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Daily Newsletter, Wednesday, 04/28/2004

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The Option Investor Newsletter                Wednesday 04-28-2004
Copyright 2004, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: See Note
Futures Wrap: See Note
Index Trader Wrap: WAITING OVER


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     04-28-2004            High     Low     Volume Advance/Decline
DJIA    10342.60 -135.56 10476.95 10333.87 2.42 bln    595/2254
NASDAQ   1989.54 - 42.99  2026.44  1958.54 1.96 bln    631/2470
S&P 100   547.54 -  7.78   555.62   547.41   Totals   1226/4724
S&P 500  1122.41 - 15.70  1138.11  1121.70
RUS 2000  577.06 - 13.70   590.76   575.82
DJ TRANS 2947.12 - 26.16  2975.24  2944.50
VIX        16.29 +  1.22    16.54    15.55
VXO        16.76 +  1.78    17.10    16.25
VXN        23.92 +  2.08    24.15    22.26
Total Volume 4,882M
Total UpVol    607M
Total DnVol  4,250M
52wk Highs     147
52wk Lows      257
TRIN          4.12
PUT/CALL      0.88
*******************************************************************

Check the Site Later Tonight For James's Market Wrap Article
http://www.OptionInvestor.com/indexes/marketwrap.asp


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

WAITING OVER
By Leigh Stevens
lstevens@OptionInvestor.com

THE BOTTOM LINE –
The pattern whereby the indices were unable to make headway
against a declining level of resistance usually has a bearish
outcome and this outcome was seen today.  As I said yesterday,
the market was vulnerable to any perceived negatives out there.
Today's market action activates my downside targets.

TODAY'S TRADING ACTIVITY –

The "shocks" I mention today were today seen as financial turmoil
at Nortel and concern about an economic slowdown in China - this
and the fact that fighting heated up in Iraq all took its toll.
Now, when the market wants a reason to sell off, it has to
sometimes invent bad news - since when and why does a desire for
more moderate growth in China by that countries leadership, have
such an impact on our Market?!

The S&P 500 (SPX) lost nearly 16 points to close at 1122.4 today,
down nearly 1.5%. The Dow 30 Average (INDU) closed just above its
intraday low and down 135.56 points to 10,342.6.  The Nasdaq
Composite (COMP) dropped nearly 43 points, about 2%, to finish at
1,989.5.

Canadian telecom giant Nortel Networks (NT) said yesterday that
it had fired its CEO and that it would delay its 2004 reports and
restate the last three years of its financials. This hit the
stock hard in pre-market trading.

War tensions hit investor confidence early also as fighting in
Iraq heated up.  The VIX volatility took a t jump as what looked
like put buying came in as a hedge against stock positions. By
early afternoon the VIX was had jumped nearly 7% and down volume
swamped up volume by 5 to 1.

Gold took a beating also and drove the XAU gold and silver stocks
index to a new low for the year. XAU was down more than 6%.   The
drop in commodities prices was laid at the doorstep of China -
word was out that not only would the Chinese economic authorities
try to slow down its booming economy but new rules in its banking
system could impact demand there for borrowing and economic
expansion.

Dow stock Alcoa (AA) got hit hard and was down 4% by the close. A
Dow stock story today related to Disney (DIS) as it dropped 1%
after Comcast (CMCSK) our biggest cable company, indicated that
it was dropping its $60 billion bid for DIS "since it's clear
that there is no interest on the part of Disney's management and
board in putting Comcast and Disney together."

Tech stocks were hit with the Internet index was down nearly 3%,
and networking and software sectors off nearly 2.5%. Nothing much
was spared in fact - biotech stocks, big winners this week got
hit and profit taking was on in its leading stocks - the biotech
index (BTK) was down 3.5%. Financials were also weak with broker-
dealers leading the way.

Besides the China news, as mentioned the tech wreck was
attributed the overnight news from Nortel, as it closed down 28%
(to $4.05) on trading that was nearing 300 million shares by the
close.

OTHER MARKETS –
In the bond market, the 10-year T-note closed down 16/32 at 96
9/32 to yield 4.47%. Demand was the weakest in several months for
the $26 billion in 2-year Treasury notes sold Wednesday. The
dollar was up 0.6 percent vs. the euro at $1.1840.

MY INDEX OUTLOOKS –

S&P 500 Index (SPX) – Daily chart:
Action today resolved the trend short-term I think as prices now
seem headed to test the lower (up) trendline.  Look for support
at 1105.

SPX is now trading below its 21-day moving average which is
bearish.  The key level is 1100 - if broken, I don't see a big
decline unless there is daily close under 1090.





S&P 100 Index (OEX) – Daily chart:

Near resistance is 558 in the S&P 100 (OEX). A close over 558 is
required to get the chart looking more bullish again - don't hold
your breath!  Key near support implied by the up trendline comes
in at 542. The chart picture is now more bearish in that the
pattern of lower and lower rally highs is again "confirmed".




It's possible that OEX is headed to a retest of its 200-day
moving average around 533 currently and is also an area where I
would take a long call position - but that's a ways ahead if at
all.

S&P 100 Index (OEX) – Hourly chart:

I would just note again here the pattern that is fairly common
where the previously broken trendline acts in an opposing fashion
- here, it is that what was support (the up trendline), when
broken, later "became" an area of rising resistance.

Key lows are the prior hourly bottom around 545.5.  Next support
under this area looks to be at 541-540.




Dow Industrials (INDU) Daily:
10,300 is key near support, then in the area of the trendline at
10,150.




Nasdaq 100 (NDX) Index  – Daily:
1450 to 1440 is near support.  The move to below the 21-day
moving average is bearish and suggests an eventual decline to the
low-1400 area, at my lower trading envelope line.




Nasdaq 100 tracking Stock (AMEX:QQQ)– Hourly:
I said last night that I would rather be short the Q's then long,
as the risk to reward looked better - lower stops on short stock
positions to 36.90.  I continue to see downside potential back to
the 35 area if not to the 34.50-34 zone.

The symmetrical triangle pattern is starting to get broken to the
downside and suggests more weakness in the days ahead UNLESS QQQ
pretty immediately regains 36.25, then 36.75.  Overhead
resistance is at 36.75 to 37.25.




Good Trading Success!


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The Option Investor Newsletter                Wednesday 04-28-2004
Copyright 2004, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: WFMI
Dropped Calls: UOPX
Dropped Puts: None
Watch List: Don't Feed The Bears


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

WFMI - Call
Adjust from $77.90 up to $78.75

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

Univ. of Phoenix - UOPX - cls: 89.80 chng: -2.39 stop: 87.50

Sadly, we have to report that our relatively new play on UOPX died
a swift death, without really ever working in our favor.  We were
looking to buy a rebound first from the $92 level and then perhaps
on a bounce from the $90 level.  Neither level provided enough
support to be considered an entry point and today's broad market
weakness drove the stock down through the 4/20 low, triggering our
$87.50 stop in the process.  Although the stock did manage to
bounce back a bit from that low, there's nothing on the price
chart that would tempt us to keep the play alive.  The stop was
hit and it looks like the next stop for UOPX will be the 50-dma
down near the $85 level.  We'll chalk this one up as a clear bull
trap, as last week's breakout has now failed in spectacular
fashion.  Any traders that opened positions on the way down should
use any rebound back towards $90 as an opportunity to exit this
failed play.

Picked on April 22nd at      $93.87
Change since picked:          -5.44
Earnings Date               3/12/04 (confirmed)
Average Daily Volume =        183 K




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

None


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

Don't Feed The Bears

___________________________________________________________________

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.
___________________________________________________________________


Lehman Brothers - LEH - close: 75.85 change: -1.74

WHAT TO WATCH: The XBD broker-dealer index really took a beating
today with a 2.27% loss.  The sector index has been suffering
under a steady trend of lower highs the entire month of April
after what looks like a triple-top in the first quarter.  The
group is quickly approaching crucial support at the 130 level and
its 200-dma.  Likewise LEH has been a huge under performer with a
steady trend of lower highs while edging closer to support at
$75.00 and its 200-dma.  Should LEH breakdown under $75.00
traders could target a move toward the $70.00 level.  We've also
listed a few more brokers in the radar screen below.

Chart=


---

Research In Motion - RIMM - close: 92.71 change: -4.83

WHAT TO WATCH: This is another crucial breakdown for RIMM but is
it for real?  The stock had been trading in a bull-flag pattern
(a.k.a. short descending channel) for the last three weeks.  That
changed today when RIMM broke down past the $95.00 mark and its
simple 50-dma.  This looks like a playable bearish breakdown but
RIMM did this a month ago with a big break below psychological
support and its 50-dma only to rebound two days later.  More
aggressive speculators might consider targeting a move toward the
$82-85 range.

Chart=


---

Netease.com - NTES - close: 45.56 change: -4.69

WHAT TO WATCH: Ouch!  Chinese Internet stock NTES got whacked
today for a 9.3% haircut.  Shares have broken support at all its
moving averages, the $48-50 level and its trendline of rising
lows.  If it wasn't for the company's earnings report due out
tomorrow night after the closing bell we might suggest aggressive
shorts targeting the $40.00 level.

Chart=


---

Terex Corp - TEX - close: 34.04 change: -1.57

WHAT TO WATCH: Uh-oh!  This company provides equipment for
construction and surface mining facilities.  It's possible that
today's 4.4% drop was due to the big decline in metals today.
TEX has broken its rising channel and technical support at its
simple 50-dma.  Shares have also broken round-number support at
$35.00 but have yet to break historical price support at $34.
There might be additional support at its 100-dma but this
breakdown looks pretty solid wit volume stronger than average
these last three sessions.

Chart=



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

UBS $70.14 -0.71 - Watch for a breakdown under $70.00.  Traders
can probably target a move toward the 200-dma near $65.

MWD $52.40 -1.17 - Already under its 200-dma, the stock is in a
steady downtrend.  Look for a move under $52.00 but watch for
possible support at $50.

FLIR $49.40 +0.90 - No weakness here!  Shares are in bottle-
rocket mode with volume super strong.  It will eventually run out
of fuel.

ADI $45.05 -0.38 - Chip stocks have been weak and ADI is back to
pivotal support at $45.00 and its 200-dma.  Will it break or
bounce?

DADE $45.03 -1.87 - DADE has bounced from support at its 40-dma
for months without fail.  Once again DADE is nearing support at
its 40-dma but that looks like a double-top.  Will it bounce or
break down?

UTX $89.07 -0.87 - Dow-component UTX is struggling with
resistance at $90.00 and appears to be rolling over.  Bears could
use a tight stop and target a move to its 200-dma near $86.


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