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Daily Newsletter, Monday, 12/15/2003

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The Option Investor Newsletter                   Monday 12-15-2003
Copyright 2003, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: One Green Cheese Lane
Futures Wrap: Return to Reality
Index Trader Wrap: Saddam and major indices end up in hole


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     12-15-2003            High     Low     Volume Advance/Decline
DJIA    10022.82 - 19.34 10139.63 10021.64 1.76 bln   1035/1808
NASDAQ   1918.26 - 30.74  1979.78  1918.26 1.78 bln    902/2196
S&P 100   530.47 -  1.31   536.53   530.42   Totals   1937/4004
S&P 500  1068.04 -  6.10  1082.79  1068.02
RUS 2000  535.25 - 12.34   553.38   535.25
DJ TRANS 2950.77 - 32.64  3010.74  2950.64
VIX        17.23 +  0.82    17.42    15.79
VXO        16.91 +  0.96    17.25    16.26
VXN        27.07 +  1.21    27.23    25.96
Total Volume 3,949M
Total UpVol  1,102M
Total DnVol  2,783M
52wk Highs     847
52wk Lows       36
TRIN          1.14
PUT/CALL      0.70
*******************************************************************

One Green Cheese Lane

If your address is One Green Cheese Lane, The Moon then you may
not know that US Military forces captured Saddam Hussein over the
weekend. This of course made for a gap up this morning but not
anywhere near the kind of gap I thought it would be.

The SPX opened at 1077 a 3-point gap from Friday's close,
immediately rushed to make a daily high of 1082 by 9:35ET and
took the rest of the day off. By 3:00 ET the SPX had closed the
gap and everyone expected a small reprieve from the selling.
Unfortunately it didn't happen and SPX just continued to fall
making a daily low of 1068 at the 4:00 close, a 14-point range.
This is what some call a gap and crap.

S&P 500 - 60-minute chart:



Using some of Jeff Bailey's retracement techniques, I have
anchored a retracement on the 60-minute chart from the November
21st lows at 1031 and fitted the 19.1% retracement, to the
December 3rd and December 12th levels. Using this retracement, a
normal 38.2% retracement would take the index back to 1064 and a
50% retracement, still within the range of a normal retracement,
would take the index back to 1057. So although today looked
bearish the SPX is not in any danger of entering bearish
territory but a trade below the last swing low and the 61.2%
retracement level (yellow line) would change my mind.

When the DOW opened it also raced to make its daily highs of
10139 by 9:35 ET. It was sort of like these indexes wanted to get
the daily highs out of the way early so they could get down to
some serious selling. The DOW closed on its lows at 4:00ET at
10021 a 118 point range.

DJIA - 60-minute chart:



I have also anchored a fitted retracement on the DOW November
21st lows and fit the 19.1% retracement to the December 9th swing
high which fits nicely with the 10000 level. As long as the DOW
stays above the 38.2% retracement level and does not make a lower
low I think the bulls are in control.

For the OEX wrap I solicited Linda Piazza's help for there is no
one the OIN staff that knows the OEX better than Linda. Here is
her commentary.

Late last week, the OEX began moving up from the midline of its
rising regression channel, suggesting that it might rise toward
the top of that channel, currently near 540.  Monday's trading
pattern questioned that assumption.  Although the 535-536
resistance zone does not appear as strong as the 527-529 and 531-
533 zones on the monthly chart, it proved strong enough to turn
back further OEX advances today.  Monday's trading pattern
produced an inverted umbrella sitting high above the previous
candles on the daily chart, with such a candle sometimes serving
as a reversal signal.  With one notable exception on October 9,
such candles on the OEX are almost universally followed by a
decline. Prices pierced through the 533 resistance and the upper
Bollinger band, but could not maintain that level and fell back,
with the body forming below both.  That shows market participants
that bullish fervor wasn't strong enough to hold onto those
levels.

Such potential reversal signals must be confirmed, however.
Tomorrow, traders will watch first for an open below that candle
and then for a move down from there to confirm the reversal
signal.  Even then, they might be nervously aware that October 10
presented just such an opening, but that day's trading produced a
spinning top that was followed by a climb rather than the
expected decline.

S&P 100 (OEX) - Daily chart:



Daily oscillators do not offer convincing evidence of either a
drop or a climb. MACD lines slant up, RSI tried to hook over, and
21(3)3 stochastics trend in territory indicating overbought
conditions.  MACD attempts to erase the bearish divergence that
has troubled many technicians, with MACD lines moving higher than
their position during the early November price highs.  However,
MACD has not yet eclipsed the MACD high achieved in September
although prices have surmounted the September high, so it's
possible to point out conflicting evidence.

S&P 100 (OEX) - 60-minute chart:



Thirty-minute and 60-minute oscillators hint that there's plenty
more downside to go, and if daily oscillators turn down, too, the
downside promised by that potential reversal signal may be
realized.  With inconclusive oscillators, October 9/10's example
before us, and the known bullishness of the Santa rally season,
we may not be able to count on that reversal signal being
confirmed.

Thank you Linda for a great analysis.

One of the reasons I have been bearish lately is the weakening of
the small cap stocks in comparison to the large caps. Last week I
posted a chart in the Market Monitor of the $RUT.X (Russell 2000
small cap index), the $SPX.X and an indicator that measures the
spread between the two. I would now like to spend some time
discussing why my bearish outlook may have been wrong. The spread
is a very simple formula (RUT + SPX) / SPX but a very good visual
for how well the small caps are doing in relation to the large
caps.

Russell 2000 (RUT) - Daily chart:



The top panel is the $RUT.X, middle panel $SPX.X and the bottom
panel the spread. Within the red box I drew, the spread is
flatlining demonstrating both indexes are falling or rising in
tandem. But come March the spread moved above its 50MA and
continued to rise, which indicates the small caps were
outperforming. Then I noticed the possible H&S forming in the
$RUT.X while the SPX was making new 52-week highs which caused
the spread to take a plunge below its 50MA. All this lead me to
believe it was bearish for market overall but that thinking may
have been wrong and another scenario may be taking place.

The Russell 2000 tracks US companies with a market capitalization
of $1.2 billion or less and therefore more sensitive to an
economic deceleration that higher interest rates could bring.
Wall Street expects to see a quarter point interest rate hike by
early next summer and although this is not a huge hike, it could
mean the cyclical small caps that are more sensitive to interest
rate hikes will no longer outperform the large caps. This is not
bearish for the market as a whole but just a cyclical reshuffling
that happens all the time.

In other news Oracle (ORCL) topped Wall Street expectations by
posting a 15% increase in net income on strong software-licensing
revenue. It reported net income for its fiscal second quarter of
$617 million, or 12 cents a share, compared with $535 million, or
10 cents a share, a year earlier. ORCL's results are closely
watched for clues about the future of corporate information-
technology spending.

Wal-Mart Stores Inc. (WMT) weighed on the Dow as the nations
largest retailer gave a not so rosy outlook for December sales as
more people delayed holiday shopping or bought gift cards that do
not immediately count toward revenue. WMT shares fell $1.76, or
3%, to $50.74.

There were not a lot of sector winners today but the airline
($XAU.X) and utility ($UTIL) indexes were able to squeak out a
1.12% and 0.04% rise respectively.

Sector losers were lead by the disk drive index ($DDX.X), the
Semicondutor index ($SOX.X) and the Russell 2000 ($RUT.X) with
3.96%, 2.79% and 2.25% loses respectively.

Moving onto market internals we saw the bears in control with
declining issues outnumbering advancers by a 20 to 12 margin on
the NYSE and by a 22 to 9 score on the Nasdaq exchange. The
volume of stocks moving lower was 928 million shares on the Big
Board and 1400 million shares on the Nasdaq, vs. higher volume
of 515 million shares and 397 million shares, respectively. New
highs to new lows painted a much healthier picture with NYSE new
highs clocking in at 435 to new lows of 10 and on the NAZ new
highs were 121 to 5 new lows.

remember plan your trade and trade your plan.

Jane Fox (with a little help from her friend Linda)


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

Return to Reality
Jonathan Levinson

The happy nonsense that has characterized equity trading of recent
sessions came to screeching halt with the unceremonious failure of
the Saddam Rally.  Maxxed out indicators and the exhaustion of
bullish bulls and frightened bears led the markets to spike up in
response to a financial non-event overnight, and then collapse
from the highs.  Treasuries fell, equities fell, gold and silver
advanced, and the US Dollar Index broke to a new bear market low.

How many flagpole rallies, Fed and BoJ interventions, short
squeezes and bull runs have been attributed to "Saddam catches" or
kills?  Well, that excuse is now gone.  Of course, Osama is still
reputedly at large, but the capture of Saddam removes one of the
bulls more powerful and inexplicable arrows from their quiver.


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 hesitated on the Saddam euphoria but quickly
resumed its primary trend, which is down.   A new low was printed
at 88.30, and the weakness of the bounce suggests that there's
more to come.  The euro printed a record high against the dollar
today, while the CRB dropped 1.60 to close at 260.84.

Daily chart of February gold


Gold sold off lightly on the Saddam news, never testing the lower
rising wedge trendline.  Its reversal brought he contract to a new
closing high above 410, with upper rising trendline resistance
holding back the advance.  Both the HUI and XAU gained as well,
recovering their earlier losses.  While today's action, which saw
precious metals advance against dollar, equity and treasury
weakness, is as bullish as a goldbug could want, but so long as
the daily bearish wedge remains intact, we will have to sleep with
one eye open, attentive to the risk of a break below support at
404.


Daily chart of the ten year note yield


Treasuries declined today, with the ten year note yield gaining
3.3 bps to close at 4.275%.  Lower pennant support held to the
downside at 4.2%, and while the daily cycle oscillators continue
to look bearish for the TNX, the picture should continue to be
muddy until we see a decisive break of either the upper or lower
pennant trendlines.


Daily NQ candles


Bears were in a panic on Sunday, and we may have seen their
capitulation in overnight trading, with the NQ print at 1456.
What followed was a glorious reaffirmation of the rules of supply
and demand as the daily NQ printed the mother of all bearish
engulfing candles for a key outside reversal.  The NQ closed
within a hair of its session low, and despite the sharp overnight
spike, the daily cycle oscillators never deviated from their
downphase.  Support is at 1392, then 1380.  Resistance is at 1400,
followed by 1410.


30 minute 20 day chart of the NQ


The selloff from the highs broke the NQ down from a rising
expanding wedge, the famous Bulloney Bullhorn formation.  The move
spent most of the 30 minute cycle downphase, and while there is
room to the downside from here, the bears are almost out of time
for this cycle, and I expect to see a bounce from either the 1392
or 1380 support levels.  The shape of the upphase to follow will
determine the fate of the rally.  I believe that last night's
blowoff top was the terminal gasp, and a weak 30 minute cycle
upphase from here will confirm it.  A bounce from support to a
lower high should open the way to lower lows below 1380.


Daily ES candles


The ES got slammed as well, sufficiently so to kick off a new
daily cycle downphase, with the 10 day stochastic finally closing
on a bearish cross.  Support at 1060-64 was not tested, and I
expect that to be the crucial level under the 30 minute cycle
downphase below.  The key reversal printed here as well portends
more downside to come tomorrow, but the aging 30 minute cycle
downphase could limit the downside fireworks from here.  A bounce
back above 1074 should be sufficient to negative the sell signals
on the daily chart, and in that case we'll have to reevaluate the
current analysis.


20 day 30 minute chart of the ES


As on the NQ, the 30 minute cycle downphase for ES was growing
long in the tooth at Monday's close.  As much as I'd love to see
it, the odds do not favor the 300 minute stochastics trending in
oversold, and I expect a bounce from 1064 support, either tonight
or in the early going tomorrow.  Resistance on that bounce will
come at 1068, followed by 1074 and 1077.


150-tick ES


The short cycle oscillators were trending in oversold and looking
for a bounce as of this writing, but the 30 minute cycle downphase
should be good for another push lower, possibly at the open
tomorrow.


Daily YM candles


The daily YM was, yet again, the most bullish of the indices,
closing on a daily cycle bearish kiss verging on a cross.  It was
not a key outside reversal day by much, with the YM closing just
10 points below Friday's closing print, but well off the overnight
high of 10166.


20 day 30 minute chart of the YM


The selloff on the YM was relatively weaker than on the other
equity contracts, but the damage was still unmistakable.  Support
should come between 9960-9990, and a weak short cycle upphase
should confirm that we've seen the top of this rally.  Resistance
is now at 10015, 10030 and 10050.

On Friday, I warned that technicals would be of secondary
importance as the Dow 10K euphoria would attract non-technical
traders.  We should not yet discount that bid, but it obviously
took a beating with today's selling.  As well, it appears that the
race is on to lock in rally gains ahead of the anticipated post-
fiscal 2003 selling in January.  I expect that we saw the Santa
Claus rally last night, but if my resistance levels above are
broken by this impending 30 minute cycle bounce, then I will
reevaluate.  See you tomorrow.


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

Saddam and major indices end up in hole

The Dow Industrials, S&P 500, S&P 100 jumped to new highs at the
opening bell on this weekend's news that Saddam Hussein had been
captured by U.S. forces in Iraq, but similar to Saddam himself,
stocks finished in a hole, with the tech-heavy NASDAQ-100 Index
being the first to tuck tail and run.

I would argue vehemently that Saddam's capture was NOT "factored
into the markets."  If Saddam's arrest had been factored into the
markets, then the Dow Industrials, S&P 500 Index and S&P 100
Index do NOT trade new 52-week highs.

What I do think Saddam's arrest has done is removed one on point
of speculation and replaced it with fact.  The fact is that
Saddam Hussein has now been arrested.

What impact that has on markets is uncertain, but I do think it
will have removed one item of SPECULATION, that has kept bears
more jittery, and eager to cover.

Take today's trade, and perhaps recent trade in the more volatile
NASDAQ-100 Index (NDX.X) 1,396.82 -1.44%, which despite bullish
news on the geopolitical front, failed again to make a new 52-
week high.

This morning I was rather eager to take profits in a QQQ bullish
trade, and when looking to re-establish a bullish trade at what I
felt would be the lower end of a daily range, where bulls might
well have defended the session, that trade was then stopped out,
and certainly has me rethinking that there is much bullish
commitment to broader technology at this point.

There was some comment today among market strategists that Saddam
Hussein's arrest would have corporations willing to take on more
risk with spending and hiring of workers, while this might make
sense in coming months, the bullish side of me was certainly
disappointed this afternoon when both the NASDAQ-100 Index and
its Tracking Stock (AMEX:QQQ) $34.78 -1.3% failed to find daily
support back that their monthly pivots.  While option expiration
"Max Pain" for the QQQ has been calculated as being $34.00 this
option expiration, I find today's lack of bullishness and
resumption of last week's weakness, a sign that investors and
traders may not be overly willing to take on a higher degree of
risk at what looks to be a higher range of resistance building at
QQQ $36.00.

While the narrower NASDAQ-100 failed to make a new high, the
broader NASDAQ Composite (COMPX) 1,918.26 -1.57% was quick to
tuck tail and run after coming close to re-testing the 2,000
level with a session high of 1,979.78.

If there was one negative in today's session, it was the market's
reaction to Wal-Mart's (NYSE:WMT) $50.74 -3.35% news that its
same store stales for December were tracking to the lower end of
its previously given 3%-5% range.

Here is a fully corrected (based on final and corrected) tracking
of today's hourly price action and internals.  I'm not sure what
happened today with some of the data vendors, but several checks
at various market sites seemed to show constant error and then
correction of data.  While I make every attempt to check price
quotes, there were some errors reported as fact in today's trade.

Market Snapshot / Internals - 12/15/03 Close



There was no improvement in today's A/D line at the 02:00 hour
for the NYSE, and while not a good excuse, is one reason intra-
day that I thought the NASDAQ-100 Tracking Stock (AMEX:QQQ)
$34.78 -1.3% would find a bid back at its WEEKLY Pivot, where a
swing trade bull could look for bullish entry, with a stop placed
safely below the WEEKLY Pivot.  While I do NOT make entry/exit
decision solely based on internals, I inaccurately judged what I
thought was an intra-day sign that internals at the NYSE were
beginning to firm and turn higher, where that leadership or
internal strengthening would later be found at the NASDAQ.

Pivot Analysis Matrix




Dow Industrials (INDU) Chart - Daily Intervals




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



My bar chart on the SPX is missing a couple of bars, and there
would not be the gap to 1,062.40 has show, but a break much below
the WEEKLY Pivot does have the SPX vulnerable back to its WEEKLY
S1 after a sharp jump higher.  To be truthful, I didn't expect
the SPX to trade its MONTHLY R2, even under the scenario of a
Santa Claus rally.

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



Any other day of the week, and today's trade at a correlative
WEEKLY R1 and MONTHLY S2 would probably be considered normal
profit taking from a nice bullish move higher.  I disagree that
Saddam Hussein being captured now provides the catalyst for a
selloff.  Still, the OEX looks overextended near-term, and
pullback to 522 is what I feel should be a strong support level.

NASDAQ-100 Tracking Stock (QQQ) Chart - Daily Interval



It has been quite some time since the QQQ has rallied back above
its shorter-term 21-day SMA and intermediate-term 50-day SMA to
then turn back below so quickly.  While Q's did try and find an
intra-day bid at the MONTHLY Pivot of $35.11, when $35.00 bas
broken, fell rather quickly below the WEEKLY pivot.  While
today's trade may be option expiration related with "max pain" at
$34.00, QQQ never really could put together what felt like an
overly bullish bid after the open.

Jeff Bailey


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The Option Investor Newsletter                   Monday 12-15-2003
Copyright 2003, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: FD, KSS
Dropped Calls: UTX
Dropped Puts: None
Play of the Day: Put - NSM
Watch List: Brought to you by the letter "M"
Market Posture: Close, but No Saddam


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*****************
STOP-LOSS UPDATES
*****************

FD - put
Adjust from $47.51 down to $46.00

KSS - put
Adjust from $46.75 down to $45.50

*************
DROPPED CALLS
*************

United Tech. - UTX - cls: 91.55 chng: -0.05 stop: 89.75

After Friday's high-volume rally to new all-time highs, we rolled
the dice and hoped for more follow-through this week, even though
our target had been reached.  The Saddam news over the weekend had
the entire market looking strong at the open and UTX actually ran
as high as $92.75 before running out of gas right at the top of
its rising channel.  After holding above $92 throughout the
session, the selloff at the close fractured that intraday support.
The daily candle looks like a pretty convincing reversal, as it
came on strong volume and UTX ended at its low of the day.  Rather
than continue to tempt fate, we're going to close the play here
for a nice gain.  Aggressive traders that want to live dangerously
can still hold onto open positions, but should maintain a tight
stop just below Friday's intraday low.

Picked on November 23rd at   $83.90
Change since picked:          +7.65
Earnings Date               1/15/04 (unconfirmed)
Average Daily Volume =     1.84 mln




************
DROPPED PUTS
************

None


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

National Semiconductor - NSM - cls: 38.00 chng: -1.57 stop: 42.00

Company Description:
National Semiconductor Corporation designs, develops, manufactures
and markets an array of semiconductor products, including a line
of analog, mixed-signal and other integrated circuits (ICs).
These products address a variety of markets and applications,
including amplifiers, personal computers, power management, local
and wide area networks (LANs and WANs), flat panel and cathode ray
tube displays and imaging and wireless communications.  The
Company's operations are organized in five groups: the Analog
Group, the Displays Group, the Information Appliance and Wireless
Group, the Wired Communications Group and the Custom Solutions
Group.

Why we like it:
Last week's plunge in the Semiconductor stocks was too good for
the bulls to pass up and once again they bought the dip.  The SOX
rebounded from just above the key $475 support level and by week's
end was resting just below the $500 level, which should now begin
to act as resistance.  Tuesday's convincing breakdown below $40
support and the 50-dma was another dip-buying entry for the bulls,
but something seems amiss in the rebound.  Rather than following
through to the upside on Friday, NSM found stiff resistance at the
50-dma (now at $40.38) and the stock spent most of the day
languishing below that critical level.  There wasn't any follow-
through to the downside, but the failure to move higher hints that
perhaps this resistance level will hold.  Helping to paint this
bearish picture is the PnF chart, which issued a Sell signal on
Tuesday with the intraday trade below $38.  The vertical count now
points to a downside target of $30, although that may be a bit far
down for the purposes of our play.  More realistically, NSM should
first break the $36 level and then work its way down to a test of
major support at $32.  The best approach for new entries is to
target a rollover from resistance near the 50-dma, as it allows us
to tightly control risk with our $42 stop.  Monitor the SOX for
signs of weakness before playing.

Why This is our Play of the Day
After the news of Saddam's capture over the weekend, it looked
like the markets were in for a strongly bullish session.  Even
Technology was going along for the ride, with the Semiconductor
index (SOX.X) leading the parade, moving to an early high of $508.
That opening surge was as good as it got though, as the SOX then
proceeded to fall more than 25 points to close at its low of the
day for a 2.8% loss.  NSM followed that trajectory as well, rising
to strong resistance just over $41 before tipping over and falling
back for a nearly 4% loss on the day, also closing at its low of
the day.  That reversal from the highs was a gift of an entry
point and it looks like we can expect more weakness to follow.
Traders looking for a momentum entry just might get their wish
tomorrow and can use a break below $37.60 (just under last
Wednesday's intraday low) as their entry trigger.  Once below that
support, look for NSM to seek out next support at $36, enroute to
our $32 downside target.  If entering on weakness, look for a
confirmation in the form of the SOX finally breaking strong
support at $475.  Maintain stops at $42 for now.

Suggested Options:
Aggressive short-term traders can use the January 35 Put, while
those with a more conservative approach will want to use the
January 40 put.  Our preferred option is the January 40 strike, as
it is currently in the money and provides ample time until
expiration.  While we've listed a December strike, it is not the
preferred strike due to the proximity of December expiration.

! Alert - December options expire this week!

BUY PUT DEC-40 NSM-XH OI=5275 at $2.30 SL=1.25
BUY PUT JAN-40*NSM-MH OI=2369 at $3.40 SL=1.75
BUY PUT JAN-35 NSM-MG OI=1283 at $1.15 SL=0.50

Annotated Chart of NSM:



Picked on December 9th at     $38.70
Change since picked:           -0.70
Earnings Date                3/04/04 (unconfirmed)
Average Daily Volume =      4.10 mln



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

Brought to you by the letter "M"

MBT - Mobile Telsys - close: 74.79 change: -2.76

WHAT TO WATCH:  This Russian mobile telecommunications stock may
have seen its top.  Shares peaked in early October near $87.50.
Sine then it has been consolidating lower with new resistance at
$84.00.  It could be forming an ugly multi-week long bull flag
pattern but that could just be a little overly optimistic.  A
test of the $70 level looks like a good bet.  If $70 breaks down
then the 200-dma near 62.50 might be the next target.

Chart=


---

Mohawk Industries - MHK - close: 68.40 change: -0.35

WHAT TO WATCH:  Shares of carpet-maker MHK are just barely
holding on to their current position above support at 67.50.  The
stock looks poised for a strong downward move after a big
rounding top formed over the last three months.  What makes us
hesitate to short it is price support at $65 and potential
technical support at its rising 200-dma just below $65.  The
weekly chart suggest it could see profit taking down toward the
$62.50-64.00 region.  Meanwhile the P&F chart is in a clear sell
signal.

Chart=


---

Marvel Enterprises - MVL - close: 26.60 change: +0.04

WHAT TO WATCH:  Keep an eye on MVL for a bounce from the $25.00
level, which is current support.  The company has a couple of new
movies coming out for 2004 and Spiderman 2, out this July, should
be huge.  Expectations for a blockbuster could easily drive the
stock higher.  If the markets pull back deep enough MVL might hit
its 200-dma as it approves the 22.50 region.  A bounce from
either might work as well.

Chart=


---

Moody's Corp - MCO - close: 57.46 change: -0.72

WHAT TO WATCH:  The credit-rating corp has been consolidating
sideways in the $55-58.50 range for weeks now.  Shares are
building a slow but steady trend of higher lows and MCO might be
getting close to an upside breakout.  More conservative traders
might do best waiting for a close over $60.  Short-term today's
candlestick looks like a bearish-engulfing pattern (not good).
If the markets pull back some more look for support at $55.

Chart=


---

Martek Biosciences - MATK - close: 59.21 change: +0.44

WHAT TO WATCH:  The BTK biotech index rolled over with the rest
of the market today and MATK followed suit after rushing up
through resistance at $60.  Now the stock looks ready for another
test of short-term support at $57.50.  If that breaks then a test
of stronger support at $55.00 is in order.  Aggressive bears
could short a break under $57.50 and target the top of the gap
near 52.50 (or if the markets really pull back then the $50
mark).  Bulls might want to wait and see if the 50-dma offers any
strength to the stock.

Chart=



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

Close, but No Saddam
by - Nich Sheldon

Wall Street opened in rally mode on news of Saddam's capture, but
after reaching new 52-week highs the NASDAQ spearheaded a market-
wide decline.

Only three indexes managed to close in positive territory.
However, only one of those indexes closed more than one percent
higher.  The XAU Gold and Silver Index tacked on 1.11 percent, and
retested its simple 10-DMA.  Traders should note that the index
has been unable to break over its 10-DMA for the past two
sessions.

The DDX Disk Drive Index fell -3.96 percent on Monday.  The index
shot higher when the market opened but could not manage to get a
foothold over the 10-DMA.

Early morning strength pushed the SOX Semiconductor Index up and
over the top of its 10 & 50-DMA.  Yet, even though the index
gained 12 points in the beginning of the session, it ended up
losing -2.85 percent by the closing bell.

The simple 10-DMA has served as strong resistance for the GHA GSTI
Hardware index for the past month, and today was no different.
The GHA folded under pressure once it reached its 10-DMA, dropping
-2.61 percent and closing at 228.66.

The XAL rebounded back to the top of its regression channel, but
the move wasn't strong enough to break resistance at 62.  The
index's failed rally left it with a drop of 2.13%.


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