Option Investor
Newsletter

Daily Newsletter, Wednesday, 03/24/2004

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Wednesday 03-24-2004
Copyright 2004, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Markets Meander Midweek
Futures Wrap: See Note
Index Trader Wrap: Mixed trade on strong February durable goods
Traders Corner: The Big Picture


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     03-24-2004            High     Low     Volume Advance/Decline
DJIA    10048.23 - 15.41 10108.15 10007.49 1.81 bln    944/1850
NASDAQ   1909.48 +  7.68  1922.51  1896.91 1.81 bln   1385/1646
S&P 100   534.49 -  0.66   537.95   532.00   Totals   2329/3496
S&P 500  1091.33 -  2.62  1098.39  1087.06
RUS 2000  557.63 -  3.29   562.26   556.13
DJ TRANS 2761.83 -  1.29  2772.29  2743.46
VIX        19.81 -  0.86    20.83    19.45
VXO        20.49 +  0.04    21.34    19.85
VXN        26.06 -  0.78    26.97    25.77
Total Volume 4,085M
Total UpVol  1,842M
Total DnVol  2,153M
52wk Highs     178
52wk Lows       48
TRIN          1.25
PUT/CALL      0.88
*******************************************************************

Markets Meander Midweek
by James Brown

Stocks seesawed sideways on Wednesday as the major averages
tested support only to see the rebound fail in the afternoon
hours.  The Dow Industrials and the S&P 500 index both posted
their fifth loss in a row while the NASDAQ managed to end its
losing streak with a bounce in the semiconductor sector.
Rotation seemed to be the agenda for the session as investors
took money out of oil services, gold, natural gas and broker-
dealers while buying semiconductors, software and hardware
issues.

The more optimistic of the market pundits were calling for a
bottom in the NASDAQ while the less sanguine commentators reduced
today's bounce to nothing more than mild short covering.
Wednesday's economic data was positive but it failed to produce
any lasting results against the new backdrop of terrorism fears.
This morning French police reported finding a bomb under the
Paris to Basel, Switzerland railroad.  Meanwhile in the Mid East
the U.S. closed their embassy in the United Arab Emirates (UAE)
under new threats of violence.

Global markets were mixed.  The Japanese NIKKEI jumped nearly 84
points to 11,364 while the Chinese Hang Seng rallied almost 90
points to 12,678.  European stocks were mostly down with the
French CAC index suffering the worst declines compared to Germany
and Britain.  Commodities were making news as gold pulled back
for the first time in eight sessions as the U.S. dollar turned in
a strong day.  Gold futures closed down $2.60 to $417.40 an
ounce.

Crude oil was also a major story after both the American
Petroleum Institute and the Department of Energy both reported a
significant build up in oil supplies last week.  Crude oil
futures dropped 44 cents to $37.01 a barrel but well off its lows
of the session at $36.65.  The pull back had no affect on
gasoline prices, which hit a new all-time (average) high of $1.74
a gallon.  Some industry experts are predicting fuel prices near
$3.00 a gallon as we approach the summer driving season.  The
pull back in oil fed the profit taking in the oil and oil service
stocks but the trend is still up for crude oil futures.  OPEC is
still considering its previously announced April production cuts
and talk is growing that we'll see $40-42 per barrel prices.

Looking more closely at the major averages you'll see the Dow,
The S&P 500 and the NASDAQ Composite all churning sideways the
last three sessions but with a trend of lower highs.
Fortunately, the Dow is holding support at the 10,000 mark while
the NASDAQ is holding support at the 1900 level.  The bad news is
that short-term technicals for both look weak again.  Meanwhile
the S&P 500 is churning sideways under old support at 1100 and
the longer it stays here the more 1100 becomes resistance.

Chart of the Dow Industrials:



Chart of the NASDAQ Composite:



Chart of the S&P 500:



Some of the trader talk this morning was focused on concerns that
the economic recovery was in jeopardy even though the Durable
Goods order and the New Home Sales numbers were positive.
Durable goods are products made to last at least three years.
The Commerce Department reported that February's durable goods
rose a better than expected 2.5% above estimates for 1.7%.  This
seemed especially bullish considering that January's numbers were
revised lower to a 2.7% decline.  Driving the gains were strong
improvements in aircraft, computers and motor vehicles.

Homebuilders are living up to their word that business is good.
The New Homes Sales numbers raced to a 5.8% gain in February to
an annualized rate of 1.16 million units.  This surpasses the old
high of 1.09 million units.  I suspect we'll see this number run
even higher as the weather continues to improve.  The good news
here is that new homes are big boost to the economy as consumers
buy new furnishings and appliances.  The historically low
interest and mortgage rates should keep this trend in place and
underpin the economic rebound.

Speaking of a rebound we might see one in shares of Microsoft
soon.  As previously announced the EU antitrust commission
officially declared its fine of $612 million against MSFT for its
monopolistic-style of business.  The $612 million or 497 million
euro fine is less than the maximum the EU could have levied,
which was just over $3 billion but still qualifies as the largest
fine like this ever levied.  MSFT plans to appeal the fine and
the decision that would impose restrictions on how MSFT can do
business in the EU including sharing their code so that rivals
can make competing applications.  Industry experts say the appeal
will tie up the decision in the court system for four to five
years.  More importantly for investors analysts believe that
MSFT, who has been sitting on close to $53 billion in cash and
adding to its hoard at close to $1 billion per quarter, can
finally make a decision about what to do with all that money.
That's not to say that MSFT is out of the legal woods just yet
but many are expecting MSFT to announce a major stock buyback
and/or a huge one-time cash dividend.  One of Goldman Sach's
analysts speculated that MSFT could declare a one-time cash
dividend in the $10 to $20 billion range.  That's anywhere from
92 cents to $1.84 a share compared to the current dividend of 16
cents annually.  Shares of MSFT, which have been weak for 9 weeks
straight, bounced higher by more than 1 percent but remain in its
current downtrend.

One of the most important developments on Wednesday occurred
after the closing bell.  Applied Materials (AMAT), the world's
biggest producer of semiconductor equipment, held its annual
meeting.  AMAT's CFO told analysts that the chip sector recovery
was still in the "early stages not the later stages" of
development.  AMAT said they see a huge opportunity in the flat-
panel market for TV and monitor screens.  This positive sentiment
for the LCD market was echoed by Corning (GLW) earlier today.
AMAT also announced a three-year $3 billion stock buy back
program.  This is great news that could really boost the nascent
rebound in the chip stocks tomorrow.  Today's bounce in the SOX
back above the simple 200-dma is a good start but to see some
follow through tomorrow would be pretty encouraging and lend some
much needed strength to any NASDAQ rally attempt.

Micron Technology (MU), another chipmaker, announced its earnings
after the close today.  Analysts were looking for a loss of 6
cents a share compared to a loss of 64 cents a share last year.
MU turned in a loss of 4 cents but fell short of consensus
revenues estimates at $1 billion for the quarter.  While the
stock traded lower after hours we've come to expect a "sell the
news" reaction.  More importantly is MU's earnings performance,
which might help set the mood for the April earnings season.
We've already heard from dozens of companies that have pre-
announced positive earnings but it may actually take the onset of
earnings season to jog investors out of the current market
malaise.

Tomorrow brings the weekly initial jobless claims data.
Estimates are suggesting a small uptick in claims from last
week's 336,000.  We'll also hear the latest and final GDP
revision for the fourth quarter but no one expects any change
from the previous reading at 4.1%.  Thursday morning also brings
the February existing home sales numbers, which economists have
predicted to rise to 6.12 million units.  News junkies can also
look for the Help Wanted index to be announced.  I don't expect
any of these to be market movers and Wall Street may continue to
ignore all the economic data until the April 2nd non-farm
payrolls job report a week from this Friday.  However, I would
keep my ears open for any positive comments from Nokia's annual
shareholder meeting being held tomorrow after the close.


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

Futures wrap is not emailed due to the excessive number of charts.
It may be read on the website at this address.
http://www.OptionInvestor.com/indexes/futureswrap.asp


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

Mixed trade on strong February durable goods

The major indices finished today's trade rather mixed with
decliners outnumbering advancers, where technology shares showed
some sign of life after February's durable goods orders, which
rose a stronger-than-expected 2.5%, suggested increased factory
production.

Orders for durable goods, which are made to last at three years,
were lead by aircraft, computers and motor vehicles.

A 9.9% increase in transportation equipment drove the advance,
chalking up the largest rise since July 2002.  Excluding
transportation, new orders fell 0.3% in February, the first
decline in three months.

Demand for military aircraft surged 61.1% after a 37.3% fall in
January and civilian aircraft gained 33.8% after a 32.5% decline.
Demand for motor vehicles was up 5.0% from a 4.4% retreat in
January.  If there was any question that transportation-related
components can be volatile on a month-to-month basis, January and
February's comparisons give observation of how volatile some of
the transportation components can be.

New orders for computers and related products rose a seasonally
adjusted 2.1% in February.  In the past year, new orders for IT
products rose 19.6%.  By comparison, new orders for all durable
goods have increased 8.0% for the previous 12 months.

Orders for communications equipment continued to climb in
February, increasing 5.5%.  In January, new communications-
equipment orders soared 65.1%.  Economists say as the economy
grows and businesses expand, they need new telephones and
communications equipment to equip new offices and factories.

Non-defense capital goods excluding aircraft, a proxy for
business spending, was up 1.1% in February after dipping 0.3% the
month before.

Market Snapshot / Internals - 03/24/04 Close



The Semiconductor Index (SOX.X) 468.14 +2.19% exerted itself as
today's sector winner, and helped boost the tech heavy NASDAQ-100
Index (NDX.X) 1,381.86 +0.86% to an 11.82-point gain.  Market
breadth at the A/D line was notably negative at the NYSE, while
NASDAQ's A/D finished fractionally negative with decliners
outnumbering advancer by an 8 to 7 margin.  This tells us that
buyers were very focused in today's trade, and not a broad-based
round of buying.

Pivot Matrix -



We'll look at my QCharts U.S. Market Watch table in a minute, but
some notes I made intra-day, and on the above Pivot Matrix table
is today's high for the SPX came just under its WEEKLY S1, while
the Semiconductor Index (SOX.X) 468.14 +2.33%, which can be a key
sector for NDX/QQQ trade, did see trade at its WEEKLY Pivot,
which does begin to suggest the making of a near-term rebound for
technology shares.  With the SOX.X having been one of the weaker
technology sectors in recent weeks, today's relative strength
versus other sectors, may indicate that some bears may have been
doing some short-covering in today's session.

U.S. Market Watch - 03/24/04 Close



I say "short-covering in the semiconductors" largely because the
Networking Index (NWX.X) 255.17 -0.49%, which finished down
fractionally, didn't seem to get nearly the bullish response from
the February durable goods data as the SOX.X did.

I thought the financials (red squared) really kept a lid on
bullishness for the SPX and OEX, and would note how in the past
20-days (20-day Net %), we're starting to see some "equalization"
of percentage losses among technology and financial, as the past
bullish leadership from financials may well have been pulled
lower by weakness in technology.

I get the observation from today's trade, when making the simple
comparison between the NYSE Composite ($NYA.X) 6,375.67 -0.66%
and the NASDAQ Composite (COMPX) 1,909.48 +0.4%, that recent
week's leading weakness in the COMPX, was still playing itself
out today.

Could it be that we're about to witness a trade, where the COMPX,
or 4-lettered stocks, start a rebound, while some of the 1, 2 and
3-lettered stocks listed at the NYSE still see decline, where
percentage losses between the two start to narrow?

Never say "never," but I would have looked, or at least be
looking for better A/D breadth than what the NASDAQ showed today.

NASDAQ-100 Tracking Stock (AMEX:QQQ) - Daily Intervals



For a third-straight session, the QQQ are showing some daily low
support near its WEEKLY S2, and perhaps some relative strength as
it relates to the WEEKLY Pivot levels.  After the closing bell,
shares of SOX.X component Micron Technology (NYSE:MU) $15.81
-0.06% fell to a last tick of $15.20 after reporting quarterly
earnings.  I mention this as it might dampen some of today's
enthusiasm toward semiconductors at the open, and might have the
QQQ a little weak back toward its DAILY S1 of $34.08, but if
buyers (bears short covering too) believe the QQQ is somewhat
oversold, I'd look for some type of support at that $34.01-$34.08
level, where a move back above $34.38 builds thought a bounce is
underway, where trade above $34.76 gives some more meaningful
sign of strength.  An eyeball target for a good oversold bounce
in my mind would be something near $36.00.

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



CNBC's Alexis Glick made comment of some unusual, or heavier than
normal put selling in the SPX today, and I made some notes in the
Market Monitor on her comments.  I posted today's top three most
active options in the SPX, where the VIX.X 4.16% decline with
1,100 puts (SPTRT) being most active, married with some out the
money calls, might suggest some option trade, where traders are
looking for a rebound.  If so, keep an eye on tomorrow's DAILY S1
of 1,086 and VIX.X.  If the VIX.X jumps higher and SPX breaks
1,086, then SPX could unravel further lower.  Conversely, and SPX
above 1,100 with imploding VIX.X and still heavy put selling,
could certainly suggest a rebound in the making.  I could perhaps
tie a QQQ $36 and SPX of 1,123 together, which we all remember
were last month's "Max Pain" levels, where I would have to think
formidable resistance to a bounce would be found.

Now... I'm going to try and outline what I think might be the
setup for a near-term "bear trap" type of move, which might be
set up perfectly in the Dow Industrials (INDU).

Here's what I'm thinking.

Just as we heard that Dow 10,000 would be formidable resistance
as the INDU approached this level from the lows, we've heard, or
I've been hearing, Dow 10,000 major support.

On Monday, and then again today, the INDU found support at ...
you got it... 10,000.  Now that all bulls have been told that
10,000 is support, it might be a "trick" that it gets broken
intra-day, then reversed back higher.  How else do you get a bull
to finally give in that break the psychological support level?

Dow Industrials (INDU) Chart - Daily Intervals



"Be Alert" is a trade scenario that traders might be cognizant of
near-term.  The INDU hasn't actually traded 10,000 at this point,
and it might not, but I would have to think there are a lot of
bullish stops, just ripe for the picking, on an intra-day break
below 10,000, and a reversal back higher, once the stops are
cleared out.  A bullish trader that would want to play this type
of trade could do so, but then follow with a stop just below the
day's low, but where bullish entry wouldn't be taken until a move
back above WEEKLY S1, or DAILY Pivot (10,554 + 10 points =
10,564).

Jeff Bailey


************************Advertisement*************************

Live Securities Brokerage Service with Licensed Option Principals

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


**Services available for Foreign Traders including Canada**

http://www.OneStopOption.com

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


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

The Big Picture
by Mark Phillips
mphillips@OptionInvestor.com

It has been a long time since I wrote about my thoughts concerning
the macro view of the markets -- where they are, why they are here
and where they are likely headed.  Based on the selloff of the
past couple weeks, I think it is high time I dusted off the topic.
A word of caution though: if you can't put aside your biases and
look at the cold hard facts, you aren't going to like what I have
to say.  Also, this treatise got far more involved than I
initially anticipated -- that seems to happen to me a lot lately -
- so make sure to pour yourself a frosty beverage and get
comfortable before diving in.

We've been blessed over the past year with a tremendous bear-
market rally.  Call it a cyclical bull market if that sets better,
but make no mistake about it, the dominant trend of the U.S.
equity market is down and it has been since early 2000.  Four
years later, the economy is struggling to get back to humming on
all cylinders again, despite the most massive dose of fiscal and
monetary stimulus the world has ever seen.  I've seen reports
pointing out that the current rate of monetary growth is running
somewhere in the $1.2-1.5 TRILLION area on an annualized basis.
That's simply obscene and it should make it crystal clear why the
value of the dollar has been plunging these past 2 years.

Everyone with a pulse and three brain cells to rub together can
see that the current administration's talk of a 'strong dollar
policy' is a complete joke.  Quite honestly, I find it astounding
that the dollar hasn't fallen further in the face of such rampant
monetary inflation.  As I've noted in the past, there are two
types of inflation -- monetary-driven and demand-driven.  We're
currently facing both of these demons, but the one that is the
hungriest right now is the monetary type.  The Fed has printed so
much money that the price of everything that isn't manufactured
elsewhere and imported has risen substantially.  From energy to
precious and industrial metals to 'soft commodities' the prices
have been soaring for months.  Jonathan talks about the action in
the CRB index in his Futures Wraps and in the Market Monitor
window on a regular basis.  Let's take a look at a chart of the
CRB index and put a face on the monster.

Monthly Chart of the CRB Index



First things first, the CRB index represents a basket of raw goods
and commodities.  These are different from manufactured goods, as
they can't be made more cheaply (at least not significantly so)
through the application of new technology via Alan Greenspan's
'productivity miracle'.  This chart shows the price of these raw
goods as they are pressured by two factors -- the value of the
currency in which they are priced and the supply/demand dynamic.

There are certain commodities like Copper that are seeing an
increasing demand component to the rise in price; of that there is
no doubt.  But I do find it interesting that the CRB has risen
just under 45% since early 2002.  Depending on what currency (or
basket of currencies) is used for the comparison, the Dollar has
fallen 30-45% in the same span of time.  Even using the very
conservative 30% number, we're faced with the fact that two-thirds
of the rise in the CRB is strictly due to the fall in the dollar.
Let's be kind and attribute the other 33% to increasing demand,
most likely from overseas as the Far East transitions from largely
agrarian to industrial economies.

Here's a different view, with the dollar factored out of the
equation.  I've talked about these ratio charts in the past, where
we are effectively denominating the primary symbol in another
'currency'  It doesn't matter if it is another paper currency or a
tangible asset like gold, silver or crude oil.  It felt a bit
dishonest to use a base commodity as the underlying currency,
since they are part of the CRB.  So I settled back onto an old
favorite, the Euro Index.  The scale isn't quite right, largely
due to the way the data was created going back before the Euro
actually became a currency, but the trend and scale (to an
acceptable tolerance) the Euro data is accurate.

Weekly Chart of the CRB vs. the Euro Index



Relative to the Euro, the CRB has been losing ground since the
peak in 2000.  That's about as clear as we can be -- the rise in
the CRB is due to inflation.  Here's the part that we have to
understand if we hope to get a handle on the big picture.  It
doesn't matter what the source of the inflation is -- whether
monetary or increasing demand -- it makes the stuff we buy more
expensive.  "But wait a minute", I can hear you say, "why is it
that everything hasn't gone up in price by 30-45% over the past 2
years?"

That's where the Asian manufacturers have been saving our bacon in
recent years.  They may be vilified in the press for taking
American jobs, but I dare say it is an irreversible trend.  If the
Chinese can make a TV for $200 and turn a profit while it costs
$500 to manufacture the exact same TV here at home, which one are
you going to buy?  Unless you've got more money than sense, you're
going to buy the $200 set.  It's called Capitalism and it is at
the core of the market-based economy.  Americans have been able to
continue consuming due in large part to the fact that the
manufactured products they buy have NOT risen in price.  It's a
good thing too, with the rate at which costs have been rising for
healthcare, energy, food and education.

So while the Fed has been creating inflation by running the
printing presses night and day, the Asian manufacturers have been
importing deflation and up until recently, it has been fairly well
balanced.  Once again, I can hear you muttering in the background
about the fact that the official government statistics show only
very slight inflation and the Fed keeps telling us that we should
want more inflation.  Obviously there's a disconnect somewhere,
but what is it?

Look under the hood of the CPI/PPI reports and you'll notice that
they do not count the price rises in the volatile food, energy,
housing and healthcare areas -- exactly the things that have been
rising in price so rapidly.  And that assumes that the BLS is
actually giving us real data without massaging it to hide the
offensive data.  The recent monkey business with the delayed PPI
reports has certainly caused me to question the integrity of that
report.  But I'll let you draw your own conclusions.  How much
have your health care costs or energy costs risen over the past 2
years?  How does that correlate with the fall in the dollar?

Let's talk about employment for a few minutes.  We get the weekly
and monthly job/employment statistics and we can clearly see that
there aren't enough new jobs being created to fuel sustained
economic growth.  Or are there?  The data reported is flawed on
two levels.  First it fails to take into account those who are
unemployed (or working below there capabilities) and no longer
collecting unemployment insurance.  These people do not show up in
the statistics.  The other huge problem is the complete lack of
accounting for those of us that have moved into the realm of the
self-employed.  There are a tremendous number of professionals
that have simply left the corporate world and are hiring
themselves out on a contract basis.  While we still must pay
taxes, there is no record of us in the employment statistics.
These two flaws make the employment data from the government
wholly unreliable in terms of gauging true job growth/contraction.

Much has been made of the strong GDP numbers from the past few
quarters and the fact that it has been compelling evidence of
strong economic growth.  I have a theory about this strength in
GDP though.  Remember our discussion above about the decline in
the dollar?  How is GDP measured?  Is it measured in units of
widgets produced and services delivered?  Nope!  It's measured in
terms of dollars!  Well if all the stuff that we're producing is
being sold into the marketplace, where it must be purchased with
less valuable dollars, doesn't it make sense that it will take
more dollars to buy the same product or service as compared to a
year ago?  Certainly companies will do what they can to keep the
costs of their products and services low in order to remain
competitive on the open market, but they still need to make a
profit.  I would find it very plausible that a sizable portion of
the GDP growth that we're seeing is directly related to currency
effects.  How about the Retail Sales numbers?  They're also
reported in actual dollar volume, not product volume.  So that
means we can be seeing the periodic reporting of increasing sales
numbers, when in fact it represents actually moving LESS product
out the door, as it takes more dollars to buy the same products.
That effect is still muted due to the deflation being imported
from Asia, but I think you can see the issue I'm driving at.  I'm
sorry, but I have a hard time seeing how that fits in with an
improving economic picture.

Now let's bring our focus back to the stock market.  For the past
year, the market has been rallying on the expectation of an
improving economy.  But something significant has changed in the
past couple weeks.  All the news coming out of the government and
from corporate leaders is bullish, but all of the sudden nobody
cares.  Good news comes out and they sell, bad news comes out and
they sell.  Hmmmm...it seems vaguely reminiscent of another period
of time in the not-so-distant past, doesn't it?

Everyone has a theory about what's causing the market to drop,
from terrorism to uncertainty about the election to any one of a
dozen other external factors.  I think it may be true that these
are triggering events, but 3 months or 6 months ago, these very
same events would have been unable to tank the market.  Why?
Sentiment has changed and I think it is changing because of the
facts I've laid out above.  Professional investors are coming to
realize that the economic recovery is a clever fiction that is
built on a foundation of wet sand.  The first big wave that comes
in can be devastating.

This is the primary worry that Alan Greenspan deals with day in
and day out.  He knows he can't raise interest rates until
business growth (i.e. job growth) begins to improve substantially,
but on the other hand, he knows at some point inflation will get
moving fast enough that he'll have to act to curtail the money
supply.  If job growth isn't robust enough by that point in time,
odds are very strong that raising rates would drop the economy
back into recession.  I'm pretty sure that's not the legacy he's
shooting for and for that reason, I expect he won't raise interest
rates this year.  Is that enough to keep the economy on a weak
expansionary path?  I wish I knew the answer.  But I think the
market is giving us it's vote quite clearly.  I want to leave you
with one final chart, a monthly view of the S&P 500.  This is the
same chart we looked at in the LEAPS column over the weekend, but
with one added technical feature.

Monthly Chart of the S&P 500



I've been looking for this bearish divergence to materialize for
several months now and it looks like it is beginning to come to
fruition.  What is really telling is the fact that price began to
tip over almost exactly at the 50% retracement of the entire bear
market decline of 2000-2002.  This is a very common occurrence for
rallies out of the first leg of a bear market.  We can see similar
size rebounds off of several relative lows from the Nikkei bear
market that began in 1989 and we can also see similar size
rebounds along the way of the 1930s bear market in the DOW.  Does
that mean our bear market will follow the price pattern of either
of those historic bear markets?  No, but there is precedence for
the 50% retracement value and for that reason I think it is
significant that this is the level from which we began to roll
over.

As should be clear, it is my contention that we've seen the top
for the bull market rebound off the October 2002 lows and we are
now in the process of working our way back down the chart.  I
strongly believe that it won't be a straight down affair though,
and I suspect there will be a strong effort made to keep the bear
at bay.  One market axiom is not to fight the Fed.  Doing so over
the past year was a painful experience for those who tried.
Another important axiom is to not fight the primary or dominant
trend.  That trend has been upward for much of the past year, but
I believe we're now resuming the dominant bearish trend that began
4 years ago, and after a year of slumber, the bear is hungry.

Remember the discussions we've had in the past where we looked at
the price action in the DOW, denominating it in different
'currencies' like gold, silver and even crude oil?  My contention
all along has been that the rally in equities over the past year
has been nothing more than a reflection of the deterioration in
the dollar.  It worked well for short-term traders playing the
upside and harvesting profits over the past year.  But it appears
that game is ending.  We took another look at these alternatively-
scaled DOW charts in last weekend's LEAPS column and I think the
charts speak for themselves.  If you missed that column, I'd
strongly recommend heading over there and taking a look at the
charts.

We've touched on a number of important questions in this long
commentary today.  Will the Fed be able to hold off the ravages of
the bear until economic recovery truly arrives?  Are we in
economic recovery now or is it a mirage?  What can we expect from
the dollar?  What is true inflation and what direction is it
headed?  Will interest rates rise later this year?  If so, what
will the likely trigger event be.  What is the future for the
employment picture and how can we best read it?  The answers to
these questions are open ended and they also connect to other
pieces of the overall puzzle such as what is the future for
housing, gold, other commodities, and energy prices?  Lurking in
the background is the political picture in the U.S., which has
become significantly murkier in recent weeks, with the very real
possibility of a change in administration.  Such a change will
force investors to contend with the possibility of losing certain
pieces of the stimulus put in place by the Bush administration,
most notably the tax cuts, especially as they pertain to capital
gains.

Enough investors are asking these same questions to inject some
serious doubt into the equation and that means volatility.  It
doesn't matter whether the long-term trend of the market is up or
down, so long as it picks a direction and moves that way in a
fairly methodical fashion.  That sort of action has been sorely
lacking for several months, but with the VIX making a solid move
over 20 recently, it appears the market is moving out of its funk.
Certainly the intraday price action in both the broad market
indices and individual stocks has been more tradable over the past
couple weeks.  Uncertainty has come back into the market and with
uncertainty comes volatility and with volatility comes more
dynamic price ranges.  It's starting to look like the rest of the
year could be enjoyable for intraday trading once again.  However,
I suspect it will be a more volatile ride and it will become
increasingly hazardous to our financial health to become married
either to a position or a market bias.

Keep Your Eye On The Ball!

Mark


************************Advertisement*************************

Stock Option and Futures Brokerage

OneStopOption teams the best trading technology with varying
levels of professional assistance at very competitive prices.
Commission costs are comparable to discount brokerage and
tailored to individual customer needs.

The power of one brokerage group with experience and expertise
in the Securities* and Futures Markets offers unprecedented
convenience for traders.

Access To All Futures Markets            Toll Free 888-281-9569
Stock Option Principals

www.OneStopOption.com

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


*******************
FREE TRIAL READERS
*******************

If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is $49.95. The quarterly
price is $129.95 which is $20 off the monthly rate.

We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support


The Option Investor Newsletter                Wednesday 03-24-2004
Copyright 2004, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: None
Dropped Calls: None
Dropped Puts: None
Spreads, Combinations & Premium-Selling Plays: Looking For A
    Bottom...
Watch List: Growing More Oversold


************************Advertisement*************************

Live Securities Brokerage Service with Licensed Option Principals

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


**Services available for Foreign Traders including Canada**

http://www.OneStopOption.com

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


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

None


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

None


************************Advertisement*************************

Full Service Brokers

Man Financial announces the formation of the OneStopOption
Brokerage Group, addressing the demand for personalized,
experienced service for both securities* and futures trading
within the same firm. Licensed Option Principals Andrew Aronson
and Alan Knuckman specialize in live assistance of stock*,
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.

Live Broker and Online Trading Available     888-281-9569

http://www.OneStopOption.com

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


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

None


************************Advertisement*************************

Full Service Brokers

Man Financial announces the formation of the OneStopOption
Brokerage Group, addressing the demand for personalized,
experienced service for both securities* and futures trading
within the same firm. Licensed Option Principals Andrew Aronson
and Alan Knuckman specialize in live assistance of stock*,
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.

Live Broker and Online Trading Available     888-281-9569

http://www.OneStopOption.com

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


*********************************************
SPREADS, COMBINATIONS & PREMIUM-SELLING PLAYS
*********************************************

Looking For A Bottom...
By Ray Cummins

Stocks ended mixed Wednesday after a volatile session punctuated
by a lack of conviction among both market bulls and bears.

The Dow Jones Industrial Average closed down 15 points at 10,048
amid a decline in its brokerage, banking and aluminum components.
The NASDAQ climbed 7 points to finish at 1,909 as semiconductor
shares rebounded from a recent slump.  The S&P 500 Index ended 2
points lower at 1,091, as gold, oil services, steel, healthcare,
metals & mining, and insurance shares drifted lower.  Volume was
1.5 billion on the NYSE and 1.8 billion on the technology exchange.
Decliners outpaced advancers by almost 2 to 1 margin on the NYSE,
while gainers had a slight edge over decliners on the NASDAQ.  The
bond market moved lower with the 10-year note down 5/32, while its
yield climbed to 3.71%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 03/23/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of our subscribers, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The editor of this section does not take actual positions in any
published plays and the summary comments are simply a service to
help new traders understand when positions might be opened and
closed.  In most cases, actions taken based on the commentary
would be far too late to be effective, thus it is not intended
as a substitute for personal trade management nor does it in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

The Maximum Yield (listed in the summary and with "naked" option
selling plays) is the greatest possible profit available in the
position.  This amount, expressed as a percentage, is based on
the initial margin requirement as determined by the Board of
Governors of the Federal Reserve, the U.S. options markets and
other self-regulatory organizations.  Although increased margin
requirements may be imposed either generally or in individual
cases by various brokerage firms, our calculations use the widely
accepted margin formulas from the Chicago Board Options Exchange.
The "Simple Yield" is based on the cost of the underlying issue
(in the event of assignment), including the premium from the sold
option, thus it reflects the maximum potential loss in the trade.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

NAKED PUTS

Stock   Strike Strike Cost   Current   Gain    Max    Simple
Symbol  Month  Price  Basis   Price   (Loss)  Yield   Yield

AMLN     APR    22    21.80   22.41    0.61   5.82%   3.21% *
APPX     APR    33    32.48   40.97    0.90   5.98%   2.77%
NEOL     APR    15    14.65   19.12    0.35   5.57%   2.39%
NKTR     APR    20    19.20   19.96    0.76   8.43%   4.17% *
OSTK     APR    25    24.30   28.40    0.70   7.25%   2.88%
APPX     APR    33    32.73   40.97    0.65   5.76%   1.99%
ASKJ     APR    25    24.15   28.89    0.85   9.04%   3.52%
CLZR     APR    11    11.07   12.98    0.17   4.72%   1.54%
JNPR     APR    22    21.85   23.79    0.65   7.82%   2.97%
NEOL     APR    15    14.65   19.12    0.35   6.74%   2.39%
PDII     APR    22    21.80   25.01    0.70   8.31%   3.21%
SWIR     APR    22    22.15   31.00    0.35   5.03%   1.58%
APPX     APR    33    33.03   40.97    0.35   4.71%   1.06%
BRCM     APR    35    34.55   37.44    0.45   4.64%   1.30%
ELN      APR    15    14.65   19.70    0.35   9.84%   2.39%
OSTK     APR    22    22.25   28.40    0.25   4.47%   1.12%
PCLN     APR    20    19.75   22.72    0.25   4.90%   1.27%
SYMC     APR    40    39.40   42.00    0.60   4.89%   1.52%
XMSR     APR    25    24.40   26.86    0.60   7.74%   2.46%
YHOO     APR    40    39.40   44.08    0.60   5.13%   1.52%
APPX     APR    35    34.45   40.97    0.55   6.27%   1.60%
ASKJ     APR    25    24.55   28.89    0.45   7.51%   1.83%
CMC      APR    30    29.60   31.28    0.40   4.72%   1.35%
CSGS     APR    15    14.65   16.17    0.35   7.65%   2.39%
ECLG     APR    17    17.20   19.82    0.30   6.26%   1.74%
JILL     APR    17    17.15   18.96    0.35   6.38%   2.04%
MGAM     APR    22    22.05   23.84    0.45   6.80%   2.04%
PBY      APR    25    24.50   26.50    0.50   5.97%   2.04%
SUPG     APR     7     7.15    9.95    0.35  16.86%   4.90%

Positions in Amylin (NASDAQ:AMLN) and Nektar (NASSDAQ:NKTR),
although positive, have been closed to limit potential losses.
Neopharm (NASDAQ:NEOL) is a candidate for exit on any further
downside activity, as is XM Satellite Radio (NASDAQ:XMSR).


NAKED CALLS

Stock   Strike Strike Cost   Current   Gain    Max    Simple
Symbol  Month  Price  Basis   Price   (Loss)  Yield   Yield

SEAC     APR    20    20.40   14.75    0.40   7.86%   1.96%
CECO     APR    55    55.65   49.00    0.65   5.59%   1.17%
ERES     APR    35    35.30   26.61    0.30   4.73%   0.85%
FARO     APR    30    30.40   20.27    0.40   7.33%   1.32%
AFCI     APR    25    25.50   20.75    0.50   8.84%   1.96%
FLSH     APR    22    22.75   18.20    0.25   5.62%   1.10%
ADTN     APR    35    36.30   29.24    0.80   9.56%   2.20%
DISH     APR    35    35.65   33.02    0.65   6.34%   1.82%


PUT-CREDIT SPREADS

Symbol  Pick   Last   Month L/P S/P Credit  C/B    G/L   Status

APOL    77.82  83.99   APR  65  70   0.60  69.40   0.60   Open
BZH    111.90 104.20   APR  95 100   0.70  99.30   0.70   Open
KBH     78.71  77.85   APR  65  70   0.55  69.45   0.55   Open
COF     73.50  71.75   APR  60  65   0.50  64.50   0.50   Open
HUG     52.95  49.77   APR  45  50   0.50  49.50   0.27  Closed
SYMC    44.64  42.00   APR  37  40   0.35  39.65   0.35   Open
DNA    106.82 100.82   APR  90  95   0.60  94.40   0.60   Open
FDX     71.59  71.59   APR  65  70   0.85  69.15   0.85   Open

L/P = Long Put  S/P = Short Put  CB = Cost Basis  G/L = Gain/Loss

Hughes Supply (NYSE:HUG) has reversed course in conjunction with
the Homebuilders/Building Materials segment, and we are closing
the position to limit potential losses.  Beazer (NYSE:BZH) is on
the "watch" list.  Since no directional recommendations were made
with the index-based credit spreads (both bullish and bearish
positions were published), we will not be tracking them in the
portfolio.  However, we will continue to offer suggested strike
prices for conservative spreads with the OEX and SPX each month
on expiration week-end.


CALL-CREDIT SPREADS

Symbol  Pick   Last   Month L/C S/C Credit  C/B    G/L   Status

ADBE    36.46  38.61   APR  45  40   0.55  40.55   0.55  Closed
DISH    35.50  33.02   APR  42  40   0.30  40.30   0.30   Open
NVLS    31.15  29.15   APR  37  35   0.35  35.35   0.35   Open
VSEA    40.85  36.27   APR  50  45   0.60  45.60   0.60   Open
COGN    29.54  28.63   APR  35  32   0.35  32.85   0.35   Open
SFA     31.96  30.80   APR  40  35   0.55  35.55   0.55   Open
BBBY    39.04  38.80   APR  45  42   0.25  42.75   0.25   Open
MSTR    52.64  48.90   APR  65  60   0.60  60.60   0.60   Open

L/C = Long Call  S/C = Short Call  CB = Cost Basis  G/L = Gain/Loss

As noted last week, the bearish spread on Adobe (NASDAQ:ADBE) was
a candidate for early exit after the recent earnings-related rally.
Although the position is currently profitable, conservative traders
should consider closing the play to limit potential losses.  Since
no directional recommendations were made (both bullish and bearish
plays were published) with the index-based credit spreads, we will
not be tracking them in the portfolio.  However, we will continue
to offer suggested strike prices for conservative spreads with the
OEX and SPX each month on expiration week-end.


DEBIT STRADDLES

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

GLBC    13.86  16.57   APR    15    12     1.80    2.50    Open?
SNP     40.74  37.80   APR    40    40     5.70    5.70    Open
CCMP    44.55  41.26   APR    45    45     5.90    5.75    Open
AMX     35.66  37.20   MAY    35    35     3.65    4.30    Open
AIG     74.28  70.00   MAY    75    75     5.60    7.00    Open
SLB     65.13  62.14   MAY    65    65     6.75    6.50    Open

Global Crossing (NASDAQ:GLBC) "gapped" higher at the open on the
first day after the play was offered, however traders who paid a
slightly higher price to enter the straddle were rewarded with a
small short-term gain.  Prices for the new positions in American
International (NYSE:AIG) and Schlumberger (NYSE:SLB), as well as
any potential gains (max. value) for existing straddles, will not
be accurate this month as I did not monitor the portfolio during
my recent absence from the market.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
NEW POSITIONS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This following group of plays is simply a list of candidates to
supplement your search for profitable trading positions.  As with
any new investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
are suitable for your personal skill level, risk-reward tolerance
and portfolio outlook.  In addition, we recommend that you avoid
any trading techniques in which you are not completely comfortable
with the potential capital loss, the necessary adjustments, and
the common entry-exit strategies.  The positions with "*" will be
included in the weekly summary.  Those with "TS" (Target-Shoot)
are below our minimum monthly return, but may offer a favorable
entry price with a limit order, due to the daily volatility of
the underlying issue.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

BULLISH PLAYS - NAKED PUTS

All of these issues have robust option premiums and relatively
favorable technical indications.  However, current news and market
sentiment will have an effect on these stocks, so review each play
thoroughly and make your own decision about its future outcome.

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered puts entails considerable financial risk,
far more than the initial margin or collateral required to open
a position.  The maximum financial obligation for the sale of a
naked put is the strike price (of the underlying stock) that is
sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of puts should have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  In addition, there is one very important rule when using
this strategy: Don't sell puts on stocks that you don't want to
own!  Why?  Because stocks occasionally experience catastrophic
declines, exponentially increasing the margin maintenance and
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock's price falls.
Many professional traders suggest closing the position when the
underlying share value moves below the sold strike, or using a
"buy-to-close" stop order at a price that is no more than twice
the original premium received from the sold option.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

AGI - Alliance Gaming  32.35  *** Hot Sector! ***

Alliance Gaming (NYSE:AGI) is a diversified, worldwide gaming
firm that designs, manufactures and distributes gaming machines
and computerized monitoring systems for gaming machines.  The
company also designs, integrates and sells highly specialized
computerized monitoring systems that provide casinos with
networked accounting and security services for their gaming
machines with over 240,000 game monitoring units installed
worldwide.  The company conducts its gaming operations under
the name Bally Gaming and Systems.

AGI - Alliance Gaming  32.35

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 30    AGI PF    155    0.45  29.55   5.4%   1.5% *


__________________________________________________________________

ASKJ - Ask Jeeves  $29.01  *** Uptrend Intact! ***

Ask Jeeves (NASDAQ:ASKJ) is a provider of Internet-wide search,
providing consumers with authoritative and fast ways to find
relevant information to their everyday searches.  Ask Jeeves
deploys its search technologies on Ask Jeeves (Ask.com and
Ask.co.uk), Teoma.com, and Ask Jeeves for Kids (AJKids.com).
In addition, to its internet sites, Ask Jeeves syndicates its
monetized search technology and advertising units to a network
of affiliate partners.  The company is based in Emeryville,
California, with offices in New York, Boston, New Jersey, Los
Angeles, London and Dublin.

ASKJ - Ask Jeeves  $29.01

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 25    AUK PE    1687   0.40  24.60   6.6%   1.6% *
SELL PUT  MAY 22.5  AUK QX      15   0.60  21.90   4.9%   2.7%
SELL PUT  MAY 25    AUK QE      75   1.20  23.80   7.2%   5.0%


__________________________________________________________________

ENDP - Endo Pharmaceuticals  $22.68  *** A Big Day! ***

Endo Pharmaceuticals (NASDAQ:ENDP) is a specialty pharmaceutical
company specializing in pain management.  The company is engaged
in the research, development, sale and marketing of branded and
generic prescription pharmaceuticals used primarily to treat and
manage pain.  The company's primary area of focus is analgesics,
with a portfolio of branded products and generic drugs that cover
a broad range of indications, most of which are focused in pain
management.

ENDP - Endo Pharmaceuticals  $22.68

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 20    IUK PD    1012   0.25  19.75   5.0%   1.3% *
SELL PUT  APR 22.5  IUK PX     151   1.05  21.45  14.0%   4.9%


__________________________________________________________________

NFLD - Northfield Labs  $15.08  *** Premium-Selling Only! ***

Northfield Laboratories (NASDAQ:NFLD) is engaged in the production
of a safe and effective alternative to transfused blood for use in
the treatment of acute blood loss.  Its PolyHeme blood substitute
product is a solution of chemically modified hemoglobin derived
from human blood.  PolyHeme simultaneously restores lost blood
volume and hemoglobin levels and is designed for rapid, massive
infusion.  PolyHeme requires no cross-matching and is therefore
immediately available and compatible with all blood types.  It
has an extended shelf life compared to blood.  Northfield Labs
purchases indated and outdated blood from The American Red Cross
and Blood Centers of America for use as the starting material for
PolyHeme.  It uses a proprietary process of separation, filtration
and chemical modification to produce PolyHeme.

NFLD - Northfield Labs  $15.08

"SPECULATIVE" PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 12.5  DHQ PV     735   0.35  12.15  12.2%   2.9% *
SELL PUT  APR 15    DHQ PC     780   1.25  13.75  23.0%   9.1%


__________________________________________________________________

PBY - Pep Boys  $26.38  *** Entry Point? ***

Pep Boys -- Manny, Moe & Jack (NYSE:PBY) is engaged primarily in
the retail sale of automotive parts and accessories, automotive
maintenance and service and the installation of parts through a
chain of stores.  The company operated its stores in 36 states
and Puerto Rico and its primary operating unit is its Supercenter
format.  Its operates over 600 Supercenters and one Service and
Tire Center, having an aggregate of 6,527 service bays, as well
as 12 non-service/non-tire format Pep Boys Express stores.  The
Supercenters serve "do-it-yourself" (retail) and "do-it-for-me"
(service labor, installed merchandise and tires) customers.

PBY - Pep Boys  $26.38

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 25    PBY PE      81   0.45  24.55   6.2%   1.8% *
SELL PUT  MAY 25    PBY QE       0   1.00  24.00   5.2%   4.2%


__________________________________________________________________

PLMO - palmOne  $17.60  *** Profitable Outlook! ***

palmOne (NASDAQ:PLMO), formerly Palm, develops, designs and sells
Palm-branded, hand-held devices, accessories and the operating
system Palm OS.  The company was historically organized into two
operating segments: the Solutions Group and PalmSource.  Now the
Solutions Group develops and markets hand-held devices and other
accessories to provide the user with a simple, elegant and useful
productivity tool.  PalmSource developed and licensed the Palm OS
and related software, which is referred to as the Palm platform.
The Palm platform is the foundation for Palm devices, as well as
for devices manufactured by other third-party licensees.

PLMO - palmOne  $17.60

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 15    UPY PC    1093   0.35  14.65   9.7%   2.4% *
SELL PUT  APR 17.5  UPY PW     978   1.25  16.25  20.2%   7.7%


__________________________________________________________________

RSAS - RSA Security  $16.05  *** Microsoft Ruling = Rally!  ***

RSA Security (NASDAQ:RSAS) is a provider of electronic security
(e-security) solutions that are designed to help organizations
ensure the authenticity of the people, devices and transactions
involved in e-business.  The company's core competencies are in
two-factor user authentication solutions, Web access management
software, digital certificate management solutions and encryption
software.  Through its RSA SecurID, RSA ClearTrust, RSA Keon and
RSA BSAFE product lines, the company directly addresses critical
e-security requirements for e-business.

RSAS - RSA Security  $16.05

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 15    QSD PC     848   0.45  14.55  10.2%   3.1% *
SELL PUT  MAY 15    QSD QC       1   0.85  14.15   7.2%   6.0%


__________________________________________________________________

SHFL - Shuffle Master  $45.98  *** New "All-Time" High! ***

Shuffle Master (NASDAQ:SHFL) develops, manufactures and markets
automatic card shufflers for use with card-based table games.
The company also develops and markets table games and licenses
these products to casinos.  Shuffle Master develops and markets
slot games and slot game operating systems for slot machines.

SHFL - Shuffle Master  $45.98

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 40    SFQ PH     241   0.35  39.65   3.6%   0.9% TS
SELL PUT  APR 45    SFQ PI     286   1.45  43.55  10.2%   3.3%


__________________________________________________________________

SYMC - Symantec  $43.02  *** The Uptrend Resumes! ***

Symantec (NASDAQ:SYMC) provides content and network security
software and appliance solutions to enterprises, individuals and
service providers.  The firm provides client, gateway and server
security solutions for virus protection, firewall and virtual
private network, security management, intrusion detection, e-mail
filtering and Internet content, remote management technologies
and security services to enterprises and service providers
worldwide.  The company views its business in five operating
major segments: enterprise security, enterprise administration,
consumer products, services and other activities.

SYMC - Symantec  $43.02

PLAY (sell naked put):

Action    Month &   Option    Open   Last  Cost    Max.  Simple
Req'd     Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL PUT  APR 37.5  SYQ PU    2620   0.25  37.25   2.8%   0.7% TS
SELL PUT  APR 40    SYQ PH    4908   0.65  39.35   5.8%   1.7% *



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

BULLISH PLAYS - CREDIT SPREADS

These candidates are based on the underlying issue's technical
history or trend.  The probability of profit in these positions
may also be higher than other plays in the same strategy, due to
small disparities in option pricing however, each play should be
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and trading style.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

LLL - L-3 Communications  $56.67  *** Technical Break-Out! ***

L-3 Communications Holdings (NYSE:LLL) is a merchant supplier
of sophisticated secure communication systems and specialized
communication products.  Its customers include the United States
Department of Defense (DoD), certain United States government
intelligence agencies, major aerospace and defense contractors,
foreign governments and commercial customers.  The company has
two major business segments, Secure Communication Systems and
Specialized Communication Products.

LLL - L-3 Communications Holdings  $56.67

PLAY (conservative - bullish/credit spread):

BUY  PUT  APR-50.00  LLL-PJ  OI=710  ASK=$0.15
SELL PUT  APR-55.00  LLL-PK  OI=435  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$54.50


__________________________________________________________________

TASR - Taser International  $61.80  *** Pure Premium-Selling! ***

Taser International (NASDAQ:TASR) develops, assembles and markets
less-lethal, conducted energy weapons primarily for use in the law
enforcement and corrections market.  The company's weapons utilize
compressed nitrogen to shoot two small, electrified probes up to a
maximum distance of 21 feet.  The probes and compressed nitrogen
are stored in a replaceable cartridge attached to the base of the
weapon.  After firing, the probes discharged from the cartridges
remain connected to the weapon by high-voltage insulated wires that
transmit electrical pulses into the target.  These pulses, which
the company calls TASER-Waves, temporarily overwhelm the normal
electrical signals within the body's nerve fibers, impairing the
subjects' ability to control their bodies or perform coordinated
actions.  The company's primary product is the Advanced Taser, a
unit designed primarily for law enforcement.

TASR - Taser International  $61.80

PLAY (less conservative - bullish/credit spread):

BUY  PUT  APR-45.00  QUR-PI  OI=94   ASK=$0.55
SELL PUT  APR-50.00  QUR-PJ  OI=642  BID=$1.20
INITIAL NET-CREDIT TARGET=$0.70-$0.80
POTENTIAL PROFIT(max)=16% B/E=$49.30



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

BEARISH PLAYS - NAKED CALLS

Based on analysis of option pricing and the underlying stock's
technical background, these positions meet our fundamental
criteria for bearish "premium-selling" strategies.  Each issue
has robust option premiums, a well-defined resistance area and
a high probability of remaining below the target strike prices.
As with any recommendations, these positions should be carefully
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and personal trading style.

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option is the strike price (of the underlying stock) that
is sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond the sold
strike, or using a "buy-to-close" stop order at a price that is no
more than twice the original premium received from the sold option.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

MTLM - Metal Management  $34.00  *** A Big "Down" Day! ***

Metal Management (NASDAQ:MTLM) is principally engaged in the
business of collecting and processing ferrous and non-ferrous
metals in the United States.  The company collects industrial
scrap and obsolete scrap, processes it into reusable forms and
supplies the recycled metals to customers, including electric
arc furnace mills, integrated steel mills, foundries, secondary
smelters and metals brokers.  These services are provided by its
recycling facilities located in 13 states.

MTLM - Metal Management  $34.00

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  APR 40    MQB DH      55   0.60  40.60   9.7%   1.5% *
SELL CALL  APR 35    MQB DG       0   2.00  37.00  18.1%   5.4%


__________________________________________________________________

NIHD - NII Holdings  $31.18  *** Consolidation In Progress! ***

NII Holdings (NASDAQ:NIHD) provides digital wireless communication
services targeted at meeting the needs of business customers with
four operating companies located in Latin American markets.  The
company was formerly known as Nextel International.  Its principal
operations are in major business centers and related transportation
corridors of Mexico, Brazil, Peru and Argentina.  It also provides
analog specialized mobile radio services through two companies in
Chile.

NIHD - NII Holdings  $31.18

PLAY (sell naked call):

Action     Month &   Option    Open   Last  Cost    Max.  Simple
Req'd      Strike    Symbol    Int.   Price Basis  Yield  Yield

SELL CALL  APR 35    QHQ DG    5040   0.30  35.30   4.4%   0.8% *
SELL CALL  APR 33.37 QHQ DQ    1938   0.60  33.98   7.3%   1.8%



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

BEARISH PLAYS - CREDIT SPREADS

All of these positions are favorable candidates for "bear-call"
credit spreads, based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit from these positions may be higher
than other plays in the same strategy, due to disparities in
option pricing.  However, current news and market sentiment will
have an effect on these issues, so review each play individually
and make your own decision about its future outcome.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

NTLI - NTL Incorporated  $53.12  *** The Downtrend Continues! ***

NTL Incorporated (NASDAQ:NTLI) provides communications services
to residential, business and wholesale customers.  The company
offers residential telephony, cable television and Internet
access services.  NTL also provides national and international
carrier telecommunications, satellite and radio communications,
as well as digital and analog television and radio broadcast
transmission services.

NTLI - NTL Incorporated  $53.12

PLAY (conservative - bearish/credit spread):

BUY  CALL  APR-65.00  NUD-DM  OI=3067  ASK=$0.55
SELL CALL  APR-60.00  NUD-DL  OI=1071  BID=$1.05
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$60.55


__________________________________________________________________

SINA - SINA Corporation  $35.96  *** In A Trading Range? ***

SINA Corporation (NASDAQ:SINA), formerly known as SINA.com, is an
online media company and value-added information service provider
for China and the global Chinese communities.  With a branded
network of localized Websites targeting China and overseas Chinese,
the company provides an array of services to its users including
region-focused online portals, search, directory, interest-based
and community-building channels, free and premium e-mail, wireless
short messaging, online games, virtual Internet service provider,
classified listings, e-commerce, e-learning, and enterprise
e-solutions.  In turn, SINA generates revenue through advertising,
fee-based services, e-commerce and enterprise services.

SINA - SINA Corporation  $35.96

PLAY (less conservative - bearish/credit spread):

BUY  CALL  APR-45.00  NOQ-DI  OI=3125  ASK=$0.30
SELL CALL  APR-40.00  NOQ-DH  OI=3379  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.70-$0.80
POTENTIAL PROFIT(max)=16% B/E=$40.70



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
STRADDLES AND STRANGLES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

__________________________________________________________________

No straddles or strangles today...

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

SEE DISCLAIMER - SECTION 1

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


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

Growing More Oversold

___________________________________________________________________

How to use this watch list:
  Readers can use the candidates below as a springboard for their
  own research.  Many are in the process of breaking support or
  resistance or in the process of starting new trends or
  extending old ones.  With your own due diligence these could be
  strong potential plays.
___________________________________________________________________


MicroStrategy Inc - MSTR - close: 47.71 change: -1.19

WHAT TO WATCH: Yuck!  The GSO software index was one of
Wednesday's best performing sectors behind the chips but shares
of MSTR were not participating in the rebound.  Today marks the
third day in a row that MSTR has closed under support at its
$50.00 mark and its simple 200-dma.  The combination of Tuesday-
Wednesday's sessions looks like a bearish failed rally pattern
under resistance. There is additional support near $45 but more
aggressive bears might try for a move toward the $40 level.

Chart=


---

United Technologies - UTX - close: 84.05 change: -0.33

WHAT TO WATCH: This Dow component does not look healthy but it
has managed to hold support at its simple 200-dma for the last
three sessions.  The bad news is that there was very little
bounce today or yesterday for that matter.  The stock is down
about 14% from its February highs and looks very oversold after
five weeks of selling.  Should the 200-dma not hold as support
there is additional support at $82.50 from October-November and
more support at $80.00 from August-September and its P&F chart.
Of course UTX has broken numerous support levels already in the
last month so there's no guarantee these will hold either.  On
the other side of the coin the more this stock drops the more it
will look like a value play.  We'd watch UTX for a move above its
10-dma.

Chart=


---

Borg Warner - BWA - close: 79.78 change: -1.52

WHAT TO WATCH: Okay, okay we've been kicking ourselves for days
now about not taking the short when BWA broke through the $90.00
level.  It did pause at support near $85 for several days but the
downtrend has picked up speed and on rising volume.  The close
under the $80 mark looks like bad news but BWA should have more
support at its simple 200-dma near $78.00.  This stock is looking
very oversold down almost 20% from its January highs.  We'd
probably watch BWA for a bounce from its 200-dma.

Chart=


---

Amazon.com - AMZN - close: 39.63 change: -0.60

WHAT TO WATCH: Yuck!  AMZN has really been on the losing end of
the recent declines.  Shares are down three days in a row and
today's decline broke support at the $40 mark.  Currently its P&F
chart points to a $32 price target, which is close to its June
2003 lows.  The only thing that might make us hesitate to open
new bearish positions is the recent six-week bearish
consolidation looks like a descending channel.  If that's the
case then AMZN is at the bottom of that channel now and should
bounce soon.

Chart=



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

CVX $85.88 -1.59 - Today was a major breakdown in the oil and oil
service stocks.  The OSX oil service index was the worst
performing sector.  Stocks like CVX and COP have broken their 50-
dma's and look vulnerable to more profit taking.

RSE $51.63 -0.47 - Watch RSE for a bounce from its 40-dma near
the $50.00 mark.


*******************
FREE TRIAL READERS
*******************

If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is $49.95. The quarterly
price is $129.95 which is $20 off the monthly rate.

We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support



DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives