
last 20 years. The fact that Greenspan chose to resurrect
it in a major speech at this time in the political cycle
almost seemed to be a free shot a the current administration.
He warned that this will set into motion an "unsustainable
dynamic" that could have "notable destabilizing effects on
the economy." He said "tax rate increases of sufficient
dimension to deal with our looming fiscal problems pose
significant risks to economic growth and the revenue base."
In other words he sees a real crisis coming that simply
raising taxes will not cure and it starts in 2008. These
comments were glossed over in reports about the speech
but I think they are the most important paragraphs.
Greenspan speech:
http://www.federalreserve.gov/boarddocs/speeches/2003/20031106/default.htm

I attended a financial seminar sponsored by Citigroup a
couple months ago and they were projecting the same thing.
Their outlook was for a massive tax increase in early 2005
once the elections were over. There are various reasons that
I have explained here in the past. The reason I bring this
up again is to remind readers to plan their long term
investing wisely and watch out for these significant market
challenges ahead. The mainline press conveniently failed to
discuss these points in the Greenspan speech.

We have a very flat economic week ahead and no material
earnings other than Dell on Thursday. There is very little
to capture investor attention and the mutual fund scandal
will probably return to the top of the news sound bites.
If the cash outflows continue from the top funds in trouble
then that will impact the market. The squeeze is on for
those in the headlines but the money will eventually find
its way back to the market in another fund. This 2-3 week
cycle time should help slow any market gains. In summary,
the market has some more consolidation work to do before
moving higher and that consolidation should continue next
week. We are more than likely going to remain trapped in
our current range from 9600-9900. The excitement has faded
and to twist the reporters comments slightly, there is no
catalyst on the horizon to rekindle that excitement. After
over eating a big thanksgiving dinner the urge to nap is
strong and after the economic overdose this week the
markets need to take that nap.

Enter Very Passively, Exit Very Aggressively!

Jim Brown

A reader sent me this letter to his senator and I thought it
was interesting and you might enjoy it. Good research and a
thought provoking conclusion.

Read the letter by clicking on this link below!
http://members.OptionInvestor.com/readerswrite/rw_110903_1.asp


**************
FUTURES MARKET
**************

Reach for the Top, Race to the Bottom
Jonathan Levinson

All appeared perfectly, if somewhat hysterically, bullish on
Thursday night, and Friday morning delivered the bullish data to
launch equities free of gravitation constraint.   Interestingly,
the 8:30 highs were never revisited.  Bonds sold off but
recovered, gold and the CRB rallied, and the US Dollar Index got
murphied for over 1%.  Equities closed on a spectacularly ugly
note, accelerating toward their session lows.

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


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

10 minute chart of the US Dollar Index


I'll let this chart speak for itself.  Suffice it to say that I
don't believe the intraday rumors about a technical glitch that
led to the selling.  All major currency pairs rallied strongly
against the dollar, metals and the CRB took off.  If this was
truly foreign selling, as it appears to have been, then it bodes
ill indeed for US equities and bonds.  For the week, the US
Dollar Index printed a higher high and higher low, but today's
selling resulted in a long upper candle shadow, for a possible
bearish reversal candle, a shooting star doji top.

Daily chart of December gold


December gold rallied against the dollar on Friday, adding 3.60
to a high of 384.30, going out at 384.10 after selling off
precipitously on the 8:30 economic data.  The session low was
375.10.  Consumer credit was released at 3PM, almost tripling
expectations, and gold launched to new highs on that data.  As
with the dollar, the move on Friday cast doubt on the week's
otherwise clear trend, in this case leaving a bullish hammer with
a long lower tail on the weekly candlestick.  The trend remains
down on the daily cycle oscillators, heavy resistance begins at
390 and continues to 410, but as we saw today, anything can
happen in this market as traders react to each economic release
with increasingly knee-jerk suddenness.

Daily chart of the ten year note yield


Ten year notes broke below trendline support at 8:30, with the
TNX gapping above pennant resistance just as we suspected it
would in Thursday's Futures Wrap.  The yield came down off its
highs, but it held above the trendline.  This move aligns with
the day cycle oscillator and portends further pain for treasury
bulls.  Pennant aside, the current level of 4.45% lines coincides
with the previous top on the yield, and so bond bears aren't out
of the woods yet.  But, another day like Friday could do it.  The
TNX added 3.2 basis points to close at 4.45%.

Daily NQ candles


How about that close?  The VXO actually closed lower by .02 at
17.56 at 4PM, and then the futures accelerated south, setting new
session lows without even rousing the slumbering bears.  The fact
that option volatility actually dropped on a day like today is a
perfect indication of the degree to which bulls have become
anaesthetized by the steady unidirectional monotony of the recent
sessions.

The NQ spiked above the upper bear wedge trendline at 8:30AM when
it set its high of the day on the spike reaction to the bullish
morning data.  At that instant, the market looked absolutely,
perfectly bullish, as it always does at tops.  The remainder of
the session ground aimlessly lower, with the strong selling
beginning at 3:30PM.  For the day, the NQ dropped 1.04%, the ES
76% and the YM .69%.

These were tame numbers, just a retracement of part of the week's
gains.  The trend is still, of course, up.  But the failure at
the new highs on beautiful news is an ominous sign, and the was
already blood in the water from the shellacking administered to
the US Dollar Index.  It appeared at the close that bulls were
saved by the bell.  While the daily cycle oscillator is still
pointed north, it lost some vigor today, and there's a bearish
divergence setting up as indicated.  Support at 1408 appears
critical.

30 minute 20 day chart of the NQ


There are bearish divergences galore on the 30 minute NQ chart,
and the market complied by breaking below the lower rising
trendline heading into the close.  This selloff confirmed the
sell signals on the 30 minute cycle oscillators, but was so sharp
and fast as to leave doubt as to whether it will stick.  On the
one hand, it looks like bulls were trying to tippy-toe out the
back door, but on the other it could have been a quick panic
selloff heading into a weekend filled with uncertainty.


The reverse head and shoulders pattern with its neckline along
the 1448 level is not invalidated by the closing print, and it
will take a continuation on Monday in order to ease the tension
level among bears.  While the 30 minute cycle oscillators are in
a confirmed downphase from their lower highs, the daily cycle is
still up.  Next support is at 1424, followed by 1415 and 1408.


Daily ES candles


The daily ES candles failed at the upper bear wedge resistance
line, and closed perilously close to the 1048 rising lower
support line.  This bear wedge projects to a downside target of
987.75 on a breakout, and unlike for the NQ, the daily cycle
oscillators may be rolling over as of Friday.  The bearish
divergences are clear on the daily chart, and while the wedge
still points higher, this is a very risky chart for those looking
for further upside.  A return to the high or even a nominal new
high is possible, but as of this Friday, the writing is on the
wall.


20 day 30 minute chart of the ES


The 30 minute ES sports the same support line failure, but also
the same reverse head and shoulders formation.  The oscillators
point south but are closer to oversold territory, and a return to
the scene of the crime bounce can be expected on Monday, in this
case in the 1054-56 area.  While I'm anything but bullish at
current levels, a bounce would not surprise me for a number of
reasons.  The 300 minute stochastic does not trend often on this
timeframe, and doesn't tend to stay either oversold or overbought
for long.  Also, as noted in Thursday's Futures Wrap, this is a
market that has lately gotten bought come rain, shine, sleet or
hail, day after day.  With caution so far from most traders'
minds (ie. the VXO closing negative today), an aggressive dip buy
cannot be ruled out.  1045 and 1038-40 are strong supports below.


150-tick ES


Note the sharp break at 3:30PM.   The closing tape-painting
run didn't hold for longer than a few minutes.

Daily YM candles


Nothing to add on the YM which didn't even make it to its upper
resistance line.

20 day 30 minute chart of the YM


This was a difficult week for traders both long and short.
Volatility levels continued to reflect a rare and, hopefully,
short-lived nirvana environment, despite the bearish engulfing
daily candles on stocks, the US Dollar Index and, to a lesser
extend, bonds, and the bullish engulfings on gold and the CRB.
This is a dangerous setup, and the weakness in the US Dollar
Index bodes particularly ill.

For next week, I urge traders to stay nimble.  With the VXO so
low, the markets could continue higher on short covering and
"greater fool" buying, but I'm personally unwilling to buy a
market as overbought as this at the risk of winding up the
"greatest" fool.  The VXO is not "broken" as some in the media
would argue, just as they always do at tops.  It seems clear to
me that there's a great deal more downside than upside from here.
At the same time, picking a top is very risky business, and it
requires active stops and sharp attention.  We remain on the
lookout for further weakness in bonds and the US Dollar Index,
both of which must eventually drag equities down, regardless of
how otherwise bullish things may appear.  See you at the bell!


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

New Highs, Bullish Data
Jonathan Levinson

The Dow tagged 9903, Nasdaq 1992, and managed to close only
slightly lower on Friday despite a steep selloff into the close,
and an acceleration thereof in the futures after 4PM.  The Dow
dropped -47.18 points or -.48%, the Nasdaq -5.63 or -.28%, and
the S&P dropped -4.84 points or -.46%.  For the week, the Dow
added 0.1%, the Nasdaq 0.2%, and the Nasdaq 2%.

Most noteworthy in Friday's trading was the selloff following yet
another day of bullish news.  The wire was bullhorning blowout
employment data, the actual bullishness I examine briefly below.
Nevertheless, the feeling at 8:30AM was "The sky's the limit,"
and one suspects that the party ended as quickly as it did
because there simply weren't many shorts left to squeeze.  New 52
week highs were made, but the indices closed lower than they did
the day before.

Option volatility remains at alarmingly low levels, demonstrating
a multiyear extreme in complacency, or, if you will, a bear
market in fear.  The VXO dropped .02 to close at 17.56, the VXN –
15 to 25.2 and the QQV -.19 at 23.49.  As discussed in the
Market Monitor today, these readings are ripe for an upside
surprise, with the VXN coiled into a bull wedge on the weekly
chart and projecting potentially as high as 70.  An upside
surprise in volatility would correspond with a downside spike in
equities.

In the meantime, the indices continue to rip higher, but as we
will see below, there are increasing indications of exhaustion,
with most every chart displaying bearish oscillator divergences.

Weekly COMPX candles


The weekly chart of the Nasdaq shows the extremely toppy
oscillators, with price scraping the upper resistance line of the
bear wedge in place since the March low.  There is nothing to
prevent the Nasdaq from pushing higher still, but the oscillators
are clearly indicating that the higher odds bet is to the
downside from here.  The bear wedge support at 1900 is crucial, a
downside break of which brings into play a possible downside
target as low as 1280.

Weekly INDU candles


The weekly Dow chart shows the oscillators trending in overbought
territory, but the 10 week stochastic is actually fade lower
along the top without actually downphasing.  This looks bearish
to me as well, and I do not expect to see the upper wedge
trendline broken.  It held on this morning's retest with a year
high set at 9903.  A sustained break of this level will
invalidate the bear wedge, but again, as with the Nasdaq, the
oscillators tell us that such is the lower odds outcome.


Daily OEX candles


The bearish divergences pick up in frequency and intensity on the
shorter timeframes, as we see on the daily chart of the OEX.
Friday's bearish engulfing candle did not abort the daily cycle
oscillator upphase in progress all week, but if the selling
doesn't reverse on Monday, it will leave significantly lower
oscillator highs against the higher price highs. This bearish
divergence portends more aggressive selling to come.  517 is
lower wedge support, with 525 upper resistance.  While the price
trend remains up, the oscillator upphase  appears to be running
out of racetrack, and with the weekly oscillators maxxed out,
upside appears limited from here.  A break below 517 projects to
to a bear wedge target of 498.

20 day 30 minute chart of the OEX


The 30 minute chart of the OEX shows a possible lower wedge
support line break.  We see more bearish oscillator divergences
as indicated, and these foretold the end-of-session breakdown.
There is, however, a bullish interpretation here, with the 100%
Fibonacci line a possible reverse head and shoulders neckline at
525.  A sustained break of this line could project to a possible
target of 546.  However, in the short term, the 30 minute cycle
oscillators are in clear downphases, and I expect more weakness
to carry into Monday.  Look for possible support at 515, followed
by 510.

Daily QQQ candles


QQQ did not leave off on as weak a note as the OEX, with somewhat
more life left in the daily oscillator upphase.  The same
negative divergences are apparent, however.  Resistance is at
36.20, support at 35.40, followed by 34.20.


20 day 30 minute chart of the QQQ


Again, the same bearish oscillator divergences and bear wedge
support failure.  It appears a foregone conclusion that the
selling on which the Qubes left off will carry into Monday
morning, with the only question being how deep a selloff we can
expect.  In a bearish position, I'd want to see the 34.40 level
broken to invalidated the potential reverse head and sholders
interpretation.  A bounce at or above that level could pack some
upside punch, particularly if the daily cycle oscillators above
are still within their upphases at that time.

Tying it all together, we have the weekly cycle oscillators maxed
out and showing hints of bearish divergence, the daily
oscillators nearing the end of upphases and showing clear bearish
divergences, and the 30 minute cycle oscillators pointed south.
I expect the selling to continue on Monday morning.  If it is
strong, we could see the daily cycles flip to downphases, which
would line up with the weekly and leave the market vulnerable to
a deep correction, particularly so when considering the low
volatility readings.  Weak selling on Monday could result in an
upside blast if the 30 minute cycle oscillators bottom out with
the daily oscillators still in their upphases.

One last matter concerning the economic data.  I came across the
following charts culled from the Bureau of Labor Statistics data,
showing the percentage of the population actually employed.  They
certainly put the recent excitement about the alleged uptick in
employment into start perspective.  I strongly encourage you to
play with BLS' excellent charting functions to gain your own
perspective on what is actually happening out there, and to draw
your own conclusions about the state of the economy.


Have a great weekend and see you at the bell!

10 year chart of Employment to Population Ratio


http://www.bls.gov/webapps/legacy/cpsatab1.htm


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**************
Editor's Plays
**************

Cheap Trick

We have one more big earnings play this week. Dell reports
on Thursday after the close and they have already affirmed
guidance. This should not be an exciting event. However,
it does offer an opportunity to roll the dice.

Dell has been making noises about "no IT spending increase"
or no recovery in the business sector. If that thought process
continues then Dell's earnings are probably going to be inline.
I am thinking that with the Cisco earnings win that Dell
could be going to produce a positive surprise.

Unfortunately I think that surprise will be short lived.
Dell stock has been moving sideways at $36 since early Oct.
If the news is good they could get a pop back to the high
end of their range at $37. I am betting it does not hold.

We could also get a rise into the earnings on a buy the
rumor move based on the Cisco results.

I am going to suggest a put position for the Nov/Dec $35
put. When/If Dell hits $36.75 we will enter the position.

The Nov $35 put is 55 cents and the December option is 90
cents. Dell closed at $36.00 on Friday. Buying either put
with Dell at 36.75 should be cheaper. I am guessing 25-30
cents for the November and 75 cents for December.

Because this is a highly speculative play I would use the
Nov option simply because it is so cheap. The only challenge
is that it would require a gap and crap on earnings day to
get back to profitability before it expired. The December
put is much safer and I think we can get it for 75 cents
or less.

BUY the Dec-$35 put DLQ-XG with a Dell trade at $36.75
(Estimated price $0.75 cents.)

Stop loss is going to be $38.00
Profit target is $35.50

Dell Chart





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Play Recaps

GE Call (recommended 11/02)

GE did not follow the market and actually led the market down
late in the week. This play was to capitalize on any investor
sentiment and potential 4Q rally to 10,000. With no rally the
play will fail. Set a stop loss on GE at 27.50 and exit the
call if hit.

http://members.OptionInvestor.com/editorplays/edply_110203_1.asp



Powerball

So close! The Powerball portfolio is within $65 of a 100% gain
since inception. The current net profit is $1190 for every $1255
increment purchased in January. We still have two months to go
and tech stocks are on fire. Unfortunately there could be some
rocky times ahead. We will keep our fingers crossed and see how
it plays out. Only TLAB is still significantly negative. GLW is
showing a $5 profit followed by CMVT at +4 and EMC at +2.75.

It would have taken $1,255 to buy one contract of each on
January-2nd. Any bets on what this will be worth on 12/31/03

Powerball Chart




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

Remember, these are high risk plays and should only be made
with risk capital.

Good Luck

Jim Brown


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

Confused Yet?
- J. Brown

The markets were holding their breath for the October non-farm
payrolls report.  Expectations were high and the economy
delivered with 126,000 new jobs in October and unemployment
falling to 6 percent, the lowest level in months.  The paint an
even rosier picture they revised the August loss of 41,000 jobs
to a gain of 35,000.  We've seen over 200,000 jobs added in the
last three months so why didn't the markets explode higher?

Part of the reason may be the market's gains from October.  The
Dow added 526 points or 5.6 percent in October with no
consolidation.  The NASDAQ added 8.1 percent in October and
another 2 percent just in November.  With so much "profit"
already in the markets many investors are more inclined to sell
the news.  The prevailing train of thought is that we'll still
see Dow 10K and NASDAQ 2K before any significant pull backs but
then the markets tend to make a habit of fooling people

A lot of the trader talk the last week has been filled with
comments about the market being toppy, sick, unhealthy, etc.  The
extremely low volatility indices don't help matters and odds of a
consolidation of some kind are growing.  If you're looking for
bullish trades a dip to the 50-dma in the DJIA or COMPX may be
the best bet but I'd wait for the bounce.


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

Market Averages

DJIA ($INDU)

52-week High:  9903
52-week Low :  7197
Current     :  9809

Moving Averages:
(Simple)

 10-dma: 9790
 50-dma: 9613
200-dma: 8864



S&P 500 ($SPX)

52-week High: 1062
52-week Low :  768
Current     : 1053

Moving Averages:
(Simple)

 10-dma: 1050
 50-dma: 1032
200-dma:  951



Nasdaq-100 ($NDX)

52-week High: 1453
52-week Low :  795
Current     : 1436

Moving Averages:
(Simple)

 10-dma: 1423
 50-dma: 1383
200-dma: 1199



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

Volatility indices continue to hover around their lows as the
major averages remain near their highs.  They continue to suggest
caution and a potential top in the markets forming.  Surprise,
surprise.

CBOE Market Volatility Index (VIX) = 16.93 +0.19
CBOE Mkt Volatility old VIX  (VXO) = 17.52 -0.06
Nasdaq Volatility Index (VXN)      = 25.20 -0.15


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.78        744,763       582,223
Equity Only    0.61        643,147       394,891
OEX            1.00         28,570        28,705
QQQ            0.71         14,754       100,442


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.9    + 0     Bull Confirmed
NASDAQ-100    75.0    + 1     Bear Correction
Dow Indust.   83.3    + 3     Bull Correction
S&P 500       81.0    + 0     Bull Confirmed
S&P 100       80.0    + 1     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: 1.11
10-dma: 1.03
21-dma: 1.08
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    1565      1585
Decliners    1252      1520

New Highs     361       363
New Lows        9        12

Up Volume    868M      900M
Down Vol.    838M     1001M

Total Vol.  1736M     1918M
M = millions


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

Commitments Of Traders Report: 11/04/03

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
10/14/03      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%)
11/04/03      391,079   415,136   (24,057)   (3.0%)

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
10/14/03      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%
11/04/03      137,829    78,206    59,623    27.6%

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
10/14/03      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%)
11/04/03      242,409   270,785    (28,376)  ( 5.5%)

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
10/14/03      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%
11/04/03      135,525    63,006    72,519    36.5%

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
10/14/03       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%)
11/04/03       34,159     48,293   (14,134) (17.1%)

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
10/14/03       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%
11/04/03       24,132     9,703    14,429    42.6%

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
10/14/03       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%
11/04/03       21,756    11,903    9,853      29.3%

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

Small Traders  Long      Short     Net     % of OI
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%)
11/04/03        5,099     9,160   (4,061)   (28.5%)

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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***************
ASK THE ANALYST
***************

Sector bullish percent updates

I learned a lot from your past articles regarding sector rotation
and the various bullish percent data.  I started using Dorsey's
point and figure charting service and see that their Wall Street
sector has reversed lower into bear confirmed status at a high
level.  Are there any stocks in this group to short or buy puts
on?

It has been quite some time since we've looked at a sector bell
curve.  From the looks of it, it has been since late June (June
29) http://www.OptionInvestor.com/ask/ask_062903_1.asp when we looked
at the various sector and market bullish percent data.

For those premierinvestor.net or OptionInvestor.com subscribers
that may be unfamiliar with the bullish percent and how to try
and analyze a market, sector and stock, you may want to read a
March 16, 2003 Ask the Analyst column "Market, sector, stock,
with bullish percent distribution"
http://www.OptionInvestor.com/ask/ask_031603_1.asp to get a basic
understanding before reading the rest of this weekend's article.
Keep in mind when you read that article, 8 months have passed.

For those traders/investors that read that article, go back and
read it again.  Boy how things have changed!  Look at what some
of those stocks mentioned in the article have done (good and
bad).

On June 1, 2003 in an Ask the Analyst titled "Market, sector
stock, and a March 16 review" we then looked at some week-to-week
bullish percent sector bell curves.  When we look at things
today, we begin to understand that a bull cycle can be longer and
more powerful than imaginable.  Regardless of what the pundits
may be saying.

This week, I also received a couple of questions regarding a
comment in Thursday evening's OptionInvestor.com Index Trader
Wrap regarding Dorsey/Wright and Associates' sector bullish % for
the Transport/Non Air Bullish % (BPTRAN) being "bull confirmed"
at 85.37%, and how it would take a reading of 82% to reverse
lower to "bull correction" status.  Here too subscribers can
associate that in March, the Dow Transportation Average (TRAN)
2,979.29 -0.2% was trading near 1,950, and has now gained roughly
1,025 points and encounters some significant resistance at the
3,000-3,050 level.

Some traders also sent me e-mail this week regarding last
weekend's article regarding 5 "beaten down" stocks for a late
October bull.  Maybe the sector bullish % will give some insight
as to some of the market/sector/stock analysis that went into the
selection of those stocks.

Whew!  A lot of questions this week, and maybe we can answer more
than a few today.

Here's an updated sector bell curve as of Friday, November 7
close.

November 7, 2003 Sector Bell Curve




In black squares, I've highlighted 4 sectors, that the 5 stocks
highlighted in last weekend's ask the analyst column reside in,
as those stocks are classified as belonging to by Dorsey/Wright's
sector bullish 5 data.  Ciena (NASDAQ:CIEN) $6.90 +0.87% could
arguably belong to either the "telephone" or perhaps the
"computer" (BPCOMP) sector bullish % and sometimes you'll be
monitoring/trading a stock that could be classified as belonging
to more than just once sector.

As it relates to SONE, this is an Internet stock that looked to
be breaking out of a longer-term basis, in a sector that is
currently in a "bull correction" phase.  By golly!  This week,
SONE did edge above it longer-term downward trend with a trade at
$9.00.  UNTD was a stock I observed as having been very bullish,
but had pulled into a longer-term bullish trend.  This week, UNTD
$18.92 -1.56% saw no change on its point and figure chart.

Darden Restaurants (DRI) $20.35 -0.29% started the week off with
a bang, then gave investors some good news and bad news with same
store sales for its Red Lobster and Olive Garden chains, but
surprisingly didn't see a test of its 200-day SMA, and saw no
change on its point and figure chart.

Retailer Kohl's (KSS) $51.91 -0.74% filled a gap back lower on
weaker same store sales.  With the retailers bullish % so high, I
thought a beaten down KSS, while weak, might be a good partial
position trade into the holiday shopping season, and while I view
the recent nonfarm payrolls data showing job growth encouraging,
where consumers may spend this holiday season, KSS better get its
act together and hold that $50.00 level.

Kohl's Corporation Chart - Weekly Intervals



My AdobePhotoshop conked out on me last weekend right when I was
wrapping up last weekend's column.  Here's a weekly interval
chart of KSS where on Thursday, KSS had no problem backfilling a
prior gap higher after reporting an 11.6% decline in October same
store sales.  With KSS's point and figure chart still showing a
bearish vertical count of $45, I think a bull should only
establish a partial bullish position, and look for strength above
$57.30.  If KSS can firm up above $50 and then trade $57, that
would be a triple-top buy signal and have us calculating a
bullish vertical count.

If you believe like I do that the bullish % is a good indicator
for MARKET and SECTOR risk, then you can see that a lot of retail
stocks are currently showing "buy signal" on their point and
figure charts.  I would prefer that KSS also show a buy signal,
but think it might be a good risk/reward trade into the holiday
shopping season, with a stop firm at $49.00.

We can really see how RISK has shifted when looking back at the
March bell curve can't we?

Some other comments, or even criticisms perhaps, is that some of
my Index Trader profiles have been rather short-term oriented.

One reason for this is that after following these sector bell
curves over the years, things can change quickly, especially when
extreme levels of bullishness (above 70%) and bearishness (below
30%) are found.

Can you believe that the Wall Street bullish % (BPWALL) has
basically run coast to coast since March?  How about the Dow
Industrials Bullish % ($BPINDU)!  Oooooeeee were they both
oversold and rather LOW risk, yet very week back in March.  Just
one option would have been similar to ringing up a jackpot on the
slot machine.

Now we see the Wall Street bullish % (BPWALL) at a very HIGH
level of BULLISH risk.  And while still VERY bullish, there's a
few stocks starting to give sell signals.

I clicked through some point and figure charts of stocks that
comprise Dorsey's Wall Street bullish %, and found one stock that
I'm going to keep an eye on for a short/put trade.

You can get a free point and figure chart at www.stockcharts.com
on shares of Gabelli Asset Management (NYSE:GBL) $36.65, and when
you look at that point and figure chart, you may note the current
bearish vertical count is currently hinting at $28, but I'm only
going to be targeting $31.00, and should the stock reverse up 3-
boxes to $37, begin looking for a short/put entry.

Gabelli Asset Management (NYSE:GBL) - Daily Intervals



With the major market averages trading 52-week highs, regardless
of what I hear or read, I'm operating under the observation that
the market is still rather bullish and most stocks have little
overhead supply in place to provide needed resistance a bear
looks for when trying to utilize overhead supply of stock to
his/her advantage.

However, shares of GBL have started to exhibit a lower low in
recent weeks, and after just testing major support (when a stock
breaks a triple-top buy signal, it often times finds support back
at that level where "old bears" or "new bulls" will be waiting).
With the Wall Street Bullish % (BPWALL) at high risk levels for
bulls, shares of BGL have at least given a sell signal, but with
the understanding the broader MARKET is still quite bullish, I'm
looking to try and short/put the stock on a rebound back near
$37, where on a point and figure chart, I can envision a 3-box
reversal back higher, maybe even to $37.50 as the stock bounces
back into overhead supply.

Two volume spikes grab my attention and we can probably draw some
correlations between these volume spikes, and sector RISK.  Where
was the Wall Street Bullish % on April 15?  I checked
Dorsey/Wright's sector bell curve and Wall Street had started
reversing up into "bull alert" status somewhere between 16% to
20% bullish, when a month earlier Wall Street had been between 0%
to 14% on Dorsey's sector bell curve scale.

So... when I look at the sector bell curve and various market and
sector status right now, Wall Street looks to be about the only
sector at this point (things can change quickly at high levels of
risk) showing some HIGH bullish RISK that has turned more
bearish.

What does biotech (BPBIOM), drugs (BPDRUG) and healthcare
(BPHEAL) have in common?  They all three are a little different,
but they also have some commonality.

One thing I think BULLS might look for in the not too distant
future is some sector rotation, or cash finding its way into
these LESS economically sensitive sectors.

Look at Amgen (NASDAQ:AMGN) $59.95 -1.93% and make the
association as to what its sector bullish % is doing.  After
trading a 52-week high in July near $72, the biotech bullish %
(BPBIOM) was "bull confirmed" between 58% and 62%.  Guess what
AMGN's bullish vertical count was dating back to December of
2003?  Would you believe $72?  That's right!  AMGN just might
have reached an objective that "smart money" had been buying in
late 2002.

Guess what AMGN's bearish vertical count is?  I come up with
$57.00.  By golly, if I take a retracement bracket from AMGN's
July 2002 lows of $31 to this past July 2003 high of $72.37, I
come up with $56.58 as being a 38.2% retracement of that range.

I'm going to set an alert on AMGN at $58, and begin monitoring
the stock more closely in the weeks to come.

Other articles related to the bullish percent can be found in the
Bailey's Basics section of the website at the November 08, 2000
"Understanding risk is key" and November 11, 2000 "Bullish
Percent Updates" articles.

Jeff Bailey


*************
COMING EVENTS
*************

-----------------
Earnings Calendar
-----------------

Symbol  Co                   Date         Comment        EPS Est

------------------------- MONDAY -------------------------------

ABV    AmBev - Companhia     Mon, Nov 10  -----N/A-----     0.32
AIV    Apartment Invest MngmtMon, Nov 10  Before the Bell   0.83
AOT    Apogent Technologies  Mon, Nov 10  After the Bell    0.36
BOBE   Bob Evans Farms  Mon, Nov 10  -----N/A-----          0.52
BAB    British Airways  Mon, Nov 10  -----N/A-----           N/A
EP     El Paso Corp.         Mon, Nov 10  Before the Bell   0.02
IFX    Infineon Technologies Mon, Nov 10  Before the Bell  -0.05
LZB    La-Z-Boy Inc.         Mon, Nov 10  After the Bell    0.29
NAB    National Aust Bank    Mon, Nov 10  -----N/A-----      N/A
NTY    NBTY Inc.             Mon, Nov 10  After the Bell    0.34
PSUN   Pacific Sunwear Cali  Mon, Nov 10  After the Bell    0.29
LQU    Quilmes Industrial    Mon, Nov 10  After the Bell     N/A
RRI    Reliant Resources     Mon, Nov 10  -----N/A-----     0.43
KPN    Royal Kpn N.V.        Mon, Nov 10  -----N/A-----      N/A
SPP    Sappi Ltd             Mon, Nov 10  Before the Bell   0.11
TS     TENARIS S A           Mon, Nov 10  After the Bell    0.53
TSN    Tyson Foods           Mon, Nov 10  -----N/A-----     0.37
VRTX   Vertex Pharm Incorp   Mon, Nov 10  -----N/A-----    -0.49
WR     Westar Energy, Inc.   Mon, Nov 10  Before the Bell    N/A


------------------------- TUESDAY ------------------------------

ANF    Abercrombie & Fitch   Tue, Nov 11  After the Bell    0.52
ATO    Atmos Energy Corp     Tue, Nov 11  -----N/A-----    -0.15
BAY    Bayer                 Tue, Nov 11  Before the Bell    N/A
CVC    Cablevision Sys Corp. Tue, Nov 11  Before the Bell  -0.37
GIB    CGI Group             Tue, Nov 11  Before the Bell    N/A
CMS    CMS Energy Corp.      Tue, Nov 11  -----N/A-----     0.11
CCH    Coca-Cola Hellenic    Tue, Nov 11  Before the Bell   0.51
CSC    Computer Sciences CorpTue, Nov 11  After the Bell    0.59
DISH   EchoStar Cmmu Corp.   Tue, Nov 11  Before the Bell   0.16
ENR    Energizer, Inc.       Tue, Nov 11  -----N/A-----     0.66
FOSL   Fossil, Inc.          Tue, Nov 11  -----N/A-----     0.33
GALN   Galen Holdings PLC    Tue, Nov 11  Before the Bell   0.65
IPR    Intl Power            Tue, Nov 11  Before the Bell    N/A
JCP    JC Penney             Tue, Nov 11  Before the Bell   0.26
KUB    Kubota Ltd            Tue, Nov 11  -----N/A-----      N/A
LEE    Lee Enterprises IncorpTue, Nov 11  Before the Bell   0.44
COL    Rockwell Collins, Inc.Tue, Nov 11  Before the Bell   0.40
IMI    SanPaolo IMI SpA      Tue, Nov 11  -----N/A-----      N/A
SHU    Shurgard Strge Cntrs  Tue, Nov 11  After the Bell    0.64
TRK    Speedway Motorsports  Tue, Nov 11  Before the Bell   0.04
SCMR   Sycamore Networks     Tue, Nov 11  After the Bell   -0.04
THC    Tenet Hlthcr          Tue, Nov 11  Before the Bell   0.05
IPG    Intrpblc Grp of Co IncTue, Nov 11  -----N/A-----     0.14
MAY    The May Dprtmnt StoresTue, Nov 11  -----N/A-----     0.11
TJX    The TJX Companies Inc.Tue, Nov 11  Before the Bell   0.35
UBS    UBS                   Tue, Nov 11  Before the Bell    N/A
WGR    Western Gas Resources Tue, Nov 11  Before the Bell   0.48


-----------------------  WEDNESDAY -----------------------------

ANN    AnnTaylor Stores      Wed, Nov 12  After the Bell    0.61
AMAT   Applied Materials     Wed, Nov 12  -----N/A-----     0.05
CWP    Cable & Wireless PLC  Wed, Nov 12  Before the Bell    N/A
CNA    CNA Finl Corp         Wed, Nov 12  Before the Bell  -1.97
CM     Coles Myer            Wed, Nov 12  -----N/A-----      N/A
RIO    Companhia Vle Rio DoceWed, Nov 12  After the Bell    0.78
DHI    D.R. Horton           Wed, Nov 12  After the Bell    1.30
DRYR   Dreyer's Grnd Ice Crm Wed, Nov 12  After the Bell     N/A
ELN    Elan Corp, PLC        Wed, Nov 12  Before the Bell  -0.22
E      ENI SpA               Wed, Nov 12  During the Market 1.19
ESPD   eSpeed, Inc.          Wed, Nov 12  After the Bell    0.18
FD     Fdrated Dprtmnt StoresWed, Nov 12  Before the Bell   0.33
HP     Helmerich & Payne     Wed, Nov 12  -----N/A-----     0.16
IAG    Iam Gold Corp         Wed, Nov 12  After the Bell    0.05
LTR    Loews Corp.           Wed, Nov 12  Before the Bell   1.17
MDT    Medtronic Inc.        Wed, Nov 12  After the Bell    0.39
NTLI   NTL INC               Wed, Nov 12  Before the Bell    N/A
OGE    OGE Energy            Wed, Nov 12  Before the Bell   1.21
PTP    Pltnm Underwriters    Wed, Nov 12  After the Bell    0.52
ROIAK  Radio One             Wed, Nov 12  Before the Bell   0.09
SQM    Scdd Quimica  Minera  Wed, Nov 12  Before the Bell    N/A
WFMI   Whole Foods Market    Wed, Nov 12  After the Bell    0.39


------------------------- THUSDAY -----------------------------

AEOS   Am Eagle Outfitters   Thu, Nov 13  Before the Bell   0.24
RMK    Aramark Corp          Thu, Nov 13  Before the Bell   0.47
ARM    ArvinMeritor, Inc.    Thu, Nov 13  Before the Bell   0.36
IRE    Bank of Ireland       Thu, Nov 13  -----N/A-----      N/A
BF     BASF                  Thu, Nov 13  Before the Bell    N/A
BEAS   BEA Systems           Thu, Nov 13  After the Bell    0.08
BE     BearingPoint, Inc.    Thu, Nov 13  Before the Bell   0.03
BNG    Benetton Group        Thu, Nov 13  -----N/A-----      N/A
BOX    BOC Group PLC         Thu, Nov 13  Before the Bell    N/A
BTY    BT Group PLC          Thu, Nov 13  Before the Bell    N/A
SID    Co Siderurgica Nacl   Thu, Nov 13  Before the Bell   0.90
DELL   Dell, Inc.            Thu, Nov 13  -----N/A-----     0.26
DT     Deutsche Telekom      Thu, Nov 13  Before the Bell    N/A
ERJ    Embrr-Emprs BrasileiraThu, Nov 13  After the Bell    0.17
EN     Enel S.p.A.           Thu, Nov 13  -----N/A-----      N/A
EVC    Entravision Cmmu Corp Thu, Nov 13  After the Bell   -0.02
GMST   Gemstar-TV Guide Intl Thu, Nov 13  After the Bell   -0.07
HB     Hillenbrand IndustriesThu, Nov 13  Before the Bell   1.08
IDCC   InterDigital Cmmu CorpThu, Nov 13  Before the Bell   0.00
JHX    James Hardie Ind N.V. Thu, Nov 13  -----N/A-----      N/A
KSS    Kohl's                Thu, Nov 13  -----N/A-----     0.42
MTA    Matav                 Thu, Nov 13  -----N/A-----      N/A
OMX    Officemax             Thu, Nov 13  Before the Bell   0.13
PBY    Pep Boys              Thu, Nov 13  Before the Bell   0.24
SI     Siemens AG            Thu, Nov 13  -----N/A-----      N/A
SBUX   Starbucks             Thu, Nov 13  After the Bell    0.17
TGT    Target Corp           Thu, Nov 13  Before the Bell   0.33
TEF    Telefonica de Espaqa  Thu, Nov 13  Before the Bell    N/A
TIF    Tiffany & Co.         Thu, Nov 13  Before the Bell   0.19
UBB    Unbnc - Un Bancos  .  Thu, Nov 13  -----N/A-----     0.67
UCOMA  UnitedGlobalCom, Inc. Thu, Nov 13  Before the Bell  -0.33
UVN    Univision Cmmu        Thu, Nov 13  After the Bell    0.13
URBN   Urban Outfitters      Thu, Nov 13  During the Market 0.29
WMT    Wal-Mart Stores Inc.  Thu, Nov 13  Before the Bell   0.47


------------------------- FRIDAY -------------------------------

AZ     Allianz AG            Fri, Nov 14  Before the Bell    N/A
ALT.MC Altadis               Fri, Nov 14  Before the Bell    N/A
BSY    British Sky Brdcstng  Fri, Nov 14  Before the Bell    N/A
CNO    CONSECO INC           Fri, Nov 14  -----N/A-----      N/A
GPX    GP Strategies         Fri, Nov 14  -----N/A-----     0.01
IMCL   ImClone Systems IncorpFri, Nov 14  -----N/A-----    -0.51
ING    ING Groupe NV         Fri, Nov 14  -----N/A-----      N/A
LUK    Leucadia National     Fri, Nov 14  -----N/A-----      N/A
L      Liberty Media Group   Fri, Nov 14  -----N/A-----     0.07
PBR    Petrobras             Fri, Nov 14  -----N/A-----     1.31
SDX    Sodexho Alliance S.A. Fri, Nov 14  -----N/A-----      N/A


----------------------------------------------
Upcoming Stock Splits In The Next Two Weeks...
----------------------------------------------

Symbol  Co Name              Ratio    Payable     Executable

BHE     Benchmark Electronics Inc 3:2      Nov  13th   Nov  14th
LSTR    Landstar System, Inc      2:1      Nov  13th   Nov  14th
BLUD    Immucor, Inc              3:2      Nov  14th   Nov  17th
MSEX    Middlesex Water Company   4:3      Noc  14th   Nov  17th
LYTS    LSI Industries Inc        5:4      Nov  14th   Nov  17th
ERTS    Electronic Arts           2:1      Nov  17th   Nov  18th
SYMC    Symantec Corp             2:1      Nov  19th   Nov  20th
JBLU    JetBlue Airway            3:2      Nov  20th   Nov  21st


--------------------------
Economic Reports This Week
--------------------------

Economic reports take a break after last Friday's non-farm
payrolls number.  Yet this week is not without news and the
majority of economic data comes out on Thursday and Friday.


==============================================================
                       -For-

----------------
Monday, 11/10/03
----------------
CIBC World Markets Health Care Conference


-----------------
Tuesday, 11/11/03
-----------------
CIBC Health care conference


-------------------
Wednesday, 11/12/03
-------------------
J.P.Morgan Small cap conference


------------------
Thursday, 11/13/03
------------------
Initial Claims  (BB)  11/08  Forecast:     N/A  Previous:     348K
Export Prices ex-ag.(BB)Oct  Forecast:     N/A  Previous:    -0.1%
Import Prices ex-oil(BB)Oct  Forecast:     N/A  Previous:     0.2%
Trade Balance (BB)      Sep  Forecast: -$40.5B  Previous:  -$39.2B
Goldman Sachs software conference

----------------
Friday, 11/14/03
----------------
PPI (BB)                Oct  Forecast:    0.2%  Previous:     0.3%
Core PPI (BB)           Oct  Forecast:    0.1%  Previous:     0.0%
Retail Sales (BB)       Oct  Forecast:    0.1%  Previous:    -0.2%
Retail Sales ex-auto(BB)Oct  Forecast:    0.3%  Previous:     0.3%
Industrial Productin(DM)Oct  Forecast:    0.4%  Previous:     0.4%
Capacity Utilization(DM)Oct  Forecast:   74.9%  Previous:    74.7%
Mich Sentiment-Prel.(DM)Nov  Forecast:    91.5  Previous:     89.6


Definitions:
DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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The Option Investor Newsletter                   Sunday 11-09-2003
Sunday                                                      2 of 5


In Section Two:

Watch List: Tempting Trading Ideas
Put Play of the Day: AZO
Dropped Calls: None
Dropped Puts: None


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

Tempting Trading Ideas

Amazon.com - AMZN - close: 54.31 change: -0.68

WHAT TO WATCH: A very overbought and extended AMZN is trying its
best to hold on to gains but short sellers are probably be
circling like a pack of wolves.  The Internet stock now has new
resistance under $58 and the last couple of weeks look like a
consolidation before it begins a new leg lower.  The last two
days of declines have been on stronger volume.  The first test
will be to see if its simple 50-dma holds up as support.

Chart=


---

C R Bard - BCR - close: 77.34 change: -0.85

WHAT TO WATCH: This looks like an entry point for new bearish
plays on BCR.  After an incredibly strong first half of October
BCR ran out of gas and traded sideways between $78 and $80.  Now
the stock has broken short-term support at $78 and its momentum
oscillators are bearish.  A drop to $75 is a good bet with a
potential retest of support (old highs) and its simple 50-dma
near $73 a distinct possibility.

Chart=


---

Donaldson Co - DCI - close: 59.84 change: +0.19

WHAT TO WATCH: After a good month and a half of trading under
resistance at $58.00 the stock has powered higher this last week.
Its MACD has turned positive and we're seeing slightly stronger
volume on the gains.  Shares are at a new all-time high.
Momentum traders can look for a move over $60.  Dip buyers can
hope for a retest of $58.00.

Chart=


---

Avery Dennison - AVY - close: 51.59 change: -0.72

WHAT TO WATCH: Check out the daily AND weekly charts for AVY.
That is an incredible trend of lower highs.  Investors continue
to sell each rally with amazing precision.  The next stop for AVY
could be a test of support near 47-48.

Chart=


---

Genentech Inc - DNA - close: 84.99 change: +0.54

WHAT TO WATCH: One of the biggest names in biotech has been a big
winner for investors this year.  Once again the stock is crawling
higher and nearing its one-year highs.  We would not be surprised
to see DNA trade to the $90 level and the stock has produced a
fresh point-and-figure chart buy signal.

Chart=


---

Electronic Arts - ERTS - close: 100.10 change: -0.08

WHAT TO WATCH: ERTS put up a valiant fight on Friday but the
broader market weakness was too much.  It rolled over again at
the $102 level and lost 8 cents on the session.  Bullish traders
can use a trigger above $102.00 to leg them into the play.  There
is some resistance near $106 but our first target would be $110.

Chart=



Homebuilders: PHM, KBH, HOV, RYL, MDC, BZH

What to watch:  The homebuilders have been an incredible story
this year.  Several of the stocks listed above have produced
amazing gains.  Friday was the first sign of weakness in weeks.
The shorts may be bloodied and bruised from failed attempts in
the past but this could be another entry point for bearish
positions.  Trade cautiously.  FYI: the DJUSHB index appears to
have produced a three-day candlestick reversal pattern.


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

GDW $100.73 -2.54 - Watch out!  After weeks of steady gains GDW
produced a high volume decline on Friday.  A move under its 21-
dma may be a short signal.

NATI $45.52 +1.02 - NATI spent nearly two months consolidating
sideways between 40-44.  Now the stock is breaking out to new
multi-year highs.

HAR $131.50 +2.19 - A shareholder meeting to vote on its upcoming
2-for-1 stock split is only days away for HAR.  How much more
pain can the shorts endure here?

ING $21.75 +0.57 - This overseas insurance company's stock has
broken out to a new high after weeks under the $21 level.

TECH $36.67 +0.79 - Breaking out to new one-year highs, TECH is
nearing long-term multi-year resistance in the 39-40 range.

SLE $19.86 +0.01 - Nobody doesn't like who?  We're watching for a
breakout over long-term resistance at $20.00.


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********************
THE PLAY OF THE DAY
********************

Put Play of the Day:
********************

AutoZone, Inc. - AZO - close: 93.30 change: -2.82 stop: 97.75

See details in play list




**************************
PICKS WE DROPPED THIS WEEK
**************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS
^^^^^

None


PUTS
^^^^

None


***********
DEFINITIONS
***********

SL  = Suggested stop loss. Sell if bid breaks this price.
OI  = Open Interest - the number of open contracts outstanding.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

Analysts ratings: 1-2-3-4-5
Analysts who follow each stock rate it and these rating are
accumulated and displayed as follows;

Position 1 = number of analysts recommending "strong buy"
Position 2 = number of analysts recommending "moderate buy"
Position 3 = number of analysts recommending "hold" or "neutral"
Position 4 = number of analysts recommending "moderate sell"
Position 5 = number of analysts recommending "strong sell"

Example rating 5-3-1-0-0 would be 5 "strong buys", 3 "moderate buys",
1 "hold" recommendation.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


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The Option Investor Newsletter                   Sunday 11-09-2003
Sunday                                                      3 of 5


In Section Three:

Current Calls: APA, COO, FD, JCI, JBL, LOW, PGR, QLGC, VRTS
New Calls: None
Current Put Plays: ATH, JBLU
New Puts: AZO, AMGN, PCAR


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******************
CURRENT CALL PLAYS
******************

Apache Corp. - APA - close: 69.90 change: -0.10 stop: 67.50*new*

Company Description:
Apache Corporation is an independent energy company that explores
for, develops and produces natural gas, crude oil and natural gas
liquids. In North America, the company's exploration and
production interests are focused in the Gulf of Mexico, the Gulf
Coast, the Permian Basin, the Anadarko Basin and the Western
Sedimentary Basin of Canada. Outside of North America, Apache has
exploration and production interests offshore western Australia,
offshore and onshore Egypt, offshore The People's Republic of
China and onshore Argentina, as well as exploration interests in
Poland.

Why we like it:
Our APA play definitely didn't get off to the start we were
expecting last week, dropping through both the 50-dma (currently
$69.19) and the mid-line of the rising channel on Tuesday.  Then
the stock caught a nice rebound, helped along by a recovery in
energy prices.  Mimicking the action in the overall market on
Friday, APA surged higher at the open, hitting a high of $70.55
and activating our trigger before pulling back to close
fractionally negative.  A look at the light volume (barely half
the ADV) on Friday shows that it is hard to read much into the
price action.  Look for new entries on another pullback and
rebound from the area of the 50-dma or else on a breakout above
Friday's intraday high.  Our initial target remains $73 (at the
early October highs) and then we'll evaluate whether a run at the
top of the channel seems feasible.  Based on last week's rebound,
we're raising our stop to $67.50 this weekend, reducing our risk
in the play.

Suggested Options:
Shorter Term: The November 70 Call will offer short-term traders
the best return on an immediate move, as it is currently at the
money.  Note that November contracts expire in 2 weeks.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the December 75 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 70 Call.

! Alert - November options expire in two weeks!

BUY CALL NOV-65 APA-KM OI= 377 at $5.30 SL=3.25
BUY CALL NOV-70 APA-KN OI=2582 at $1.25 SL=0.65
BUY CALL DEC-70 APA-LN OI= 249 at $2.10 SL=1.00
BUY CALL DEC-75 APA-LO OI= 408 at $0.50 SL=0.25

Annotated Chart of APA:



Picked on November 2nd at    $69.72
Change since picked:          +0.18
Earnings Date               1/22/04 (unconfirmed)
Average Daily Volume =     1.36 mln
Chart =


---

Cooper Cos - COO - close: 43.55 chg: -0.40 stop: 41.75

Company Description:
The Cooper Companies, Inc. manufactures and markets specialty
healthcare products through its CooperVision and CooperSurgical
units.  CooperVision markets a broad range of contact lenses for
the vision care market. Headquartered in Lake Forest, Calif., it
manufactures in Huntington Beach, Calif., Rochester, N.Y.,
Norfolk, Va., Adelaide, Australia, Farnborough and Hamble,
England, Madrid, Spain and Toronto. CooperSurgical supplies
diagnostic products, surgical instruments and accessories to the
gynecology market. With headquarters in Trumbull, Conn., it also
manufactures in Bedminister N.J., Cranford, N.J., Fort Atkinson,
Wis., Malmo, Sweden, Montreal and Berlin. (source: company press
release)

Why We Like It:
Thus far we've been patiently waiting for COO to complete its
rally and tag or break through the $45 level.  COO produced a
short-term double-bottom at $39.00 a month ago and dip buyers got
another chance to buy the bounce from its rising simple 50-dm two
weeks ago.  Unfortunately, this last week has been one of
sideways consolidation in the Dow and we're seeing the same
pattern in COO.  Bullish traders still interested in new
positions may want to wait for a pull back and bounce near the
$42.00 level (again, the rising 50-dma).  Otherwise we are not
suggesting new positions.  Short-term traders can plan to exit if
COO nears our initial target at $45.

Suggested Options:
Short-term traders should probably look over the November options
while longer-term traders can evaluate the February strikes.

! Alert - November options expire in two weeks!

BUY CALL NOV 40 COO-KH OI= 869 at $3.90 SL=2.00
BUY CALL FEB 40 COO-BH OI= 752 at $5.30 SL=3.20
BUY CALL FEB 45 COO-BI OI= 530 at $2.35 SL=1.25

Annotated chart:




Picked on October 12 at $41.40
Change since picked:    + 2.15
Earnings Date         09/03/03 (confirmed)
Average Daily Volume:      391 thousand
Chart =


---

Federated Dep Store - FD - cls: 48.62 chng: +0.36 stop: 47.00*new*

Company Description:
Federated Department Stores, Inc. is a retail organization
operating department stores that sell a range of merchandise,
including men's, women's and children's apparel and accessories,
cosmetics, home furnishings and other consumer goods.  As of
February 2003, the company, through its subsidiaries, operated
394 department stores and 61 furniture galleries and other
specialty stores under the names Bloomingdale's, The Bon Marche,
Burdines, Goldsmith's, Lazarus, Macy's and Rich's.  In addition
to its stores in 34 states, Puerto Rico and Guam, the company
conducts direct-to-customer mail catalog and e-commerce business
under the Bloomingdale's By Mail and macys.com names.

Why we like it:
It hasn't been particularly pretty, but shares of FD have indeed
delivered the rally we've been expecting into earnings.
Unfortunately they haven't yet reached the levels we were
initially looking for when we initiated coverage last month.
Despite the choppiness of the rise, FD is nearing that initial
$50 target and with earnings set to be released on Wednesday
before the opening bell, that looks like all we can expect from
the play. With the imminent approach of earnings, we are not
recommending new positions anymore -- now our focus moves to
pulling maximum gains from the play.  As mentioned last week, a
move into the $49-50 area should be used for harvesting gains.
Friday's brief foray above $49 provided one opportunity to do so
and we're likely to get at least one more chance in the next two
days.  Note that we need to also tighten our stop to keep the
risk and reward balanced for the duration of the play.  Move
stops up to $47, just below last week's closing low.

Suggested Options:
We are not recommending new positions at this time, with earnings
only a couple days away.

! Alert - November options expire in two weeks!

Annotated Chart of FD:



Picked on October 9th at     $45.60
Change since picked:          +3.02
Earnings Date              11/12/03 (unconfirmed)
Average Daily Volume =     1.87 mln
Chart =


---

Johnson Controls - JCI - cls: 107.84 chg: -1.02 stop: 104.99

Company Description:
Johnson Controls is a global market leader in automotive systems
and facility management and control. In the automotive market, it
is a major supplier of integrated seating and interior systems,
and batteries. For non- residential facilities, Johnson Controls
provides control systems and services including comfort, energy
and security management.  (source: company press release)

Why We Like It:
Finally we see a stock produce more traditional cycles.  A few
days up, a couple days back in profit taking...or in JCI's case
several days up in a row and a few days slipping backward in
profit taking.  There's no arguing that JCI isn't overbought but
for months investors have been buying the dips.  This entire
industry of car-related interiors and parts has been doing
extremely well, at least with improvements to their share prices.
Traders interested in new bullish positions can look for a bounce
in the $106-$107.50 range.  Our stop is basically $105, which
should keep risk to a minimum.  JCI's P&F chart continues to
display a triple-top buy signal.

We also note that JCI is a split candidate.  The company last
split its stock 2-for-1 on April 1, 1997 at the $80 level.  There
has been ample opportunity to split since and they did not.
However, shares are now trading at all-time highs and October was
the first time they broke the century mark.

Suggested Options:
Short-term traders can choose from the November and December
options while longer-term investors may want to look at January
04 and April 04 strikes. We like the 105s and 110s.

! Alert - November options expire in two weeks!

BUY CALL NOV 105 JCI-KA OI=577 at $3.70 SL=1.85
BUY CALL NOV 110 JCI-KB OI=320 at $0.90 SL= --
BUY CALL DEC 105 JCI-LA OI=  5 at $4.70 SL=2.50
BUY CALL DEC 110 JCI-LB OI=102 at $2.00 SL=1.00
BUY CALL DEC 115 JCI-LC OI=128 at $0.65 SL= --

Annotated chart:



Picked on October 30 at $107.07
Change since picked:     + 0.77
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      432 thousand
Chart =


---

Jabil Circuit - JBL - close: 31.15 chg: +0.22 stop: 27.99

Company Description:
Jabil Circuit, Inc. is one of the world's largest electronic
manufacturing services providers. Jabil manufactures for
international electronics companies in the automotive, computing
and storage, consumer, instrumentation and medical, networking,
peripheral and telecommunications markets. Jabil offers circuit
design, board design from schematic, prototype assembly, volume
board assembly, system assembly, repair and warranty services
from facilities in the Americas, Europe and Asia.
(source: company press release)

Why We Like It:
Up, up and away!  Okay, JBL isn't flying that high but it did
show a lot more strength this week than most stocks.  The recent
breakout above long-term resistance at $30.00 was essentially due
to the positive earnings numbers from CSCO.  Cisco Systems does a
lot of business with JBL and if CSCO's business is improving that
means more money for JBL as one of its suppliers.  The last few
weeks have seen a number of positive analyst comments on the
stock.  The most bullish indicator for JBL has been the very
strong volume on its rallies this last week, which indicates
conviction from buyers.

The breakout also produced a triple-top buy signal on JBL's
point-and-figure chart.  We like the stock at current levels but
odds are decent it will pull back to retest the $30 level as
support.  Patient traders can wait for the dip to evaluate new
entries.  We're leaving our stop loss at 27.99 but more
conservative traders can probably use a stop closer to $29.  We
are going to keep an eye on the SOX.  Chips have been very strong
but they look very overbought and due for some profit taking.



Suggested Options:
There are plenty of options to choose from.  Short-term traders
can focus on November or December strikes.  Longer-term traders
can use the January or March strikes.  We like the 30's even
though they are at-the-money.

! Alert - November options expire in two weeks!

BUY CALL NOV 25 JBL-KE OI= 419 at $6.40 SL=3.75
BUY CALL NOV 30 JBL-KF OI=2551 at $1.80 SL=0.90
BUY CALL DEC 25 JBL-LE OI=2211 at $6.70 SL=4.00
BUY CALL DEC 30 JBL-LF OI=5114 at $2.65 SL=1.35
BUY CALL DEC 35 JBL-LG OI= 452 at $0.60 SL= --

Annotated Chart:



Picked on November 04 at $30.11
Change since picked:     + 1.04
Earnings Date          09/18/03 (confirmed)
Average Daily Volume:      1.4 million
Chart =


---

Lowe's Companies - LOW - close: 59.00 change: -0.17 stop: 58.00

Company Description:
As a retailer of home improvement products, Lowe's has a specific
emphasis on retail do-it-yourself and commercial business
customers.  The company specializes in offering products and
services for home improvement, home decor, home maintenance, home
repair and remodeling and maintenance of commercial buildings.

Why we like it:
Despite hitting new all-time highs early last week, our LOW play
has been a bit of a disappointment, churning in sideways fashion
between $58-60 since breaking above the last consolidation zone
at the end of October.  Thursday's price action was particularly
unnerving, as the stock came within a dime of hitting our $58
stop.  The stock does look like it is consolidating for another
break higher, but after nearly 2 weeks of going nowhere, we're
losing confidence in the upside potential.  Aggressive traders
might consider new positions on a breakout over last Monday's
high, but the risk is that the breakout will be followed by
another two weeks of sideways action.  The better approach would
be to harvest gains in the $61-62 area by selling into strength.
Remember that LOW is set to report earnings on 11/17, giving the
stock only one more week to achieve that initial $62 target.
Maintain stops at $58

Suggested Options:
Shorter Term: The November 60 Call will offer short-term traders
the best return on an immediate move, as it is currently at the
money.  Note that November contracts expire in 2 weeks.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the December 60 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 55 Call.

! Alert - November options expire in two weeks!

BUY CALL NOV-55 LOW-KK OI= 2321 at $4.50 SL=2.75
BUY CALL NOV-60 LOW-KL OI= 8449 at $1.10 SL=0.60
BUY CALL DEC-55 LOW-LK OI=  160 at $5.20 SL=3.25
BUY CALL DEC-60 LOW-LL OI= 1500 at $2.05 SL=1.00

Annotated Chart of LOW:




Picked on October 23rd at    $58.65
Change since picked:          +0.35
Earnings Date              11/17/04 (unconfirmed)
Average Daily Volume =     3.85 mln
Chart =


---

Progressive - PGR - close: 75.71 chg: -0.30 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: (Original Update from Thursday)
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.

! Weekend Comments: Our new call play from Thursday's newsletter
has been triggered with a surge of strength in Friday's session.
PGR traded as high as $76.44 before slipping lower with the rest
of the market Friday afternoon.  This triggered our play at
76.25.  Traders can choose to look for a bounce from the $74 area
or look for new strength above 76.50 before opening new
positions.

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.

! Alert - November options expire in two weeks!

BUY CALL NOV 75 PGR-KO OI= 815 at $1.75 SL=0.90
BUY CALL DEC 75 PGR-LO OI=  28 at $2.80 SL=1.40
BUY CALL DEC 80 PGR-LP OI=  14 at $0.75 SL= --

Annotated Chart:




Picked on November 07 at $76.25
Change since picked:     - 0.54
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      654  thousand
Chart =


---

QLogic Corp. - QLGC - close: 57.49 change: -0.21 stop: 55.85*new*

Company Description:
Somebody has to make the equipment that lets your computer talk
to all its peripheral equipment, and QLGC does it well.  A
leading designer and supplier of semiconductor and board-level
input/output (I/O) management products, QLGC has been providing
SCSI-based connectivity solutions to this market sector for over
12 years.  QLGC's I/O products provide a high performance
interface between computer systems and their attached data
storage peripherals, such as hard disk and tape drives, removable
disk drives and RAID (redundant array of independent disks)
subsystems.  The company is also the market share leader in Fibre
Channel host bus adapters, a market segment that is receiving
tremendous attention from investors.

Why we like it:
The bullish action in shares of QLGC has come nowhere near
rivaling the excitement of the sharp breakout over $55 on 10/28,
but the stock is continuing its persistent rise.  As expected,
the $58.00-58.50 area provided initial resistance, but the bulls
are steadily chipping away at that obstacle, with a test of that
level on 5 of the last 7 days.  While they can't claim victory
yet, the bulls are definitely chipping away at this resistance
level, with the intraday highs gradually rising.  As long as the
Semiconductor index (SOX.X) continues to rise, QLGC should
continue its ascent as well.  Be aware though, that when the
NASDAQ Comp hits 2000 (probably early next week), it may initiate
a bout of profit taking.  So conservative traders may want to
proactively harvest gains as that level is reached.  Intraday
dips near $57 still look acceptable for new entries ahead of a
push up towards our $61-62 final target.  We are still suggesting
traders exit open positions when that solid resistance level is
reached.  Raise stops slightly to $55.85, just below the
consolidation zone from the last few days in October.

Suggested Options:
Shorter Term: The November 55 Call will offer short-term traders
the best return on an immediate move, as it is currently at the
money.  Note that November contracts expire in 2 weeks.

Longer Term: Aggressive traders looking to capitalize on an
extended rally will want to look to the December 60 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 55 Call.

! Alert - November options expire in two weeks!

BUY CALL NOV-55 QLC-KK OI=5594 at $3.20 SL=1.60
BUY CALL NOV-60 QLC-KL OI=7816 at $0.70 SL=0.35
BUY CALL DEC-55 QLC-LK OI= 977 at $4.50 SL=2.75
BUY CALL DEC-60 QLC-LL OI=1670 at $2.00 SL=1.00

Annotated Chart of QLGC:



Picked on October 21st at    $54.21
Change since picked:          +3.29
Earnings Date               1/14/04 (unconfirmed)
Average Daily Volume =     4.45 mln
Chart =


---

Veritas Software -VRTS - cls: 38.90 chng: +0.29 stop: 35.90*new*

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.

Why we like it:
The much-anticipated breakout in shares of VRTS arrived with a
bang last Wednesday, with the stock rocketing through $38
resistance.  Despite the broad market struggling to move higher
through the remainder of the week, the stock inched steadily
higher into the end of the week, testing the waters above $39
before closing just below that mark.  We've still got our eye on
$40 as the next logical place to harvest some gains.  That
achievement will likely occur in concert with the NASDAQ
Composite testing the 2000 level and a round of profit taking
would be the expected result.  Provided it is just a normal round
of profit taking, we'll be looking for new entries on a dip and
rebound from the $37 level, which should now act as support.
Price action is getting a bit extended above the short-term
moving averages, so we would not recommend momentum entries on
further strength above Friday's close.  Raise stops to $35.90,
which is just below the bottom of the most recent pullback.
After VRTS scales the $40 level, we'll take a more in-depth look
at whether a continued rally towards our aggressive $45 target
seems realistic.

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.  Note that November contracts expire in 2 weeks.

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.

! Alert - November options expire in two weeks!

BUY CALL NOV-35 VIV-KG OI=15282 at $4.20 SL=2.50
BUY CALL NOV-40 VIV-KH OI= 7717 at $0.85 SL=0.40
BUY CALL DEC-35 VIV-LG OI= 1478 at $5.00 SL=3.00
BUY CALL DEC-40 VIV-LH OI= 5991 at $1.60 SL=0.75

Annotated Chart of VRTS:




Picked on October 28th at    $37.27
Change since picked:          +1.63
Earnings Date               1/21/04 (unconfirmed)
Average Daily Volume =     6.18 mln
Chart =



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

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*****************
CURRENT PUT PLAYS
*****************

Anthem, Inc. - ATH - close: 66.55 change: -0.67 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:
We certainly can't be disappointed with the initial action in our
bearish ATH play, as the stock did as we expected and dropped on
Friday.  It wasn't much (about 1%), but it was a larger drop than
seen in any of the major indices and that keeps the premise of
relative weakness intact.  When we initiated coverage, we set a
trigger of $66 and while close, Friday's dip to $66.19 wasn't
quite enough to get the job done.  That leaves us with the same
action plan for next week.  Wait for the trigger to be satisfied
and then enter according to your trading style.  Momentum traders
will want to enter on the initial break, while those with a more
cautious stance will want to wait for a subsequent failed bounce
in the $67-68 area.  There's likely to be some mild support found
in the $63.50 area, but once below there, ATH should seek out
strong support near $60.  Maintain stops at $70.05 and wait for
the trigger to be hit before taking action.

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.  Note that November contracts
expire in 2 weeks.

! Alert - November options expire in two weeks!

BUY PUT NOV-70 ATH-WN OI=2085 at $3.90 SL=2.25
BUY PUT NOV-65 ATH-WM OI= 575 at $0.90 SL=0.40
BUY PUT DEC-65 ATH-XM OI=2456 at $2.10 SL=1.00

Annotated Chart of ATH:




Picked on November 6th at    $67.22
Change since picked:          -0.67
Earnings Date               1/26/04 (unconfirmed)
Average Daily Volume =     1.66 mln
Chart =


----

JetBlue Airways - JBLU - cls: 55.19 chg: -0.01 stop: 58.51

Company Description:
JetBlue is a low-fare, low-cost passenger airline, which provides
high-quality customer service. JetBlue operates a fleet of 48 new
Airbus A320 aircraft and is scheduled to place into service
another five A320s by the end of 2003.  Based out of New York
City's John F. Kennedy International Airport, JetBlue currently
operates 184 flights a day and serves 22 destinations in 11
states and Puerto Rico and plans to commence service in January
from Boston to Orlando, Tampa and Ft Lauderdale, FL, LA/Long
Beach, CA, and Denver, CO. With JetBlue, all seats are assigned,
all travel is ticketless, all fares are one-way, and a Saturday
night stay is never required. (source: company press release)

Why We Like It:
There has been a real tug-of-war in shares of JBLU the last few
days.  The stock has come to a halt near the $55 mark and hasn't
traded above the $56.30 level in four sessions.  Whether you
believe it is the bears resting before the next leg lower or that
bulls are putting up a tough defense it's hard to argue with the
ugly (and very bearish) P&F chart for JBLU.  Of course I don't
find it any coincidence that shares have been hugging the $55
level, which just so happens to be the 38.2% retracement of the
April-through-October run for JBLU.  Another drop from here and
JBLU should hit $50 without even trying.

Bulls will point to the relative strength in the airlines on
Friday as the XAL index was one of the few sectors that closed in
the green.  This is even more surprising given the rise in crude
oil prices that have climbed back above the $30 level.  Higher
oil means more expensive jet fuel and pressures the airlines'
profit margins.  Optimists will also point to the XAL's bullish
trend that has not yet been broken.  If the XAL can mount another
rally from here it will make it tougher for bears in JBLU to gain
any momentum.

We are a little cautious merely because JBLU has so many fans.
Traders can evaluate new entries on a failed rally under $57.00
or a new low under $54.00.  Very conservative traders probably
shouldn't be in a volatile stock like JBLU but if you are
consider a stop loss above the 10-dma.

Suggested Options:
Short-term traders can choose from the November or December
options while longer-term players can check out the Januarys.  We
like the 60s and 55s.

! Alert - November options expire in two weeks!

BUY PUT NOV 60 JGQ-WL OI=1376 at $5.30 SL=3.00
BUY PUT NOV 55 JGQ-WK OI=1945 at $1.95 SL=1.00
BUY PUT DEC 60 JGQ-XL OI= 921 at $6.50 SL=4.00
BUY PUT DEC 55 JGQ-XK OI= 572 at $3.40 SL=1.70
BUY PUT DEC 50 JGQ-XJ OI=1063 at $1.60 SL=0.80

Annotated Chart




Picked on November 02 at $57.67
Change since picked:     - 2.48
Earnings Date          10/23/03 (confirmed)
Average Daily Volume:      1.5 million
Chart =



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

AutoZone, Inc. - AZO - close: 93.30 change: -2.82 stop: 97.75

Company Description:
AutoZone is a retailer of automotive parts and accessories,
primarily focusing on do-it-yourself customers.  Each of its more
than 2900 stores in 42 states and Mexico carries an extensive
product line for cars, vans and light trucks, including new and
re-manufactured automotive hard parts, maintenance items and
accessories.  Approximately half of its domestic stores also have
a commercial sales program, which provides commercial credit and
prompt delivery of parts and other products to local repair
garages, dealers and service stations.

Why we like it:
It wasn't that long ago that we were enjoying a nice bullish run
in shares of AZO and for awhile there, it looked like the good
times would never end.  But that was before the mutual fund
trading scandal began to pick up steam and widely held stocks
like AZO have been losing their appeal.  The stock suffered a
steep drop on 10/31, and then after several days of consolidating
that drop, got hit for another big loss on Friday.  That last
drop creates some real problems for longs, as it broke the 4-
month rising trendline and dropped the stock all the way back to
the 50-dma ($92.76) on volume that doubled the ADV.  Adding to
the bearish picture, the PnF chart gave a "High Pole Warning"
with this sharp reversal and indicates more price weakness ahead.
It isn't full bear ahead yet though, as AZO won't actually print
a new Sell signal until it trades $89.

AZO has had quite a drop in the past couple weeks, and chasing
the stock lower at this point doesn't appear to be the best
course of action.  Instead, we're looking for an oversold rebound
from the 50-dma and subsequent rollover in the $95-96 area, which
should now be strong resistance.  Entering on that rollover would
be our preferred strategy.  That doesn't mean that momentum
entries won't work, just that they carry greater risk.  Traders
so inclined can use a break below $92 as an entry trigger,
looking for a quick drop to next support near $89.  The $86-87
area was strong resistance for nearly a year, and we're looking
for it to now act as firm support on the way down.  That makes
for a nice target to shoot for, as well as a nice potential
reward when compared against our initial stop at $97.75, which is
just above last week's intraday highs.

Suggested Options:
Aggressive short-term traders will want to focus on the November
95 Put, as it will provide the best return for a short-term play.
Longer term traders will want to look to the December 90 Put, as
it should provide ample time for AZO to move in our favor without
time decay becoming a major factor.

! Alert - November options expire in two weeks!

BUY PUT NOV-95 AZO-WR OI=4129 at $2.85 SL=1.50
BUY PUT NOV-90 AZO-WS OI=2040 at $0.75 SL=0.35
BUY PUT DEC-90 AZO-XR OI=1929 at $2.15 SL=1.00

Annotated Chart of AZO:




Picked on November 9th at    $93.30
Change since picked:          +0.00
Earnings Date              12/22/04 (unconfirmed)
Average Daily Volume =     1.02 mln
Chart =


---

Amgen Inc - AMGN - close: 59.95 chg: -1.18 stop: 62.51

Company Description:
Founded in 1980, Amgen is a pioneer in the biotechnology
industry. Based on a history of scientific innovation, Amgen
launched the first biotechnology blockbuster products, EPOGEN.
(Epoetin alfa) and NEUPOGEN. (Filgrastim), and continues to
research, identify and develop novel therapeutics to treat
grievous illness. The Company invests heavily in research and
development, having invested 22 percent of total product sales in
R&D in 2002, among the highest reinvestment levels in the
biotechnology and pharmaceutical industries.
(source: company press release)

Why We Like It:
Trading biotech companies always carry a certain amount of risk.
If you're long, then there is the risk that some crucial drug
trial doesn't produce.  If you're short, then there is the risk
they come out with a cure for cancer or other amazing news that
sends the stock skyrocketing.  With that in mind we find it hard
to believe that bears aren't drawn to the distribution taking
place in AMGN these days.  The stock has been a huge winner since
summer of 2002 and has single-handedly lead the biotech sector
higher.  Unfortunately for AMGN the stock peaked in July of 2003
and hasn't been able to mount a comeback.  After a couple of
months sliding lower in a wide descending channel the stock was
hammered after its Oct. 21st earnings announcement as investors
sold the news.

The mid October drop was fueled with big volume.  Now the stock
has taken a couple of weeks to consolidate and it looks ready for
its next leg down.  Further complicating matters for the bulls is
the simple 200-dma that has thwarted any rally attempts for the
last two weeks.  AMGN's point-and-figure chart has broken rising
bullish support and Friday's close under $60 looks like an entry
point.

There is some congestion and potential support between $57.50 and
60.00 from March and April of this year but we don't think it
will hold.  Our first target is $55.  We'll start the play with a
stop at 62.51.

Suggested Options:
The December and January 60s and 55's look tempting.

! Alert - November options expire in two weeks!

BUY PUT NOV 60 YAA-WL OI=15117 at $1.35 SL=0.65
BUY PUT DEC 55 YAA-XK OI= 4760 at $0.75 SL= --
BUY PUT DEC 60 YAA-XL OI= 4394 at $2.30 SL=1.15
BUY PUT DEC 65 YAA-XM OI= 1240 at $5.70 SL=3.25

Annotated Chart:




Picked on November 09 at $59.95
Change since picked:     - 0.00
Earnings Date          10/21/03 (confirmed)
Average Daily Volume:       8.8 million
Chart =


---

PACCAR - PCAR - close: 76.35 chg: -2.12 stop: 78.01

Company Description:
PACCAR is a global technology leader in the design, manufacture
and customer support of high-quality light-, medium- and heavy-
duty trucks under the Kenworth, Peterbilt, DAF and Foden
nameplates. It also provides financial services and distributes
truck parts related to its principal business. In addition, the
Bellevue, Washington-based company manufactures winches under the
Braden, Gearmatic and Carco nameplates.
(source: company press release)

Why We Like It:
After an incredible run from $40 in January to 87.50 in August
investors are finally taking profits in shares of PCAR.  The last
two months have produced a wedge-like consolidation pattern with
higher lows and lower highs.  Normally this is a neutral pattern
that can produce a powerful breakout in either direction.
However, this time we see the simple 50-dma applying pressure to
shares in October and again in early November.  Combine that with
its extremely overbought status and the rising volume on Friday's
decline and it smells like a put play candidate.

Aggressive traders can evaluate new bearish positions as soon as
it breaks the trend of higher lows.  We're going to look for a
little bit of momentum and only open the play on a drop below the
$75.00 mark.  Our trigger is $74.99.  If we're triggered our
first stop loss will be 78.01 but we'll quickly move to lower it
as the play progresses.

Suggested Options:
We like the 75 and 70 strikes with a preference for Decembers.

! Alert - November options expire in two weeks!

BUY PUT NOV 75 PAQ-WO OI=1313 at $1.00 SL= --
BUY PUT DEC 70 PAQ-XN OI=  27 at $1.10 SL=0.50
BUY PUT DEC 75 PAQ-XO OI=  83 at $2.70 SL=1.35
BUY PUT DEC 80 PAQ-XP OI= 210 at $5.60 SL=3.00

Annotated Chart:



Picked on November xx at $xx.xx
Change since picked:     - 0.00
Earnings Date          10/21/03 (confirmed)
Average Daily Volume:       899 thousand
Chart =



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The Option Investor Newsletter                   Sunday 11-09-2003
Sunday                                                      4 of 5


In Section Four:

Leaps: DOW 10,000 - Here We Come!
Traders Corner: Does God Protect Drunks And Fools?
Futures Corner:: Swing Trade Plan--Putting All the Pieces Together



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*****
LEAPS
*****

DOW 10,000 - Here We Come!
By Mark Phillips
mphillips@OptionInvestor.com

The DOW has had a pretty impressive rally over the past several
months, rebounding from below 7500 and is now knocking on the door
of the venerable 10,000 level.  The media mavens are trumpeting
the virtues of the latest wave of economic growth and the bulls
are responding by pawing the ground with glee.  The doom-sayers
are issuing warnings about extreme over-valuation and all the
myriad problems with the economy, but are largely ignored, both by
the media and the investing public.  Anything but long has been
wrong for several months and for the most part, nobody believes it
can change anytime soon.  In short, everyone is right and to be
fair, most are wrong.

Both the bulls and the bears are about to be treated to a roller-
coaster ride of unprecedented speed and excitement.  You see, I'm
describing the conditions in early March, 2000.  This was before
the DOW had ever seen the upside of 10,000 and before the Y2K bug
had really moved to the forefront of our consciousness.  Over the
next year, the DOW would soar to almost 12,000, before finally
tipping over and...well, we all know the rest of the story.  Well,
here we are 4 1/2 years later, with the DOW once again approaching
10,000 and the media trumpeting the virtues of economic growth and
the return of the bull market.  There are plenty of bears to point
out the problems in the here and now, and in all honesty, I have
to count myself among them.

You see, by my read, the underlying economic conditions are very
different than they were in 1999.  Instead of government
surpluses, we have huge (and growing) deficits, corporate and
individual indebtedness is frighteningly high and despite the
recent improvement in the employment statistics, the reality is
that U.S. jobs are still flooding over the borders.  There's still
a large overhang of production capacity and businesses are still
quite stingy about opening up the capital expenditures purse
strings.  But probably the most important difference is the
deteriorating condition of our currency.  In early 1999, the
dollar was in the early stages of recovery from the abrupt
correction of late 1998.  Fast forward to today, and the dollar is
off sharply against every major currency in the past 6,12 and 18
months.  Not only that, but it is trading near its 1998 lows and
with the profligate money printing activities of the Fed, it seems
unlikely that it can go anywhere but down.

We spend a lot of time over the past couple weeks in the Trader's
Corner column delving into my fundamental views of the economy and
I won't belabor the point here today.  Suffice to say, it doesn't
yet appear anywhere close to healthy, but these types of macro
factors rarely have merit in a short-term trading environment.
Our job is to trade what the market gives us, regardless of the
underlying economic picture.  There are rare times when the
confluence of fundamental factors generates a substantial market
move (like what happened in March of 2000), but for the most part
it is the day-to-day price action and the technical chart patterns
it creates that determines where the market is headed.

We remain in a cyclical bull market within an overall secular bear
market.  It has been over 20 years since this particular dynamic
presented itself to us.  I will turn 40 next year, so it should
come as no great surprise that this particular macro market
dynamic is new territory to me.  That means I continue to rely on
the collected wisdom of those who are both older and wiser than I
in my quest to make sense of what I see.

I've been actively trading in various markets since the mid-1990s,
and what I find interesting is that most of the tools I have
relied on in the equity market over the past 5 years have
performed poorly, if at all.  Oscillators, sentiment readings,
various technical studies and even basic chart patterns have
failed to work again and again.  The over-riding and controlling
factor is the money the Fed is pumping into the system and that is
inflating all assets, even stocks, without regard to what comes
next.  When the Fed ceases to prime the money pump, or worse yet,
starts to run it in the other direction (through rising interest
rates and a drop in liquidity), we will be in for a nasty
correction in the market.

That's precisely what happened in early 2000, as the Fed began
removing the excess liquidity that had been injected to head off
any potential problems related to Y2K.  If you look at the recent
numbers for money supply growth/contraction, it is clear the Fed
is already starting to back off on the accelerator.  It doesn't
mean the music has stopped, but I think it would be wise to scope
out a chair that you can get to in a hurry just in case it does
stop.

The market's date with destiny (Dow=10K, SPX=1065-1070,
COMPX=2000) appears right on track and I'd actually be surprised
if we don't at least brush these levels next week.  The VIX
remains at levels that screams for a decent correction in the
market, the likes of which we haven't seen since this rally began
in March.  Until the major indices drop below their respective 50-
dmas and stay there for more a day or two, long is really the only
way to play.  At the same time, position trades to the long side
continue to carry more risk than I'm comfortable assuming with the
bullish percent readings holding at multi-year bullish extremes.

Throughout the course of the last 5 months, the DOW has advanced
800 points, the SPX has gained roughly 50 points and the NASDAQ
Composite is up roughly 300 points.  Those are all enviable gains
that I certainly would have liked to have captured.  But the
underlying conditions from which those gains were spawned was not
one in which I would have even remotely considered initiating long
position trades.  The VIX by early June was already flirting with
the 20 level, which normally forecasts a sizeable market
correction and all of the bullish percent readings were pegged
deep in overbought territory.  In addition, every one of the
weekly Stochastics oscillators were threatening to break down out
of overbought territory after being there for over a month.

Needless to say, the market correction has yet to show itself,
weekly Stochastics have never really dropped out of overbought,
the VIX continues driving to lows not seen since 1998 and the
bullish percent readings have yet to show any appreciable
deterioration.  How much longer can it continue?  It could all
come crashing down next week or the market may continue stumbling
higher right into 2004.  I honestly don't know.  We've got a
couple bearish plays cued up that should perform quite nicely if
we successfully pick the top.  But let me be very clear in stating
that we are trying to pick a top in a market that has been very
unforgiving of that type of trade for the past 8 months.  Without
further ado, let's turn our attention to the meager list of plays
we're currently following.

Portfolio:

WMT - The more time that goes by, the better I like our WMT play.
Not because it is performing great -- in fact it has really done
nothing for us in the past month -- but I like the way it is
starting to show real weakness relative to the broad market and
the Retail index (RLX.X).  So long as the stock remains below that
long-term descending trendline (now at $59.70), odds favor the
downside.  In fact, if we can get the weekly Stochastics to tip
over here, we should have a decent shot at an initial drop to the
$53-54 area, which will allow us to lower our stop near breakeven.
For now, failed rally attempts below the trendline can still be
used for new entries, and we'll keep our stop set at $61.

Watch List:

QQQ - Still climbing well within its ascending channel, the QQQ
has yet to give us either a definite sign of weakness or a push
high enough to attempt shorting the top.  I still think the best -
albeit aggressive - approach will be to try to pick a top on a
push up to the $36.50-37.00 area, which should coincide with the
NASDAQ Composite testing the 2000 level.  For traders that would
prefer to wait for signs of a breakdown, waiting for the clear
breakdown means waiting for a drop below the bottom of the channel
($34.55) and the 50-dma ($34.39) before entry.  So we can raise
our trigger for the breakdown entry to $34.40.  Stops on the
higher entry will be set at $39.25, while traders taking a
breakdown entry should set their stop just above the relative high
at $36.25.

SMH - I sure am glad we put this play on hold a few weeks back!
The Semiconductor index has continued to lead the NASDAQ higher
and is now pushing into heavy resistance in the $540-560 area.
That corresponds to $44-46 on the SMH and until there is some sign
of weakness - either a breakdown or a pattern of lower highs, I
believe we're best served by keeping it on hold.  We'll continue
to monitor the action until conditions are more favorable for a
downside play, but for now we watch and wait.

NEM - As strong as the equity market has been lately, it has been
pretty impressive to see gold and gold stocks holding up as well
as they have been of late.  A big part of the strength in gold
continues to be attributable to the weakness in the dollar, a
dynamic that shows no signs of ending anytime soon, with the
rampant money supply growth from the Fed.  That said, I believe it
is a fool's errand to be chasing shares of NEM higher at this
elevated level.  Our job right here is to exercise the necessary
level of patience and wait for the inevitable (I hope) pullback.
That pullback should drop the price of gold back near its 200-dma
(now at $359) and NEM should pull back as well.  I'm still
expecting a drop back near $38, so we'll keep that entry target in
place.  Traders willing to take a bit more risk can enter on a dip
and rebound from the 50-dma (currently $40.28), as it has been
acting as strong support ever since late April.  In either case,
we'll be using a generous stop at $35, as that should keep us in
this long-term bullish trend.

SBUX - Ah, regret.  SBUX broke out without giving us even a hint
of an entry point and the stock has continued to rise from there.
That doesn't mean that we can't make a viable play here, but it
does mean that we're going to need to wait a bit longer.  The
stock broke out of its long-term ascending channel and is once
again hitting new all-time highs.  If the price pattern remains
intact, we're unlikely to see our initial $27.50-28.00 entry
target offered.  Instead, the likely point of consolidation is
likely to be in the $29-30 area, with the 50-dma now sitting at
$29.98.  So that's where our entry target goes now.  Initial stops
will be placed at $28, which is just below the top of the late-
August gap.

DJX - The other half of our top-fishing duo, our DJX play is very
likely to offer up an entry next week on a foray up to the $100
level.  As we've discussed repeatedly, this is an aggressive play,
with the DOW having failed to show any of the signs of weakness
we'd like to see.  We're strictly placing a bet on the strength of
resistance and selling pressure that ought to be waiting at that
level.  We're not looking for a huge market correction, but a drop
back to $90 is certainly possible.  In keeping with the play's
aggressive nature, we're using a wide stop at $104, which should
be sufficient to keep us in the play, even if the ultimate top is
up nearer to the $103 level.  Conservative traders may want to
hedge their bets by opening only a 1/2 position at $100, looking
to round it out to a full position in the vicinity of $103.

Radar Screen:

QCOM - If it weren't for the fact that the PnF price target for
QCOM is at $67, I would be removing it from consideration this
weekend.  It certainly appears like a breakout is coming again
early next week and the stock has clearly run away from what would
have been a nice entry in the $40 area.  Fundamentally and
technically, I still like the outlook for QCOM, but finding an
attractive entry point has been a bit of a challenge.  I'm a
patient man though and I can wait.  We could see a near-term
pullback into the $42-43 area and that would work for aggressive
traders.  In fact, looking again at the PnF chart, that is the
level I would prefer for targeting a bullish entry.  A drop to $40
would generate a PnF Sell signal, so I would expect the $40-41
area to be staunchly defended by the bulls, giving us the freedom
to use a tight stop at $39.50.  There were no nasty surprises at
all in the company's earnings report last week, and I like the
current price action.  Next week, we can look forward to QCOM
transitioning to the Watch List.

Closing Thoughts:

I did a lot of thinking this week about the big picture -- between
diaper changes and late-night feedings -- and was reminded of the
difference between having a big picture market view and making
money from market action.  Sometimes the two are in perfect
concert and that was certainly the case for me in 2001-2002.  This
year has been a challenge, due largely to the fact that the market
has not behaved according to the tools I've become accustomed to
using in recent years.  You know the old saying, "If it ain't
broke, don't fix it"?  Well, the corollary to that saying is that
if it's busted, scrap it!

The bottom line is that the market is in full bull mode and until
something changes, it is unlikely to provide winning trades in
line with my big picture view.  I'll continue watching for plays
that fit within my market view, but in the meantime, I'm going to
dust off some methods that I haven't used in many a year.  The
intended goal will be to find some longer-term winning plays that
we can enjoy while we wait for the market to come to its senses or
for the economy to prove me wrong.  Look for an aggressive
repopulation of the Radar Screen and Watch List in the weeks
ahead.

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays

SYMBOL OPENED     LEAPS    SYMBOL  ENTRY   CURRENT  CHANGE  STOP

Calls:
None

Puts:
WMT    10/03/03  '05 $ 55  ZWT-MK  $ 5.10  $ 4.10  -19.61%  $61
                 '06 $ 55  WWT-MK  $ 7.20  $ 5.90  -18.06%  $61


LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
NEM    10/05/03   $37-38, $40  JAN-2005 $ 35  ZIE-AG
                            CC JAN-2005 $ 30  ZIE-AF
                               JAN-2006 $ 35  WIE-AG
                            CC JAN-2006 $ 30  WIE-AF
SBUX   10/12/03   $29-30       JAN-2005 $ 30  ZIE-AG
                            CC JAN-2005 $ 25  ZIE-AF
                               JAN-2006 $ 30  WIE-AG
                            CC JAN-2006 $ 25  WIE-AF



PUTS:
QQQ    08/10/03  $36.50-37.00  JAN-2005 $ 32  ZWQ-MF
                 $34.40        JAN-2006 $ 32  WD -MF
SMH    08/24/03  HOLD          JAN-2005 $ 35  ZTO-MG
                               JAN-2006 $ 35  YRH-MG
DJX    11/02/03  $99.50-100.00 DEC-2004 $ 96  YDK-XR
                               JUN-2005 $ 96  ZDK-RR


New Portfolio Plays

None


New Watchlist Plays

None


Drops

None


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

Does God Protect Drunks And Fools?
By Mike Parnos, Investing With Attitude

Considering the abundance of fools, along with a healthy
population of drunks, who trade stocks and options, it seems that
God has his work cut out for him.  While he works on a solution,
let's see what enticing strategy we can come up with for the CPTI
fraternity.

Is there any strategy in the market that is foolproof? Or
drunkproof?  Of course not.  A dose of stupidity with a 100-proof
chaser can submarine most any well thought out strategy.  But, if
we're alert, cagey, capitalized -- and sober, we have a good
chance of coming home at the end of the day with more than we started with.

Introducing the OEX BP Boogie
Well, we have to call it something, right?  BP stands for "Bull
Put" and "Boogie" refers to the possible adjustments that might be
necessary during the life of the trade.  Don't like the name?
Well, it'll do for now.  If you have a better idea, send me your
suggestions.

At this writing, the OEX index is trading at $520.70.  We're
currently in an uptrend.  How can we take advantage of continued
upward movement – and reduce our risk to almost nothing?

Impossible you say?  Well, almost anything is possible.  Don't
believe me?  We now know how to take pictures with a telephone,
put cheese inside of a pretzel, get Santa down a chimney without
Vaseline, and cure everything but stupidity and the common cold.
Need I say more?

The Position
We like the OEX index because it’s a cash settlement.  It’s not a
stock.  That means there is no risk of early assignment regardless
of how deep in the money an option becomes.

We will use a 1-contract position for our example.  You should
obviously adjust your position to accommodate your risk tolerance
and account size.
Sell a Dec. OEX $525 put @ $13.40
Buy a Dec. OEX $510 put @ $7.40
Credit:  $6.00 x 100 = $600 per contract
Risk:  $9.00 x 100 = $900 per contract

We're assuming that you’re a shrewd trader and managed to shave an
additional $.20 off each side of the spread.  That would make your
credit an even $6.00 and your risk an even $9.00.  I like round
numbers better.  I like a lot of round things . . . Oreos, M&Ms,
pizza, Pamela Anderson . . . the list goes on and on.

Are You Sufficiently Capitalized?
This strategy requires a substantial sized account.  There may be
large margin requirements when placing the adjustments. The
initial maintenance requirement on a 10-contract position is
$9,000 (difference between the strikes -- $15 -- less the credit
received -- $6.00 -- for the 10 contracts.  Notice that, it’s the
same as the initial risk.

The Plan
Now, I said that the risk would be reduced to almost zero.  We’re
going to accomplish this by having a plan – a way to adjust the
position should it go in the wrong direction.

If the trend continues and OEX moves, and remains, above $525,
we’re in great shape (Just like me.  Round is a shape, isn't it?).
No adjustments would be necessary and we'll all live happily ever
after.   It will also please all of our beneficiaries.

If the OEX becomes a PIA and starts to trend in the other
direction:
1. We wait until it gets to a point where it costs $12 to buy back
the short call.  At that point, we buy back the short $525 put
contract for $12.  Why do we wait that long?  We wait for a large
of a movement because we hope, if the short strike is violated,
that a new trend has begun.  We don’t want to be whipsawed back
and forth.

Now what?  We were wrong about the initial direction.  So what?
It’s not the first time and certainly won’t be the last. It broke,
the chart lied, but it’s fixable.

2.  Now we look over to the put side of the option chain.  We find
a bull put spread, at or below the current OEX value, which will
enable us to take in a credit of $6.00 – and sell 20 contracts.
That will effectively replenish the $12 we just spent to buy back
the short $525 puts.

In order to achieve a $6.00 credit in the new bull put spread, it
might be necessary to widen it a bit – thereby increasing your
maintenance requirement.  For example, instead of a $15 difference
between strikes, it might require a $20 difference between
strikes.  If you took in $600 per spread, your risk would be
$1,400 per spread.  Twenty contracts would require $28,000 in
maintenance. Sounds like a lot, but it’s not really at risk – if
you follow the plan.  It’s just to give the broker some peace of
mind.

Many Forms Of Maintenance
When we discuss maintenance, remember that maintenance does not
have to be in the form of cash.  If you have bonds, mutual funds,
stocks or other securities, the maintenance can be applied against
their marginable value.  Make sure your bungee cord is attached
before you jump – and confirm length of the cord, too.  Call your
broker and check out their margin policies.

Note that, after our little flurry of trades, our original $6.00
credit is still intact – less a few commissions.  If the OEX
continues trending up, everything is just dandy.  However, if it
reverses again, we have to repeat the process – by going in the
other direction – and doubling the number of contracts.

We’re hoping for a trend, and it doesn’t really matter what
direction.  It doesn’t have to last forever – four or five weeks
is plenty.  We’re willing to go with the flow and that’s how we
position ourselves.  You’ll never look more forward to option
expiration.

Amen & Pass The Doritos
The OEX BP Boogie strategy may not be our salvation.  It probably
isn't going to do much for fools and drunks either – they're God's
problem.  After all, you can't wash the spots off a leopard.  It
does, however, give dedicated CPTI students a way of taking
advantage of a trending market – and that's what we seem to have,
at least for now.
_____________________________________________________________

NOVEMBER POSITIONS
Position #1 – SPX Iron Condor – Trading @ 1053.21
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) – 520.70
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 - $128.00
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 @ $35.63
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, on Wednesday, 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 @ $520.70
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 -- $35.63
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.
_____________________________________________________________

What did the cannibal get when he was late to dinner?  The cold
shoulder.
_____________________________________________________________

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.


**************
FUTURES CORNER
**************

Swing Trade Plan--Putting All the Pieces Together
Keene Little

After years of trading several different systems, each seemingly
good for one kind of market but not good for another, I've refined
a system that seems to be usable in all markets. After all my
struggles to find the Holy Grail, which clearly doesn't exist,
I've naturally found that I have to combine indicators to give me
greater confidence in taking a trade, and just as importantly,
where to exit. But most importantly, where to place my protective
stop.

I think part of the learning process, usually paid for dearly as a
high tuition cost paid to the market, is to figure out which
system or indicators will work for you in the type of market
you're currently in. Moving averages work beautifully in a
trending market. Oscillators are perfect in a range-bound market.
Sentiment indicators are great for helping identify major turning
points in the market. But how do you identify where you are
currently in the market? As I've said to many, I'm the first one
signed up for hindsight trading as soon as it's offered. Until
then, we need to figure it out real-time.

The most effective "indicator" I've found is Elliott Wave (EW)
analysis combined with fibonacci tools. I will use them as my
primary tools to identify turning points, support levels and to
predict market action. When I make a prediction based on these
tools, and the market obliges me, my confidence to enter the trade
is increased. I use oscillators, moving averages, Bollinger Bands,
ADX and other tools to back me up. If as many of these tools as I
can comfortably watch don't "line up" and support my belief in a
direction for the trade, I prefer to stand aside and wait for
clarity. You will see me say that a lot. I've mentioned before,
this is a great profession we've chosen. If we don't like the
looks of the bus which just pulled into the station to pick us up,
we let it leave without us. We do this because we know there will
be another bus right behind it for us to check out.

Probably the biggest reason I like using EW and fibonacci is
because it takes much of the emotion out of the equation. We human
beings react to fear and greed and it negatively affects our
trading. We just don't think straight when we're afraid. Planning
your trade and trading your plan seems to be easily tossed out the
window at the starting gun. When I use EW and fibs, I'm trading
price levels that are very logical to me and I can identify where
and why I should enter a trade and where a logical stop loss level
should be. Knowing where that stop level is before I enter the
trade allows me to assess my risk before I ever take the trade.
This is absolutely essential.

Let's start with the chart setups I use so that we're all singing
off the same sheet of music. Here's what I'm watching on the
bottom of my charts (I'm using QCharts):





As can be seen in the chart above, I use stochastic settings of
10,5,3. MACD uses 8,13,5 (these numbers are fibonacci numbers).
RSI setting is 13. And I like to watch stochastic of RSI as a
backup to the standard oscillators because I've found it to give
fewer false signals. Settings on it are 13,21,5,5. Feel free to
play with these settings to give you signals you're comfortable
with. I use the same settings on the various time frames I use.

I have my screen set up so that I'm watching NQ, YM and ES on 1-
minute charts so that I can quickly see if one of the markets is
stronger than the others. I have smaller windows to watch 5-
minute, 10-minute, 30-min and 60-min charts of whichever symbol I
choose. I also have my symbols list and small chart windows to
watch bonds, NYSE advance-decline volume and NYSE advance-decline
issues. I have a few other charts in icons that I can bring up as
soon as I want to look at them, such as the daily chart. I'm
running QCharts on a 2-screen setup which obviously helps in
viewing all this data.

If you have fibonacci tools available on your charts, I strongly
suggest you play with them to get comfortable. Users of QCharts
have some very good fibonacci tools. I'm not that familiar with
TradeStation's tools and it's been years since I used eSignal. If
anyone would like more information and recommendations for setups
on these tools, drop me a line. The standard settings are usually
fine. You will see these tools used on the charts I regularly
post.

I don't want to bore you to tears on EW--there are plenty of good
books, the best primer probably is Elliott Wave Principle, by
Frost and Prechter. But basically I watch for a trend marked by
impulse waves and pullbacks which are marked by corrective waves.
Impulse waves consist of 5 internal waves, corrective waves have 3
(but can be more complicated versions). Impulse waves are much
easier to trade than corrective waves. There are certain rules and
"personalities" of the waves, but I won't get into that here. If
ever you'd like a little more information on what I'm seeing from
an EW standpoint, shoot me an email. I try to keep EW comments to
a minimum because it can be confusing to the uninitiated. Here's a
chart showing the SPX's rally and pullback since October 24th. I
think it's a good example of what I watch:





For those who care to follow EW counts, you can see my wave labels
from the October 24th low. There are 5 waves up, ending the rally
on November 3rd (there are some internal wave labels within these
5 but let's stick with the larger waves. An impulse wave is the
direction of the larger trend. A corrective wave, typically
labeled a-b-c, can be seen as the pullback November 3rd through
the 5th. Note that the pullback came to the 38% retracement of the
5-wave rally. I also watch for fibonacci relationships between the
waves to determine a level where I'll be watching for the market
to turn. The next chart below shows an example of this.

There are certain rules that EW patterns follow. If these rules
are violated by price action, the count must be something
different. You will see me refer to certain price levels that
can't be violated otherwise my assumption for the market's
direction is wrong. I will typically use these levels for my stop
levels.

Again, I don't want to get too technical on EW analysis. I just
wanted to show an example of what I watch for during the day. You
will see counts on my charts and if you ever have any questions or
comments about these, please drop me a line. EW analysis is not an
exact science and is subject to interpretation. That's why in
addition to EW counts and fibonacci levels, I use the indicators
you see in the chart below. I like to make us of trend lines as
well. The following chart shows an example of a number of signals
that would have helped us set up a trade.





Look at the setup above. Number 1 (in blue) shows the count--after
the 5th wave up there will need to be a larger correction. Number
2 shows a common fibonacci relationship between the waves that
help me identify potential turning points. If I miss the initial
trade, I watch for a break of the up channel. Number 3 shows an
opportunity where both the trend line and the middle of the
Bollinger Bands (the 20-period moving average) were broken. Number
4 shows the rollover in the oscillators, confirming the breakdown
after reaching the high. And number 5 shows the classic "kiss" of
the broken trend line (and the 20-pma in this case). When I can
get groups of these tools to confirm each other, I'll feel more
confident about entering the trade.

Note that the upper trendline was drawn from wave-1 to wave-3, and
then a parallel line was created and attached to wave-2. This
creates the up-channel. Wave-4 will usually run over/down to the
line and then head up to finish the rally. And when the count gets
confusing, sometimes these trend lines are the simplest way to
confirm the end of the run.

This analysis, like the use of any of the other technical tools,
can be used on any of the various time frames you care to look at.

That pretty well sums up the tools I use to set up my trades and
to identify targets and stop levels. I like clarity to build my
confidence in taking a trade. There are some basic rules I've
established for myself. I do not like jumping in and out of trades
several times a day on a "gut" feel for a direction. That's
scalping and my emotions kill me trying to do that kind of
trading. In my swing trades I look for at least a 3:1 ratio of
reward to risk. If I'm risking 2 points on the ES to my stop, I
need to see a target of at least 6 points. If I take 3 losses in a
row, I'm out of synch and I'll step out of the game until I get my
head cleared. That usually means I'm done until the next day.

If at any time you have suggestions about what you would like to
see more, or less, of, your comments and suggestions are more than
welcome. This service is for you and we value your input. Above
all, we are trying to teach the logic of why trades are taken, the
value of risk management and tight stop control. Stay disciplined
and happy trading!

Keene Little


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The Option Investor Newsletter                   Sunday 11-09-2003
Sunday                                                      5 of 5


In Section Five:

Covered Calls: Covered-Call Q&A
Naked Puts: Economics & Stock Prices -- Part III
Spreads/Straddles/Combos: Investors Brace For A Pause In The Rally

Updated In The Site Tonight:
Market Posture: Bears Stage Late Day Cattle Drive


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Note: Options involve risk. Risk disclosure:
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*************
COVERED CALLS
*************

Trading Basics: Covered-Call Q&A
By Mark Wnetrzak

One of our readers wants to know about "target-shooting" an entry
in a covered-call position and another reader has questions about
a "rule of thumb" for net-debit orders.


Attn: markw@OptionInvestor.com
Subject: Opening Covered-Call Plays

Hi,

I'm fairly new to the web-site and you wrote something last week
that seemed confusing.  The statement in the stock's write-up was
"target-shooting a lower net-debit will lower the cost basis and
raise the potential yield in the position."  What exactly does
this mean when it involves a covered call -- which requires that
I buy stock AND sell call options?  Does it refer to the stock
price or the option price?

Thanks for your help!

KN


Hello KN,

The technique of "target-shooting" to open a covered-call play
involves placing a buy-write (with a net-debit) order at a price
less than the current market and waiting for a dip in the cost
of the underlying issue to fill the order.  A buy-write involves
the buying of stock, whilst simultaneously writing a call against
the purchase of that underlying security.  Sometimes you can wait
days for a dip, but in the current market climate we are seeing
volatile activity almost every day.  Normally the dips are too
quick to react with manual orders but if you have an existing
(limit) order, you can get filled when it happens and sometimes
at the low for the day.  Obviously, if you use this method, you
will enter fewer plays because not all the orders will be filled.
However, the plays you do enter will have better profit potential
and you may be buying-in at the low price for the day.  In short,
using the buy-write order can help you establish a new position at
an acceptable risk/reward ratio without the possibility of loss
during the transaction.  The stock does not have to be monitored
during the day's trading as the order will be executed only when
the appropriate net-debit is achieved.  This type of trading works
well with low volume issues and provides the market-maker with an
opportunity to fill the request based on other orders in the pits.
It can also be used with volatile stocks that new investors might
otherwise avoid when utilizing the conservative, covered-writing
strategy.

Regards,

Mark
OIN


Attn: markw@OptionInvestor.com
Subject: Covered Call questions

Hi Mark,

First of all, I like your service.  I've found it to be quite
educational.  I'm starting to take a real liking to ITM CCs.
Maybe the monster returns aren't there, but they certainly
aren't bad for the limited risk!

A couple of questions...

First:  Are you able to recommend a good online screener?  I've
been trying Optionfind.com.  It seems pretty good for what I'm
after (I'm not a full time trader, so I'm not looking for an
expensive "professional" screener...just a reliable one).

Second:  Here's one trade that I was looking at (more for
education rather than investment, at this point).  The spread
is fairly large, so I'd like to put a combined debit order in.
Do you have any rule of thumb for where you would enter an
order?  Would you have a chance by splitting the B & A at $4.89?

Quotes           Last   Bid    Ask
APHT             6.40  6.37   6.45
NOV 5 CALL       2.45  1.40   1.65

Covered Call Price  4.72 - 5.05

Thank you for any insight!

ST


Hello ST,

Thank you for the kind remarks.  Even though ITM covered-calls
are considered a conservative investing strategy, there is still
a risk of loss.  Yes, they do reduce the risk from outright stock
ownership, but only to a certain extent, and at the cost of upside
potential.

There are several covered-call screeners (besides the OIN) that
are available on the Internet and one of the most popular among
our readers is Poweroptions (www.poweropt.com).  In addition, a
simple search for "covered calls" would likely yield a number of
other data providers.

As for entering a position like the one you listed, it really just
depends on the liquidity of the stock and option series.  In your
example (stock at $6.40 and option bid at $1.40), the covered-call
is priced at parity, and there is very little chance a "net-debit"
order would be filled.

As in all market transactions, demand and supply will control the
pricing pressure, and if the market isn't liquid, then there will
be no pricing pressure.

Regards,

Mark W.
OIN


SUMMARY OF PREVIOUS CANDIDATES
*****

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.

Note:  Margin not used in calculations.

Stock   Price   Last    Option    Price   Gain  Potential
Symbol  Picked  Price   Series    Sold   /Loss  Mon. Yield

SGMO     5.10    5.01  NOV  5.00  0.55    0.45*   8.6%
XOMA     7.83    7.52  NOV  7.50  0.80    0.47*   7.3%
OXGN    10.51   10.28  NOV 10.00  1.10    0.59*   6.8%
ITMN    20.03   20.13  NOV 20.00  0.85    0.82*   6.2%
MONE     5.14    5.72  NOV  5.00  0.40    0.26*   6.0%
TMM      3.44    3.55  NOV  2.50  1.10    0.16*   5.9%
SEAC    15.57   15.13  NOV 15.00  1.50    0.93*   5.7%
PLUG     5.91    6.01  NOV  5.00  1.15    0.24*   5.5%
TLAB     7.53    7.56  NOV  7.50  0.30    0.27*   5.4%
BVSN     5.31    5.10  NOV  5.00  0.65    0.34*   5.3%
ALGN    15.60   17.87  NOV 15.00  1.60    1.01*   5.2%
QSFT    14.90   15.14  NOV 15.00  0.55    0.65*   4.9%
CMOS    16.31   16.73  NOV 15.00  1.80    0.49*   4.9%
RTEC    26.15   27.18  NOV 25.00  1.95    0.80*   4.8%
PUMA     5.54    7.29  NOV  5.00  0.85    0.31*   4.8%
GSS      5.49    5.40  NOV  5.00  0.70    0.21*   4.8%
CMNT     9.22   10.59  NOV  7.50  2.10    0.38*   4.6%
VECO    25.67   26.93  NOV 25.00  1.85    1.18*   4.3%
EMBT    12.90   14.25  NOV 12.50  0.75    0.35*   4.2%
BRCD     6.33    6.89  NOV  6.00  0.65    0.32*   4.1%
CDN     15.39   16.66  NOV 15.00  0.80    0.41*   4.1%
CRYP    10.84   12.46  NOV 10.00  1.20    0.36*   4.1%
SSTI    11.21   13.46  NOV 10.00  1.65    0.44*   4.0%
AFFX    25.63   25.55  NOV 25.00  1.30    0.67*   4.0%
TLAB     7.83    7.56  NOV  7.50  0.70    0.37*   3.8%
ALKS    14.33   12.27  NOV 12.50  2.50    0.44    3.2%
ALKS    15.16   12.27  NOV 12.50  3.20    0.31    1.9%

*   Stock price is above the sold striking price.

Comments:

The major averages continued to move higher this week though
the bullish momentum seemed to wane as the weekend approached.
Will there be any consolidation or will the market morph into
a Christmas rally without pause?  Maybe we have seen the highs
for the year?  As always, next week should offer some new clues
in this never-ending puzzle.  With two weeks until expiration,
continue to monitor and adjust positions that are acting weaker
than expected or changing their trends.  Alkermes (NASDAQ:ALKS)
is testing a key support area and could become an "early-exit"
candidate if its long-term MA fails to hold.

Positions Previously Closed: Ibis Technology (NASDAQ:IBIS) -
rebounding for a second-chance exit?.


NEW CANDIDATES
*********

Sequenced by Target Yield (monthly basis)
*****
Stock   Last   Option    Option  Last  Open  Cost  Days Target
Symbol Price   Series    Symbol  Bid   Int.  Basis Exp. Yield

EMIS    7.90  NOV  7.50  MTQ KU  0.80  215    7.10  14  12.2%
AKAM   10.30  NOV 10.00  UMU KB  0.75  798    9.55  14  10.2%
IDTI   17.60  NOV 17.50  ITQ KW  0.65  617   16.95  14   7.0%
FFIV   25.49  NOV 25.00  FLK KE  1.25  835   24.24  14   6.8%
IFX    15.70  NOV 15.00  IFX KC  1.15  143   14.55  14   6.7%
VSAT   22.98  NOV 22.50  IQS KX  1.15  43    21.83  14   6.7%
ACN    25.05  NOV 25.00  ACN KE  0.55  1755  24.50  14   4.4%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, TY-Target Yield (monthly basis).

*****
EMIS - Emisphere  $7.90  *** Drug Speculation ***

Emisphere Technologies (NASDAQ:EMIS) is a biopharmaceutical
company specializing in the oral delivery of therapeutic
macromolecules and other compounds that are not deliverable
by oral means.  The company has pioneered the oral delivery
of otherwise injectable drugs, including proteins, peptides,
polysaccharides and other compounds.  Emisphere has been
forging a Stage I base as investors await positive news on
the company's drug trials.  The recent bullish activity
suggests further upside potential and traders who believe
good news is forthcoming can profit from that outcome with
this position.  Earnings are due on Wednesday, November 12.

NOV-7.50 MTQ KU LB=0.80 OI=215 CB=7.10 DE=14 TY=12.2%


*****
AKAM - Akamai  $10.30  *** Earnings Rally ***

Akamai Technologies (NASDAQ:AKAM) provides services and software
that enable private enterprises and government agencies to extend
and control their e-business infrastructure.  Akamai's services
are designed to help extend the reach of its clients e-business
infrastructures for all their business processes.  Through a
large distributed computing platform, Akamai offers its customers
seamless information flow and robust, control of information,
enabling the secure delivery of networked information and
applications.  Its services are built upon its distributed
platform for content, streaming media and application delivery,
which is comprised of more than 13,000 servers within over 1,100
networks in 66 countries.  Akamai has rallied higher on very
heavy volume after reporting favorable earnings and most recently,
a lawsuit settlement.  We simply favor the bullish trend and this
short-term position allows investors a reasonable way to speculate
on the company's future share value.

NOV-10.00 UMU KB LB=0.75 OI=798 CB=9.55 DE=14 TY=10.2%


*****
IDTI - Integrated Device Tech.  $17.60  *** Rally Mode ***

Integrated Device Technology (NASDAQ:IDTI) designs, develops,
makes and markets a range of high-performance semiconductor
products.  Applications for the products include data
networking and telecommunications equipment, such as routers,
hubs, switches, cellular base stations and other devices;
SANs; other networked peripherals and servers, and PCs.  The
company provides a portfolio of communications-oriented ICs,
including ICs focused on accelerating intelligent packet
processing in next-generation network equipment.  IDT serves
equipment vendors by applying its advanced hardware, software
and memory technologies to create flexible, highly integrated
products that enhance the functionality and processing of
network services.  The company offers 1,300 devices in over
15,000 product configurations.  IDTI appears to be completing
a bottom formation and investors who agree can utilize this
short-term position to try and "target-shoot" an entry point
in the issue.

NOV-17.50 ITQ KW LB=0.65 OI=617 CB=16.95 DE=14 TY=7.0%


*****
FFIV - F5 Networks  $25.49  *** Next Leg Up? ***

F5 Networks Inc. (NASDAQ:FFIV) provides integrated products and
services to manage, control and optimize Internet traffic.  FFIV's
core products, the BIG-IP Controller, the 3-DNS Controller and the
BIG-IP Link Controller, help manage traffic to servers and network
devices in a way that maximizes availability and throughput.  The
company's iControl Architecture integrates its products and also
allows its customers to integrate them with other third-party
products.  FFIV's solutions address many elements required for
successful Internet and Intranet business applications, including
high availability, high performance, intelligent load balancing,
fault tolerance, security and streamlined manageability.  FFIV
spiked to a two-year high this week after the company said it
returned to profitability in the 4th-quarter due to an increase
in sales across all product lines.  The technical indications
suggest a bullish bias in the near-term and this position offers
traders a way to profit from upside movement in the issue with
a cost basis closer to the 30-day MA.

NOV-25.00 FLK KE LB=1.25 OI=835 CB=24.24 DE=14 TY=6.8%


*****
IFX - Infineon  $15.70  *** Another New High! ***

Infineon Technologies (NYSE:IFX) designs, develops, manufactures
and markets a broad range of semiconductors and complete systems
solutions used in a wide variety of microelectronic applications,
including computer systems, telecommunications systems, consumer
goods, automotive products, industrial automation and control
systems, as well as chip card applications.  Their products
include standard commodity components, full-custom devices,
semi-custom devices and application-specific components for
memory, analog, digital and mixed-signal applications.  Shares
of Infineon rallied to another new 52-week high on Friday as
the stock moved above a resistance area near $15, which should
now provide support.  Reasonable short-term speculation on a
bullish stock.

NOV-15.00 IFX KC LB=1.15 OI=143 CB=14.55 DE=14 TY=6.7%


*****
VSAT - ViaSat  $22.98  *** Hot Stock! ***

ViaSat (NASDAQ:VSAT) is a provider of advanced broadband digital
satellite communications and other wireless networking and signal
processing equipment and services to the defense and commercial
markets.  For the defense market, the company offers UHF DAMA
(demand assigned multiple access) products and services.  In
addition, it has developed communications products for military
applications such as the Link-16 MIDS (multi-function information
distribution system) terminal, information assurance and simulator
and test products.  ViaSat's government defense business units
include Mobile Satellite Systems, Tactical Data Links, Simulation
and Test and Tactical Networking and Information Assurance.  For
the commercial markets, it offers satellite communications and
other wireless communications products and services.  These
commercial business units include VSAT Network Systems, Satellite
Ground Systems, Broadband Systems, Comsat Laboratories and U.S.
Monolithics.  ViaSat continues to soar higher as the stock made
another new multi-year high on Friday after reporting favorable
earnings results.  Traders can speculate conservatively on the
near-term performance of the issue with this position.

NOV-22.50 IQS KX LB=1.15 OI=43 CB=21.83 DE=14 TY=6.7%


*****
ACN - Accenture  $25.05  *** The Rally Continues ***

Accenture (NYSE:ACN) is a management consulting and technology
services organization.  The company's consulting and technology
services and solutions business is structured around 5 operating
groups: Communications and High Tech, Financial Services, Products,
Resources and Government.  ACN provides business and management
consulting, technology and outsourcing services and delivers
solutions tailored to each client's industry.  The company also
has two capability groups, Business Consulting and Technology and
Outsourcing, which support the operating groups and provide access
to the full spectrum of business and IT solutions.  Its capability
groups comprise service lines and solution units.  Accenture made
another new 52-week high on Friday as the stock attacks a 2-year
old resistance area.  Reasonable short-term speculation for those
investors who wouldn't mind owning ACN near $24.50.

NOV-25.00 ACN KE LB=0.55 OI=1755 CB=24.50 DE=14 TY=4.4%


*****


*****************
SUPPLEMENTAL COVERED CALL CANDIDATES
*****************

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Target Yield (monthly basis)
*****
Stock   Last   Option    Option  Last  Open  Cost  Days Target
Symbol Price   Series    Symbol  Bid   Int.  Basis Exp. Yield

MMR    16.10  NOV 15.00  MMR KC  1.65  493   14.45  14   8.3%
ENER   10.03  NOV 10.00  EQI KB  0.40  197    9.63  14   8.3%
PLXT   10.10  NOV 10.00  PIU KB  0.45  86     9.65  14   7.9%
TER    25.16  NOV 25.00  TER KE  1.00  1099  24.16  14   7.6%
MTSN   15.06  NOV 15.00  QQM KC  0.55  86    14.51  14   7.3%
NTPA   13.61  NOV 12.50  NQD KV  1.50  244   12.11  14   7.0%
IIJIE   5.73  DEC  5.00  IQD LA  1.15  456    4.58  42   6.6%
RMBS   25.73  NOV 25.00  BNQ KE  1.45  6987  24.28  14   6.4%
ISSX   17.60  NOV 17.50  ISU KW  0.60  1179  17.00  14   6.4%
MGAM   41.45  NOV 40.00  QMG KH  2.55  618   38.90  14   6.1%
MANU    7.74  DEC  7.50  ZUQ LU  0.80  279    6.94  42   5.8%
LTXX   15.77  NOV 15.00  UXT KC  1.15  436   14.62  14   5.6%
SIMG    7.65  DEC  7.50  QSI LU  0.65  160    7.00  42   5.2%



*****************
NAKED PUT SECTION
*****************

Options 101: Economics & Stock Prices -- Part III
By Ray Cummins

This week, we continue our discussion on the Federal Reserve and
how the FOMC uses basic economics to effect monetary policy.

There are three primary instruments that the Federal Reserve uses
to accomplish its goals in monetary policy.  These tools help the
Fed achieve economic stability by varying the quantity of money in
circulation, and the cost and availability of credit.  They are:
Open Market Operations, Reserve Requirements, and the Discount
Window.

The use of Open Market Operations is both relatively simple and
appropriately titled as it involves the purchase and sale of
government bonds by the Central Bank in the open market.  When
it is necessary to expand the money supply and lower interest
rates, the Central Bank will buy bonds.  In contrast, bonds will
be sold if the Fed needs to reduce a surplus of credit and raise
borrowing costs.  Due to its ease of application and the smooth
interaction it has with the economy as a whole, this technique
is the most widely used method in the Federal Reserve's ongoing
efforts to manage the money supply.  The process begins with the
Federal Open Market Committee, which specifies the short-term
objective for open market operations.  This objective can be a
specific quantity of reserves or a desired level for the federal
funds rate, which is interest rate banks charge when they lend
money to other banks overnight.  The Federal Reserve's objective
for open market operations has evolved considerably over the past
decade with a major change occurring in 1994, when the FOMC began
announcing its policy stance.  In 2000, the FOMC began publishing
an assessment of the risks to achieving its long-run goals after
each meeting.  In recent year's, the committee's focus has been
on attaining a specific federal funds rate and that is the most
obvious indicator of the Fed's outlook on the economy.

The next instrument of monetary policy involves the amount of
money that commercial banks and other depository institutions
must keep on deposit at the Central Bank as a requirement for
specified liabilities in federal banking regulations.  The term
for this obligation is "reserve requirement" and it is expressed
as a percentage, or reserve ratio, of the financial institution's
demand deposit liabilities (net transaction accounts, nonpersonal
time deposits, and eurocurrency liabilities).  An important fact
is these accounts do not pay interest and although rarely used
to effect policy, the reserve requirement may be adjusted by the
Central Bank in order to restrict or increase the money supply.
For example, when the reserve requirement is increased, a larger
percentage of a bank's deposits are held by the Central Bank,
thereby taking money out of the open market.  This eventually
leads to higher interest rates as less cash (through loans and
financing) is available to borrowers.  Since an adjustment of
this magnitude affects many facets of the finance industry in a
very significant manner, this type of action is only performed
occasionally as a severe corrective measure.  In addition, the
Fed has slowly been moving towards an environment where reserve
requirements are relatively small, thus reducing the competitive
disadvantage of non-interest bearing reserves for banks.

The last tool in the Fed's arsenal of policy-making devices is
the Discount Window.  This is the vehicle through which banks and
other depository institutions are able to borrow reserves from
the Central Bank at a discounted rate.  This enables banks to
change credit conditions, thereby affecting the money supply.
The term Discount Window originated in the days when banks would
sell securities to the government at a "discount" in order to
collateralize a short-term loan.  Currently, the interest rates
that financial institutions pay for the Federal Reserved money
are recommended by the regional banks -- subject to the Board of
Governors -- and they are below short-term market rates.  It's
also important to note that although the Discount Window is not
viewed as a crucial aspect of monetary policy, it is often used
to signal the Fed's intentions.  A reduction in the discount rate,
for example, may indicate that the Fed foresees a lower risk of
inflation in the future, and possibly will lean towards a more
expansive monetary policy.

Economists will always argue about the effectiveness of changes
to the money supply, however most agree that monetary policy can
establish ranges for inflation, unemployment, and interest rates.
This fundamental idea compels our government to actively influence
money supply through monetary policy with the goal of achieving
a stable financial environment, where investment and savings can
help sustain economic growth.  That is one of the primary steps a
nation must take to achieve its financial goals and in the next
segment, we'll talk about how well the Fed is living up to its
task of promoting a prosperous (and enduring) economy.

Good Luck!


SUMMARY OF PREVIOUS CANDIDATES
*****

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.

Stock   Price   Last    Option    Price   Gain   Simple  Max
Symbol  Picked  Price   Series    Sold   /Loss   Yield  Yield

CYD     29.90   36.45  NOV 25.00  0.65    0.65*   3.9%  12.2%
ONXX    24.76   24.30  NOV 20.00  0.50    0.50*   2.8%   9.6%
ESPR    23.02   24.35  NOV 20.00  0.60    0.60*   3.4%   9.6%
ONXX    25.93   24.30  NOV 20.00  0.60    0.60*   2.7%   9.0%
XMSR    19.10   22.49  NOV 17.50  0.85    0.85*   3.7%   8.9%
CYD     27.57   36.45  NOV 22.50  0.50    0.50*   2.5%   8.4%
ESPR    23.87   24.35  NOV 20.00  0.35    0.35*   2.6%   8.4%
FCEL    14.35   16.39  NOV 12.50  0.50    0.50*   3.0%   8.2%
XMSR    20.25   22.49  NOV 17.50  0.30    0.30*   2.5%   7.7%
AFCI    26.70   23.92  NOV 22.50  0.60    0.60*   2.4%   7.4%
PXLW    12.10   14.23  NOV 10.00  0.30    0.30*   2.2%   7.1%
INSP    26.05   26.53  NOV 22.50  0.35    0.35*   2.3%   7.0%
CELL    28.65   26.89  NOV 23.38  0.30    0.30*   1.9%   6.7%
FFIV    25.01   25.49  NOV 22.50  0.35    0.35*   2.3%   6.5%
MTZ     12.81   12.93  NOV 10.00  0.25    0.25*   1.9%   6.4%
NWAC    12.18   13.47  NOV 10.00  0.25    0.25*   1.9%   6.2%
SCUR    14.09   15.28  NOV 12.50  0.30    0.30*   2.1%   6.0%
ALGN    15.21   17.87  NOV 12.50  0.25    0.25*   1.8%   6.0%
FCS     20.04   24.25  NOV 17.50  0.40    0.40*   2.0%   5.9%
SCRI    25.49   26.83  NOV 22.50  0.40    0.40*   2.0%   5.7%
AVCT    36.00   37.48  NOV 32.50  0.75    0.75*   2.1%   5.6%
FCS     22.60   24.25  NOV 20.00  0.25    0.25*   1.8%   5.4%
CNX     21.88   21.55  NOV 20.00  0.55    0.55*   2.0%   5.4%
IDXC    24.30   24.60  NOV 20.00  0.35    0.35*   1.5%   5.3%
SCHN    36.92   39.39  NOV 30.00  0.40    0.40*   1.5%   5.3%
CY      20.44   22.84  NOV 17.50  0.40    0.40*   1.7%   5.1%

*  Stock price is above the sold striking price.

Comments:

Renewed concerns over the lofty levels of stocks ended the recent
bullish trend Friday, despite stronger than expected employment
data.  The activity suggests that the market is in need of brief
consolidation and it is likely to extend into the holiday season,
possibly until early next year.  With that in mind, traders are
cautioned to initiate new positions only in the most technically
favorable issues and to be extra attentive to current portfolio
plays.  Advanced Fibre (NASDAQ:AFCI) remains on the "watch" list.
In addition, the profitable position in Palm (NASDAQ:PALM) has
been removed from the portfolio due to the complex share value
adjustments in the wake of the company's merger with Handspring
(NASDAQ:HAND), which produced PalmOne (NASDAQ:PLMO), and the
spin-off of PalmSource (NASDAQ:PSRC).

Previously Closed Positions: CV Therapeutics (NASDAQ:CVTX),
which is currently profitable.


WARNING: THE RISK IN SELLING NAKED 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.


MARGIN REQUIREMENTS

The Initial Margin is the amount of collateral you must have in
your account to initiate the position.  In specific terms, margin
refers to cash or securities required of an option writer by his
brokerage firm as collateral for the writer's obligation to buy
or sell the underlying interest if assigned through an exercise.
The Maintenance Margin is the amount of cash (or securities)
required to offset the changing collateral requirements of the
written options in your portfolio.  As the price of the option
and the underlying stock changes, so does the maintenance margin.
With (short) put options, the margin requirements can increase
when the underlying stock price declines and also when it rises
significantly.  The reason is the manner in which the collateral
amount is determined (with the formula listed above) and traders
should always consider not only the initial margin requirement,
but also the maximum margin needed for the life of the position.
Option writers occasionally have to meet calls for additional
margin during adverse market movements and even when there is
enough equity in the account to avoid a margin call, the need
for increased collateral will make that equity unavailable for
other purposes.  Please consider these facts carefully before
you initiate any "naked" option positions.

For more information on margin requirements, please refer to:

http://www.cboe.com/LearnCenter/pdf/MarginManual2000.pdf


MONTHLY YIELD: MAXIMUM & SIMPLE

The Maximum Monthly Yield (listed in the summary and with each
new candidate) 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 Monthly 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 position.


NEW CANDIDATES
*********

Sequenced by Maximum Yield (monthly basis - margin)
*****
Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

PMCS   22.12  NOV 20.00  SQL WD 0.40 1841 19.60  14   4.4%  12.2%
RTEC   27.18  NOV 25.00  UXH WE 0.45 65   24.55  14   4.0%  10.7%
PHTN   40.90  NOV 37.50  PDU WU 0.45 49   37.05  14   2.6%   7.3%
ECLG   25.25  NOV 22.50  EGU WX 0.25 20   22.25  14   2.4%   7.1%
CYD    36.45  NOV 30.00  CYD WF 0.25 999  29.75  14   1.8%   6.5%
MCD    26.01  NOV 25.00  MCD WE 0.25 2414 24.75  14   2.2%   5.6%
ERES   46.78  NOV 40.00  UDB WH 0.30 838  39.70  14   1.6%   5.3%


Company Descriptions

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, SY-Simple Yield (monthly basis - without
margin), MY-Maximum Yield (monthly basis - using margin).

*****
PMCS - PMC-Sierra  $22.12  *** On The Move! ***

PMC-Sierra (NASDAQ:PMCS) designs, develops, markets and supports
a broad range of high-performance integrated circuits primarily
used in the telecommunications and data networking industries.
The company has more than 120 different semiconductor devices
that are sold to equipment manufacturers, who in turn supply
their equipment principally to communications network service
providers and enterprises.  The firm also provides semiconductor
solutions for customers by leveraging its intellectual property,
design expertise and systems knowledge across a wide range of
applications.  The company's networking products are sold into
four areas of the global network infrastructure: metro, access,
enterprise/storage and consumer-related markets.  Shares of PMCS
started moving higher in late October, partly due to expectations
that major customer Cisco Systems (NASDAQ:CSCO) would post strong
quarterly results and provide an optimistic business outlook.  As
it turns out, Cisco's report was indeed favorable and the future
for PMCS looks great, based on recent trends in the semiconductor
industry.

NOV-20.00 SQL WD LB=0.40 OI=1841 CB=19.60 DE=14 TY=4.4% MY=12.2%


*****
RTEC - Rudolph Technologies  $27.18  *** Favorable Earnings! ***

Rudolph Technologies (NASDAQ:RTEC) is a worldwide leader in the
design, development manufacture and support of high-performance
process control metrology systems used by semiconductor device
manufacturers.  The company provides a full-fab solution through
its families of proprietary systems for metrology applications
used throughout the device manufacturing process.  Rudolph's
product development has successfully anticipated and addressed
many emerging trends that are driving the semiconductor industry's
growth.  The firm's success in creating complementary metrology
applications through aggressive research and development is key
to Rudolph's strategy for continued technological and market
leadership.  RTEC recently posted favorable earnings, noting that
revenue increased to $14.2 million as gross margins rose by 3%
over the prior year.  The company also said it anticipates 6% to
10% sequential revenue growth for the fourth quarter.  Traders
who like the outlook for the stock can speculate conservatively
on its near-term performance with this position.

NOV-25.00 UXH WE LB=0.45 OI=65 CB=24.55 DE=14 TY=4.0% MY=10.7%


*****
PHTN - Photon  $40.90  *** Rally Mode! ***

Photon Dynamics (NASDAQ:PHTN) is a provider of yield management
solutions to the flat panel display (FPD) industry.  The company
also offers yield management solutions for the printed circuit
board assembly and advanced semiconductor packaging industries
and the cathode ray tube display and CRT glass and auto glass
industries.  The firm's test, repair and inspection systems are
used by manufacturers to collect data, analyze product quality
and identify and repair product defects at critical steps in the
manufacturing.  PHTN has been on of the best performing stocks
over he last few weeks due to the company's favorable earnings
announcement.  Photon recently posted a narrower quarterly loss
as revenue rose to $21 million from $13 million in the previous
period.  The company also forecast revenue for the first quarter
of fiscal 2004 to be between $21 million and $23 million, with
the potential for a profit of up to $0.03 per share.  Investors
who agree with a bullish future for the issue can establish a
cost basis near $37 with this position.

NOV-37.50 PDU WU LB=0.45 OI=49 CB=37.05 DE=14 TY=2.6% MY=7.3%


*****
ECLG - eCollege.com  $25.25  *** Go To School At Home! ***

eCollege.com (NASDAQ:ECLG) is a provider of technology, products
and services that enable colleges, universities, primary and high
schools, grade schools and corporations to offer online classes
for distance, on-campus and hybrid learning.  The firm's unique
technology enables it's customers to reach students who wish to
take courses at convenient times and locations via the Internet.
Its customers can also use its technology to supplement on-campus
courses with an online environment.  In addition, the company
offers services to assist in the development of online programs,
including online course and campus design, development, management
and hosting, as well as ongoing administration, faculty and student
support.  eCollege is a leader in the development of e-learning
solutions for post-secondary education programs and the company's
stock price reflects that fact.  Investors who believe the trend
towards this type of curriculum will continue can profit from that
outcome with this position.

NOV-22.50 EGU WX LB=0.25 OI=20 CB=22.25 DE=14 TY=2.4% MY=7.1%


*****
CYD - China Yuchai  $36.45  *** Another New High! ***

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 firm owns a primary
interest in Guangxi Yuchai Machinery and owns, through six
subsidiaries, 76.4% of the outstanding common shares of Yuchai.
Yuchai 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 engine parts.
Yuchai's products are in high demand due to China's rapidly
growing infrastructure and the modernization of the world's
most populous country bodes well for the company's bottom-line
in the near-term.  Traders can speculate conservatively on a
continued rally in the issue with this position.

NOV-30.00 CYD WF LB=0.25 OI=999 CB=29.75 DE=14 TY=1.8% MY=6.5%


*****
MCD - McDonald's  $26.01  *** Blue-Chip Portfolio Stock ***

McDonald's Corporation (NYSE:MCD) operates in the foodservice
industry and primarily operates and franchises quick-service
restaurant businesses under the McDonald's brand.  The firm's
restaurants serve a varied, yet limited menu in 119 countries
worldwide.  Approximately 80% of McDonald's restaurants and
about 75% of the total revenues of its restaurants are in nine
markets: Australia, Brazil, Canada, China, France, Germany,
Japan, the United Kingdom and the United States.  The company
also operates other restaurant concepts under its partner
brands: Boston Market, Chipotle Mexican Grill and Donatos
Pizzeria, which are located primarily in the United States.
McDonald's recently announced that global system-wide sales
increased 17.8% in October, compared with October 2002.  The
company's CEO also said, "The U.S. continued to generate robust
sales as customers find more reasons to make McDonald's a part
of their day."  Investors who want to make MCD part of their
long-term portfolio should consider target-shooting a higher
initial premium to initiate this position.

NOV-25.00 MCD WE LB=0.25 OI=2414 CB=24.75 DE=14 TY=2.2% MY=5.6%


*****
ERES - eResearch Technology  $46.78  *** Uptrend Intact! ***

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.  In late October, eResearch
announced that earnings and revenue in the coming year would top
its previous estimates because of recent contract signings.  The
company said it now expects 2004 earnings of 92 cents per share to
94 cents per share, up from its previous estimate of 84 cents per
share.  ERES also announced a 3-for-2 split of its common stock,
to be distributed on November 26, 2003.  Traders who agree with a
bullish outlook for the company can profit from continued upside
activity in its share value with this position.

NOV-40.00 UDB WH LB=0.30 OI=838 CB=39.70 DE=14 TY=1.6% MY=5.3%


*****


*****************
SUPPLEMENTAL NAKED PUT CANDIDATES
*****************

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.

Sequenced by Maximum Yield (monthly basis - margin)
*****
Stock  Last    Option    Option Last Open Cost  Days Simple  Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield  Yield

UNA    23.10  NOV 22.50  UNA WX 0.60 3    21.90  14   6.0%  14.1%
SOV    23.65  NOV 22.50  SOV WX 0.55 1033 21.95  14   5.4%  13.5%
ADAT   14.12  NOV 12.50  HAU WV 0.25 103  12.25  14   4.4%  12.7%
DOX    25.13  NOV 25.00  DOX WE 0.60 133  24.40  14   5.3%  12.4%
PLMD   31.35  NOV 30.00   PM WF 0.65 104  29.35  14   4.8%  11.9%
MCRL   18.02  NOV 17.50  MIQ WW 0.35 35   17.15  14   4.4%  10.8%
BRCM   36.05  NOV 35.00  RCQ WG 0.65 1912 34.35  14   4.1%  10.1%
AMD    17.01  NOV 16.00  AMD WQ 0.25 6706 15.75  14   3.4%   9.0%
KEI    18.05  NOV 17.50  KEI WW 0.25 0    17.25  14   3.1%   7.8%
RMBS   25.73  NOV 22.50  BNQ WX 0.20 4881 22.30  14   1.9%   6.0%
SRZ    33.32  NOV 30.00  SRZ WF 0.25 454  29.75  14   1.8%   5.3%


SEE DISCLAIMER IN SECTION ONE
*****************************


************************
SPREADS/STRADDLES/COMBOS
************************

Investors Brace For A Pause In The Rally
By Ray Cummins

U.S. equities drifted lower Friday after a favorable employment
report failed to inspire stock buyers, who have recently become
worried about lofty share values.

The blue-chip Dow Jones industrial average slipped 47 points to
9,809 amid weakness in cyclical and financial components.  The
technology-laden NASDAQ Composite Index fell 5 points to 1,970,
despite having reached a 21-month high earlier in the session.
The broad Standard & Poor's 500 Index wilted 4 points to 1,053,
with tobacco, paper, brewer, aluminum, lodging, and gold shares
among the few groups seeing buying pressure.  Volume was active
with 1.41 billion shares changing hands on the New York Stock
Exchange and 1.95 billion traded on the NASDAQ.  Even with the
slump in the equity indices, advancers outnumbered decliners by
a small margin on the major exchanges.  Treasuries continued to
slide in the wake of favorable economic data with the 10-year
note closing down 9/32 to yield 4.44%.

*****************
PORTFOLIO SUMMARY
*****************

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 or 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.


PUT CREDIT SPREADS
******************

Symbol  Pick    Last  Month  LP  SP  Credit  CB     G/L   Status

AET     62.76   58.99  NOV   50  55   0.55  54.45  $0.55   Open
MXIM    44.82   51.74  NOV   35  40   0.50  39.50  $0.50   Open
PHS     54.50   56.53  NOV   45  47   0.30  47.20  $0.30   Open
PIXR    71.56   71.69  NOV   60  65   0.70  64.30  $0.70   Open
COH     31.43   36.46  NOV   27  30   0.35  29.65  $0.35   Open
CYMI    44.99   48.73  NOV   35  40   0.65  39.35  $0.65   Open
SAP     36.00   38.63  NOV   30  32   0.30  32.20  $0.30   Open
ICOS    45.42   46.70  NOV   35  40   0.50  39.50  $0.50   Open
SINA    42.00   38.68  NOV   30  35   0.45  34.55  $0.45   Open
SMH     38.55   43.99  NOV   32  35   0.20  34.80  $0.20   Open
BBY     58.31   58.14  NOV   50  55   0.40  54.60  $0.40   Open
CTX     97.50   97.18  NOV   85  90   0.40  89.60  $0.40   Open
VSEA    48.40   51.69  NOV   40  45   0.45  44.55  $0.45   Open

LP = Long Put  SP = Short Put  CB = Cost Basis  G/L = Gain/Loss

Sina Corporation (NASDAQ:SINA) and Aetna (NAYSE:ATE) are the most
obvious issues on the early exit "watch" list.


CALL CREDIT SPREADS
*******************

Symbol  Pick    Last   Month  LC  SC  Credit  CB     G/L   Status

CA      23.50   23.30   NOV   30  27   0.35  27.85   $0.35   Open
MTG     53.79   52.76   NOV   65  60   0.55  60.55   $0.55   Open
BJS     32.50   32.18   NOV   37  35   0.30  35.30   $0.30   Open
CEPH    45.77   46.60   NOV   55  50   0.55  50.55   $0.55   Open
HDI     47.26   47.51   NOV   55  50   0.50  50.50   $0.50   Open
SEPR    26.98   26.63   NOV   35  33   0.25  32.75   $0.25   Open
AMZN    54.51   54.31   NOV   65  60   0.50  60.50   $0.50   Open
OEX    511.25  520.70   NOV  540 535   0.45 535.45   $0.45   Open
MERQ    44.23   49.55   NOV   50  47   0.40  47.90  ($1.65) Closed
EBAY    55.93   56.13   NOV   65  60   0.50  60.50   $0.50   Open
FNM     71.69   69.15   NOV   80  75   0.50  75.50   $0.50   Open
KSS     56.07   51.91   NOV   65  60   0.40  60.40   $0.40   Open
NBIX    46.88   48.51   NOV   55  50   0.50  50.50   $0.50   Open

LC = Long Call  SC = Short Call  CB = Cost Basis  G/L = Gain/Loss

As noted last week, Mercury Interactive (NASDAQ:MERQ) has rallied
in conjunction with technology stocks and the additional upside
activity was due cause for an early exit in the bearish position.
Neurocrine Biosciences (NASDAQ:NBIX) has reversed direction in
the short-term and traders should be prepared to cover/roll/close
the position in the coming week.


CALL DEBIT SPREADS
******************

Symbol  Pick   Last   Month  LC  SC   Debit   B/E   G/L   Status

LLTC    40.77  44.14   NOV   35  37   2.20   37.20  0.30   Open
QCOM    47.49  48.04   NOV   42  45   2.25   44.75  0.25   Open

LC = Long Call  SC = Short Call  B/E = Break-Even  G/L = Gain/Loss

CV Therapeutics (NASDAQ:CVTX) was crushed by investors recently
after the U.S. Food and Drug Administration said it would grant
conditional approval for the company's angina drug Ranexa, but
also indicated that it wants "additional clinical information"
before it issues final marketing clearance.  The announcement was
totally unexpected and with little hope of a near-term rebound,
the position has been closed to limit losses.


PUT DEBIT SPREADS
*****************

Symbol  Pick   Last  Month  LP  SP   Debit   B/E   G/L   Status

NPSP    25.45  28.26  NOV   35  30   4.40   30.40  0.60   Open
CVC     18.70  20.94  NOV   22  20   2.20   20.30 (0.64) Closed
IACI    37.34  33.45  NOV   42  40   2.25   40.25  0.25   Open

As mentioned last week, the recent upside activity in Cablevision
(NYSE:CVC) suggested an early exit in the position.


SYNTHETIC (BULLISH)
*******************

Stock   Pick   Last   Expir.  Long  Short  Initial   Max.   Play
Symbol  Price  Price  Month   Call   Put   Credit   Value  Status

XING     9.13   8.95   DEC     12      7     0.10    0.30   Open
JNPR    16.63  18.70   NOV     19     14    (0.20)   1.00   Open?
LRCX    24.38  30.76   DEC     30     20     0.15    2.20   Open?
PHTN    32.40  40.90   JAN     40     25     0.00    3.40   Open?

Lam Research (NASDAQ:LRCX) and Photon Dynamic (NASDAQ:PHTN) have
provided outstanding profits for speculative traders.


SYNTHETIC (BEARISH)
*******************

No Open Positions


CALENDAR & DIAGONAL SPREADS
***************************

Stock   Pick   Last     Long     Short    Current   Max.   Play
Symbol  Price  Price   Option    Option    Debit   Value  Status

PRU     36.41  36.95   DEC-37C   NOV-37C  (0.20)   0.40    Open?
SCRI    20.52  26.83   FEB-22C   DEC-25C   1.40    2.10    Open
GPRO    26.77  29.56   FEB-30C   NOV-30C   1.95    2.25    Open

Traders in the Prudential (NYSE:PRU) position can close the play
for a favorable gain.  Sicor (NASDAQ:SCRI) has previously been
adjusted to a diagonal spread and that position is reflected in
the summary.  The Microsoft (NASDAQ:MSFT) spread, which offered
a number of profitable opportunities, has previously been closed.


DEBIT STRADDLES
***************

Stock   Pick   Last   Exp.   Long  Long  Initial   Max     Play
Symbol  Price  Price  Month  Call  Put    Debit   Value   Status

ZMH     55.52  65.08   DEC    55    55     5.20   10.25    Open?
PCLN    30.45  20.78   NOV    30    30     4.90    9.25    Open?
ADVP    49.05  51.04   NOV    50    50     3.40    3.90    Open?
TM      59.45  63.35   NOV    60    60     3.40    4.25    Open?
DIGE    35.10  37.03   NOV    35    35     4.50    6.00    Open
PLCE    30.10  31.04   NOV    30    30     3.00    3.20    Open
RMBS    24.79  25.73   NOV    25    25     2.50    2.35    Open

Priceline.com (NASDAQ:PCLN) exceeded all expectations, providing
nearly a 100% gain after the issue plunged on mediocre earnings.
Zimmer Holdings (NYSE:ZMH) continued to trade higher this week,
adding to its previous profits.  Both Advance PCS (NASDAQ:ADVP)
and Toyota Motors (NYSE:TM) have achieved small short-term gains.
The straddle in Engineered Support Systems (NASDAQ:EASI), which
has previously been closed, offered traders yet another lucrative
exit opportunity.  Triad Hospitals (NYSE:TRI), which has never
achieved profits on a simultaneous order basis, has previously
been closed to preserve capital.


CREDIT STRANGLES
****************

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 investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your skill level, risk-reward tolerance, and
portfolio outlook.  In addition, we recommend that you avoid any
strategy or technique in which you are not completely comfortable
with the potential loss, the necessary adjustments and the common
entry-exit strategies.

**************
CREDIT SPREADS
**************

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may be higher than other plays in the same strategy, due to
small disparities in option pricing.  Current news and market
sentiment will have an effect on these issues, so review each
play individually and make your own decision about its outcome.

*****
LNCR - Lincare  $41.05  *** Multi-Year High! ***

Lincare (NASDAQ:LNCR) is one of the nation's largest providers
of oxygen and other respiratory therapy services to patients in
the home.  The Company provides services and equipment to over
465,000 customers in 47 states.  The firm's customers typically
suffer from chronic obstructive pulmonary disease, such as
emphysema, chronic bronchitis or asthma, and require supplemental
oxygen or other respiratory therapy services in order to alleviate
the symptoms and discomfort of respiratory dysfunction.  The firm
also provides a variety of durable medical equipment and home
infusion therapies in certain geographic markets.

LNCR - Lincare  $41.05

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-35.00  LQN-XG  OI=88  ASK=$0.30
SELL PUT  DEC-37.50  LQN-XU  OI=45  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$37.20


*****
MGAM - Multimedia Games  $41.45  *** Buyout Rumors = Rally! ***

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  $41.45

PLAY (conservative - bullish/credit spread):

BUY  PUT  DEC-30.00  QMG-XF  OI=57   ASK=$0.45
SELL PUT  DEC-35.00  QMG-XG  OI=132  BID=$0.95
INITIAL NET-CREDIT TARGET=$0.55-$0.70
POTENTIAL PROFIT(max)=12% B/E=$34.45


*****
PLMD - PolyMedica  $31.35  *** Near All-Time Highs! ***

PolyMedica (NASDAQ:PLMD) is a rapidly growing national medical
products company.  The company is best known through its Liberty
brand name and unique direct-to-consumer television advertising
to seniors with diabetes and respiratory disease.  Building on
its technology-based operating platform and compliance management
focus, PolyMedica continues to expand its product offerings for
these chronic diseases and in other categories.  PLMD recently
posted a rise in its second-quarter results on increased demand
for its diabetes test kits.

PLMD - PolyMedica  $31.35

PLAY (less conservative - bullish/credit spread):

BUY  PUT  NOV-27.50  PM-WY  OI=117  ASK=$0.35
SELL PUT  NOV-30.00  PM-WF  OI=104  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$29.75


*****
AIG - American Intl. Group  $58.28  *** A New Leg Down? ***

American International Group (NYSE:AIG) is a holding company that,
through its subsidiaries, is engaged in a variety of insurance
related activities, mainly general insurance and life insurance,
in the United States and abroad.  The principal general insurance
subsidiaries are American Home Assurance Company; National Union
Fire Insurance Company of Pittsburgh, Pennsylvania; New Hampshire
Insurance Company Lexington Insurance Company; The Hartford Steam
Boiler Inspection and Insurance Company (HSB); Transatlantic
Reinsurance Company; American International Underwriters Overseas,
Ltd., and United Guaranty Residential Insurance Company.  AIG's
operations are conducted primarily through four business segments:
general insurance, life insurance, financial services and retirement
savings and asset management.

AIG - American Intl. Group  $58.28

PLAY (less conservative - bearish/credit spread):

BUY  CALL  DEC-65.00  AIG-LM  OI=728   ASK=$0.20
SELL CALL  DEC-60.00  AIG-LL  OI=1406  BID=$1.10
INITIAL NET-CREDIT TARGET=$0.90-$1.00
POTENTIAL PROFIT(max)=22% B/E=$60.90


*****
BJS - BJ Services Company  $32.18  *** Bearish Trend Intact! ***

BJ Services Company (NYSE:BJS) is a provider of pressure pumping
and oilfield services serving the petroleum industry worldwide.
The company's pressure pumping services consist of cementing and
stimulation services used in the completion of new oil and gas
wells and in remedial work on existing wells, both onshore and
offshore.  Other oilfield services include completion products
and tools, completion fluids and tubular services provided to the
oil and gas exploration and production industry, commissioning and
inspection services provided to refineries, pipelines and offshore
platforms, as well as specialty chemical services.  In 2002, the
company acquired OSCA, a completion services (pressure pumping),
completion tools and completion fluids company with operations
primarily in the Gulf of Mexico, Brazil and Venezuela.

BJS - BJ Services Company  $32.18

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-37.50  BJS-LU  OI=289  ASK=$0.25
SELL CALL  DEC-35.00  BJS-LG  OI=827  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.30-$0.35
POTENTIAL PROFIT(max)=14% B/E=$35.30


*****
SNPS - Synopsys  $30.85  *** Stuck In A Trading Range? ***

Synopsys (NASDAQ:SNPS) is a global supplier of electronic design
automation software to the electronics industry.  The company
offers customers a comprehensive suite of products used in the
logic synthesis and functional verification phases of chip design,
including a broad array of reusable design building blocks.  It
also offers a set of physical synthesis and design products and
a number of physical verification products.  The company offers
its customers products required to design a chip from concept to
the point at which it goes to the manufacturer for fabrication,
as well as an array of design building blocks.  It also offers a
range of professional services, including turnkey design services,
design assistance and methodology consulting.  The company is
organized into four product development groups: Integrated Circuit
Implementation, Verification Technology, Nanometer Analysis and
Test and Intellectual Property and Design Services.

SNPS - Synopsys  $30.85

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-37.50  YPQ-LU  OI=848   ASK=$0.20
SELL CALL  DEC-35.00  YPQ-LG  OI=5959  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.30-$0.40
POTENTIAL PROFIT(max)=14% B/E=$35.30


*************
DEBIT SPREADS
*************

These candidates offer a risk-reward outlook similar to credit
spreads, however there is no margin requirement as the initial
debit for the position is also the maximum loss.  Since these
positions are based primarily on technical indications, traders
should review the current news and market sentiment surrounding
each issue and make their own decision about the outcome of the
position.

*****
LTR - Loews Corporation  $38.99  *** Earnings Rescheduled? ***

Loews (NYSE:LTR) is a holding company whose subsidiaries are
engaged in various lines of business.  These include property,
casualty and life insurance through CAN Financial Corporation,
a 90%-owned subsidiary; the production and sale of cigarettes
through Lorillard, a wholly owned subsidiary; the operation of
hotels through Loews Hotels Holding Corporation, a wholly owned
subsidiary; the operation of offshore oil and gas drilling rigs
through Diamond Offshore Drilling, a 54%-owned subsidiary, and
the distribution and sale of watches and clocks through Bulova
Corporation, a 97%-owned subsidiary.

LTR - Loews Corporation  $38.99

PLAY (speculative - bearish/debit spread):

BUY  PUT  NOV-45.00  LTR-WI  OI=315   ASK=$6.30
SELL PUT  NOV-40.00  LTR-WH  OI=1403  BID=$1.80
INITIAL NET-DEBIT TARGET=$4.40-$4.50
POTENTIAL PROFIT(max)=11% B/E=$40.50


*****
VLO - Valero Energy  $44.00  *** Rally Mode! ***

Valero Energy Corporation (NYSE:VLO) is an independent petroleum
refining and marketing company in the United States.  Valero owns
and operates six refineries in Texas, California, Louisiana and
New Jersey with a combined throughput capacity of one million
barrels per day.  Valero produces premium, environmentally clean
products such as reformulated gasoline, low-sulfur diesel and
oxygenates, and is able to achieve the specifications of the
California Air Resources Board (CARB) for gasoline.  Valero also
produces a substantial slate of middle distillates, jet fuel and
petrochemicals.  Valero markets its products in across the U.S.
through an extensive wholesale bulk and rack-marketing network,
and in California through over 300 retail locations.  The firm
also owns Ultramar Diamond Shamrock, an independent petroleum
product and convenience store merchandise marketing company.

VLO - Valero Energy  $44.00

PLAY (conservative - bullish/debit spread):

BUY  CALL  DEC-37.50  VLO-LU  OI=978   ASK=$6.30
SELL CALL  DEC-40.00  VLO-LH  OI=3800  BID=$4.10
INITIAL NET-DEBIT TARGET=$2.15-$2.20
POTENTIAL PROFIT(max)=14% B/E=$39.70


*******************
SYNTHETIC POSITIONS
*******************

These stocks have momentum-based trends and favorable option
premiums.  Traders with a directional outlook on the underlying
issues may find the risk-reward outlook in these plays attractive.

*****
IDCC - InterDigital  $19.00  *** Bottom-Fishing Only! ***

InterDigital Communications (NASDAQ:IDCC) specializes in the
architecture, design and delivery of wireless technology and
product platforms.  Over the course of its corporate history,
the company has amassed a substantial and significant library of
digital wireless systems experience and know-how, and holds an
extensive worldwide portfolio of patents in the wireless systems
field.  InterDigital markets its technologies and solutions
primarily to wireless communications equipment producers and
related suppliers.  In addition, the company licenses its Time
Division Multiple Access and Code Division Multiple Access
patents to equipment manufacturers worldwide.

IDCC - InterDigital  $19.00

PLAY (speculative - bullish/synthetic position):

BUY  CALL  JAN-25.00  DAC-AE  OI=940   ASK=$0.50
SELL PUT   JAN-15.00  DAC-MC  OI=1106  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.15-$0.25
INITIAL TARGET PROFIT=$0.45-$0.85

Note:  Using options, the position is similar to being long the
stock.  The minimum initial margin/collateral requirement for the
sold option is approximately $450 per contract.  However, do not
open this position if you can not afford to purchase the stock at
the sold put strike price ($15.00).


***********************
STRADDLES AND STRANGLES
***********************

Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable volatility-based plays.

*****
KDE - 4Kids Entertainment  $25.00  *** Earnings Speculation! ***

4Kids Entertainment (NYSE:KDE) is a diversified entertainment
and media firm specializing in the youth-oriented market with
operations in the Licensing, Advertising Media and Broadcast,
Television and Film Production/Distribution business segments.
The Licensing business is conducted by 4Kids Entertainment
Licensing and 4Kids International, which license commercial
rights to children's properties, personalities and product
concepts.  The firm's Advertising Media and Broadcast business
provides programming content to the Fox Box, Fox Broadcasting
Company's Saturday morning programming block.  Also included
in this segment are the operations of The Summit Media Group,
which provides media planning and buying services for clients
in both print and broadcast media.  The company's Television
and Film Production/Distribution business is conducted by 4Kids
Productions, 4Kids Entertainment Music, and 4Kids Entertainment
Home Video.  Quarterly earnings are due on 11/14/03.

KDE - 4Kids Entertainment  $25.00

PLAY (very speculative - neutral/debit straddle):

BUY CALL  NOV-25.00  KDE-KE  OI=447  ASK=$0.85
BUY PUT   NOV-25.00  KDE-WE  OI=125  ASK=$0.90
INITIAL NET-DEBIT TARGET=$1.60-$1.70
INITIAL TARGET PROFIT=$0.55-$0.90


*****
URBN - Urban Outfitters  $35.07  *** A "Reader's Request" ***

Urban Outfitters (NASDAQ:URBN) is a merchandising company that
operates specialty retail stores under two distinct brands,
Urban Outfitters and Anthropologie, as well as the Free People
wholesale division.  The company creates and manages retail
stores that offer highly differentiated collections of fashion
apparel, accessories and home goods in dynamic store settings.
In addition to its retail stores, the company offers its many
products and markets its many brands directly to the consumer
through the urbn.com and anthropologie.com Websites, as well
as the Anthropologie catalog.  The company's quarterly earnings
report is due on 11/13/03.

URBN - Urban Outfitters  $35.07

PLAY (very speculative - neutral/debit straddle):

BUY CALL  NOV-35.00  URQ-KG  OI=401  ASK=$1.45
BUY PUT   NOV-35.00  URQ-WG  OI=108  ASK=$1.40
INITIAL NET-DEBIT TARGET=$2.65-$2.80
INITIAL TARGET PROFIT=$0.90-$1.20


*****


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MARKET POSTURE
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