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Daily Newsletter, Monday, 04/12/2004

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The Option Investor Newsletter                   Monday 04-12-2004
Copyright 2004, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Stocks Rebound on Relief Rally
Futures Wrap: See Note
Index Trader Wrap: See Note
Traders Corner: The Good, The Bad, The Earnings & The Quickies
Traders Corner: Floating the Turnover


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     04-12-2004            High     Low     Volume Advance/Decline
DJIA    10515.56 + 73.53 10526.27 10443.81 1.37 bln   1500/1313
NASDAQ   2065.48 + 12.60  2069.45  2057.64 1.47 bln   1793/1318
S&P 100   559.49 +  3.37   560.10   556.12   Totals   3293/2631
S&P 500  1145.20 +  5.88  1147.29  1139.32
RUS 2000  599.65 +  1.77   603.04   597.88
DJ TRANS 2933.82 +  6.94  2945.79  2926.84
VIX        15.28 -  0.98    16.12    15.00
VXO        15.44 -  0.39    16.26    15.30
VXN        20.37 -  1.01    20.88    20.23
Total Volume 3,182M
Total UpVol  1,996M
Total DnVol  1,138M
52wk Highs     414
52wk Lows       57
TRIN          0.80
PUT/CALL      0.77
*******************************************************************

Stocks Rebound on Relief Rally
by James Brown

Stocks soared quickly higher at the open on Monday as investors
breathed a sigh of relief that the holiday-long weekend passed
without a terror-related incident.  This allowed traders to focus
on the Q1 earnings season, which is about to hit in force
starting tomorrow.  More than 700 companies are expected to
report this week.  Expectations for corporate profits to rise 17-
20% above last year's period have generated a bullish under
current for the markets.  However, some professional investors
are worried if the rebound from the March lows has already baked
in a strong earnings performance.

Money poured into energy stocks with the OIX oil index (+1.54%)
and the OSX oil services index (+2.42%) turning in today's best
gains.  Driving the move was a 70-cent jump to $37.84 a barrel in
crude oil futures. The International Energy Agency released their
latest forecast showing worldwide consumption of oil will rise
for the sixth consecutive month.  While that's not a surprise
given the U.S. economic rebound, expanding global economy and the
voracious appetite from China's red-hot economy the breakout over
resistance at $37 a barrel is a new 20-year high.  Airlines, who
suffer from higher fuel costs as crude rises, were understandably
lower today (XAL -1.21%).  Benefiting from the rise in oil were
refiners.  Dow component ExxonMobil (XOM) rose 2.1%,
ConocoPhillips (COP), the U.S.'s largest refiner, added 1.7% and
Valero Energy (VLO) soared 4.2%.  Meanwhile retail gas prices hit
another new all-time high at $1.786 a gallon.

Overall the U.S. stock markets were broadly higher with only a
few sectors posting minor losses.  The Dow Industrials added 73
points to break above what could have been resistance at 10,500.
The NASDAQ Composite rose just under 13 points to 2065 and the
S&P 500 added close to 6 points to 1145.  Unfortunately, market
internals were probably a little less bullish than I might have
expected.  Advancers outnumbered decliners 15 to 13 on the NYSE
and almost 18 to 13 on the NASDAQ.  Up volume was only 742
million versus 607 million in down volume on the NYSE.  The
NASDAQ turned in a stronger 10-to-4 ratio of up over down volume.
However, total volume was very light on both exchanges.

Chart of the Dow Industrials:



Chart of the NASDAQ Composite:



Chart of the S&P 500 Index:



Boosting the Industrials this morning was Dow component DuPont
(DD) who started the day by announcing plans to cut 6% of its
workforce or 3,500 jobs.  Investors applauded the news by sending
the stock higher 1.45%.  DD said the layoffs would result in a
restructuring charge for its second quarter earnings of 17 to 19
cents per share.  More than countering DD's positive influence on
the Dow was Disney's (DIS) 2% drop on comments from a Bank of
America analyst who expects that Comcast will drop its
unsolicited $54 billion bid to buy Disney.  Also limiting the
Dow's gains today was a 1% decline in Hewlett-Packard (HPQ) after
a Goldman Sachs analyst suggested investors sell the stock.  The
hardware company is seeing more and more competitive pressure in
its crucial printer and ink business from the likes of Dell.

This morning also brought earnings reports from the likes of
Gannett Corp (GCI) and the New York Times (NYT).  Both companies
announced a strong turnaround in March ad revenues with GCI
seeing 10% growth (+25% for its USA Today operations) and the NYT
reporting 8.6% ad growth.  For the first quarter GCI reported
earnings of $1.00 per share, which was inline with estimates.
The NYT managed to beat estimates by 2 cents with net income of
38 cents per share.

Raising earnings estimates was Kimberly-Clark (KMB) the well-
known maker of Huggies diapers and Kleenex brand facial tissues.
Their press release said the company expects Q1 earnings of 91
cents a share compared to previous estimates in the 85-87 cent
range.  Management cited strong "top-line growth, along with
success in reducing costs and a slightly lower effective tax
rate.  Net sales for the quarter increased approximately 10
percent to $3.8 billion."  The company also said its full year
numbers should be toward the high end of its $3.55-3.65 range but
they'll be forced to raise prices on some products to offset
rising raw materials.

One of the most closely watched sectors today was the
semiconductor industry.  The SOX added 0.67% and looks poised to
breakout over resistance at the 520 level if Intel issues some
good news at their earnings report Tuesday after the closing
bell.  Analysts expect Intel to report earnings of 27 cents per
share, which is nearly double the 14 cents from a year ago.  Of
course many on Wall Street are curious to see where Intel's
revenue number will fall.  Early last month Intel guided revenues
lower to the $8.0-8.2 billion range.  Hopefully Novellus Systems'
(NVLS) earnings report tonight is a positive sign for the
industry.  NVLS turned in earnings of 11 cents per share, which
beat consensus estimates of 10 cents and a nice improvement over
last year's 8 cents per share.  Revenues were better than
expected at $262.9 million for the quarter.  NVLS said shipments
soared 36% in the first quarter.  Furthermore the company guided
Q2 earnings higher to 18-20 cents compared to analysts' estimates
of 18 cents.

For some investors trading semiconductor stocks isn't exciting
enough.  No, the new thrill ride on Wall Street are small cap
security companies.  If you watching the MarketMonitor today you
already know about TBUS and MACE as Jeff Bailey kept us posted on
their 73% and 133% one-day gains.  However, you may not have
heard about IPIX's 51% gain, ICTS' 71% gain and ARTX's 14% gain.
Almost every single one of these small cap stocks, and I do mean
small cap, were trading near $2.00 in the last week to three
weeks but they've since exploded with 100%, 200% and 1000% gains
as investors search for ways to play the rise in "geo-political"
tensions.  I'm certainly not making any recommendations on how to
trade these.  Personally, I tend to enjoy the fireworks from the
sidelines where I can't get burned.

Tomorrow brings a couple of economic reports on top of the parade
of earnings announcements.  The business inventory numbers and
retail sales for March should be out before the opening bell.
We'll also hear earnings from Dow Jones (DJ), Dow component
Johnson and Johnson (JNJ), Merrill Lynch (MER), Pepsi Bottling
(PBG), State Street Bank (STT) and Infosys Technologies (INFY)
before the opening bell.

Overall the broad-based rally was encouraging and I expect to see
more of the same tomorrow.  Let's cross our fingers and hope that
Intel doesn't kill the momentum with any ill-placed comments in
their conference call on Tuesday night.


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

Check the Site Later Tonight For Jeff's Index Trader Article
http://members.OptionInvestor.com/itrader/marketwrap/iw_041204_1.asp


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

The Good, The Bad, The Earnings & The Quickies
By Mike Parnos, Investing With Attitude

Here are some quickies.  It’s earnings season.  There should be
some positive and some negative earnings.  Hopefully, they will
balance themselves out and the market will be at this same level
at Friday’s expiration.

A word of warning.  These premiums were based on Thursday’s
closing prices.  Three days have gone by and the premiums will not
likely be the same.  More than likely, they will be less.  So,
enter these trades only if you believe there is enough premium
left to make them worthwhile.

April Expiration Quickies
These quickies can be hazardous to your wealth.  In past months
we’ve had many more winners than losers.  The losers can be
expensive, though.  These are hypothetical and educational plays,
but readers have been known to roll the “quickie” dice.   Should
you be so inclined, only use hypothetical money you can afford to
lose.
__________________________________________________________

April Quickie #1 – Iron Condor SPX – 1139.32
Sell 10 SPX April 1120 puts
Buy 10 SPX April 1110 puts
Credit:  $1.05 ($1,050)

Sell 10 SPX April 1160 calls
Buy 10 SPX April 1170 calls
Credit:  $.90 ($900)
Total net credit and potential profit of $1,950.  Maximum profit
range of 1120 to 1160.
__________________________________________________________

April Quickie #2 – Iron Condor RUT – 597.88
Sell 10 RUT April 580 puts
Buy 10 RUT April 570 puts
Credit:  $.90 ($900)

Sell 10 RUT April 610 calls
Buy 10 RUT April 620 calls
Credit:  $1.35 ($1,350)
Total net credit and profit potential of $2,250.  Maximum profit
range of 1120 to 1160.
__________________________________________________________

April Quickie #3 – QQQ Strangle - $36.94
Buy 10 QQQ April $38 calls @ $.10 ($100)
Buy 10 QQQ April $36 puts @ $.15 ($150)
Total debit of $.25 ($250)
If the QQQs make a quick move in the next five business days, be
prepared to take some profits.  Even if you can close out the
position for $.50, you’ve doubled your risk.
__________________________________________________________

Those Friendly Reminders
The premiums quoted on the above educational trades are based on
Thursday’s closing bid/ask prices.  On Monday, the premiums will
likely be different due to market movement and/or the additional
two days of time erosion.  In a few instances, when the bid/ask
spread is wide, we figure you may be able to shave off a nickel
here and there.  Be careful.  If a stock gaps up or down, it may
change the entire dynamic of the trade.  Don't skydive without a
parachute.  Just because you have a pulse and evidence of brain
activity doesn't mean you a trader.  And make sure you thoroughly
know the intricacies of a strategy before you trade.  The money
you save may be your own.
__________________________________________________________

APRIL CPTI POSITIONS

April Position #1 – SPX Iron Condor – 1139.32
We sold 4 SPX April 1075 puts and bought 4 SPX April 1050 puts for
credit of: $2.50 (x 4 contracts = $1,000).  Then we sold 10 SPX
April 1170 calls
And bought 10 SPX April 1180 calls for a credit:  $1.40 (x 10
contracts = $1,400).  Total net credit and potential profit of
about $2,400.  Maximum profit range is 1075 to 1170.  Safety range
is about 1072.60 to 1177.40.  Maintenance: $10,000
__________________________________________________________

April Position #2 – RUT Iron Condor – 597.88
We sold 10 RUT April 530 puts and bought 10 RUT April 520 puts for
a credit of  $1.10.  Then sold 10 RUT April 610 calls and bought
10 RUT April 620 Calls for a credit of $1.15.  Total net credit of
about $2.25.  Potential profit: $2,250.  Maximum profit range: 530
to 610.  Safety range: 527.75 to $612.25.  Maintenance: $10,000.
______________________________________________________

April Position #3 – XAU Iron Condor - $101.62
Sold 10 XAU April 95 puts and bought 10 XAU April 90 puts for a
credit of  $.85 (x 10 contracts = $950).  Sold 10 XAU April 110
puts and bought 10 XAU April 115 puts for a credit of $.55 (x 10
contracts = $550).  Total net credit: $1.40.  Potential profit:
$1,400.  Maximum profit range $95 to $110.  Safety range: $93.60
to $111.40.
______________________________________________________

April Position #4 – OSX Calendar Spread Plus – $102.52
OSX is the Oil Index.  This is a play on the common belief that
oil prices will continue to move up over the next month or two.
Bought 10 OSX June $115 calls (36 delta) and sold 10 OSX April
$115 calls (23 delta) at a cost of  $2.15 ($2,150).

We also put on an April $100/$90 bull put spread and took in an
extra $.70 ($700) to reduce the cost basis to $1.45 ($1,450).

Adjustment:  We rolled out to the May $110 calls and took in
another $1.25.  Our cost basis is now only $.20.  However, we sold
a strike price that is $5 less than our long $115 call.  That
means we are exposed for the $5 difference between the $110 call
and the $115 call.
______________________________________________________

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $36.94
We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts
of the 2005 QQQ $29 calls for a total debit of $14,300.   We make
money by selling near term puts and calls every month.  Here's
what we've done so far:
Oct. $33 puts and Oct. $34 calls – credit of $1,900. Nov. $34 puts
and calls – credit of $1,150. Dec. $34 puts and calls – credit of
$1,500.  Jan. $34 puts and calls – credit of $850.  Feb. $34 calls
and $36 puts – credit of $750. Mar. $34 calls and $37 puts –
credit of $1,150. Apr. $34 calls and $37 puts – credit of $750
Total credit: $8,050.

We’re going to try and roll out our April $34 calls to the May $34
calls for about $.15.  We’ll have to wait until closer to
expiration to deal with the $37 puts that are right at the money.

Note:  We haven't included the proceeds from this long term QQQ
ITM Strangle in our profit calculations.  It's a bonus!  And it's
a great cash flow generating strategy.

ZERO-PLUS Strategy.  OEX – 556.12
In my Feb. 8th column, I outlined a strategy based on an initial
investment of $100,000.  $74,000 was spent on zero coupon bonds
maturing in seven years at a value of $100,000.  The principal
$100,000 investment is guaranteed.  We’re trading the remaining
$26,000 to generate a “risk free” return on the original
investment.

Long Term: Bought 3 OEX Jan. 2006 540 calls @ $81 (x 300 =
$24,300)
March: Sold 3 OEX 585 calls @ $3.10 (x 300 = $930)
March: 535/525 Bull Put Spread for credit of $1.10 (x 300 = $330).
Bought back 3 OEX March 585 calls for $.10 & sold 3 of March 560
calls for $1.35.  A credit of $1.25 x 300 = $375.00.  Bought back
March 560 calls for $.15, locked in profit of $120 x 3 = $360.
Cash position is $3,320 ($1,620 plus the unused $1,700).

April Positions:
OEX Bull Put Spread - $556.12.  Sell 5 OEX April 515 puts and buy
5 contracts of April 505 puts for credit of  $.90 (x 5 contracts =
$450).
Sell call against long 540 call. Sell 5 OEX April 570 calls for
$1.35 (x 5 contracts = $675).

New cash position is $2,640 plus unused $1,700 = $4,340.
______________________________________________________

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

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

Mike Parnos
CPTI Master Strategist and HCP
______________________________________________________

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


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

Floating the Turnover

Lately I have become a little skeptical about technical analysis
or maybe the correct word would be jaundiced. This has happened
over the years because just when I had found the indicator or
combination of indicators that gave me an edge something always
seemed to stop working. I was turning yellow (jaundiced) and I
needed something to give me back the pink passion I had for
research. Just like a new pair of shoes can put new vigor into a
woman's wardrobe, I needed a new kind of technical analysis to
put the verve and vigor back into my analyst's toolbox. I may
have just found those new pair of shoes.

Qcharts has a new study that was introduced in version 4.3 called
the Float Turnover Channel. Since I had never heard of this study
(actually Jeff Bailey has touched on it but didn't quite
understand it) I decided to do some research. I truly didn't
expect much but what I found was terribly exciting.

The Float Turnover Channel is based on Float Analysis "invented"
by Steve Woods. The definition of Float Analysis is: by adding up
volume cumulatively and comparing it to the number of shares
actually available for trading (the float), we can see areas on a
chart where the stock goes through a change of ownership. We can
see where the Smart Money is accumulating at the bottom and we
can see were they get out at the top.

But before I blast off let's define some terms so we can get on
an equal footing.

The Float is defined as all the shares available for trading by
the public that are not owned by the company's management. Or the
number of freely traded shares in the hands of the public, the
number of outstanding shares less the shares owned by management.

The Float Turnover is the approximate time it takes for the float
to change ownership, a proxy for a change of ownership. It is the
amount of time it takes for a stock's cumulative volume to equal
its floating supply of shares and the price range of this
"turnover." It implies that a large percentage of the stock's
ownership has changed hands.

For example, if a stock's float has 50 million shares actively
trading and the volume for the last four weeks was exactly 50
million shares, then the float's turnover would be a four-week
span starting from the current date and going back to the day
when a cumulative total of the volume equaled 50 million shares.
However we never know exactly when a complete turnover of shares
traded has occurred because we don't know the intentions of the
traders or investors. Some long-term investors may hold onto a
stock through thick and thin, through ups and downs and some
short-term traders may buy and sell several times during that
time it takes for the float to go through one hypothetical
turnover.

Here is how the Float Turnover Channel is calculated. Starting on
any given day and working backwards, the current day's volume is
added to the previous day's volume which is added to the next
previous day's volume and so on. As each cumulative volume number
is added to the previous number, it is compared to the stock's
float and when the cumulative volume total is equal to or greater
than the float two horizontal lines are plotted on the chart. The
top line shows the highest price reached during the backward
count, and the bottom line, the lowest price. The lines extend
backward from the starting date to the bar, where the float has
gone through one complete turnover.

The Float Turnover Channel lines that look like a moving average
are the footprints’ left behind from previous float turnovers
and are created by plotting only the top right and lower right
corner points of the current float turnover on a day-to-day
continuum basis.  They allow us to see previous float turnover
trading ranges and breakout points.  The Float Turnover study
also has 50% Channel lines, which are created exactly the same as
the 100% channel lines discussed above except they are tracking a
float turnover that is exactly half the actual float number.  It
has been found that these 50% float turnover lines are often the
point where support or resistance occurs in a stock's price
movement.

There are vast differences between stocks when it comes to float
analysis. Some stocks with a small float may take months or years
to go through one complete turnover, while other stocks with
large floats may have a rapid turnover in a matter of days. Some
stocks may have a turnover lasting several months and then come
under heavy accumulation and have quick turnovers of just a few
days. For example, I have seen TASR's float turnover last only
two days.

Now, of course, not all stocks are candidates for float analysis.
First you all you want stocks that are trading a couple hundred
thousand shares a day and are breaking out of bases.

There are three basic types of breakouts:

1. Stocks that are trending down and are continuously going
through the bottom channel line. Then reverse and break out above
the top channel line with volume.

2. Stocks that are trending up and are continuously going through
the top channel line. Then reverse and break down below the
bottom channel line with volume.

3. Stocks that make long sideways moves and do not break above or
below either channel line for a long time and then break out of
either the top or bottom with volume.

Once a breakout has happened always wait for the pull back to the
channel or approximately 50% of the channel but with light
volume.  The channel lines and 50% of the channel are support
lines when a stock’s price is moving up and away from an
accumulation bottom formation and they are resistance lines when
a stock’s price is moving down and away from a distribution top
formation.

Avoid stocks that are making 'wide and loose' formations.  These
have prices that move above their float turnover channel, then
below, and then back above only to then move below again, making
a back and forth wide and loose look.  With these stocks, it is
very difficult to tell if a breakout or a breakdown is valid.

The stocks that are easiest to analyze are those that have floats
that are turning over every 50 to 100 days at accumulation
bottoms and 10 to 50 days at distribution tops.  Long low volume
bottom formations are the best for moves to the upside.  Short
high volume distribution tops are the best for moves to the
downside.

Avoid stocks that are turning over extremely fast because they
tend to give a lot of false signals.  These would be the stocks
that have float turnovers in the 1 to 10 day range.  They are
hard to analyze.

An exception to this would be a stock that has had a long run up
(continually moving through the top float channel line) and
hasn't broken below its lower float turnover channel line during
the entire run.  Then right at the top it crashes through the
bottom line.

Look for strong volume to accompany the breakout or breakdown.
On the upside, this indicates a lot of money moving into the
stock.  On the downside, this indicates a lot of money moving out
of the stock.  Follow the money.

Well this introduction has given you an idea of what to look for
I will follow up with another article that has examples of what I
have just detailed here.

I also have lost a little of my yellow coloring and am starting
to return to a much more natural color pink.

Remember plan your trade and trade your plan.

Jane Fox


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The Option Investor Newsletter                   Monday 04-12-2004
Copyright 2004, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Leaps: Is It Already Baked In?
Stop Loss Updates: CAT, PDCO, ZBRA, CFC
Dropped Calls: None
Dropped Puts: AHC
Watch List: Mixed Bag


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*****************
LEAPS FROM SUNDAY
*****************

Is It Already Baked In?
By Mark Phillips
mphillips@OptionInvestor.com

That's a really big question, as we could be referring to the
question of whether strong earnings are already factored into the
market or we could be talking about whether improvements in
employment, the economy or the geopolitical situation are already
incorporated into the current levels for stocks.  As we've talked
about on numerous occasions, it isn't as simple as just looking at
the news and deciding whether it is good or bad.  It is in
comparing it to the prior expectations that we can start to make
some intelligent decisions as to whether or not the news should be
bullish or bearish for a given stock or the market as a whole.

Clearly, we can see from the market's reaction on Thursday, YHOO's
stellar earnings report (along with the split announcement) were
not expected by the market.  There we have a clear case of
positive, unexpected news driving an individual stock and its
sector (Internets) sharply higher, as expectations were ratcheted
up a few notches.  It certainly didn't hurt the performance of our
EBAY play!

There are clearly some bullish expectations for this earnings
season and we can expect to see some strong upside surprises and
probably some stellar misses as well.  But on the whole, we'll
likely see a solid performance from the April earnings cycle.  But
we know the market is a forward-looking mechanism, right?  April
earnings will tell us what has already happened.  The more
important data will be what the corporate chieftains have to tell
us in the way of future guidance for next quarter and more
importantly for the remainder of the year.  For clarity on that
front, we'll simply have to watch and see what interesting tidbits
come to light in the next few weeks.

Further clouding the picture will be what the prospects are for
inflation, job growth and of course interest rates.  The bond
market has been telling us for a while that it didn't see any
serious chance of the Fed raising rates before the election in
November and quite possibly not until 2005.  But that all changed
in dramatic fashion with the bond market implosion that followed
the most recent Jobs Report.  The bond junkies made it clear that
they viewed the report as sending a clear message that the
timetable of interest rate increases had been moved up.  That
surge in yields was the largest seen in many years and the lack of
a meaningful drop back over the past week hints that it was more
than just a knee-jerk move.

Does that mean the Fed will move rates at the May meeting?  I
think that is highly doubtful, but not out of the question.  More
likely, the Fed will verbally prepare investors for the reality
that interest rates will rise sooner, rather than later.  When
that process begins, it will place yet another burden on Corporate
America, that is already struggling with astronomical energy costs
and the uncertainty of who will sit in the White House next
January and what it will mean in terms of taxes.  The taxation
factor will weigh directly on consumers' minds as well, especially
in the next week, as they hurry to finish up their 2003 returns
ahead of the April 15th filing deadline.

The month of March delivered the first decent correction in the
market in the past year and market participants wisely harvested
profits ahead of the next directional move.  Early last week, we
completed a sizable retracement of that drop.  The remainder of
the holiday-shortened week delivered little in the way of clarity
as to what to expect as we head into this earnings season and that
leaves us with a fairly clean slate to work with.  My expectation
is that we'll probably test the recent highs before the April
earnings season is complete, but I'm doubtful that we'll see a
meaningful upside breakout.  Following earnings, it's hard to say
what the next catalyst will be for an upside move and we do have
the nagging reality of a potential rise in interest rates to keep
the bulls in check.

The recent rash of PnF Sell signals on the major indices have been
reversed, bullish percent readings are still quite high (except in
the case of the NDX, which has now reversed to Bear Correction at
52%), and technically things look bullish.  This is balanced
against volatility levels that are historically still quite low,
with the VIX once again trolling around the 16 level.

With the new PnF Buy signal on the DOW and a price target of
11,600, you'd think I'd be excited to do a DJX LEAP Call play
here, right?  Well, all things being equal I probably would.  The
issue that rests in my frontal lobe keeping me from pursuing such
a course of action is the view we've taken of looking at the rally
of the past year in light of different currencies.  That view
hasn't changed one iota and unless the dollar weakens considerably
more in the near-term, my thinking is that rangebound trade is the
more likely scenario.

As a matter of fact, if we were to expand our view of the DOW vs.
Euro chart to encompass the 1996-2004 timespan, we can see quite
clearly a H&S top formation building.  There's nothing concrete
there yet, (just as there's nothing concrete yet on the bearish
divergence on the monthly S&P chart we've been looking at), but it
is yet another potential situation that long term bulls on these
two indices must beware of.  I would have liked to include those
two charts this weekend, but for some reason my chart capture
program is feeling uncooperative.  They're both long-term enough
though that we can update them next weekend.

If it sounds like I'm hedging my bets this week, then you're right
on target!  I can't make a convincing argument for a major
downside move and I think much of the positive expectations for
the April earnings cycle are already factored into equity prices
at current levels.  It is entirely possible that we'll see a
breakout to the upside in the weeks ahead.  It's just as likely
that we'll see the broad market churn in the range already defined
since the start of the year.  That makes this a stock-picker's
market (I hate that term, but I think it applies here) at least
until we move through the month of April.

I think we're well-positioned to take advantage of continued near-
term bullishness with our long plays and we have a few candidates
that could shape up for new plays both on the long and short side
in the weeks ahead.  Now is the time to monitor what happens in
the market, and adjust our bias and our playlist accordingly in
the weeks ahead.  So without further ado, let's head over to look
at the specific plays and candidates and see what the holiday-
shortened week just completed had to offer.

Portfolio:

NEM - Consolidation appears to be the name of the game in the gold
sector over the past couple weeks.  It wasn't that long ago that I
was getting excited all over again with the breakout over $46,
generating a new PnF Buy signal, but the stock has been largely
stagnant since then.  This lack of directionality can be blamed on
the fact that the price of gold has been unable to break out over
its January highs near $430, which is itself attributable to the
renewed strength in the dollar, due to thoughts that interest
rates in the U.S. will be rising soon following the most recent
Jobs Report.  As we've covered here ad nauseum, the gold bull is a
difficult beast to ride and it requires an uncommon level of
patience to do so.  As long as the Fed continues to print money at
anywhere near the current rate, the long-term decline in the
dollar should continue, at least relative to gold.  Remember, the
next significant event in this gold bull market will be when gold
breaks out to new multi-year highs against the other currencies
like the Yen Euro and Swiss Franc.  Until then, we can be content
to sit and wait for the natural price action to unfold.  Maintain
stops at $41 (which would create a new PnF Sell signal) on our NEM
play.

HD - What can I say?  HD remains stuck in a rut, stuck in a rut,
stuck in a rut...and is not going anywhere of substance.  We need
a breakdown under $35 (and preferably below the 200-dma) to give
any conviction to our bearish thesis.  On the other hand, a
breakout over $40 would tell us that we're on the wrong side of
this play.  Until one of those scenarios play out, we've no choice
but to wait and see.  Prospects for rising interest rates should
put downward pressure on the stock, but that effect has been
muted, to say the least.

MLNM - Traders searching for guidance from MLNM's daily price
chart have got to be tearing their hair out!  Slight breakouts
from the recent consolidation met with a slight breakdown and now
we're headed right back into the heart of that consolidation range
again.  On the weekly chart, we can still see the semblance of a
bullish trend, and it appears that key support is now found near
the $16.50 level.  The late March dip to that level successfully
filled the December gap and now the stock is free to pursue a
strong upside move -- at least that's what I'm hoping for.  My
biggest source of concern is the fact that the PnF chart is
currently on a Sell signal and we need to see a trade at $19.50 to
negate that signal.  Last week the Biotechnology index (BTK.X) was
turned back from just below its March lows and MLNM will need to
see renewed strength from the BTK to propel it back into the $19-
20 area.  Should the BTK manage a breakout above $565 and MLNM be
unable to deliver a trade at $19.50, then I think we'll have to
concede defeat and drop the play.  That sort of relative weakness
would tell us unequivocally that we are not riding a strong horse.
In light of the lackluster trade of late, I'm going to reduce our
risk in the play, raising the stop to $16, just under the recent
low, as well as the 200-dma.

CHK - After 3 months of trading in a broad consolidation pattern,
it looks like CHK is finally ready to move higher again.  Of
course it didn't hurt that on Thursday the June futures contract
for Natural Gas broke out to a new high.  CHK got with the
program, surging through the $13.50-13.60 resistance level that
has been holding it back these past couple months and a test of
the $14 multi-year highs seems likely in the near future.  The
stock has survived three attempts at a breakdown under $12 and
with the 200-dma now at $11.73, I think it is safe to inch our
stop up to $11.50 this weekend.  Recall that a trade at $11.50
would constitute a new PnF Sell signal, so that is the sensible
place for our stop.  Once CHK breaks out over $14 and then
solidifies that breakout, we'll look to raise our stop even
further.  Remember, once through $14, CHK will be headed towards
next resistance at $16 from 1996-1997.  Our job at this point is
just to ride this train higher as long as the bullish trend in the
Natural Gas sector holds firm.

SNDK - It seems every week now is bringing encouraging technical
developments for our SNDK play and last week was no exception.
Tuesday's strong round of buying smashed through the 100-dma and
the 200-dma and the stock just headed higher into the end of the
week.  The stock has now soundly broken from its descending trend,
broken into its gap from late January and appears headed for a
test of the mid-January highs near $36.  Any pullback now should
find firm buying interest in the $29-30 area, and a dip and
rebound in that area can be used for secondary entries into the
play.  As this rally unfolds, the picture on the PnF chart
continues to get stronger, with the bullish price target now
pointing to $48 as a possible objective.  One important feature on
the daily chart is the way volume has been expanding lately.  That
is particularly interesting in light of the weak overall market
volume last week.  We've got a nice gain in the play right here,
and it only makes sense to tighten our stop to above our original
entry point and liquidate the protective put.  Raise stops to $28,
which should be safe under the $29-30 support level, and even if
hit, should be high enough to ensure a breakeven or better result
on the entire play.  Of course, with earnings set to be released
next week (Wednesday) conservative traders may just opt to harvest
their gains and avoid the risk of holding over the announcement.

LUV - As bad as things looked for the Transports and the Airline
index (XAL.X) a few weeks ago, there's certainly been a strong
turnaround as earnings season gets underway.  The XAL has now
pushed right back to its 200-dma and is already above the 50-dma
and we could be witnessing a turnaround in the group.  We
certainly can't attribute the resurgence to a substantial drop in
energy costs, with Crude rebounding to close just off its contract
highs on Thursday.  Perhaps, as I speculated at the outset, this
is the beginning of the seasonal rebound in the Airline stocks as
the peak travel season gets ready to take off.  Whatever the
cause, our LUV play is now moving in the right direction, having
handily cleared the 50-dma and now getting set for a confrontation
with the 100-dma just over $15.  Of course the strong resistance
that will have to be dealt with is a bit higher in the $15.60-
16.20 area, with the 200-dma just above there.  With the breakout
from the downtrend, I think it should be safe to raise our stops
to $12.75, just under the March low.  Pullbacks near the 50-dma
can be used for continuation entries, as the weekly Stochastics
are now clearly in a bullish configuration.

EBAY - As impressive as the breakout over $70 was, EBAY gave us
another strong performance last week.  After consolidating near
the $74 level, the stock broke out on strong volume on Thursday in
response to the strong earnings report from YHOO.  Stepping back a
bit and looking at the big picture, I'm struck by the similarity
of the stock's price pattern over the past few weeks to what
happened late last year.  After consolidating below strong
resistance (then at $59), EBAY made one failed breakout attempt
(early October), then a failed breakdown (mid-November), before a
strong breakout that just continued to rise into the mid-$60s.
Look what just happened in the past several weeks.  In early
March, there was an aborted move through the $70 resistance, then
a false breakdown in late March (complete with a PnF Sell signal)
and then the strong and decisive breakout of the past two weeks.
If this really is a repeating pattern, then we should expect that
the initial breakout level ($70) should not be threatened again.
So I think it is warranted to get more aggressive with our play
management here.  Let's sell the protective put for its residual
value and raise our stop to $70.  That should guarantee no worse
than a breakeven for this position and I'm expecting EBAY to
continue higher ahead of earnings (scheduled for 4/21).  Of course
the conservative approach may be to harvest gains ahead of the
report, but I'm inclined to stick with this play and go for the
gusto, especially with the newly bullish PnF chart, which is now
giving us a tentative bullish price target of $99.

Watch List:

TYC - As the price action continues to unfold, I'm growing less
enthusiastic for a bullish move in shares of TYC.  While the stock
remains in its bullish rising channel, I can't ignore the
potential H&S top that appears to be forming over the past 2
months, with the neckline just below our $27 entry target at the
100-dma.  That said, I could just as easily make the case for this
being an extended period of consolidation ahead of the next
bullish move.  If that latter interpretation is correct, then we
still ought to be targeting entries at the bottom of the channel.
Despite my trepidation, I'm going to stay the course, looking for
entries on a test of the $27 level.  If filled, we'll use a
liberal stop at $23.50, now just under the 200-dma.  Hopefully my
comments this week convey my view that this is now a more
aggressive play candidate.

Radar Screen:

WMB - If you've been following the price action in shares of WMB
with me, I think you would agree that the price action has been
rather inscrutable of late.  There's no doubt that the recent
bullish breakout from the short-term neutral wedge looks
encouraging, but I don't care for the lack of follow-through,
especially with the continued strength in the price of Natural
Gas.  Since it is too difficult to structure a good risk to reward
play in this stock, I'm going to remove it from consideration this
week.  Let's focus our attention elsewhere.

APA - Continuing to build its bullish wedge and threaten to break
out to the upside, APA has been very unwilling to give us what I
would consider a viable entry point.  The stock may very well
break out in the near future, but I don't like the prospects of
chasing the stock higher.  We'll remain passive on this one if it
does break out.  I still view a pullback to strong support in the
$35-36 area as the best way to participate in the bullish trend.
Absent that, we'll leave it alone.  If APA does break out and
continue higher above $45, we'll remove it from consideration as a
potential play.

GM - The 50-dma has been stiff resistance for GM over the past
couple weeks and it certainly looks like a stock that wants to
head lower.  But with the weekly Stochastics now starting to turn
bullish, I have the distinct impression that a bullish move is
about to unfold as we head into the April earnings parade.  On one
hand, I'm tempted to initiate a Watch List play here, looking for
a rejection at the top of the long-term falling channel.  On the
other hand, I don't want to enter a bearish play when the weekly
Stochastics are clearly just starting to turn the other way.
Let's remain on the sidelines through the company's earnings
report (April 20th) and then re-evaluate.

DJX - Along with the rest of the market, the DJX had a nice
rebound off the March lows and is now sitting right in the middle
of what we can view as a broad consolidation zone from 10,000-
10,700.  The PnF chart is bullish, with a target of 11,600 and I
think it is very difficult to make a case for either a strong
bullish or bearish long-term trade on this index right here.  If
forced to choose, I think I'd have to go with the long side, but
beyond the April earnings cycle I'm hard-pressed to see what the
bullish catalyst will be.  At the same time, I can't see what the
bearish catalyst would be to initiate a strong downtrend either.
My gut feel here is that the DOW will remain rangebound throughout
the summer and leading up to the November election unless we see
more evidence of strong growth and sharp increases to earnings
guidance in the weeks ahead.  Of course on the bearish side of the
coin, if the Fed were to start raising short-term rates earlier
than anticipated, that could have a pronounced bearish effect.  At
this juncture though, it is little more than conjecture.  That's
not a viable basis for a long-term trade, so let's just wait and
watch for now.

EK - Following our most recent failed attempt at playing the
downside in EK, I've had some interesting discussions with readers
about giving it another shot.  I've been slow to come to the
conclusion that my readers are right and it is time to start
thinking about trying this one again.  But now isn't the time, in
large part due to the weekly Stochastics, now almost buried in
oversold.  The other unknown factor is how the removal from the
DOW will affect the stock over the short-term.  Better to let that
dynamic play out and then we can look to once again enter the
dominant downtrend.  We'll take our cue from the weekly oscillator
here and look to move EK onto the Watch List when the oscillator
once again nears overbought, provided price is still meandering
below the long-term falling trendline, now at $28.50.  If we do
manage to get a favorable setup for the play, we'll be targeting a
return to the 2003 lows near $20.

AIG - In an impressive show of force, AIG staged a strong breakout
last week, hitting its best levels since early 2002.  A quick look
at the weekly chart shows that the stock has potential up to the
$85 level and possibly into the low $90s.  That view is confirmed
by the PnF chart, with a new Buy signal and a tentative bullish
price target of $91.  I was tempted to add the stock to the Watch
List this weekend on that alone, but I'm inclined to be a bit
cautious due to the unknown impact of the stock's addition to the
DOW.  It "should" have a bullish impact, but that assumes that
there wasn't a lot of buying over the past several sessions in
anticipation of the index reshuffling.  Let's let this one play
out for a week and if it still looks good, we can officially add
it to the Watch List next weekend.  For those eager beavers that
can't wait, my view is that a dip near the $73 level should make
for a solid entry into this bullish trend.  But make sure to use a
stop at $68 (just under the March lows) in case of a sharp
reversal.


Closing Thoughts:
Despite looking at over 200 "leap-able" stock charts this weekend,
I saw very little that made me want to jump aboard, either to the
long or the short side.  The broad market appears to be
consolidating ahead of its next directional move and with the
number of cross-currents acting on the equity market, I can make
valid arguments for long or short on many symbols.  To me, that is
a warning sign that there is insufficient clarity.  Echoing my
closing comments from last week, I think we're well loaded with a
nice selection of bullish plays, some of which are now performing
quite nicely.  There is very little to choose from on the short
side right here, with most "short-able" candidates only offering
the ability to try picking a top in an established and extended
uptrend (no thanks!) or an opportunity to play the downside when
the weekly oscillators are already buried in oversold.  Once
again, no thank you!

A good trading friend of mine recently reminded me that if I'm
looking at a chart (or group of charts) and the trade isn't
immediately obvious, then perhaps there isn't a high-odds trade
there at all.  Taking that advice to heart, I have to say that is
the case with most charts I viewed this weekend.  So let's just
stick with what is currently working and wait for the next trade
setup to scream "What about me?" at us.  At the very least, the
first full week of earnings ought to help provide clarity as to
what the majority of market participants are thinking and that
should help to illuminate what we're looking for in terms of long-
term plays.

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays



LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
TYC    03/07/04   $27          JAN-2005 $ 30  ZPA-AF
                            CC JAN-2005 $ 25  ZPA-AE
                               JAN-2006 $ 30  WPA-AF
                            CC JAN-2006 $ 25  WPA-AE
                            PP JUL-2004 $ 25  TYC-SE



PUTS:
None



New Portfolio Plays

None

New Watchlist Plays

None


Drops

None


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

CAT - call play
  Raise stop from $78.95 to $79.99

PDCO - call play
  Raise stop from $70.99 to $71.75

ZBRA - call play
  Raise stop from $68.00 to $69.99


CFC - put play
  Lower stop from $90.51 to $89.25


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

None


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

Amerada Hess Corp. - AHC - close: 66.05 change: +1.99 stop: 65.50

The continued rise in energy prices on Monday was too much for
bears in AHC, and the stock finally broke firmly above its
descending trendline, triggering our stop in the process.  This is
a bearish play that didn't work one bit in our favor, but we're
actually pretty happy about it, as our entry trigger kept us out
of trouble.  Recall we were looking for a breakdown under the 50-
dma to trigger the play to active status and since that never
happened, there was never an opportunity to get on board and get
hurt by the rally of the past few days.  Clearly we're dropping
the play from consideration tonight.

Picked on April 1st at        $63.15
Change since picked:           +2.90
Earnings Date                4/28/04 (unconfirmed)
Average Daily Volume =         905 K




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

Mixed Bag

American International Group - AIG - close: 76.77 change: +0.50

WHAT TO WATCH: Continuing to hold up well throughout last week,
AIG delivered more of the same on Monday and looks as though it
could continue to power higher, first to $80 and then to $85.
Target entries on a pullback to support in the $74-75 area, and
then hold on for a bullish run up to the next level of resistance.

Chart=


---

Invitrogen Corp.  - IVGN - close: 73.78 change: -0.43

WHAT TO WATCH: Looking for a rollover candidate?  Shares of IVGN
appear to be doing just that, having failed to scale the $76
resistance level and now beginning to tip over, confirmed by the
rolling daily oscillators.  Use an entry trigger under the 50-dma
and target a drop to the March lows near $65.  Use a tight stop at
$76.

Chart=


---

Johnson Controls Inc. - JCI - close: 56.68 change: -0.04

WHAT TO WATCH: we've been monitoring JCI for a few weeks now,
noting how it is stuck in a range between $56-60.  We're looking
for a break of that range to signal the next strong tradable move
and based on the heavy selling volume, the downside may have the
nod.  Look for a break under $56 to trigger entries, targeting a
drop first to the 200-dma and then to stronger support near $50.

Chart=


---

Quest Diagnostic - DGX - close: 84.10 change: +0.55

WHAT TO WATCH: While the rise has been lethargic so far, shares of
DGX look like they are poised for a strong bullish move, as the
pattern of higher lows and higher highs is inching its way towards
strong resistance just under $86.  Aggressive traders can enter on
a break above today's high, while the more conservative approach
will be to wait for the trade at $86.  A break to new highs will
open the door for a rally towards next resistance at $90 and
possibly a run at the all-time highs near $96.

Chart=


---

===================
On the RADAR Screen
===================

APA $43.22 - While not quite able to hold its breakout today, APA
did make a convincing early move over $44, hitting new all-time
highs and issuing a new PnF Buy signal.  The pullback from the
highs may be setting up another solid bullish entry.  Target
entries on a rebound from above $42, the site of the near-term
rising trendline and look for a rally into the $47-48 area, as
energy prices continue to rise.

RYL $79.37 - Is the housing bubble about to burst?  With interest
rates apparently on the rise, housing stocks have been showing
some weakness again and shares of RYL plunged again on Monday,
coming to rest on the 200-dma.  Trigger entries on a break under
that average and target a drop back near the January lows just
over $70.  Keep an eye on the $75 level though, as it is possible
that level will provide support for the next bounce.


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