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Daily Newsletter, Tuesday, 11/11/2003

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


In Section One:

Wrap: Pause to Reflect
Futures Markets: The Little Train that Couldn't
Index Trader Wrap: Nikkei-225 faces first test
Market Sentiment: Markets Slump Again


Posted online for subscribers at http://www.OptionInvestor.com
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MARKET WRAP  (view in courier font for table alignment)
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      11-11-2003           High     Low     Volume Advance/Decline
DJIA     9737.79 - 18.70  9761.20  9719.05 1.43 bln   1291/1892
NASDAQ   1930.75 - 10.90  1944.01  1923.50 1.63 bln   1088/2051
S&P 100   518.66 -  0.11   519.58   517.11   Totals   2379/3943
S&P 500  1046.57 -  0.54  1048.23  1043.46
W5000   10194.56 - 20.40 10221.12 10167.22
RUS 2000  528.57 -  4.64   533.42   526.76
DJ TRANS 2927.24 - 52.10  2963.76  2935.28
VIX        17.54 -  0.08    18.53    17.50
VXO (VIX-O)18.00 +  0.05    18.53    17.86
VXN        26.55 +  0.06    26.99    26.54
Total Volume 3,294M
Total UpVol  1,116M
Total DnVol  2,099M
52wk Highs  281
52wk Lows    25
TRIN       1.11
NAZTRIN    0.96
PUT/CALL   0.96
************************************************************

Pause to Reflect

While the country paused to observe Veterans Day the markets
paused to reflect on direction. Volume for the last two days
has been very low with Monday failing to break three billion
shares across all markets. There were no material economic
reports and no material news. However, there was a material
change in the market internals.

Dow Chart



Nasdaq Chart




The only economic report was the weekly Chain Store Sales and
the number showed a significant +1.2% bounce. This was the
largest gain since +1.3% on Oct-4th but barely enough to
recover the drain over the last four weeks. The cold weather
finally appeared and drove shoppers to the stores to buy more
seasonal clothing. However, the Bank of Tokyo lowered their
estimates for the month to +4% from +5% based on the overall
trend. Retailers are still expecting a strong holiday season
but price competition is going to be tough. The price wars
online have already started and profits are going to be hard
to capture.

Since the markets were not moved by the numbers there was
another factor at work. The mutual fund cloud appears to be
growing and that worry kept the normally bullish holiday in
the negative column. According to Putman they suffered -$14
billion in mutual fund outflows last week. This was more than
the -$10 billion previously reported and in addition to -$9
billion in withdrawals on other managed assets. This is a
major hit to Putman in the range of about -5% of their fund
assets. Typically some funds keep 2% to 3% of their assets
in cash for redemptions and buying opportunities. This was
about twice their cash held in reserve. Alliance funds also
said they saw -$14 billion in withdrawals last week.

A Morningstar spokesman said they had talked to several fund
managers at Putman and they confirmed they were selling stock
to raise cash. How they were selling differed among managers.
Some were selling a "slice" or a percentage of everything in
the portfolio and others were just liquidating stocks they
no longer wished to hold. Since Putman is generally a large
cap fund family you only need to look at GE or MSFT to see
some selling pressure. Contrasting them with MMM and INTC
you can see that the weaker of those are being dumped while
the stronger earners are fairing better. It is not that GE
and MSFT do not produce strong profits but they both had
some qualifications in their earnings that caused analysts
to expect less growth in the future. Plus, they are the
biggest and most liquid large caps. Funds can get out easy
and not ripple the market. Also, funds seeing a cash drain
could continue to sell into any bounce to raise additional
cash for future redemptions and to replenish their normal
cash reserves.

Adding to the fund problems were comments today that the
founder of the Strong funds could be subject to criminal
prosecution for market timing his own funds for friends and
family. He created an additional $600,000 profits from the
trades and has volunteered to repay anyone that was harmed
by the process. What is harming investors is the constant
stream of bad news about these funds under fire. The Gallup
organization ran a poll in the last week of October and
before the latest volley of bad news. They found that 51%
of investors with money in funds would probably withdraw
their money from any fund with problems.

The bright side of this equation is these investors are pure
stock investors and that money will be put back to work in
other funds relatively quickly. Funds benefiting from the
switch are Fidelity and Vanguard which have not been charged.
Conflicting fund flow data also appeared today. AMG Data
said that $24 billion flowed into funds in October. This was
more than $17 billion that TrimTabs had estimated just last
week. We have seen this in the past as each firm calculates
the numbers differently. The numbers for November are sure
to be even more confusing as investors shuffle record amounts
of money into different funds.

Another worry is that funds under attack or expected to
come under attack could start looking at locking in their
gains to produce strong year end ads in order to rebuild their
image. This could produce selling into any bounce to try and
maximize gains.

Other worries are slipping through the markets. There is a
persistent rumor that Greenspan could make a preemptive
strike and raise rates 25 points at the December meeting.
The move while miniscule would signal an end to the neutral
bias and show that the Fed was ready to attack the coming
inflation flu. Personally I think this is pure bull and not
worth a honorable mention but it is making the rounds. The
reason I do not expect any Fed action other than maybe a
bias change or the removal of the "considerable period"
clause from the statement is due to the lack of a recovery.
Yes, I said it but it is not what you think.

The official estimates for the 4Q GDP are hitting the wires
again and they range from +3.9% to +4.0%. But the estimates
for the 2004 GDP have been raised to +4.2%. You were expecting
more? Forrester Research announced this week that IT spending
for all of 2004 is only expected to grow +4%. They said they
expect companies to remain cautious until the recovery is
well under way. Once the rate hikes start there is likely to
be a period of consolidation and hesitation until we see if
the hikes kill the recovery. More bull since all recoveries
are accompanied by higher rates but that is another story.
What will slow the markets is ten year rates over 4.75%.
This is the level where conservative funds can feel
comfortable switching from risky stocks to safe bonds.

The problem it appears is the validity of the GDP numbers
for the 3Q. There are different trains of thought on why the
GDP numbers were so high. The general consensus was pumping
of autos at little or no profit to keep the pipelines moving
and the continued activity in the housing sector. I suspect
it may be a little more basic than that. If you remember the
Retail Sales for September were +5.9% and everybody was
bragging about how fast the consumer was ramping up. This
followed a hot August pace at +5.1%. Most people do not
realize that merchandise for the coming holidays must be
ordered 3-6 months or even more in advance. The drop dead
order date for most merchandise is the end of August or
early September. With the lowest inventory to sales levels
on record and a strong ramp in August and September the urge
to order holiday merchandise was probably strong. How much
of this holiday ordering impacted the 3Q GDP is unknown.
What is known is that any holiday orders that contributed
to the +7.2% GDP surge are now history. That merchandise is
either in stores or will be in stores over the next week to
take advantage of the Thanksgiving shopping spree. This means
there could be a pause in orders and production for consumer
goods until retailers see how the holiday season progresses.
It could also mean that the November jobs report could show
a loss of jobs once again.

The true test will be the 4Q-GDP, which is not announced
until late January. We also need to see if the job growth
sticks or whether that was a one time bounce. We will see
the Nov. Jobs on Dec-5th. With the next Fed meeting not
until Dec-9th it is far too soon to start worrying about
a preemptive rate hike. Anybody that thinks they know
Greenspan's next move in advance is on drugs. While he will
want to be on the lookout for the inflation flu it is not
even a remote risk at present. He can do more to further the
recovery by sitting on his hands than by trying to micromanage
the bounce. He is widely credited with killing the last bubble
so I doubt he wants to step in front of the canons again so
soon.

Despite the minor sell off of the last three days the market
sentiment is still very bullish. Only today did the internals
begin to show weakness but on holiday volume it would be
tough to draw any conclusions. About the only fly in the long
term ointment is the vast discrepancy between insider buying
and insider selling. According to Thompson Financial there
was only $52 million dollars of inside buying in October.
This is not even a drop in the bucket much less bullish
confirmation of the future economic outlook. They also show
that insider selling was exploding with $59 of insider selling
for every $1 of insider buying. This is the WORST ratio since
records have been kept. (15 years) This is a long term
sentiment indicator that has proven accurate in the past.

A short-term indicator is the number of new highs/lows. The
number of new highs topped out in the recent rally at +1172
on Nov-3rd. They eased off slightly and then rebounded to
1066 on Friday. Monday there were 600 and today 281. While
this is a significant drop both Monday and Tuesday were very
low volume days and are not statistically valid. Should the
volume pick up on Wednesday as expected and the numbers
continue to decline then it would be very negative. The VXO
spent most of the day over 18 due to three days of light
selling but fell back under 18 just before the close. Despite
the selling there is still no fear in the markets.

Earnings are still in progress with over 200 late reporters
due out in the next three days. JCP fell today after announcing
a -56% drop in earnings due to losses at its Eckerd Drug Store
chain. ANF dropped -2.5% after the bell after announcing a drop
in same store sales of -9% and warned that the 4Q sales could
be flat. They guided analysts to 93 cents for the 4Q and that
was less than the $1.00 that was expected. AMAT announces on
Wednesday and WMT and Dell on Thursday. CSCO gave cautious
comments at their shareholder meeting and said that customers
remain extremely conservative despite the apparent recovery
in progress. Chambers said this was the least "risk taking"
environment he had ever seen. He also said he was only
cautiously optimistic that the telecommunications sector
was rebounding. Not a very cheerful overall outlook. Adding
to the gloom was a serious drop, -303 points, in the Nikkei
last night to punctuate a -1000 point drop in the last three
weeks.

To recap all the above we have verified selling in mutual
funds, unverified rumors of a preemptive rate hike, heavy
insider selling and disappointing results by JCP and ANF.
CSCO appeared to be backing up slightly and the Nikkei is
imploding. Despite all the bad news the Dow is only down
-115 points in the last three sessions. The Nasdaq is down
-46 points. This is hardly a sell off or even light profit
taking. Now that the jobs report has passed traders appear
to be just taking a breather. The two-day holiday and that
is what it was if you look at the volume, was a chance for
everyone to step back and look at the picture and decide
what they are going to do over the next six weeks. Six
weeks! That is all that is left in this year. Do they keep
them and hope for the rally to continue or do they sell
them and chalk up huge gains. Based on the minimal
reaction to nearly $30 billion in fund withdrawals I would
say the plan was to hold and hope for more.

The next three days are going to be critical. Monday and
Tuesday were throwaways due to the holiday. Friday was also
in that category because of the job shock. Now all the news
has been digested and the direction we take between now and
Friday could be our direction for the rest of the year. The
lack of material selling could be a leading indicator but
there are very strong opinions on both sides. Watch the
internals the rest of the week and hope for strong volume.
The bulls need for the new highs to break 1000 again and
the advance/decline volume needs to be better than 3:1 in
favor of advancers. If we get that then we might get another
chance at Dow 10,000. If we get 3:1 down volume on more
than four billion shares then it may be time to step aside.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


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

The Little Train that Couldn't
Jonathan Levinson

An initial gap down, a brief run up, and then a failure to a low
range that persisted for the remainder of what proved to be a
very long day for equities.  Bonds were closed for Veterans Day.
Gold and the CRB finished higher.

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


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

10 minute chart of the US Dollar Index


The US Dollar Index dipped briefly below 93 but bounced back up,
once again doing so in what appears to be a bear wedge pattern.
The CRB added .89 to 251.60, right at 52 week highs, led by
natural gas, copper and soybean futures.

Daily chart of December gold


December gold added 1.30 to close at 388, with the HUI up .57 and
XAU .29.  Gold crept ever closer to the beginning of strong
resistance at 390, but the move, coming on the heels of the
strong up move from last week, was sufficient to print a bullish
kiss on the daily cycle oscillators.  Another day of gains could
bring us a buy signal from a higher oscillator high, which would
be a nice way to greet the gatekeeper at 390.  While I remain
entirely dubious of gold's ability to launch straight through
this strong resistance zone, the overall environment is just as
bullish as I could imagine, with no one believing the move at
current levels.  I heard today (secondhand, as I avoid watching
CNBC) that the same geniuses who referred to goldbugs early this
year as "the lunatic fringe" were laughing as they quoted the
gold and crude oil prices.   If so, then gold bulls, who have
outperformed Nasdaq bulls this year, could not hope for a better
environment in which to watch their long positions appreciate.
Nevertheless, I'll follow the charts.  Resistance begins just
above current levels, with some hints on the oscillators that it
will be challenged.  392, the year high, is the number to watch.

Daily chart of the ten year note yield


I have attached yesterday's closing chart, as treasuries were
closed for trading today in honor of Veterans Day.  GLOBEX
observed one minute of silence in recognition thereof.  In my
opinion, that minute should be an entire day as well.


Daily NQ candles


Quite separately from thoughts for those who fought for our
freedom in the United States and in Canada, today was a good day
to miss.  The indices all dropped, 0.02% on ES, .35% for NQ and
20% for ES.  But, for the first time in months, the bulls just
couldn't get out of their own way, or at least out of the bears'
way.  As can be seen on the daily candle chart, the NQ closed
right on the lower wedge trendline, down 5 points but with a low
at 1402.  Worse yet, the oscillators are rolling over from
overbought territory, beginning a downphase from a lower
oscillator high against the higher price high.  This is a
negative divergence starting a downphase right on critical
support within a multiweek bearish chart pattern.  Tick-tock,
bulls.

30 minute 20 day chart of the NQ


That said, the 30 minute chart tells a slightly more nuanced
story, with the price just beginning a possible breakout from a
descending bull wedge, with the 30 minute cycle oscillators
finally, at last catching a bit of air on their struggling
upphase.  All day, all day long, I waited for the price to react
to this struggling upphase.  This is the first time in months
that I have seen the 300 minute stochastic trend for this long in
oversold territory.  Add to that the persistence of the put to
call ratio above 1, again with no particular bounce.  Bulls need
to be careful in the extreme, but in the short term, a bounce is
due.  A lower high on that bounce would be a beautiful short
entry for the next big wave lower, as it would be aligned with
the weekly, daily and 30 minute cycle downphases.  We'll wait and
see, but in the meantime, the 30 minute cycle bounce is due and
appears to be underway.

Daily ES candles


We see the same setup on ES, except that the small drop was
sufficient to break the lower trendline at 1045.  While the 30
minute cycle is up, ES bulls need to see an immediate return back
above the broken wedge support line.  Any further selling from
here could abort the 30 minute cycle upphase and bring in the
next visit to 1024, with a nearly clear shot to 987.75 wedge
support.  We have abundant negative oscillator divergences here,
and a possible break of support on this quiet day.

20 day 30 minute chart of the ES


Note the hesitant upphase beginning on the 30 minute chart.  So
far, price has failed to cooperate, and dip-buyers today were
wringing their hands in frustration as the cavalry repeatedly
failed to arrive.  Even hedging open short positions was
difficult in the narrow, listless trading range.  Again, 1045
needs to be regained quickly, with next resistance at 1052-54-
this looks like a likely target for the next rollover, if today's
weakness was any indication.


150-tick ES


Portrait of listless session on the 150-tick ES.


Daily YM candles


The YM closed right on the line, similar to the NQ, but we have
the same bearish setup here.  Bulls need to pull this up quickly
to avoid a downside breakout.

20 day 30 minute chart of the YM


For tomorrow, we are left with a big question mark.  Either
support will hold or fail.  If it holds, I don't see the
conditions present for big upside from here.  While there was a
high put to call ratio all day and plenty of selling during the
past three sessions, I wonder how many new shorts there are to
squeeze.  Certainly the cycle picture I follow shows only an
intraday bounce in the cards, with the daily cycle oscillators
now on sell signals.  Perhaps a revisit to the upper wedge
resistance is possible, but I'm more inclined to expect trouble
at the next resistance.

Either way, tension is building, and another move is due
tomorrow.  If the bounce doesn't come, be prepared for a
violation of today's lows, possibly quickly.  Keep in mind that
the daily cycle oscillators and chart patterns are set up for a
potentially big drop, with the 30 minute cycle upphase running
interference.  See you at the bell!


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


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INDEX TRADER SUMMARY
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Nikkei-225 faces first test

Finally, some not so strong economic news!

I've got 2.5 hours to cover Japan and the U.S. so put your
thinking caps on and hopefully you've been following along prior
Index Trader Wraps and some of today's intra-day commentary
regarding the S&P Banks Index (BIX.X) 329.95 +0.06% and Dow
Transportation Average (TRAN) 2,927.24 -0.88%, which in my
opinion shows the rubberband of two economically relevant sector
being stretched in two directions, where the major indices that
you may be trading, finished today's Veteran's Day session
fractionally lower.

In this morning's 09:00 AM EST update,
http://members.OptionInvestor.com/allviewer.asp?404;http://members.OptionInvestor.com/intraday/111103_1.asp
we noted that Japan's Nikkei-225 Index ($NIKK) 10,207 -2.83% fell
297 points after economic data in that country showed private
machinery orders falling 1.6% in September (compared to August).
While I'm not cheering some weaker economic data out of Japan, it
provides a good test for a major equity market, which may have
impact on future trade here in the U.s.

After investors and traders here in the U.S. have been inundated
with more upbeat economic news in recent weeks and months, recent
trade has shown the major indices depicting more of a hesitant
bullish trade than a more euphoric type of bullish reaction to
stronger than expected economic data like Q3 GDP ramping to 7.2%
and nonfarm payrolls showing the economy adding more than 100,000
new jobs the past two months (while not strong for jobs growth on
historical standard, much stronger than economist' forecast).

It would be difficult to draw too many conclusions from today's
trade when the Treasury bond market was closed in observance of
Veteran's Day, and perhaps the 1.27-point narrow range in the S&P
Banks Index (BIX.X) and 42-point range for the Dow Industrials
(INDU) 9,737.79 -0.19% gives some confirmation on how equity
traders will look to the bond markets for some decision making
impact.

I quickly went back through some prior Index Trader Wraps to see
what nights we discussed the Nikkei-225, and found an article on
October 8, 2003
http://members.OptionInvestor.com/Itrader/marketwrap/iw_100803_1.ASP
 .  I know that I wrote an update on the Nikkei-225 regarding the
apex of a bullish triangle that developed after October 8, but
with minimal time allowed, I just haven't been able to find it at
this point.  Still, the October 8th article and the support zone
identified in that article is what I think traders and investors
need to be monitoring once again.  My thought tonight is that
there has been some slightly negative news out of Japan on the
economic front, and it may be important to monitor that MARKET'S
response.

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




In tonight's chart of the Nikkei-225, we still show the zone of
support at 10,150 holding, and can perhaps begin tying some of
the concerns regarding the strengthening yen versus the dollar
expressed in the October 8 wrap, with more data learned today
that heavy equipment orders fell 1.6% in September.

I've made some additional observations tonight in regards to long
columns of X's (demand) and O's (supply) really becoming
prevalent in recent weeks, and coming within a range of 10,150 to
11,150, as if this market (the Nikkei-225) just doesn't know what
to think!

My analysis is that the apex of that bullish triangle has tended
to be more of a gravitational point of resistance in recent weeks
at the 10,700 level, and that the Nikkei-225 is now at a pretty
important level of longer-term horizontal support, where if
broken to the downside, has the $NIKK vulnerable to the 9,750
level.

My thoughts based on what I've seen is that Japan's economy is
more dependent on the U.S., than the U.S.'s economy is on Japan.
I say this in part because Japan's government has been more
concerned in keeping its currency weak against the dollar, in
order to help maintain its exports to the U.S.

While this may be very simplistic in thought, I'm going to also
go out on a limb and say the U.S equity markets tend to be a
leadership market for the Nikkei-225, where Japan's equity
markets have tended to find strength from the U.S.

From a U.S. equity index perspective, the main concern, or
monitoring that needs to be done right now, is to monitor the
Nikkei-225 for strength or weakness from what looks to be a
rather important level of support.

One thing I do NOT want a trader to think is that if tomorrow
morning we wake up and the Nikkei-225 has closed at 10,100, that
this immediately means "SHORT THE U.S EQUITY INDICES BECAUSE THE
NIKKEI-225 IS FALLING APART!"

Let's not do that, and lets not also say that we BUY the heck out
of the U.S. Markets if the Nikkei-225 rebounds overnight to
10,750.

Let us instead use the Nikkei-225 directional trade and RATE OF
CHANGE as an influence on our trading strategy.

In this morning's Market Monitor, I tried to do just this with
the bearish profiling of the NASDAQ-100 Tracking Stock (AMEX:QQQ)
$35.06 -0.36%, at the $35.20 level, just after our market open,
with the thought that there was more of a negative bias to the
WEEKLY S2s after seeing Monday's trade, and then seeing the
Nikke-225 declines this morning.

Humph!.... After seeing today's tightly traded range, I wonder
why I traded at all with the bond market closed, where for the
better part of the day, the QQQ's along with the major indices
traded relatively unchanged.

I can tell you this.  Having traded both bearish and bullish the
major indices in recent week's, I've yet to find an "easy" trade,
where from the get go, I think to myself.... "you were exactly
right, so sit back because this is so easy!"

I think I know "exactly" what a bear wants to see.  He/she wants
to see the Nikkei-225 fall lower, the S&P Banks Index (BIX.X)
reverse lower, and the Transports (TRAN) 2,927 -0.88%, after
testing the 3,000 level, continue lower and break below its
bullish regression channel.

In today's 01:00 PM EST update, I discussed the S&P Banks Index
(BIX.X) with main observation being that while some of the other
major indices in our WEEKLY Pivot Matrix traded their WEEKLY
S1's, the BIX.X had not, and to see the major indices trade their
WEEKLY S2s, then I would look for the BIX.X to at least pull back
to its WEEKLY S1.  With the BIX.X just sitting there like a
200,000 pound vault today, as the session wore on, it began to
seem unlikely that the major indices were going to test their
WEEKLY S2s.

In the 03:15 PM EST Update, I quickly reviewed the Dow
Transportation Average (TRAN) 2,927.24 -0.88%, which by golly saw
a session low of 2,925.28, as if there might have been some
buyers at that 80.9% retracement level and mid-point of
regression.

While this will seem crazy right now, I'm going to mention it
anyway.  IF the Nikkei-225 were to trade lower to its bullish
support trend (blue +s), I'm not going to be a bit surprised if
the TRAN is at the lower end of its upward regression channel
around the 2,800 level, where we also see a rising 50-day SMA on
the TRAN.  On the upside, if the Nikkei-225 rebounds back to the
highs, I'm not surprised to see the TRAN pressing higher at
3,050.

Here's a quick look at the Pivot Analysis Matrix

Pivot Analysis Matrix




I'm going to immediately tie in the observations from the Nikkei-
225 with the major indices finding today's lows of the session
coming at or near their WEEKLY S1s.

On a Nikkei-225 break further lower, then WEEKLY S2s are in play,
with even greater focus being given to Thursday and Friday's
economic data at this
http://www.OptionInvestor.com/comingevents/ce_110903_1.asp
If the Nikkei-225 were to rebound tomorrow, my thoughts are that
the WEEKLY S2, if not the WEEKLY S1s which were not tested,
become leveraging points of support for bulls, and I would close
out my still bearish profile in the QQQ.  With little QQQ
correlation in the DAILY/WEEKLY matrix, a QQQ trader would most
likely view the correlative resistance at NDX WEEKLY S1 and DAILY
R1 as their upside risk assessment levels, especially when we now
see Stochastics nearing the "oversold" levels, where in times
past, the NDX/QQQ has found rebounds back higher.

Again.... I think the Nikkei-225 becomes an important observation
near-term.

NASDAQ-100 Tracking Stock (QQQ) - Daily Interval




Holding a bearish trade in the QQQ now feels like its a race
against time, or Stochastics approaching the oversold level.
I've marked somewhat similiar Oscillator setups found today as
that dating back to late-September where the QQQ fell more
sharply below its 21-day SMA (the QQQ did close below its 21-day
SMA today) and had the QQQ falling to test its rising regression
channel and 50-day SMA, which today's chart would be right near
the $34.50 level.

The "best" bullish trade I would look for is the Nikkei-225 to
rebound tomorrow, the QQQ fall back to $34.62 and then look long
from that level.  But PLEASE wait for us short-term bears to
cover first!

If the Nikkei-225 breaks further lower tomorrow, the QQQ
vulnerable to $34.49-$34.62 level.

Today's trade saw a net loss of 2 stocks to point and figure sell
signals and this has the NASDAQ-100 Bullish % ($BPNDX) reversing
into "BEAR CONFIRMED" status!  I don't have time to show this
chart, but you can view it for FREE at wwww.stockcharts.com.  If
looking to buy weakness back near $34.62, PLEASE do so with SMALL
positions in the once again "bear confirmed" status.  While this
bullish % has been oscillating between bear confirmed and bear
correction status in recent weeks, its the time a bull LOADS up
on a bullish position, and the bounce doesn't come.

This is why we're trying to add in the S&P Banks Index (BIX.X)
and Dow Transports (TRAN) as some sectors to be monitoring
against!

I do think that if $34.49 in the QQQ were broken, that a good
bounce from $33.67 would be found, and that bounce would bring
the QQQ back to the $34.50 level.  There's still quite a few
shorts in the QQQ, they've seen the recent 52-week high, and the
bulk should be looking to square up positions at $33.67 as a
bulls safety net.

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




The SPX found support in our near-term support zone of 1,042-
1,045 and with Stochastics nearing oversold, my MAX bearish
decline would be to WEEKLY S2 and rising 50-day SMA.  A couple of
weeks ago, some bulls may have been in the SPX from the 1,030
level and understand the strength that was seen from the 1,035
zone and after a new 52-week high, would deem this pretty firm
support.

Today's trade saw no net change in the broader S&P 500 Bullish %
($BPSPX).  Still "bull confirmed" at 80.6% and would take a
reversal reading lower to 76% to see "bull correction" status.

The narrower S&P 100 Bullish % ($BPOEX) saw no net change today
and still remains "bull correction" status at 80%.

Dow Industrials Chart - Daily Interval




The INDU finds its Stochastics first to reach the "oversold"
level where we would now be looking more closely for a level to
see a bounce back higher.  I would begin looking very closely at
WEEKLY S2 of 9,700, and monitor the TRAN and BIX.X for some
confirming strength, or firming.  If Dow 10,000 is in the cards,
the INDU really needs to hold the 9,650 level and MONTHLY Pivot.

Today's trade saw no net change in the very narrow Dow
Industrials Bullish % ($BPIND).  Still Bull correction status at
83.33%.  On Monday, shares of Altria (NYSE:MO) $48.70 gave a
point and figure buy signal, which had the Dow's bullish %
gaining 3.33%.

Finally....

One of the most-asked questions this week has been what type of
impact the current mutual fund scandal, regarding "late trading"
of mutual funds, and some $14 billion worth of liquidations at
Putnam Funds is having on the major indices, and market
psychology.

While it is impossible for me to present any quantitative data on
this topic, to back up my thoughts, I do think it could be having
some impact on the major indices from a sell side of the trade,
but also on market psychology.

From the sell side of things, most reports I've read is that
Putnam (considered a LARGE mutual fund family) has seen roughly
$14 billion in investor redemptions since the fund family was
cited as being one of the more active participants in illegal
after-hours trading of its funds.  However, reports also note
that Putnam's fund managers (like most fund managers from any
mutual fund) will keep anywhere from 1% to 3% of a funds assets
in cash in order to meet normal levels of redemptions from its
investors, and the reported $14 billion in net redemptions at
Putnam currently equates to about 5% of the fund family's total
assets managed.

Today we noted that Microsoft (NASDAQ:MSFT) $25.81 -0.77% broke
back below its longer-term 200-day SMA of $26.00 in today's
trade, a notable break after the stock had been finding support
at this key longer-term moving average for the past eight trading
sessions.  In today's Market Monitor at OptionInvestor.com, I saw
several comments about General Electric (NYSE:GE) $28.11 -0.21%
testing its longer-term 200-day SMA of $28.05 in today's trade.

What comes to mind is that these two VERY LIQUID STOCKS are
probably holdings at Putnam, if not most mutual funds, and if I
(Jeff Bailey) were a mutual fund manager at Putnam and having to
meet redemptions, I'm probably turning to some of my more LIQUID
large cap stocks like a MSFT or GE to sell in order to meet
redemptions.  Please note, I'm only suggesting MSFT and GE are
being sold because of their LIQUIDITY, and it would be an error
to interpret my comments as either bullish or bearish these two
VERY liquid stocks.

Can the redeeming of cash by investors at Putnam and other mutual
funds have negative near-term impact on the major averages?
Certainly they can as both MSFT and GE are the two largest market
capitalization stocks in the cap-weighted S&P 100 Index (OEX.X)
518.66 -0.02%.

While some of the funds being investigated for illegal after-
hours trading of their funds have seen withdrawals, other funds
seeing notable net inflows were reported as being Fidelity,
VanGuard and American Funds, so one might think that some of the
redemptions being seen from other fund families are immediately
finding their way back into the markets.

I can only make a guess on market psychology, but if I owned a
mutual fund, in a family of funds mentioned as allowing illegal
after-hours trading of their funds, I would first have to
consider any tax consequences of liquidating those funds and
triggering a taxable event.  At this same time, I'm probably
aware that when the fund manager is selling some of the holdings
in the fund to meet redemptions, he/she generating a taxable
event for me regardless of what I do, or don't do.  My best hope
if holding one of these funds is that he/she is selling their
losers (losses) in equal amounts as their winners (profits) as to
not generate an overly surprising taxable event at the end of the
year (if the mutual fund were held in a taxable account).

From the psychological side of things, I don't see any of this
mutual fund scandal being positive for the markets.  The reason I
say this is if an investor just so happened to plow every dollar
they had into an equity fund in March, there may be a high odds
chance they decide to take the money out of the mutual fund cited
for illegal after-hours trading, and park it back into cash.

Jeff Bailey


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

Markets Slump Again
- J. Brown

It was a slow day on Wall Street with the bond markets closed for
Veteran's Day but that didn't stop the current trend of profit
taking from etching another decline in both the Dow and the
NASDAQ averages.  The morning got started with some earnings from
several retailers.  Overall the news was positive and Merrill
Lynch upgraded half a dozen stocks to a "buy" up from "neutral".
It was enough to push the RLX retail index into the green but
this was one of the few sectors that managed to close positive.
Drugs, Gold and chips saw meager bounces while the rest of the
markets drifted lower.

There was heavy selling in both the biotech and airlines sectors
for back-to-back sessions.  "Heavy" being a relative term for the
airline index, which tends to move slowly, although it did close
under its simple 50-dma.  Meanwhile crude oil futures closed
above $31, which may explain some of the weakness in airlines.
Without any big economic news analysts and pundits turned to the
interest rate discussion again.  The argument takes various forms
from when the FOMC may have to raise rates again (from Q2 of 2004
to early 2005) to a healthy economy naturally producing higher
interest rates on its own via the bond market.  Whatever your
personal view it seems like idle chatter today as stocks
experience some overdue selling and potentially setting up for
the next leg higher.  Yet somehow I don't think the selling is
quite done yet.

In the meantime the rest of Wall Street is eyeing the string of
economic reports set to come out on Thursday and Friday of this
week.  As if we needed any more proof that the economy has
finally turned the corner and on its way back to recovering.
Friday is the big day with the PPI, Retail Sales, Production and
Utilization and Michigan Sentiment numbers.


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

Market Averages

DJIA ($INDU)

52-week High:  9903
52-week Low :  7197
Current     :  9737

Moving Averages:
(Simple)

 10-dma: 9804
 50-dma: 9624
200-dma: 8881



S&P 500 ($SPX)

52-week High: 1062
52-week Low :  768
Current     : 1046

Moving Averages:
(Simple)

 10-dma: 1051
 50-dma: 1033
200-dma:  953



Nasdaq-100 ($NDX)

52-week High: 1453
52-week Low :  795
Current     : 1409

Moving Averages:
(Simple)

 10-dma: 1426
 50-dma: 1385
200-dma: 1203



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

The recent market weakness has pushed the volatility indices
higher but we're still near multi-year lows.

CBOE Market Volatility Index (VIX) = 17.54 -0.08
CBOE Mkt Volatility old VIX  (VXO) = 18.00 +0.05
Nasdaq Volatility Index (VXN)      = 26.55 +0.06


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.96        537,257       514,414
Equity Only    0.73        447,950       326,768
OEX            0.64         24,273        15,499
QQQ            4.68         14,388        67,297


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.4    + 0     Bull Confirmed
NASDAQ-100    71.0    - 4     Bear Confirmed
Dow Indust.   83.3    + 0     Bull Correction
S&P 500       80.6    + 0     Bull Confirmed
S&P 100       80.0    + 0     Bull Correction


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

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

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


 5-dma: 1.19
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    1086      1073
Decliners    1713      1974

New Highs     195       237
New Lows       19        22

Up Volume    499M      546M
Down Vol.    871M     1053M

Total Vol.  1397M     1618M
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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The Option Investor Newsletter                  Tuesday 11-11-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: COO
Dropped Puts: None
Call Play Updates: APA, JCI, JBL, PGR, VRTS
New Calls Plays: MME
Put Play Updates: AZO, AMGN, ATH, JBLU, PCAR
New Put Plays: None


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

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


CALLS:
*****

Cooper Cos - COO - close: 41.65 chg: -0.52 stop: 41.75

We think it's time to cut COO loose.  Shares dropped out of their
sideways consolidation pattern on Monday as the markets pulled
back.  That in and of itself wasn't so bad but today's close
under the 50-dma concerns us.  The stock's oscillators (MACD,
stochastics) have turned bearish and a retest of the $40 level
may be next.

Picked on October 12 at $41.40
Change since picked:    + 0.25
Earnings Date         09/03/03 (confirmed)
Average Daily Volume:      391 thousand
Chart =



PUTS:
*****

None


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

Apache Corp. - APA - close: 70.07 change: +0.02 stop: 67.50

You can almost here the bulls chanting "I think I can".  Shares of
APA clawed their way back over $70 and have been vacillating both
sides of that level for the past 3 days.  We're still looking for
a breakout above the current consolidation and then a run back at
the October highs near $73.  Aggressive traders can consider
entries on dips near the 50-dma ($69.25), while the more
conservative approach will be to wait for a breakout over $70.60
before playing.  The lack of upside progress is somewhat
disconcerting, so to mitigate our risk in the play, we're
tightening our stop to $68, just below the lows from last week.
One other issue of concern is the fact that the Oil Service sector
(OSX.X) has been trading poorly this week, and is once again
approaching major support near $83.  The best approach will be to
enter on strength in both APA and the OSX.

Picked on November 2nd at    $69.72
Change since picked:          +0.35
Earnings Date               1/22/04 (unconfirmed)
Average Daily Volume =     1.33 mln
Chart =


---

Johnson Controls - JCI - cls: 105.71 chg: -1.04 stop: 104.99

We had suspected that a high-dollar stock like JCI would see
profit taking if the markets continued to slip and that is
exactly what happened.  Our plan was to look for a bounce in the
$106-107.50 range but selling pressure has pushed JCI under the
$106 mark.  Now shares are approaching our stop and round-number
support near $105.  It is interested that aside from the early
morning drop today JCI narrowed into a very tight trading range.
Volume on the last two sessions has been light but given the
holiday today that's not a surprise.  We would NOT suggest new
bullish positions in JCI until we saw a bounce and if it trades
under $105.00 we'll close the play at our stop.

Picked on October 30 at $107.07
Change since picked:     - 1.36
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      432 thousand
Chart =


---

Jabil Circuit - JBL - close: 29.67 chg: -0.51 stop: 27.99

Ouch!  The tech sector was hit hard on Monday as investors chose
to take profits despite positive comments for the chip sector
(and an upgrade for INTC).  JBL fell back toward the $30 level
and broke that support on Tuesday.  We do note that volume is
dropping on this consolidation and that's what we'd hope for if
it's just a pause in the rally.  Fortunately, JBL's slide stopped
at the $29.50 level.  Whether or not this proves to be a new
entry point for the bulls will probably depend on market
direction tomorrow.  Given the possibility of the NASDAQ
retesting the 1900 mark we'd be patient.  JBL may pull back to
the $29.00 level.

Picked on November 04 at $30.11
Change since picked:     - 0.44
Earnings Date          09/18/03 (confirmed)
Average Daily Volume:      1.4 million
Chart =


---

Progressive - PGR - close: 75.24 chg: -0.13 stop: 72.75

Shares of PGR are stuck in limbo.  They have churned sideways in
a $2.20 range for the last six sessions.  More aggressive traders
can try and buy any bounce from $74.00 but we would probably
prefer the momentum entry on this stock with a move above the
$76.25 level.  There has been no new news.  Readers may want to
keep an eye on the IUX insurance index.  The IUX appears to have
put in a double-top near the 285 level but it is also bouncing
near the 275 area, which has been support for the last several
weeks.

Picked on November 07 at $76.25
Change since picked:     - 1.01
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      654  thousand
Chart =


---

Veritas Software -VRTS - cls: 36.96 chng: -0.96 stop: 35.90

Uh-oh!  Now that just doesn't look good.  While the broad market
action has been rather subdued, shares of VRTS have not gotten the
week off to a good start, following up Monday's loss with another
2.5% slide today.  This brings up the very real possibility of a
retest of the $36 support level and that will be a make-or-break
test for our play.  Bolstering that $36 support is the 20-dma,
which has now risen to $36.24.  This pullback may prove to be just
the latest entry point into the play, much like what was seen at
the end of October, with two down days and then a rally up to set
new 52-week highs.  Aggressive traders can look for new entries on
a rebound from the 20-dma, with an eye towards a run back to the
$39-40 resistance level.  As an interesting side note, traders
that aggressively harvested profits near that resistance level
last week are now sitting in a much better position to potentially
play the next leg of this ongoing rally.  Maintain stops at
$35.90, as trading below that point would violate the pattern of
higher lows of the past several weeks and suggest that we are
going to see a deeper pullback before continuing higher.

Picked on October 28th at    $37.27
Change since picked:          -0.31
Earnings Date               1/21/04 (unconfirmed)
Average Daily Volume =     6.10 mln
Chart =



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

Mid Atlantic Medical - MME - cls: 56.65 chng: +0.60 stop: 55.00

Company Description:
Mid Atlantic Medical Services is a holding company for
subsidiaries active in managed healthcare and other life and
health insurance related activities.  MME and its subsidiaries
offer a broad range of managed healthcare coverage and related
ancillary insurance and other products and deliver these services
through health maintenance organizations, a preferred provider
organization, and a life and health insurance company.  MME owns
a home healthcare company, a pharmaceutical services company and
a hospice company.  The company also owns a collections company
and maintains a partnership interest in an outpatient surgery
center.

Why we like it:
When the news broke on 10/27 that MME would be acquired by UNH,
the stock soared, gapping above $58 and running as high as
$60.74, before beginning to sell off into earnings.  That
weakness persisted through earnings and the stock didn't begin to
bounce until yesterday morning, predictably right from the bottom
of the 10/27 gap.  At the time the deal was announced, the
acquisition value of MME stock was near $62.50, based in part on
the value of UNH stock.  Looking at UNH, we can see that stock's
decline mirrors the decline in MME, as well as the rebound that
began yesterday.  What we like about this play is that MME began
its bounce right at the bottom of its gap, and UNH began its
rebound from strong support near $47.50.  This looks like a great
bargain for traders that want to participate in a recovery back
towards the value originally placed on MME.  That means we can
aggressively target a rally up to the $62 level.  But since MME
has twice found strong resistance in the $60-61 area, that seems
a more reasonable target.

Not only did the bottom of the gap provide support, but there's
also the 20-dma (now at $56.30) which should help in that
department.  With MME having broken above its descending channel
of the past 2 weeks, we like entries near current levels.  But
more conservative traders might try to shave a bit off the entry
price by targeting and dip and rebound from the vicinity of $56.
While we're only targeting a rally into the $60-61 area, the play
still provides a favorable risk-reward ratio, with our stop
placed at $55.00, just under the recent lows and the 30-dma
($55.03).  If looking to enter the play on strength above today's
high, it would be advisable to also monitor the strength of UNH,
as the two stocks will now likely move in lockstep.

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.  But with November options expiring next Friday, using the
December 55 strike may be a better choice.

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 look all the way out to the March
60 Call.

! Alert - November options expire in less than two weeks!

BUY CALL NOV-55 MME-KK OI= 174 at $2.40 SL=1.25
BUY CALL DEC-55 MME-LK OI= 163 at $2.90 SL=1.50
BUY CALL DEC-60 MME-LL OI=1091 at $0.40 SL=0.20
BUY CALL MAR-60 MME-CL OI= 495 at $1.45 SL=0.75

Annotated Chart of MME:
Chart =




Picked on November 11th at   $56.65
Change since picked:          +0.00
Earnings Date               2/04/04 (unconfirmed)
Average Daily Volume =        698 K


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

AutoZone, Inc. - AZO - close: 92.90 change: +2.35 stop: 96.25

We were expecting a rebound in our AZO play, and it arrived today,
albeit a day later than anticipated.  Since the bounce commenced
from the bottom of yesterday's move (just above $90), that means
we're looking for a slightly lower lid on this oversold rebound.
There's substantial resistance in the $94-95 area, reinforced by
the 30-dma ($94.94) and a rollover from that area would make for a
solid bearish entry.  The one note of concern is that today's
2.59% rebound came on very strong volume (nearly quadruple the
ADV) and seemed to occur in the absence of any meaningful news, so
we need to be on the alert that this could be the beginning of a
reversal.  This is precisely why when we initiated coverage, we
wanted to avoid chasing the stock lower.  If looking to enter on a
failed rebound, remember that we want to enter on a rollover, not
just because the stock has managed to recover into that $94-95
area.  Just selling at that price point is the converse of
catching a falling knife and not conducive to a positive eauity
curve.  Maintain stops at $96.25, just above Friday's intraday
high.

Picked on November 9th at    $93.30
Change since picked:          -0.40
Earnings Date              12/22/04 (unconfirmed)
Average Daily Volume =     1.05 mln
Chart =


---

Amgen Inc - AMGN - close: 58.98 chg: -0.16 stop: 62.51

Hmm... our put play in AMGN was off to a good start on Monday
with some follow through on Friday's close under the $60 level.
Yet now the stock has produced a decent intraday bounce from the
$58 mark and it wouldn't surprise us to see AMGN retest the $60
level as resistance this time.  Some traders may want to use a
failed rally at $60 as an entry point for new positions.  There
has been a lot of biotech headlines lately and the BTK biotech
index has put together two hefty back-to-back losses.  Some of
the headlines have been regarding experimental cancer therapy
drug Epratuzumab, co-developed by Amgen and Immunomedics (IMMU).
AMGN has decided not to pursue a clinical trial of the drug and
IMMU's shares fell more than 50% on the news.  The smaller
biotech firm appears to have finally (as of this evening)
negotiated the rights from Amgen to develop epratuzumab on their
own.  Biotech stocks were also under pressure after Vertex and
Aventis announced it would voluntarily stop an experimental trial
for a new rheumatoid arthritis drug after animal studies showed
adverse affects to their livers.  Plus, Mylan Labs (MYL) was
downgraded by UBS from "buy" to "neutral" claiming that odds are
growing that JNJ will overcome in a patent lawsuit.  Shares of
MYL dropped 6.5%.  P&F chart traders will note that AMGN is close
to its vertical count/bearish price target of $57.00 but given
the negative trend and high-volume declines in the last few weeks
this is one time where the stock might exceed its P&F target.

Picked on November 09 at $59.95
Change since picked:     - 0.97
Earnings Date          10/21/03 (confirmed)
Average Daily Volume:       8.8 million
Chart =


---

Anthem, Inc. - ATH - close: 65.88 change: +0.67 stop: 69.50

We couldn't have asked for more from our ATH play this week, as it
started off yesterday by dropping through $66 support and
triggering the play.  That was the momentum entry for those
willing to take it.  Then today, more conservative traders got
their shot at an entry, as the stock rebounded right up to $66 by
midday and then weakened slightly into the close.  It may be that
there's a bit more life in this rebound, but resistance in the
$67-68 area should be a tough nut to crack.  Any rollover below
that level (the closer, the better) can be used as a fresh entry
into the play, as the 10-dma ($67.47) should just reinforce that
resistance if tested.  Maintain stops at $69.50, as that should be
far enough out of the way to not be threatened unless ATH puts in
a real reversal.  The next level of support to contend with is
near $63.50, enroute to our $60 target.

Picked on November 6th at    $67.22
Change since picked:          -1.34
Earnings Date               1/26/04 (unconfirmed)
Average Daily Volume =     1.62 mln
Chart =


----

JetBlue Airways - JBLU - cls: 51.63 chg: -0.64 stop: 55.26 *new*

Well it looks like we know who won the recent tug-of-war.  Shares
of JBLU dropped steadily again on Monday breaking to new relative
lows and closing below its simple 100-dma.  Volume was better
than average on the decline.  Today produced a small follow
through on the drop and JBLU is quickly approaching our initial
target of $50.00.  Short-term traders may want to jump out ahead
of the crow who might plan on covering near the $50 mark and exit
as JBLU nears $51.00.  As a matter of fact we're going to set an
official exit price of $50.50 and if JBLU trades there we'll
close the play.  We're lowering our stop to Monday's high at
$55.26.

Picked on November 02 at $57.67
Change since picked:     - 6.04
Earnings Date          10/23/03 (confirmed)
Average Daily Volume:      1.5 million
Chart =


---

PACCAR - PCAR - close: 73.90 chg: -0.82 stop: 78.01

All right!  Shares of PCAR have broken out of their consolidation
pattern and Monday's drop triggered our play at $74.99.  Even
more encouraging was the rising volume on the declines (Thursday,
Friday, Monday).  Today's drop was mild as was the volume given
the market's semi-holiday.  The bearish breakout has produced a
bearish-triangle breakdown on PCAR's point-and-figure chart.
This is one of the most successful patterns to trade, although
certainly not a guarantee.  Short-term traders can target the
$70.00 mark.  More aggressive traders may want to target the 200-
dma near $67.50.  After six down days in a row it wouldn't
surprise us to see a small bounce before PCAR continues lower.
Plan accordingly.

Picked on November 10 at $74.99
Change since picked:     - 1.10
Earnings Date          10/21/03 (confirmed)
Average Daily Volume:       899 thousand
Chart =



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

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


In Section Three:

Play of the Day: CALL - MME


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

Mid Atlantic Medical - MME - cls: 56.65 chng: +0.60 stop: 55.00

Company Description:
Mid Atlantic Medical Services is a holding company for
subsidiaries active in managed healthcare and other life and
health insurance related activities.  MME and its subsidiaries
offer a broad range of managed healthcare coverage and related
ancillary insurance and other products and deliver these services
through health maintenance organizations, a preferred provider
organization, and a life and health insurance company.  MME owns
a home healthcare company, a pharmaceutical services company and
a hospice company.  The company also owns a collections company
and maintains a partnership interest in an outpatient surgery
center.

Why we like it:
When the news broke on 10/27 that MME would be acquired by UNH,
the stock soared, gapping above $58 and running as high as
$60.74, before beginning to sell off into earnings.  That
weakness persisted through earnings and the stock didn't begin to
bounce until yesterday morning, predictably right from the bottom
of the 10/27 gap.  At the time the deal was announced, the
acquisition value of MME stock was near $62.50, based in part on
the value of UNH stock.  Looking at UNH, we can see that stock's
decline mirrors the decline in MME, as well as the rebound that
began yesterday.  What we like about this play is that MME began
its bounce right at the bottom of its gap, and UNH began its
rebound from strong support near $47.50.  This looks like a great
bargain for traders that want to participate in a recovery back
towards the value originally placed on MME.  That means we can
aggressively target a rally up to the $62 level.  But since MME
has twice found strong resistance in the $60-61 area, that seems
a more reasonable target.

Not only did the bottom of the gap provide support, but there's
also the 20-dma (now at $56.30) which should help in that
department.  With MME having broken above its descending channel
of the past 2 weeks, we like entries near current levels.  But
more conservative traders might try to shave a bit off the entry
price by targeting and dip and rebound from the vicinity of $56.
While we're only targeting a rally into the $60-61 area, the play
still provides a favorable risk-reward ratio, with our stop
placed at $55.00, just under the recent lows and the 30-dma
($55.03).  If looking to enter the play on strength above today's
high, it would be advisable to also monitor the strength of UNH,
as the two stocks will now likely move in lockstep.

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.  But with November options expiring next Friday, using the
December 55 strike may be a better choice.

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 look all the way out to the March
60 Call.

! Alert - November options expire in less than two weeks!

BUY CALL NOV-55 MME-KK OI= 174 at $2.40 SL=1.25
BUY CALL DEC-55 MME-LK OI= 163 at $2.90 SL=1.50
BUY CALL DEC-60 MME-LL OI=1091 at $0.40 SL=0.20
BUY CALL MAR-60 MME-CL OI= 495 at $1.45 SL=0.75

Annotated Chart of MME:




Picked on November 11th at   $56.65
Change since picked:          +0.00
Earnings Date               2/04/04 (unconfirmed)
Average Daily Volume =        698 K


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OCO Stop & Profit Orders                        OneStopOption
All types of Spreads and Buy Writes             888-281-9569
Auto-Trade Market Monitor Signals
Personal Service and Education


**Services available for Foreign Traders including Canada**

http://www.OneStopOption.com

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**********

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