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Daily Newsletter, Thursday, 11/20/2003

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The Option Investor Newsletter                Thursday 11-20-2003
Copyright 2003, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Markets Bombed For A Loss
Futures Markets: Equities Get Trashed, Twice
Index Trader Wrap: I wouldn't even try
Market Sentiment: Markets Look for Cover


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      11-20-2003           High     Low     Volume Advance/Decline
DJIA     9619.42 - 71.00  9726.09  9613.72 1.61 bln   1235/1978
NASDAQ   1881.92 - 17.70  1916.55  1880.91 1.78 bln   1223/1935
S&P 100   511.79 -  5.03   518.31   511.56   Totals   2458/3913
S&P 500  1033.65 -  8.79  1046.48  1033.42
W5000   10077.82 - 78.20 10193.96 10074.30
RUS 2000  523.08 -  2.54   529.01   520.75
DJ TRANS 2855.48 - 11.40  2885.71  2846.02
VIX        19.48 +  0.68    19.61    18.46
VXO VIX-O  20.20 +  0.75    20.84    18.94
VXN        30.49 +  0.53    30.62    29.43
Total Volume 3,789M
Total UpVol  1,074M
Total DnVol  2,665M
52wk Highs  280
52wk Lows    37
TRIN       1.40
NAZTRIN    1.46
PUT/CALL   0.81
************************************************************

Markets Bombed For A Loss

After holding their ground overnight the S&P futures tanked
to the lows for the month at 1031 when the bombs went off
in Istanbul Turkey. They recovered slightly but were hit
again at the open when the White House was evacuated with
what was said at the time to be an airspace violation. Again
we hit the lows at 1031 but traders bought the dip. After
struggling higher all day the fear of darkness came back
and traders headed back to the bomb shelters by the close.

Dow Chart


Nasdaq Chart



Jobless Claims fell sharply for the last week at only 355,000
and -10,000 under the consensus estimates. The prior week was
revised up +4,000 to 370,000 making this weeks number even
better. This was the lowest claims number since Feb-2001 and
one month before the recession began. There is strong
speculation that a third 13-week extension of benefits will
be passed by Congress before the Thanksgiving break. It is
strange that although the claims went down there were only
six states reporting a decrease in claims. 47 states and
territories reported a rise in claims.

Not so good news came from the Philly Fed Survey, which
fell from 28.0 in Oct to 25.9 in November. The main reason
for the decline was a huge drop in the New Orders component
to 20.8 from 29.0. Remember my theory that the orders from
the last three months were for holiday merchandise and those
orders were over. That is still just a theory but we are
watching the numbers play out to see if it fits. Other
components that fell included employment, hours and prices
received. Inventories also fell to -11.5 from -2.5 and this
is the lowest level in over six months. While prices received
went down prices paid rose sharply. Shipments also slowed.
This was not a positive report despite the positive headline
number. The trend definitely dipped in November but then
October was a blowout over September so some pull back was
expected.

Monthly Leading Indicators rose by +0.4% and last months
-0.2% decline was revised to zero. The main reason for the
gains was the decline in the Jobless Claims and a larger
spread in interest rates. Since this is an indicator that
is derived from other indicators the impact on the market
was minimal.

The mutual fund scandal continued with charges being filed
against the founders of the PBHG funds. Fidelity and John
Hancock received subpoenas for trade data but both raced
to remind investors that just having investigators look
at records does not mean there were any problems. Despite
the fund outflows from funds in trouble there was still a
net inflow for the week of +$3.7 billion into stock funds
according to TrimTabs.com.

The GE saga I mentioned on Tuesday started a new chapter
when GE warned that they would not hit prior estimates
for 2004 due to lower profits in the power division and
higher employee costs. They did say that they expected to
return to double digit growth in 2005. They offset this
bad news with good news that they were spinning off their
slow growth insurance business and investors bought the
story. The stock bounced to $29.50 on the initial news
before sliding back under $29 by Thursday's close. This
three day spike by GE has helped the Dow keep its head
above water but the global news today finally dragged it
under again.

HPQ announced earnings last night and beat the street by
a penny and upped estimates for the future. While the news
did not help HPQ which closed down -62 cents it did help
power the Nasdaq to a gain for most of the day. Also
helping the Nasdaq into the green were comments from Intel
that they saw relatively robust semi growth for 2004. Help
also came from the Semi Book-to-Bill number Wednesday night
at 1.00. This was the first time in over a year that semis
received one dollar in orders for every dollar shipped.
Orders jumped +12% in October. Much of the increased chip
demand is coming from consumer electronics not just
computers.

Offsetting this tech bullishness was cautious comments from
Intel CEO Craig Barrett. He said the U.S. was the laggard
in terms of global growth. He said emerging countries saw
IT growth of +15% in the 3Q but the U.S. growth was only
+3% as well as only +3% in Europe. He said there was no data
to suggest the U.S. IT spending was recovering. He said he
thought there was improvement based on anecdotal stories
but he could not prove it. Barrett was optimistic but he
was cautious in his comments.

The Fed heads were out in force again. Greenspan headed
the list with comments that "creeping protectionism" must
be stopped and reversed. He was referring to the tariffs
and trade sanctions reported recently. He was joined by
Moskow and Poole who made similar comments in different
speeches. Economists feel that politicians have good
intentions but sanctions sometimes backfire when other
countries begin choosing sides. Countries tend to vote
with their orders for new products and they will place
those orders elsewhere if their exports are being
restricted.

Moskow went on to say that the economy remained in long
term fiscal trouble but it was currently improving. He
suggested we were a long way from any inflation worries
and a long way from any Fed rate hikes.

The markets tried very hard to hang on to higher ground
with the Dow trading as high as 9726 and over the 9700
hurdle once again. The Nasdaq turned positive at 10:20
and remained in positive territory until after 3:PM.
Unfortunately the fear of darkness took hold and the Dow
ended down -71 points and at a low for the month. The
Nasdaq dropped -17 points and also closed at the low for
the month. Both indexes are now well below their 50 DMA
(9653 and 1903) and are threatening to take out significant
support.

The Dow support at 9600-9625 has held for a week but the
close at 9619 is very threatening. Should this level break
there is a good chance of testing 9500 very quickly. If
the worst came to pass we could see 9250 as the next
significant level. The Nasdaq is much closer to support
at 1875 with backup support at 1800.

The market is not reacting to any economic news or any
real pressure on stocks. It is reacting to the terror
threat and the mutual fund scandal. Money is being
rotated to different fund families in record amounts and
while those withdrawals are being offset by deposits at
other funds the impact to the market is seen in the churn.
It is tough to push higher with fund selling offsetting
fund buying. If we assume that is a neutral based on the
net inflows of +$3.7 billion over the last week then the
real problem remains the terror threat.

The four bombings in Turkey in recent days as well as
numerous threats of coming attacks on U.S. assets has
investors running scared. While the bombings overseas
are very bad news they don't directly impact the U.S.
markets. The worry is that eventually there will be an
event in the U.S. and with every new bombing overseas
that same event here is seen as drawing closer to reality.
With the end of Ramadan not until next Tuesday the fear
is concentrated into the next five days. Once Ramadan
is over and the markets break for the Thanksgiving
holiday we should see that fear begin to fade.

There are no material economic reports on Friday with the
Internet E-Commerce sales at 10:AM and ECRI Weekly at 10:30.
The key will be any overnight terror activity. Futures
are flat as we await the opening of the Nikkei. The index
rebounded last night but had closed just prior to the
Turkey bombings. Odds are good the index will test the
3-month lows from yesterday once again. Warnings have gone
out to westerners overseas to avoid public places and places
where other westerners may gather. Britain also warned this
afternoon that their was evidence that more attacks against
them were imminent. Not a good atmosphere going into the
weekend. Since the market is being news driven but still
fundamentally sound I still feel this is a buying opportunity
but I would want to wait until Tuesday to spend any real
money. Taking a lottery play here and there on the dips
should satisfy your gambling urge but don't get carried
away until next week.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


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

Equities Get Trashed, Twice
Jonathan Levinson

Equities got slammed in the morning, recovered for the remainder
of the day, and then sold off, accelerating into the close.
Treasuries advanced, gold and silver declined.

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 bottomed on a spike below 90.30 just before
the cash open on news that the White House had been evacuated.  A
few minutes later it was learned that a small plane had
innocently wandered into the no-fly zone, and the dollar, along
with equities, rebounced, uncertainly at first and then gaining
speed.  The initial drop was so sharp that many might have missed
it.  Gold and silver did not gain at the outset and spent the
duration of the session slightly negative.  The CRB dropped 1.31
to close at 250.61.


Daily chart of December gold


December gold was lower by 10 cents at the close, trading 394.80.
The HUI dropped 2.09 to 234.72, XAU -.95 to 104.22.  These are
very respectable prices, and the declines today were
insignificant.  However, more disconcerting was that they did not
gain substantially on the initially suspected bad geopolitical
news, did not gain on the subsequent relief, and did not gain on
the subsequent afternoon plunge.  If the move in equities was
opex-related, then we shouldn't read much into today's action in
metals.  However, if the drops were liquidity-related, with the
morning's scare serving as an impetus, then gold and silver will
not be immune to a subsequent deep correction.  I do, however,
expect them to outperform the major equity indices.  "Gold (and
other commodities) is nobody else's paper."


Daily chart of the ten year note yield


Treasuries were the big winner today, with the TNX dropping 8.1
bps to close at 4.154%.  As discussed recently, a plunge or even
crash in equities would accomplish the Fed's task of driving down
rates, and today's action was a perfect illustration.
Presumably, a liquidity crunch would hurt bonds as well, but the
"flight to safety" bid would counteract that effect.  Yields
remain in a downphase on the daily chart, comfortably below the
broken pennant support line.


Daily NQ candles


The NQ had a very ugly day, printing a bearish engulfing candle
and closing just above its 1359.50 low at 1362.  The decisive
moves were sufficiently sudden and divergent in terms of
magnitude as to surprise most participants, although they did
conform to the oscillator signals.  The bounce behaved as a
corrective move, but managed to persist long enough to reverse
the 30 minute downphase briefly.  The initial decline in the
afternoon was unimpressive, and only gathered speed and scope
just before 3PM, when a bounce that was due failed to
materialize.  The daily cycle downphase extended further, with
the break below 1392 confirmed.  Support at the low of the day
should be tested either overnight or at tomorrow's cash open, and
given the 30 minute oscillator setup, we could easily see 1345
tomorrow.

30 minute 20 day chart of the NQ


Today was a great day for traders, with large directional moves
in both directions.  The whipsaw on the 30 minute oscillator was
troublesome, as was the ferocity of the afternoon's drop.  If the
lows hold, we'll have a bullish divergence on the oscillators
with their higher cycle lows.  However, with the 300 minute and
10 day stochastics both in gear to the downside, bears can wait
to see today's 1059 low violated and then look for lower prices
on the failure.  Any bounce will have trouble first at 1370,
followed by 1392.


Daily ES candles


The ES pushed again, but couldn't break through 1028-30 support.
Indeed, 1025-30 should provide a battle royale, but the
oscillators are setup to see it fail.  The rising support line
from the August lows continues to hold, and options expiration
may provide support at the open, following which the markets will
be (relatively) on their own.  1048-50 to the upside and 1025-30
to the down are the key levels to watch.


20 day 30 minute chart of the ES


Again, we see the carnage inflicted this afternoon.  Note that
the sharpest moves for the past few weeks have all been to the
downside, which qualifies for me as illustrating a change in
trend.  That said, however, it will take a continuation today's
selling to avoid a bullish divergence on the 300 minute
stochastic, and the intraday oscillators are all very oversold.
The 1025-30 – 1048-50 range is key on the 30 minute chart as
well, and if 1025 fails, I expect to see 1016 quickly.  A move
above 1050 could abort the daily cycle downphase and open the
door to a retest of the rally highs.  As today's action showed,
anything can happen, and so we need to be attentive to the
implications of sudden moves.  It's NOT a time to be trading
without stops.


150-tick ES


I've crammed more candles into the 150-tick chart to help you
contextualize today's moves relative to yesterday's.  The short
cycles are set up for some kind of bounce, and if this afternoon
is any indication, it should be weak.


Daily YM candles


Same story on the YM.  9580-9750 is the key range.  It is very
wide, but the bulls ran out of steam at 9722 today, and a move
above even that level would be surprising given today's close.


20 day 30 minute chart of the YM


I'm really looking forward to getting op-ex week behind us.
Every move appeared designed to flush open contracts, and it
muddied my reading of the charts.  The oscillators anticipated
both the bounce from 9600 YM and the failure from 9710, and we
thankfully didn't have to watch the throwovers for longer than a
minute or two at both extremes.  But the magnitude of the moves
was just shocking-  a good time for trailing stops.

Tomorrow is set up for either an immediate bounce or another
cascade.  Bonds should continue to trade inversely to equities,
and precious metals are either in consolidation or distribution.
We won't know until the next direction move, but they're in a
major congestion zone at the top of a big upside run-  just like
equities.  See you tomorrow.


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

I wouldn't even try

I never developed a taste for hard liquor, but have been known to
sip some fine Rocky Mountain spring water on occasion, and after
following today's trade, which trader's call a "round tripper," I
would have to be inebriated before I could possibly even try to
attempt to make sense of what took place in the final hours of
trade.

Here's an intra-day chart of the NASDA-100 Tracking Stock
(AMEX:QQQ) $33.88 -0.95%, which ended today's trade right where
it started on this morning's opening gap lower.

NASDAQ-100 Index Tracking Stock (QQQ) - 5-minute intervals



It couldn't have been more than 15-minutes after I sent out this
morning's pre-market update that stock futures fell quickly just
prior to the market's open on news that the White House had been
evacuated.  Later it was learned that a blip on a radar screen
depicting an airplane flying into restricted airspace turned out
to be a false alarm, but after bombings in Turkey, one can reason
that market participants were jittery to begin today's trade.

As the major indices recouped their opening bell losses, a better
than forecasted October Leading Indicators Survey help stocks
lift from their morning lows, and as the clock struck 12:00 PM
EST, stocks were at their best levels of the session when the
November Philadelphia Fed report was released, with a reading of
25.9, which compared to economists' forecast of 30.0 (economists'
forecasts ranged from 17.0 to 35.0) and October's 28.0 reading.

In today's 01:00 PM EST update, I inadvertently placed a link to
the Philadelphia Fed's October Survey, not its November survey.
While I've gone back an corrected this error on the web site, the
last 3 paragraphs in today's 01:00 PM EST e-mail would be
incorrect as information reported there was from the October
report.

As market participants perused a generally upbeat Philadelphia
Fed report, investors pushed the major indices to their best
highs of the session.

While I have no opinion on pop music icon Michael Jackson, it has
been written that he has lead an "interesting yet perplexing
life," and today's breaking news coverage of Mr. Jackson's
private jet arriving at a Santa Barbara, CA airport as he turned
himself in to authorities on child molestation charges, that news
seemed to catch floor trader's attention at the NYSE and trading
seemed to come to a standstill.  Not long after, stock began a
perplexing and perhaps a Jackson-esk turn lower.

Ahead of option's expiration, there are always some numbers
floating around as to where a stock or index might look to finish
its day's trade.  Two numbers mentioned for the QQQ was $35.00
and $34.00.

It's arguable that both strikes could have been in play ahead of
option expiration, but one could also suggest today's late-day
declines were driven by selling ahead of the weekend as a
defensive move on heightened fears of terrorism.

I said I wasn't going to try and interpret today's trade, but I
would have to lead toward option expiration as playing the bigger
role (70%) in today's trade, when compared to a more of a
defensive move (30%) on concern of terrorist activity.  If the
markets were going to be more defensive on heightened terrorism
fears, then I just don't think the QQQ as a representative index,
would have rebounded from the morning low, but more likely
remained at or below yesterday's close.

Over the years I've seen enough volatility around an option
expiration to think today's trade was highly influenced by option
expiration.

Would this interpretation have a trader or investor then
discounting current geopolitical events or the impact of
terrorism on market psychology?  Certainly not!  If anything,
today's volatility should simply serve as an alert that traders
and investors should be practicing some disciplined trade and
account management.  The starting point for trade/account
management is to limit trade size, or look to play both sides of
this current market environment.

Treasuries can be a good pulse as to a market being defensive,
and just the opposite of stocks, Treasuries found a buying into
their close with the benchmark 10-year YIELD ($TNX.X) falling 8.1
basis points to finish with a 4.154% YIELD.

In this weekend's Ask the Analyst column, I'll discuss a recent
trade strategy profiled in the market monitor, where on Tuesday I
profiled a bearish trade in the S&P 500 Index (SPX.X) 1,033.65
-0.85%, but when I didn't see follow through to the downside on
dollar weakness Wednesday, I looked to create a synthetic hedge
with a QQQ long.

Today may have been an excellent session for this weekend's
column as I took multiple screen captures of how this hedge was
trading during the day.  Here's what this trade looks like at
tonight's close.

SPX put and QQQ long hedge - 11/20/03 (Market Close)



A hedge trade is not a trade you put on, and then forget about
and by no means should the above hedge be construed that Jeff
Bailey is bullish the QQQ and bearish the SPX and that the QQQ
will go up and the SPX will go down between now and December
expiration, but with some uncertainty as to what impact a weak
dollar, U.S./China trade tensions, terrorist activity being
weighted against strengthening economic data, a hedge trade may
be appropriate, if managed properly, to get a trader/investor
through some volatile times, while generating a profit for the
account.

The above trade, is WEIGHTED toward bearish, and in this
weekend's Ask the Analyst column, you will see that despite the
different dates of trade, the QQQ position was established very
close to when the SPX position was established on 11/18/03.

I digress, with the quick discussion of the above hedge trade,
but maybe it will turn a light bulb on in an investor/trader's
head as to risk management in their account.

Here's a post from tonight's Market Monitor where Jim Brown
quickly posted some potential gravitational points where option
open interest might have Max-Pain theory at work.

Market Monitor -  Theory of Max-Pain



Max pain-theory stated in simplistic form that sellers of options
will manipulate stocks or indices around, in order to try and
create losses for the bulk of option positions (puts and calls
combined).  It is this manipulation, which can create high levels
of volatility as an option expiration nears.

I've quickly posted today's CLOSING levels, but if you want to
review some of the RANGES for the above listed stocks and
indices, you will see great volatility.  I've drawn some
correlations with Intel (INTC) and the Semiconductor HOLDRs
(AMEX:SMH) as well as the Semiconductor Index (SOX.X).  For INTC
to achieve "Max-Pain" it needs to fall $1.83, the SMH needs to
fall $1.10 and the SOX would need to fall 15.55 points.

But that might not "add up" if the QQQ needs to gain $1.12 to
achieve max pain.  But it might make sense for the QQQ to achieve
$35.00 Max-Pain, if MSFT were to gain $2.40 to reach its Max-
Pain.

Are you a drinker of hard liquor at this point?  Do you see how
there can be GREAT VOLATILITY that is DIFFICULT to even try and
interpret?  Was today's trade meaningful in a larger scope of
things?  What about tomorrow's trade?

Let's move on and take a quick look at the Pivot Matrix for
tomorrow.

Pivot Analysis Matrix



Ugh!  I stopped making any correlations in the matrix after
seeing Jim's Max-Pain post at the QQQ and tentative resistance of
$34.13 (WEEKLY S2) and $34.12 (DAILY Pivot).  Today the QQQ
traded its DAILY R2 to the penny.  Is $35.00 a potential Max-Pain
point?  Heck, there was enough volatility today to at least pose
the thought.

My point here is if for every trader that was CERTAIN $35.00 is a
QQQ gravitational point and BET BIG on that outcome, is feeling
his/her own max pain today.

I've highlighted in PINK some levels that are close to the
gravitation points in Jim's quick notes.

Jim posted the DJX gravitation point, and since we follow the DIA
in our matrix, you will see if we add the 34-cent difference
between the DJX close and DIA close, we could envision a DIA
gravitation point at 97.32.

Again... this in only to drive home the point to plan for
volatility, and it is nearly impossible to read much into today's
trade, let alone tomorrow's trade.

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



Heck... 515 as a gravitational point in the OEX makes sense, but
trader's can't necessarily rely on these gravitational points.  I
could envision a decline to 508, a bounce back to 518, and a
settlement at 515.  All I can say is be prepared for volatility
and trade small positions, if you're going to trade at all
tomorrow.

Today's trade saw a net loss of 1 stock to a point and figure
sell signal and has the S&P 100 Bullish % ($BPOEX) falling 1% to
78%.  Still "bull correction" status.

The broader S&P 500 Bullish % ($BPSPX) saw a net loss of 1 stock
to a point and figure sell signal with the bullish % slipping
lower by 0.2%.  Still "bull confirmed" status at 79%, and would
still need a reversal lower reading of 76% to turn "bull
correction" status.  The S&P 500 Index (SPX.X) 1,033.65 -0.84%
did close just under its 50-day SMA of 1,036.21 for the second
time in four sessions.  It is difficult for me to want to read
too much into today's action, but SPX looks defensive as to the
other major indices.

Today's trade saw the NASDAQ-100 Bullish % ($BPNDX) seeing a net
GAIN of 3 stocks to point and figure buy signals.  Still "bear
confirmed" but rising back to 69%.

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

I'm out of time on my deadline, but I hope you can see from
today's trade, which basically had the indices mirroring
Wednesday's range, how I think option expiration has any analysis
of today's trade being very difficult to interpret.  The main
message I can give is for traders to expect and plan for more
volatility tomorrow, and even into early next week.

Jeff Bailey


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

Markets Look for Cover
- J. Brown

Thursday turned into a widespread sell-off that left few
survivors.  Traders initially bought the dip but stocks couldn't
hold their gains and major market indices and sectors rolled over
into the close.  The only sector index to close in the green was
the DFX defense index (not to be confused with the DFI defense
index).  Growing concerns over terrorism overpowered any positive
economic news or corporate earnings.

It was hard to hear through the media haze surrounding the
bombings in Turkey and Michael Jackson turning himself into
authorities but there was some positive market news today.  The
initial jobless claims dropped again and the semi book-to-bill
number came in at 1.0.  There was quite a bit of news going both
ways for the semiconductor sector but by the close the SOX lost
more than two percent.  The regional Philly Fed survey turned out
to be negative, dropping from 28.0 in October to 25.9 in
November.

Market internals were negative with nearly 18 losers for every 10
winners on the NYSE and almost 19 losers for 11 winners on the
NASDAQ.  Down volume swept by up volume almost 3-to-1 on the NYSE
and more than 2-to-1 on the NASDAQ.

I don't have a lot of bullish expectations for Friday, especially
consider its options expiration.  There are just five days left
in the holy month of Ramadan and the recent spurt of bombings in
Turkey have the shadow of an homeland attack looming large.  If
you remember Al Queda made serious threats to hit America hard
during Ramadan.  Odds are good that our Homeland Defense is on
high alert even though the threat level remains unchanged at
"elevated".  The defensive thing to do as an investor would be to
hedge your bets, take some money off the table ahead of the
weekend and wait until Wednesday.  Yet by that time you're
probably thinking about Thanksgiving.  It wouldn't surprise me to
hear about professional traders on Wall Street taking an early
Thanksgiving holiday and not coming back until December.

Sounds like a good idea to me!


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

Market Averages

DJIA ($INDU)

52-week High:  9903
52-week Low :  7197
Current     :  9619

Moving Averages:
(Simple)

 10-dma: 9740
 50-dma: 9653
200-dma: 8941



S&P 500 ($SPX)

52-week High: 1063
52-week Low :  768
Current     : 1034

Moving Averages:
(Simple)

 10-dma: 1046
 50-dma: 1036
200-dma:  960



Nasdaq-100 ($NDX)

52-week High: 1453
52-week Low :  795
Current     : 1363

Moving Averages:
(Simple)

 10-dma: 1405
 50-dma: 1390
200-dma: 1217



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

The weakness in the market has powered the fear indices into a
new up trend.  We haven't seen the VXO close over 20 in a month.
The new VIX is approaching 20 and they might suggest the top in
the market is behind us but until the INDU breaks 9600-9500 and
the NASDAQ breaks 1850-1840, I'd be careful about loading up on
bearish plays.

CBOE Market Volatility Index (VIX) = 19.48 +0.68
CBOE Mkt Volatility old VIX  (VXO) = 20.20 +0.75
Nasdaq Volatility Index (VXN)      = 30.49 +0.53


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.80        859,456       690,504
Equity Only    0.65        562,395       364,840
OEX            1.25         54,680        68,207
QQQ            2.49         23,576        58,751


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

Bullish Percent Data

           Current   Change   Status
NYSE          72.8    + 0     Bull Confirmed
NASDAQ-100    69.0    + 1     Bear Confirmed
Dow Indust.   80.0    + 0     Bull Correction
S&P 500       79.0    + 0     Bull Confirmed
S&P 100       78.0    - 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: 1.47
10-dma: 1.27
21-dma: 1.19
55-dma: 1.16


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    1058      1150
Decliners    1776      1885

New Highs     111       118
New Lows       19        18

Up Volume    442M      528M
Down Vol.   1117M     1223M

Total Vol.  1571M     1769M
M = millions


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

Commitments Of Traders Report: 11/11/03

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

Commercial traders continue to stall on making any big bets.
They remain slightly net short in the big S&P contracts. We
see the same hesitation in the small traders with little
overall change.


Commercials   Long      Short      Net     % Of OI
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%)
11/11/03      389,965   415,259   (25,294)   (3.1%)

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
10/21/03      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%
11/11/03      136,072    74,249    61,823    29.4%

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


E-MINI S&P 500

Hmm... now we are seeing some action in the e-minis.
Commercial traders have eliminated 12K short contracts and
upped their longs by 7K.  This has narrowed the gap but they
remain net short.  Small Traders have made big changes and
reduced a big chunk (40K) of their long positions and 12K
of their shorts but they remain net long.


Commercials   Long      Short      Net     % Of OI
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%)
11/11/03      249,864   258,503    ( 8,639)  ( 1.7%)

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
10/21/03      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%
11/11/03       94,649    51,815    42,834    29.2%

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


NASDAQ-100

Unfortunately we still don't see any big changes in the
NDX futures from the Commercial traders.  They have slowly
been upping their short positions, which is bearish for
the tech-heavy NDX.  Meanwhile small traders are at their
most bullish in four weeks.  Sounds like a potential top.


Commercials   Long      Short      Net     % of OI
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%)
11/11/03       35,889     49,201   (13,312) (15.6%)

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
10/21/03       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%
11/11/03       26,212    10,730    15,482    41.9%

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

Commercials still aren't making big bets in the INDU futures
and remain net long.  Small traders are hedging their bets a
bit by upping their longs and reducing their shorts by about
1,000 contracts each.


Commercials   Long      Short      Net     % of OI
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%
11/11/03       20,209    11,660    8,549      26.8%

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
10/21/03        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%)
11/11/03        6,105     8,201   (2,096)   (14.7%)

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

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


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The Option Investor Newsletter                 Thursday 11-20-2003
Copyright 2003, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: MDC
Call Play Updates: APA, DGX, MME, PGR
New Calls Plays: HOV
Put Play Updates: AVID, AZO, GDW, MXIM, NFLX
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:
*****

None


PUTS:
*****

M.D.C. Holdings - MDC - close: 66.06 change: +0.64 stop: 67.00

Despite giving us an initial move below $64, our MDC play has
been a huge disappointment.  The expected weakness never
materialized in the Housing sector and after that dip under $64
(clearly a bear trap), the stock has been building a new base.
With the broad market closing well in the red today, the Housing
sector ($DJUSHB) was the only sector to close in the green, and
that's never a good sign when we're leaning to the downside.  In
fact, it looks like a breakout above the $66.50 level could
arrive as early as tomorrow and it will likely carry some energy
as well.  Since the play never worked in our favor, we'll
mitigate our risk by dropping the play for a small loss tonight.
Better safe than sorry.

Picked on November 16th at   $64.55
Change since picked:          +1.51
Earnings Date                1/8/04 (unconfirmed)
Average Daily Volume =        233 K
Chart =



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option* and futures traders. The combination of the proven Man
Financial global presence and the convenience of one group for
all trading needs provide customers with the tools needed for
success.

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

Apache Corp. - APA - close: 70.30 change: -0.66 stop: 70.00

It was a rough day for the bulls today and nearly every major
sector ended in the red, including the oil sector.  After some
bullish action last week, the stock has been steadily falling
lower and today's drop had price only a dime above our $70 stop
before a slight rebound into the closing bell.  Odds are good
that price will be pinned near that round number for expiration
Friday tomorrow.  If our stop is hit, then we want to honor that
and close out any open positions, while a solid rebound from
above that level can be used for aggressive entries.  The better
approach would be to wait and see if the stock can get back over
the 10-dma ($70.90) before adding new positions.

Picked on November 2nd at    $69.72
Change since picked:          +0.58
Earnings Date               1/22/04 (unconfirmed)
Average Daily Volume =     1.29 mln
Chart =


---

Quest Diagnostics - DGX - close: 71.21 change: +0.20 stop: 67.50

In light of the weakness in the overall market this week, our DGX
play has performed like a champ.  While it hasn't been able to
advance through the $72 resistance level, neither have the bears
been able to puncture the $70 support.  Price action this week
looks like a classic consolidation flag and a break to the upside
from that pattern (above $72) can be used for new momentum-based
entries enroute to our initial target of $75.  Should DGX dip
back near the $70.50 support level that has been holding all
week, aggressive traders can use that as an entry point as well.
With the 10-dma now over $69 and the 20-dma at $68.32, our $67.50
stop should not be threatened.

Picked on November 13th at   $69.46
Change since picked:          +1.75
Earnings Date               1/20/04 (unconfirmed)
Average Daily Volume =        875 K
Chart =


---

Mid Atlantic Med. - MME - cls: 58.70 chng: -0.48 stop: 56.75*new*

Yesterday's bullish outlook from UNH provided just the boost our
MME play needed.  UNH broke free of the $50 resistance level and
that was enough to drive shares of MME above $59.  While both
stocks saw some weakness today, it was encouraging to see MME
retain better than half of its gains from yesterday, closing just
below $59.  We're getting close to achieving our $60-61 target on
the play, so rather than contemplating new entries, our focus
shifts now to controlling our downside risk and maximizing gains.
It should now be safe to raise stops to $57.75 (just below
Monday's intraday low).  If that level were to be broken, it
would be a violation of the uptrend as well as the 10-dma
($57.36) and the 20-dma ($57.65).  Use a rally into the $60-61
area to harvest profits and consider it a successful play.

Picked on November 11th at   $56.65
Change since picked:          +2.05
Earnings Date               2/04/04 (unconfirmed)
Average Daily Volume =        713 K
Chart =


---

Progressive - PGR - close: 76.74 chg: -1.18 stop: 74.99

Shares of PGR have reluctantly given back all of its gains from
last Friday.  The broader weakness in the markets has prompted
some profit taking in PGR, which had broken out to new all time
highs.  We've been suggesting that a bounce above the $76 level
could be a new entry point for bullish positions.  Now it looks
like we're going to get an opportunity for a bounce right at the
$76 mark.  Conservative traders who do not want to take the heat
towards the round-number support at $75 may want to up their
stops to just under $76.  We're going to leave our stop at 74.99
and re-evaluate the play tomorrow.

Picked on November 07 at $76.25
Change since picked:     + 0.49
Earnings Date          10/22/03 (confirmed)
Average Daily Volume:      654  thousand
Chart =



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

Hovnanian Enterprises - HOV - cls: 84.51 chg: +1.52 stop: 81.99

Company Description:
Hovnanian Enterprises, Inc. was founded in 1959 by Kevork S.
Hovnanian, Chairman, and is headquartered in Red Bank, New
Jersey. The Company is one of the nation's largest homebuilders
with operations in Arizona, California, Maryland, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas,
Virginia and West Virginia. The Company's homes are marketed and
sold under the trade names K. Hovnanian, Washington Homes,
Goodman Homes, Matzel & Mumford, Diamond Homes, Westminster
Homes, Fortis Homes, Forecast Homes, Parkside Homes, Brighton
Homes, Parkwood Builders, Summit Homes and Great Western Homes.
As the developer of K. Hovnanian's Four Seasons communities, the
Company is also one of the nation's largest builders of active
adult homes. (source: company press release)

Why We Like It:
Wow! It's hard to pick another sector that has been as strong or
resilient as the homebuilders.  The group has been hot, hot, hot
and shows no signs of slowing down. Historically low mortgage
rates have been drawing more and more homebuyers and the 30-year
mortgage just dipped again last week to levels not seen since
mid-summer.  I know that many had been calling an end to the run
in homebuilders, claiming these stocks would collapse under their
own weight.  Shoot, I may have said that myself at one time or
another.  Evidently, there is an insatiable appetite for these
stocks, especially with the Fed still quoting their "considerable
period of time" mantra (for keeping interest rates low).  Of
course mortgage rates aren't just affected by the Fed.  If
stock's sell off and investors run to bonds it will drive yields
lower, which will drive mortgage rates lower and should push
homebuilders even higher.  If stocks run higher it will probably
be due to a renewed encouragement for the economy and
homebuilders should run with them.  The caveat there is that
rising bond yields, as money rotates from bonds back to stocks,
may slow the homebuilders' ascent.

Recently, rival homebuilder Centex (CTX) said things look very
favorable not just through 2004 but through 2005.  The company
(CTX) also announced a 2-for-1 stock split.  We think HOV might
be a good candidate for a stock split as it approaches its early
December earnings announcement.  The last time HOV split its
stock was a 2-for-1 back in 1987.  I know many traders are too
wary to chase a stock that is up more than 160% this year alone.
I would be too.  However, despite the price appreciation HOV
still has a P/E under 13.  In a recent interview a senior
director for Standard & Poor's portfolio advisers said they like
HOV and had a 12-month price target of $96 for the stock.  We
think if HOV can break $90 it will head straight to $100.  Here's
our plan.  The 85.50 level has been intraday resistance for the
last two weeks.  We'll open the play with a TRIGGER at $85.51.
If we are triggered then we'll use a tight stop at 81.99.  Short-
term traders can target $90.  We think 95-100 is not out of the
question.  FYI: for the P&F chart fans it looks like HOV is
breaking out to the upside from a bullish triangle but it was one
column too shallow.  It still looks bullish!

Suggested Options:
Short-term traders can probably do well using December strikes
while longer-term traders can look over the February '04 strikes.
We like the 80s, 85s and 90's.  We realize ATM strikes have the
highest premium but the DEC 85 looks like the best pick.

BUY CALL DEC 80 HOV-LP OI= 475 at $6.90 SL=4.75
BUY CALL*DEC 85 HOV-LQ OI= 931 at $3.80 SL=1.90
BUY CALL DEC 90 HOV-LR OI= 620 at $1.85 SL=0.90
BUY CALL FEB 85 HOV-BQ OI= 273 at $7.10 SL=5.00
BUY CALL FEB 90 HOV-BR OI= 407 at $4.90 SL=2.75

Annotated Chart:





Picked on November xx at $xx.xx <- see trigger above
Change since picked:     + 0.00
Earnings Date          12/08/03 (unconfirmed)
Average Daily Volume:      827  thousand
Chart =



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

Avid Technology - AVID - cls: 49.15 chg: +1.17 stop: 51.26

Hmm... the tug-of-war continues for shares of AVID as the stock
consolidates sideways between $48 and $50.  The stock looked
poised to resume a new downward trend after closing under support
at $48 yesterday.  The stock did trader lower early on today but
quickly bounced back to fail yet again at the $50 mark.  We're
starting to grow a little concerned that sellers in AVID can't
mount a bigger offense, especially with the broader markets
trading lower much of this week.  At this point we would only
consider new positions under $47.50 and conservative traders may
want to tighten their stop close to the $50 level.  This sideways
consolidation could be giving bullish traders encouragement that
the stock is running out of willing sellers.  Remember, this was
a technical play to capture profit taking in a company that has
pretty strong growth.

Picked on November 16 at $48.45
Change since picked:     + 0.70
Earnings Date          10/16/03 (confirmed)
Average Daily Volume:       637 thousand
Chart =


---

AutoZone, Inc. - AZO - close: 91.36 change: +0.46 stop: 94.00

Can you say rangebound?  AZO is continuing to look weak as it
drifts along with support holding just above the $90 level, with
the 10-dma ($91.93) exerting downward pressure again on Thursday.
We're still looking for a breakdown below that $90 level to open
the door for a move down towards our $86-87 target, but with
oscillators trying to turn up, we may not get that breakdown.
Conservative traders that entered up near the $93 area might want
to mitigate their risk in the play by lowering their stops to
break even.  Aggressive traders can consider new positions on a
break below $90, but should only do so if volume picks up from
the anemic levels of the past few days.  The 50-dma ($93.24)
should reinforce resistance in the $93.00-93.50 area, so our $94
stop should be safe unless AZO really breaks out of its bearish
trend.  another failed rebound below the 50-dma can be used for
new entries, but only if the rollover is accompanied by rising
volume.

Picked on November 9th at    $93.30
Change since picked:          -1.94
Earnings Date              12/22/04 (unconfirmed)
Average Daily Volume =     1.13 mln
Chart =


---

Golden West Financial - GDW - cls: 100.27 chg: -0.76 stop: 102.26

Whew!  The market bounce yesterday had GDW trading back towards
the $102 mark but it never made it.  As a matter of fact, GDW
made a new lower high when compared to the highs last week.
Today the stock gapped down to $100, bounced and then rolled over
again just over $101.  This marked yet another lower high.  Bears
not comfortable opening positions here above $100 might want to
wait for a move through $99.40, which is recent price support or
its rising simple 30-dma near $99.30.  Both the BKX and BIX look
prone to more selling and if the BKX can break its 50-dma then we
might see stronger selling pressure in GDW.

Picked on November 18 at $99.54
Change since picked:     + 0.73
Earnings Date          10/21/03 (confirmed)
Average Daily Volume:       608 thousand
Chart =



---

Maxim Int. Prod. - MXIM - close: 49.15 change: -1.35 stop: 52.30

With yesterday's bounce in the Semiconductor sector (SOX.X) back
over $500, our MXIM play offered us a picture perfect entry
point.  Popping up above the $50 level, the stock exactly tagged
the top of the channel before dropping just a bit at the close.
Confirming the stock's weakness was the dip back under $50 at the
open, failed rebound just below yesterday's close and then a
sharp plunge down near the $49 level at the close.  It actually
looked like the bulls might keep MXIM pinned near the $50 level
heading into options expiration tomorrow, but the afternoon drop
and close below the 20-dma ($49.83) - the first since early
October - certainly tips the scales in favor of the bears.
Another failed rebound in the $50-51 area can be used for new
entries, as can a break below $49, today's low.  Look for
confirming weakness from the SOX dropping below $495 before
initiating new momentum trades.  Maintain stops at $52.30.

Picked on November 18th at   $49.89
Change since picked:          -0.77
Earnings Date                1/27/04 (unconfirmed)
Average Daily Volume =      6.43 mln
Chart =


---

Netflix Inc - NFLX - close: 45.56 change: -0.88 stop: 48.50*new*

-Company Description-
Launched in 1998, Netflix is the world's largest online movie
rental service, providing more than one million subscribers with
access to a comprehensive library of more than 15,000 DVD titles.
For $19.95 a month, Netflix subscribers can rent as many DVDs as
they want, with three movies out at a time, and keep them for as
long as they like. There are no due dates and no late fees. DVDs
are delivered directly to the subscriber's address by first-class
mail from shipping centers throughout the United States. Netflix
can reach more than seventy percent of its subscribers with
generally overnight delivery. The Company also provides
background information on DVD releases, including critic reviews,
member reviews and ratings and personalized movie
recommendations.  (source: company press release)


- Most Recent Update (Thursday, Nov. 20, 2003) -
Ready for round two?  Late last week and Monday this week NFLX
completed a nice three-day decline to break its 50-dma.  It then
offered a little oversold bounce but found new resistance at its
simple 10-dma.  Today's early morning weakness and failed rally
at $47 looks like a new entry point but more conservative traders
(who probably shouldn't be playing NFLX anyway) might want to use
a trigger under the $44.20 mark to open any new positions.  It
sounds like the Wall Street Journal's "Heard on the Street"
column highlighted NFLX today.  The article reminded traders that
execs and venture capitalists had been selling lots of shares.
Not everything in the article was negative but some speculate
that long-term competition from video on demand or the Internet
(downloading movies) could impede the company's growth.  We are
going to lower our stop loss to breakeven at $48.50.

Traders should note that this is an aggressive play and not for
everyone.  NFLX typically carries an EXTREMELY high amount of
short-interest and when they cover it gets painful.  The need for
good stop loss is important.  Plus, after such a strong rise from
its IPO price less than two years ago there is the remote risk of
a stock split announcement.

- Play of the Day Comments -
Given the failed rally at its 10-dma today and potential weakness
in the markets tomorrow we're going to be aggressive and suggest
NFLX as the play-of-the-day.  Traders may want to wait for a move
below the $44.20 level before initiating any new plays.  Our next
target is $40.00.


- Suggested Options -
We like the December 50's and 47.50's but the 45's or 42.50's
could work for the speculating trader.

BUY PUT DEC 50.00 QNQ-XJ OI=1379 at $6.50 SL=3.95
BUY PUT DEC 47.50 QNQ-XS OI= 700 at $4.80 SL=2.45
BUY PUT DEC 45.00 QNQ-XI OI=1657 at $3.40 SL=1.75
BUY PUT MAR 47.50 QNQ-OS OI= 531 at $8.00 SL=5.50
BUY PUT MAR 40.00 QNQ-OH OI= 760 at $4.40 SL=2.40

Annotated Chart:





Picked on November 13 at $48.50
Change since picked:     - 2.94
Earnings Date          10/15/03 (confirmed)
Average Daily Volume:       1.7 million
Chart =



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

None


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The Option Investor Newsletter                 Thursday 11-20-2003
Copyright 2003, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Play of the Day: PUT - NFLX
Traders Corner: Expiration Week – We Rocked & Rolled Out


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

Netflix Inc - NFLX - close: 45.56 change: -0.88 stop: 48.50*new*

-Company Description-
Launched in 1998, Netflix is the world's largest online movie
rental service, providing more than one million subscribers with
access to a comprehensive library of more than 15,000 DVD titles.
For $19.95 a month, Netflix subscribers can rent as many DVDs as
they want, with three movies out at a time, and keep them for as
long as they like. There are no due dates and no late fees. DVDs
are delivered directly to the subscriber's address by first-class
mail from shipping centers throughout the United States. Netflix
can reach more than seventy percent of its subscribers with
generally overnight delivery. The Company also provides
background information on DVD releases, including critic reviews,
member reviews and ratings and personalized movie
recommendations.  (source: company press release)


- Most Recent Update (Thursday, Nov. 20, 2003) -
Ready for round two?  Late last week and Monday this week NFLX
completed a nice three-day decline to break its 50-dma.  It then
offered a little oversold bounce but found new resistance at its
simple 10-dma.  Today's early morning weakness and failed rally
at $47 looks like a new entry point but more conservative traders
(who probably shouldn't be playing NFLX anyway) might want to use
a trigger under the $44.20 mark to open any new positions.  It
sounds like the Wall Street Journal's "Heard on the Street"
column highlighted NFLX today.  The article reminded traders that
execs and venture capitalists had been selling lots of shares.
Not everything in the article was negative but some speculate
that long-term competition from video on demand or the Internet
(downloading movies) could impede the company's growth.  We are
going to lower our stop loss to breakeven at $48.50.

Traders should note that this is an aggressive play and not for
everyone.  NFLX typically carries an EXTREMELY high amount of
short-interest and when they cover it gets painful.  The need for
good stop loss is important.  Plus, after such a strong rise from
its IPO price less than two years ago there is the remote risk of
a stock split announcement.

- Play of the Day Comments -
Given the failed rally at its 10-dma today and potential weakness
in the markets tomorrow we're going to be aggressive and suggest
NFLX as the play-of-the-day.  Traders may want to wait for a move
below the $44.20 level before initiating any new plays.  Our next
target is $40.00.


- Suggested Options -
We like the December 50's and 47.50's but the 45's or 42.50's
could work for the speculating trader.

BUY PUT DEC 50.00 QNQ-XJ OI=1379 at $6.50 SL=3.95
BUY PUT DEC 47.50 QNQ-XS OI= 700 at $4.80 SL=2.45
BUY PUT DEC 45.00 QNQ-XI OI=1657 at $3.40 SL=1.75
BUY PUT MAR 47.50 QNQ-OS OI= 531 at $8.00 SL=5.50
BUY PUT MAR 40.00 QNQ-OH OI= 760 at $4.40 SL=2.40

Annotated Chart:





Picked on November 13 at $48.50
Change since picked:     - 2.94
Earnings Date          10/15/03 (confirmed)
Average Daily Volume:       1.7 million
Chart =



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

Expiration Week – We Rocked & Rolled Out
By Mike Parnos, Investing With Attitude

Looks like the chance for us finding profit are a lot easier than
George W. finding Iraq's weapons of mass destruction.  Why?
Because the profits actually exist!   We may call them
"hypothetical," but, in reality, they put food in our bellies and
gas in our cars – or is it the other way around?

The market has been churning – and that churns up profits for us.
Today (Thursday) was a typical day.  Down, up and down again.
Sometimes we can take advantage of intra-day movement.  Other
times, it's best to wait until Friday expiration to close out, or
roll out, our position.  Here's what we did today and a peek into
tomorrow . . .
______________________________________________________________

November Position – BBH – Siamese Condor - $126.05
Sold 10 contracts of the BBH November $130 puts and 10 contracts
of the BBH November $130 calls for about $8.50.  Then, bought 10
contracts of BBH November $140 calls and 10 contracts of the BBH
November $120 puts for about $2.40.  The net credit was $6.00.

Today (Thursday), when BBH was trading at about $128.00, we bought
back the $130 put for $2.20.  We also bought back the BBH $130
call for $.20.   We originally took in $6.00 ($6,000) when
initiating the position and we spent $2.40 ($2,400) to buy back
the short positions.  Our net profit was $3,600.

Why didn't we wait until Friday?  Since BBH was right in the
middle of two strike prices, it seems unlikely that the market
makers would be able to run it up or down to a specific strike.
There is also some resistance near this level.  Not being greedy,
a profit of $3,600 was easy to take – so we took it.  The market
came back down later in the day.  Every once in awhile we make the
right choice.  Locking in a decent profit is never a bad choice.

QQQ ITM Strangle – Ongoing Long Term -- $33.88
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).

This week the QQQs cooperated and were trading down near $34.
Today we bought back the short $34 calls and puts and rolled out
to the December $34 calls and puts.  We took in $.80 on the calls
and $.70 on the puts for a total of $1.50 ($1,500).  In just three
months we've taken in $4.55 ($4,550).  That more than covers our
initial risk of $4.30.

For the bean counters out there (and I know there are a more than
a few), just a reminder that we haven't included any of the
proceeds from this long term QQQ ITM Strangle in our profit
calculations.  It's a bonus!

QQQ Put Calendar Spread – Trading @ $33.88
We decided to risk a buck.  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. We rolled out to the
November $32 and took in a $.30 credit.  Today, near the end of
trading, we bought back the November $32 puts and sold the
December $32 puts for another credit of $.40.  Our cost basis is
now only $.30.   Those same prices should still be available
tomorrow for those who have yet to roll.
______________________________________________________________

NOVEMBER QUICKIE IDEAS
SPX Iron Condor – 1033.65
Sell 10 contracts of Nov. SPX 1030 puts and buy 10 contracts of
Nov. 1015 SPX puts for a credit of about $1.10.  Then, sell 10
contracts of Nov. SPX 1070 calls and buy 10 contracts of Nov. 1085
calls for a credit of about $.90.  Total credit of about $2.00.
Did the SPX stay in a 40-point range for the week.  You can call
1-888-OPTIONS tomorrow mid-afternoon and find out the official
settlement price.

QQQ Lottery Strangle -- $33.88
Buy 10 contracts of Nov. QQQ $34 puts for $.15 and buy 10
contracts of Nov. $36 calls for $.15.  Total risk of $.30 ($300).
As of Thursday's close, the QQQ $34 put could be sold for $.30.
If the market spikes down early, you may have a chance to pick up
some nice profit.  Be alert.  Be awake.  Be an opportunist.  And
Be decisive!

IBM Siamese Condor -- $88.39
Sell 10 contracts of Nov. IBM $90 puts and sell 10 contracts of
Nov. $90 calls for $1.75.  Buy corresponding protective $100 calls
and $80 puts for $.10.  Your net credit is $1.65.  Look at the
chart.  There seems to be nice support above $88 and resistance
near $92.  Maybe the market makers will cooperate and have IBM
finish darn close to $90.  Wouldn't that be nice?  Bailout points
are $91.65 and $88.35.  Early Thursday we could have closed out
the IBM trade for about $.80 – which would have yielded a profit
of about $850.  These are the opportunities we have to look for
when we trade the quickies as well as our regular trades on the
last few days before expiration.

MMM Lottery Put -- $76.80
If you wanted to bet $.15 on a longshot, look at the MMM chart.
It doesn't seem to want to go through $80.  If it breaks below
$78, it could go all the way to $75, perhaps lower.  So, buy 10
contracts of the MMM Nov. $75 puts at $.15 for a total risk of
$150.

LOW Siamese Condor -- $57.61
LOW was trading in a narrow range between $57 and $60.  Sold 10
contracts of the Nov. LOW $60 puts and Nov. LOW $60 calls for
about $3.00.  Then bought the corresponding protective $50 puts
and $70 calls for a total of $.10-.15.  Net credit of $2.90.  As
of Thursday's close, we could close out LOW for $2.50 – yielding a
profit of about $400.  If there is a spike up tomorrow, I'd take
the money and run.
_____________________________________________________________

NOVEMBER POSITIONS
Position #1 – SPX Iron Condor – Trading @ 1033.65
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.

SPX closed well within the trading range.  Although we're still
subject to the settlement price announcement tomorrow, we couldn't
be in a safer position. I'll go out on a limb and say we can book
our $2,150 in profit on this trade.

AFCI Iron Condor – Position closed for $700 loss.

OEX Iron Condor (By Request) – 511.79
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.

The market ended pretty close to where it started five weeks ago.
OEX is in our range.    It looks like more profit for the good
guys (that's us) -- $1,800 worth.

OEX – Bearish Calendar Spread – OEX @ $511.79
In September 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.  We sold the November 485 puts for $2.60.  Our
cost basis is now $2.70.

In some trades we learn what TO do.  In other trades we learn what
NOT to do.  Unfortunately, this was the latter.  We anticipated a
downward move for the market.  What mistakes did we make?  First
and foremost, we thought we could pick a direction (what a joke!).
Second, we didn't give ourselves enough time to be right.  And it
cost us $2,160 to put an exclamation point on our (my) stupidity.

_____________________________________________________________

DECEMBER POSITION
OEX CS Boogie - 511.79
Sell 2 December OEX 520 calls @ $9.00
Buy 2 December OEX 545 calls @ $1.55
Total credit and potential maximum profit of $7.45 ($1,490).
Exposure $17.55 ($3,510).  Maintenance $25.00 ($5,000).

Note:  Nice things sure do happen when the market goes in the
right direction.  With the OEX moving down, we could conceivably
close out this position for $5.20 – yielding a $2.25 profit in
less than a week.  We won't close it out now because we entered
this trade to make money and for educational purposes as well.
_____________________________________________________________

December "Hypothetical" Position Preview -- What am I looking at?
-- A conservative position may be a BBH 120/135 Iron Condor.  It
will yield about $1.15 on a $5.00 risk.
-- Our monthly Iron Condor SPX position might include 7 contracts
of the 10075/1090 calls for $1.70 and 8 contracts of the 990/975
puts for about $1.30.  Total credit of about $2,230.
_____________________________________________________________

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

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

Mike Parnos
CPTI Master Strategist and HCP
_____________________________________________________________

Couch Potato Trading Institute Disclaimer

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


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