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Daily Newsletter, Tuesday, 05/04/2004

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The Option Investor Newsletter                 Tuesday 05-04-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Fed Raising Rates
Futures Markets: See Note
Index Trader Wrap: Trader's logbook, April 21, 2004
Market Sentiment: Listening to the Fed


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      05-04-2004           High     Low     Volume   Adv/Dcl
DJIA    10371.20 +  3.20 10386.04 10266.17 2.01 bln 1869/1377
NASDAQ   1950.48 + 11.80  1968.70  1933.60 1.87 bln 1855/1266
S&P 100   547.15 +  1.30   551.03   543.59   Totals 3724/2643
S&P 500  1119.51 +  2.02  1127.65  1112.89
W5000    Problem with data feed
SOX       448.31 +  7.40   454.76   440.87
RUS 2000  569.64 +  4.16   575.18   565.18
DJ TRANS 2915.63 -  7.50  2935.02  2902.28
VIX        16.55 -  0.07    17.13    15.97
VXO (VIX-O)16.36 -  0.27    17.52    15.88
VXN        25.14 -  0.58    25.89    24.36
Total Volume 4,245M
Total UpVol  2,767M
Total DnVol  1,362M
Total Adv  4247
Total Dcl  2978
52wk Highs  134
52wk Lows   224
TRIN       0.87
NAZTRIN    0.69
PUT/CALL   0.67
************************************************************

Fed Raising Rates
by Jim Brown

Using Fedspeak Greenspan said they were ready to raise
rates but they are not raising them now. The Fed left rates
unchanged but said they could begin raising rates at a
measured pace in the near future. The market was not sure
if they liked the new Fed policy stance despite getting
everything they wanted from the statement.

Dow Chart - Daily


Nasdaq Chart - Daily




The morning started off great with Chain Store Sales jumping
to +1.5% for last week compared to -0.5% for the prior week.
No real excitement there with tax refunds fueling the buying.
The real excitement came from the Factory Orders, which soared
+4.3% for March compared to +1.1% for Feb. That Feb number
was revised up from only +0.3%. Consensus for March was only
+2.3% and it was widely assumed to be optimistic. The blowout
at almost twice what was thought to be optimistic really gave
traders some positive economic ammo but they failed to hold
any morning gains. Nondurable goods rose +3.5% which completely
erased the -1.8% decline in February. Shipments rose +3.8%,
unfilled orders rose +1.2% but most important was nondefense
capital goods, that is normal business equipment, rose +4.5%.

The upward revision to a weak February and the blowout in
March suggests the economy may actually be exploding. While
traders were excited with the initial release their fears
that the strong numbers would excite the Fed weighed on the
bulls. The morning bounce to 10330 on the news was sold into
the pre Fed lull. Worry, worry everywhere and not a buy
program in sight.

Helping fan the economic flames was a very minor +6.1% jump
in layoffs from 68K to 72K in April according to the Challenger
Layoff report. Better news showed that the private sector was
firming and the government sector was responsible for the
majority of the cuts. The number of layoffs has been moving
steadily down for months with only a couple spikes in Oct and
Jan. Challenger also found that small business hiring actually
grew +25% in the first quarter. Companies of less than 500
employees are doing the most hiring.

The big news was of course the Fed announcement that they
were not going to raise rates today BUT they are ready to
raise rates at a pace that is likely to be measured. (Their
words) They cleaned up their policy statement to remove any
hint of economic weakness and any reluctance to act on their
part. The dumped the comments that either "inflation" or
"unwelcome disinflation" were likely and adopted a "risks
are equally balanced" posture. This was a key point they
tried to make. No inflation. The mentioned inflation in one
form or another several times. "Long term inflation expectations
appear to have remained well contained." "Price stability is
in balance." "Inflation low and resource use slack." All of
these comments were made to tell us that the Fed is not
worried and not in a rush to raise rates. When they do begin
to raise rates it will be at a "measured pace" meaning they
are not going to try and shock the market or make any large
sudden moves. It was a picture of a Fed trying to be patient
in an election year without actually saying so. In Fedspeak
it is all "read between the lines".

They have left us with an economy that is "robustly growing
productivity", "output expanding at a solid rate" and "hiring
appears to have picked up", all their words. They like what
they see and see no reason to raise rates despite the lowest
rates in decades. The markets rallied to new highs for the
week on the news then crashed back to pre Fed announcement
levels. The Dow ended up +3 and the Nasdaq +11. What in
earth happened?

Fear of the unknown. The Fed left the cloud over the market
and left traders guessing about when the rate hikes would
begin. There was actually a strong contingent of traders
hoping for a hike today. Traders in the Chicago pits and
on the floor of the NYSE booed when the announcement was
made. Amazing when you think about it. The Fed statement
gave everyone a present, strong economy, no inflation and
no rate hikes on the horizon. If the market was afraid of
rate hikes last week then today should have been a breath
of fresh air. Unfortunately it did not give them any view
of the future other than the Fed is ready to act if needed.
That can happen as soon as next Monday or six months from
now. It is like riding down the highway with a bubble on
your tire. You know it could pop at any time and you are
afraid to go very fast. That is the market today. We have
a Fed cloud over our car and lightning could strike at any
time.

The outlook shifted to events in the future that could
cause the Fed to react. The immediate threat is the Jobs
report on Friday. The Fed has been known to react between
meetings on the Monday after an employment report. If the
Layoff report is any clue then the Jobs report this Friday
could be decent. The +25% growth in small business hiring
as indicated by Challenger is the key. Last months report
showed an increase of +308,000 jobs and a similar report
this month would just about guarantee a rate move in June
if not before. Should the jobs from last month be revised
down significantly it could put the Fed on hold that much
longer. It is a very confusing scenario for institutions
and for bond traders. When confusion reigns nothing happens.
That is exactly what we saw today.

The Dow had been uptrending slightly from last weeks severe
depression. The post Fed spike sent the Dow to near 10400
once again but that level was very short lived and we fell
to close back near 10300. The slight uptrend is still intact
but just barely. Resistance is still 10325 and it has held
for three days. Support is 10265 and it has held for two
days. Odds are good we are going to break one of those
levels on Wednesday.

The Nasdaq is exhibiting the same very slight uptick although
it was the strongest index today. We saw a spike to 1970 after
the announcement, a solid retrace of those gains but a stubborn
hold at 1950 at the close. After three days of concentrated
selling last week the Nasdaq is refusing to give ground.
Current support has turned into 1933 and that is also the
200dma as we discussed last weekend. It is right on the edge
of a real rebound or a real failure. The buyers appeared at
the right level but so far have not been able to get enough
traction to move it higher.

This brings us to the rest of the week. Just like we went
into hold mode for the announcement today we could just as
easily maintain this mode into the Jobs report on Friday.
The Fed stance put the bulls back into bad news mode where
they want any economic news to be just good enough to prove
there is an economic pulse and not strong enough to require
a Fed sedative. Instead of wanting another +300K of new
jobs on Friday the bulls would be perfectly happy with a
number less than consensus, say in the +150K range. Too
much good news now could activate the Fed either at or
before the June 29th meeting. The goal for traders now will
be to somehow get through the June-29th meeting with no hike
and that gives them a potential free pass into August. This
makes everything that happens between now and the June FOMC
meeting of greater than normal importance.

Personally I think the markets received a free pass until
Fall as long as the jobs do not continue at the +300K
pace. The Fed is clearly watching for inflation but not
currently concerned due to the weakness of the recovery
until now. The Fed does not want to crash the housing
market before summer and they realize that the stock market
also contributes to overall good will and economic prosperity.
With everything running so smoothly AND with the bond market
already pricing in a rate hike, the Fed only needs to keep
up the tough talk and the credit markets will keep rates
at a reasonable level. This will allow the carry traders
plenty of time to unwind their trades and the home builders
to produce a record summer. The economy will benefit from
both and in an election year that can't be bad. Besides, if
a little economic slowdown appears over the summer the Fed
will not be making it worse. Now, all I need to do is make
the market see it my way.

For Wednesday I would look to be long over 10330/1960 and
short under 10275/1940 and simply follow what the market
gives us. The funds could begin to reenter the market
tomorrow but remember we are still in a down trend. Until
the pattern of lower highs is broken we are just range bound
at a lower level with risk to the downside. Earnings are
still decent but declining in quality and frequency and the
summer doldrums are just ahead. There is no real catalyst to
send us higher but there is no specific risk either. The Fed
should already be priced into the market. We are likely to
see some volatility at the open as the various forces do
battle so don't look for direction until after 10:00.

Enter Passively, Exit Aggressively.

Jim Brown
Editor


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

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



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

Trader's logbook, April 21, 2004

I was never much of a fan, or constant watcher of the Star Trek
TV series, but the other night I watched one of the Star Trek
movies on TV (Star Trek III: The Search for Spock), where Captain
Kirk and some of his old crewmembers decided to go looking for
Spock.

I didn't see the ending of the movie, but do remember Captain
Kirk recollecting something Spock had said as he (Spock) was
trapped in the ships engine chamber, which eventually caused his
death, that served an important clue for which I'm sure Captain
Kirk and crew eventually found Spock.

Again, I didn't watch the end of the movie, but having seen Spock
on some recent TV commercials for Priceline.com (NASDAQ:PCLN)
$25.42 +2.21%, Captain Kirk must have found him.

Trader's logbook, April 21, 2004.

Hmmmm... sounds a bit like the beginning of most Star Trek
movies, where Captain Kirk is explaining the setting, what's been
going on, and what the next mission will be.

In a trading session that may have been as difficult for me to
follow, make sense of, and similar to the complex yet interesting
Star Trek movie plots, there are some things I think we can draw
from today's session, which I found, and you might also find,
somewhat similar, if not almost IDENTICAL, to April, 21, 2004.

In this afternoon's Market Monitor, it hit me.  While I wasn't
around last week, today's plethora of buy/sell program premium
alerts (6 buy and 6 sell), which were generated just after the
Federal Open Market Committee announced its decision to keep
interest rates unchanged, had me remembering the subtleties of
the April 21, 2004 trading session, where a plethora of buy/sell
program premium alerts were found.

For those that would like a quick refresher of the Index Trader
Wrap, here's the link:
http://members.OptionInvestor.com/Itrader/marketwrap/iw_042104_1.ASP


While we witnessed some wild volatility after the FOMC meeting,
the major indices finished higher, but well off their post FOMC
meeting highs.  After trading as high as 10,386.32 (up 76 points
from yesterday's close, and 105 points from where it was trading
just second before the FOMC announcement) the "slower moving" Dow
Industrials (INDU) 10,317.20 +0.03% finished up a fractional 3.2
points.

The more volatile QQQ $35.25 +0.42% didn't disappoint on the
volatility side of things, and traded a session high of $35.75
(up 1.56% from its $35.20 trade just seconds before the FOMC
release) to still muster a 15-cent gain on the session, but
again, well off its post FOMC high.

Here's a quick look at my Premium of S&P 500 Futures ($PREM.X)
chart, so you get a feel for today's buy/sell program premium
alerts.  If you feel any confusion at the end of today's trade,
you're probably not in the minority.  Again, buy/sell programs if
measured on 5-minute intervals were evenly matched at 6 buy and 6
sell from 02:15 PM EDT to the close.

Premium of S&P 500 Futures ($PREM.X) - 5-minute intervals



I went back and looked at the 04/21/04 Index Trader wrap, and
sure enough, it was Alan Greenspan's testimony before Congress
that had some buy/sell program premiums being triggered.

Kirk to Bones:  Hey Bones! (Bones was the doctor on Star Trek).
Didn't the Dow Industrials close at 10,317.27 on April 21, 2004?

Hmmm.... today's close for the INDU was 10,317.20.  Coincidence?
Perhaps.

Now Captain Kirk begins to think.  What was it that Spock was
saying?

Market Snapshot / Internals - 05/04/04 Close



Here's a quick look at our market snapshot/internals.  In PINK
boxes I make note of the INDU closing value, and the closing
value of Spot Gold.  On April 21, 2004, Spot Gold closed at
$390.65.  I make note of this tonight, as I had made a brief
comment about it in the April 21, 2004 Index Trader Wrap.

Now, I'm also going to make note that as of tonight's close, the
NYSE Composite ($NYA.X) 6,531, NASDAQ Composite (COMPX) 1,950.48,
S&P 500 (SPX.X) 1,119.55, S&P 100 Index (OEX.X) 547.15, Russell-
2000 Index (RUT.X) 569.64, NASDAQ-100 Tracker (QQQ) $35.25 and
Semiconductor Index (SOX.X) 448.31 all trade below their 04/21/04
closing values.  ONLY the INDU trades closest to its 04/21/04
close.

I will note that in percentage terms, tonight's closing values
aren't all that much different, but late this afternoon, I
started posting and commenting about some things I saw in this
afternoon's trade, which I think tie in VERY close with April 21.

Check this out, and make two notes to yourself, and check my
thinking, and see if this observation might help clear some of
today's action up.

A bit of history first, which you can review in the Index Trader
Wraps.  On April 20, Fed Chairman Alan Greenspan testified before
the Senate Banking Committee late that afternoon, and from his
comments (Green-speak might be equivalent to Vulcan-ees) the
equity markets trade notably lower to the close, when it may have
been interpreted that Mr. Greenspan was hinting at Fed
tightening.

It was on April 21 that Mr. Greenspan then testified before
Congress and the Joint Economic Committee, where Mr. Greenspan
delivered an upbeat message on the economy, put to rest worries
of deflation, and mentioned little sign of inflation.  In
essence, Mr. Greenspan smoothed over some of his comments, or the
MARKET's interpretation of his April 20 testimony to the House
Banking Committee.

The best chart to begin putting some of these timelines together
will the a 60-minute interval chart of the QQQ.  Check this out.
For now, FOCUS on the current WEEKLY and MONTHLY Pivots.  Then
think about April 20, then April 21, and now today.

NASDAQ-100 Tracking Stock (QQQ) - 60-minute interval



See the yellow horizontal "zone" which is between the WEEKLY and
MONTHLY Pivot?  I've tried to mark the 04/20/04 late afternoon
trade in the QQQ (Greenspan testimony to Bank Committee), then
the 04/21/04 session (Greenspan testimony to Economic Committee)
where we noted a bunch of buy/sell program premium alerts, then a
very bullish upside day on 04/22/04.

Difference:  QQQ closes below $35.66 today, whereas on April 20
and even April 21, QQQ closes above.

Now, does this MEAN the QQQ stays below $35.66?  Nope, but it may
suggest a bearish bias from the market, if not institutional
computers at this point.  See how the QQQ did trade right back up
to its April 20 close and pretty close to its April 21 session
trade, but for WHATEVER reason (unhappy the Fed didn't raise
rates today, or still not comfortable with the thought of future
Fed tightening) there was some type of selling triggered at that
level.

Now, a trader that wipes the above chart free of the pivot
analysis retracement, and simply draws a horizontal line at the
"zone" between the WEEKLY and MONTHLY Pivots would still view
that as some type of resistance, where over the past month, this
level (say $35.66) did serve some support (April 20 and 21), but
when broken on April 29 (Thursday of last week) now provides some
resistance.

I did draw what I consider to be a "cheater's upward trend" from
the recent March 23 relative lows to Friday's session low, where
combined with the downward trend we've had represents a wedge.

Analysis:  A move much above today's highs in the QQQ gives a
near-term bullish bias.  Current bias somewhat bearish below
$35.66, while break below trend has $34.00 in play (WEEKLY S1 at
$33.90 and MONTHLY S1 at $33.83).

S&P 500 Index (SPX.X) Chart - 60-minute intervals



Here's a similar 60-minute interval chart of the SPX.X.  Buyers
weren't strong enough to get a close above its MONTHLY Pivot
(1,121.61), and I might begin to think that the only reason the
SPX reversed from its late session high of 1,127.74, is that the
QQQ trading its MONTHLY Pivot, which may have been the trigger
for the late session sell programs had something to do with it.

This might be an important observation/thought for us to keep in
mind as it relates to these markets right now.

Until QQQ can show some strength back above MONTHLY Pivot, then
SPX may try and lead higher in the pivot matrix, but gains could
be capped if QQQ isn't confirming.

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



At times, the WEEKLY 38.2% retracement shown in the OEX chart has
had some type of trade significance.  My main observation with
the OEX would be this.

Point one:  With just 100 stocks, it may trade cleaner, or neater
than the broader S&P 500 (100 stocks versus 500 stocks), where
program trading may show a more accurate trade.

Point two:  And this would be a more important point tonight, is
some similar Stochastics positioning found tonight as found back
on March 15.  On March 15, the OEX closed at its low of the
session (542.57 which is this week's 61.8% retracement) and while
Stochastics turned up and continued to rise, the OEX popped the
next two sessions to 551.56 (current weekly 38.2% retracement)
and then reversed rather sharply back lower.  At that time, MACD
was below zero and still below its Signal.  Similar to tonight.
In my opinion, with both the 21-day SMA and 50-day SMA trending
lower, I don't see a good bullish trade, or at least not a lot of
bullish reward at this point.

Dow Industrials (INDU) Chart - Daily Intervals



I'm carrying over some of the Stochastics notes from the OEX
chart to the INDU chart.  Stochastics turned up on the INDU on
03/16 from the current MONTHLY S1, INDU rallied for nice gain on
03/17, stalled at current MONTLY Pivot/WEEKLY Pivot, then
reversed rather quickly back lower.  The bigger rally really came
once MACD crossed above its Signal, where the steeper downward
trend then reversed.

Here's an intra-day chart of the INDU that I was trying to
verbally describe in this afternoon's market monitor.  Then our
servers went down, or something happened as just after I made
comment that the INDU was pounding up against its WEEKLY Pivot
like the big bad wolf blowing at the 3-little pigs' door, I
couldn't post anything in the market monitor.

Dow Industrials (INDU) Chart - Daily Intervals



That notable move above the WEEKLY Pivot in the INDU came from
02:45-02:50 PM.  In today's 03:15 intra-day update, I thought
intra-day action began to look like a "Big battle taking place."

There's definitely some type of selling, or has been some selling
taking place at the INDU's WEEKLY Pivot, and it did get broken to
the upside, only to then fade into the close, where sellers won
out.

In the DAILY interval chart (lower right corner) I noted that on
April 21, the INDU fell early in the morning only to make a bold
move back higher to the close.

Let's plant that seen in our mind for tomorrow.  It doesn't
matter if YOU are bullish or bearish.

What a trader may want to monitor for is SIMILARITY or
DIVERGENCE.

One major DIVERGENCE a trader might monitor for is a INDU bounce
higher at the open, and failure back lower.

Pivot Analysis Matrix -



The Dollar Index (dx00y) 89.81 showed the dollar taking a hit
lower today, and boy it was a very volatile trade just after the
FOMC meeting for the greenback too.  The dollar finds selling and
suggests some market participants may have actually been looking
for Fed tightening today.  It would also depict an interpretation
from the MARKET that the FOMC statement did NOT suggest of any
near-term rate hikes.

In this afternoon's Market Monitor, Jan Fox made some notes from
John Murphy regarding the dollar's relationship in the markets.
I'm running way behind and need to get this Wrap to traders, but
will review tomorrow, as it is quite informative.

I'll look to see if there are any correlative levels of
support/resistance in the DAILY matrix (compared to WEEKLY and
MONTHLY), but I just ran out of time.

Jeff Bailey


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

Listening to the Fed
Jonathan Levinson

During the past several weeks, as bond yields have continued
their strong rally, we've seen a great deal of bearishness on
bonds and bullishness in the dollar.  Metals and commodity
prices, as well a equities corrected as traders anticipated the
abandonment by the Fed of its aggressive reflationary policy.
You'll recall statements by Bernanke and Greenspan along the way,
beginning to acknowedge what they referred to as a decrease in
the risk of unwelcome deflation and hinting at tighter monetary
policy.

As we've seen during recent years, central banks prefer to move
the markets with words instead of money, and today's action was a
fine example of just that.  Indeed, the ten year yield had
increased almost 100 basis points during the previous two months,
far exceeding anything that the Fed might have done to its
overnight rates today.

While this seems obvious in retrospect, the moves following
today's FOMC annoucement indicate some surprise, as equities,
metals, and bonds all whipsawed to the upside following the 2:15
statement and then levelled out again, giving back their gains.

Whether these trends continue or not remains to be seen.
However, I will continue to be dubious of any direct action by
the Fed to shock the markets with higher rates.  Simply put, the
level of personal, mortgage and corporate debt makes higher rates
a dangerous formation in the financial landscape, and were I a
central banker, I would be seeking as much as possible to allow a
gradual, unexciting move higher in rates without panicking the
markets with sudden moves.

I'm guessing we will see a range develop as traders seek
direction.  Equities, bonds, commodities and foreign currencies
should firm up as the dollar softens.  The drop in the volatility
indices following the announcement indicates general bullishness
increasing based on the prospect of further stimulation from the
Fed.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8416
Current     : 10317

Moving Averages:
(Simple)

 10-dma: 10364
 50-dma: 10383
200-dma:  9985



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  912
Current     : 1119

Moving Averages:
(Simple)

 10-dma: 1125
 50-dma: 1129
200-dma: 1074



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1103
Current     : 1422

Moving Averages:
(Simple)

 10-dma: 1451
 50-dma: 1448
200-dma: 1410



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

CBOE Market Volatility Index (VIX) = 16.55
CBOE Mkt Volatility old VIX  (VXO) = 16.36
Nasdaq Volatility Index (VXN)      = 25.14

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.67        698,925       467,344
Equity Only    0.50        583,332       291,348
OEX            0.81         25,970        21,135
QQQ            0.38        167,368        64,122


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.3    + 0     Bull Confirmed
NASDAQ-100    42.0    - 1     Bear Confirmed
Dow Indust.   80.0    + 0     Bear Confirmed
S&P 500       69.0    - 1     Bear Confirmed
S&P 100       70.0    + 0     Bear Confirmed



Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart.  Readings above 70 are considered overbought, and readings
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend


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

 5-dma: 1.36
10-dma: 1.30
21-dma: 1.09
55-dma: 1.14


Extreme readings above 1.5 are bullish, and readings below .85
are bearish.  These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.


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

Market Internals

            -NYSE-   -NASDAQ-
Advancers    1643      1822
Decliners    1178      1258

New Highs      55        51
New Lows       82        38

Up Volume   1276M     1211M
Down Vol.    694M      556M

Total Vol.  2005M     1829M
M = millions


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

Commitments Of Traders Report: 04/27/04

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.

Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.

S&P 500

Commercials aren't making any big moves and remain net bearish.
Small trades are relatively flat from last week as well and
remain net bullish.


Commercials   Long      Short      Net     % Of OI
04/06/04      409,429   419,471   (10,042)   (1.2%)
04/12/04      412,827   419,910   ( 7,083)   (0.9%)
04/20/04      409,729   421,456   (11,727)   (1.4%)
04/27/04      406,927   416,244   ( 9,317)   (1.1%)

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   23,977  - 12/09/03

Small Traders Long      Short      Net     % of OI
04/06/04      130,262    80,174    50,088    23.8%
04/12/04      135,840    89,090    46,750    20.8%
04/20/04      136,699    92,982    43,717    19.0%
04/27/04      133,775    90,535    43,240    19.3%

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


E-MINI S&P 500

Commercial traders have upped their bets on both longs and
shorts but remain net bearish.  Small traders have decreased
the size of their long positions but are still strongly bullish.


Commercials   Long      Short      Net     % Of OI
04/06/04      270,904   328,862    (57,958)  ( 9.7%)
04/12/04      261,889   341,163    (79,274)  (13.1%)
04/20/04      275,985   355,555    (79,570)  (10.1%)
04/27/04      291,365   370,549    (79,184)  (12.0%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  133,299   - 09/02/03

Small Traders Long      Short      Net     % of OI
04/06/04      148,737     46,235   102,502    52.6%
04/12/04      172,473     52,274   120,199    53.5%
04/20/04      186,799     69,137   117,662    46.0%
04/27/04      175,788     69,613   106,175    43.3%

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


NASDAQ-100

There is virtually zero movement in the positions for commercial
traders but luck would have it the little movement we did get
pushed them to a new bullish high.  Small traders are also
stuck in limbo.


Commercials   Long      Short      Net     % of OI
04/06/04       54,862     34,762    20,100   22.4%
04/12/04       54,144     34,432    19,712   22.3%
04/20/04       54,852     35,964    18,888   20.8%
04/27/04       54,196     33,948    20,248   23.0%

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:  20,248   - 04/27/04

Small Traders  Long     Short      Net     % of OI
04/06/04        7,971    20,721   (12,750)  (44.4%)
04/12/04        8,297    20,746   (12,449)  (42.9%)
04/20/04        8,538    19,431   (10,893)  (39.0%)
04/27/04        9,008    20,347   (11,339)  (38.6%)

Most bearish reading of the year: (12,750) - 04/06/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Commercial traders aren't changing their bets on the Dow either
and remain marginally net long.  Small traders remain net bearish
but they have reduced their short positions.


Commercials   Long      Short      Net     % of OI
04/06/04       23,101    22,108      993       2.2%
04/12/04       23,501    22,748      753       1.6%
04/20/04       24,156    22,009    2,147       4.7%
04/27/04       23,676    22,009    1,667       3.6%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
04/06/04        7,316     8,085     (769)    (5.0%)
04/12/04        6,136     7,450   (1,314)    (9.7%)
04/20/04        5,997     9,631   (3,634)   (23.3%)
04/27/04        5,998     8,868   (2,870)   (19.3%)

Most bearish reading of the year: (12,106) -  3/09/04
Most bullish reading of the year:   8,523  -  8/26/03

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


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The Option Investor Newsletter                  Tuesday 05-04-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: ASD
Call Play Updates: AU, BBY, DGX, GDW, MIK
New Calls Plays: OMC
Put Play Updates: AMZN, COF, LTR, SLAB
New Put Plays: WHR


****************
PICKS WE DROPPED
****************

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****

None


PUTS:
*****

American Standard Co - ASD - cls: 106.50 chg: +0.27 stop: 107.51

This week, ASD following through on the bounce suggested by
Friday's potential reversal signal after ASD hit support near
$104.  It popped just high enough to hit our stop exactly before
falling back before the close.  This bounce may be nothing more
than a bear-flag bounce off support, but it's already turned RSI
higher, and has produced a bullish stochastics kiss.  Those
stochastics lines have not yet moved above signal, however, so
the commitment to the upside remains tentative.

Picked on April 29 at $104.80
Change since picked:   + 1.70
Earnings Date        04/14/04 (confirmed)
Average Daily Volume:     495 thousand
Chart =



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all trading needs provide customers with the tools needed for
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********************
PLAY UPDATES - CALLS
********************

Anglogold - AU - close: 34.20 change: +2.34 stop: 31.84*new*

Since the day it released earnings, AU has been rising off the
low reached the previous day, April 28.  Today, AU gapped higher.
That breakaway gap was reassuring to those eyeing the weekly
chart and noting some vulnerability down to $37, the target of
the H&S on that weekly chart.  We advised that this was a risky
play because it may well be a play on a countertrend oversold
bounce.  It could be more than an oversold bounce, but many
retracement levels and historical resistance levels now pile up
above the current price.  One of those resistance levels resulted
from a swing high in 2002, and that marked the top of AU's
advance today.

We've raised the stop to the bottom of the gap that was created
this morning, giving AU a couple of cents leeway.  In addition,
we're going to set a quick upside target, still eyeing that
downside vulnerability and the approaching resistance.  The 38.2
percent retracement of the April plunge lies at 35.16 and the 50
percent retracement crosses at 36.62.  We want to set the
official profit target below that 50 percent retracement as
that's a danger point for our bullish play.  We're going to set
the profit target at $35.49, just below the swooping-lower 21-
dma.  We would not suggest new entries at this point.

Picked on April 30 at $ 32.25
Change since picked:   + 1.95
Earnings Date        04/29/04 (confirmed)
Average Daily Volume:     1.0 million
Chart =


---

Best Buy Co - BBY - close: 53.59 change: -0.33 stop: 51.99

BBY spent late last week and the early part of this week moving
lower to retest the neckline of its reverse H&S.  Today it
plunged through the 21-dma but then bounced back above that
average.  Although we were glad to see that bounce, BBY closed
back below that neckline.  That's concerning, as is the bearish
configuration of the oscillators.  Next support exists from
today's low down to 52.21, so we hope to see a bounce from above
our stop, but we'd really like to see BBY back above $54.00 and
then showing other signs of strength.

On Monday, BBY made two new additions to its board.  The company
also announced additions to its customer centricity initiative
with that program intended to focus attention on BBY's best
customers and attract new groups of customers.  Tuesday, Deutsche
Bank reiterated its buy rating and said that the customer
centricity initiative was "clearly working."  So far, these
positives have not produced the hoped-for bounce, but we hope to
see it do so soon.

Because of the fall back below the H&S neckline and the
configuration of the oscillators, as well as rising volume on
today's decline, we would not suggest new entries at this time.

Picked on April 23 at $ 55.05
Change since picked:   - 1.46
Earnings Date        03/31/04 (confirmed)
Average Daily Volume:     3.6 million
Chart =


---

Quest Diagnostics - DGX - close: 85.16 change: -0.78 stop: 82.00

Since its post-earnings breakout, DGX has been consolidating near
its highs, trying to build up enough strength to continue that
breakout move.  Yesterday's strong rally looked encouraging, but
then the stock traded in a narrow consolidation pattern again
today, building a clear inside day pattern.  That means a
breakout over yesterday's high ($86.10) could be used for an
aggressive bullish continuation entry, while a break below
yesterday's low ($84.23) would be a bearish development.  The
stock has been finding solid support near the $84 level, so any
rebound above the lows of the past week still looks like a viable
entry point.  Conservative traders will want to see a breakout
over $86.70 to new highs before adding new positions.  For now,
we'll maintain our stop at $82, which is well below the 50-dma
($82.79) and just under the bottom of the post-earnings gap.

Picked on April 25th at      $86.15
Change since picked:          -0.99
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =        611 K
Chart =


---

Golden West Fin. - GDW - cls: 105.10 chng: -0.94 stop:
101.75*new*

In typical fashion, Financial stocks saw a good deal of volatile
whipsaw action in the wake of the announcement following the FOMC
meeting.  Earlier in the day, GDW had pushed over the $106 level,
satisfying our entry trigger for the play.  After the
announcement, the stock surged above $106 one more time before
heading back to the $105 price magnet near the close.  The jury
is still out on whether the stock will be able to extend its
rebound above the 100-dma ($106.09) on a closing basis, but it
isn't encouraging that the stock has failed to move much higher
over the past few days, while at the same time daily Stochastics
have almost reached overbought territory.  This sets up clear
bearish divergence on the daily chart and the bulls will need to
show some conviction soon.  Because of this potentially bearish
situation that is developing, we're getting more aggressive with
our stop tonight, raising it to $101.75, just under last
Thursday's intraday low.  A successful rebound from t he $104-105
area tomorrow can still be used for new entries, but make sure to
abide by those stops.  More conservative traders will want to
wait for a decisive breakout over today's high before playing.

Picked on April 29th at     $104.99
Change since picked:          +0.11
Earnings Date               4/20/04 (confirmed)
Average Daily Volume =        660 K
Chart =


---

Michaels Stores - MIK - cls: 49.90 chng: +0.39 stop: 48.50

Bullish traders in shares of MIK are certainly having their
patience tested in recent days.  After a convincing breakout over
the $49.50 level, the stock stalled out near $52.50 and has
retraced back to test the site of the original breakout.  The
past three sessions have seen an intraday dip near $49 before the
stock rebounded into the close.  Daily Stochastics are finally
starting to turn up and so far, price hasn't been able to break
support at the 50-dma ($48.73), so entries on this weakness still
look viable.  But it should be understood that MIK is skating on
thin ice.  A break below the 50-dma will almost surely fall far
enough to trigger our $48.50 stop and that would be the end of
the play.  We'd prefer to see the stock break above the top of
the intraday range of the past 3 days with a move over $50.50
before adding to current positions.

Picked on April 20th at      $51.23
Change since picked:          -1.33
Earnings Date               5/26/04 (confirmed)
Average Daily Volume =        323 K
Chart =



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

Omnicom Group - OMC - close: 82.78 change: +1.24 stop: 79.25

Company Description:
Omnicom Group is a marketing and corporate communications
company.  The company has grown its strategic holdings to over
1500 subsidiary agencies operating in more than 100 countries.
OMC's wholly and partially owned businesses provide
communications services to clients on a global, pan-regional and
national basis.  The company's agencies provide an extensive
range of marketing and corporate communications services,
including advertising, brand consultancy, crisis communications,
custom publishing, database management, digital and interactive
marketing, business-to-business advertising, employee
communications and environmental design.  OMC also provides field
marketing, healthcare communications, marketing research,
promotional marketing and sports and event marketing.

Why we like it:
The first 10 weeks of the year were not a pleasant affair for OMC
investors, as the stock peaked just south of $89 in the first
week of January and headed persistently lower until reaching its
low point near $75 in the middle of March.  Since then, things
have really started to improve.  First the stock rebounded from
its lows, moving steadily upwards until running into stiff
resistance near the 100-dma ($82.05) and backing off over the
next few weeks.  Last week, OMC finally managed to stabilize
again, this time right on top of the 50-dma ($79.54) and 100-dma
($79,43) and it has launched sharply higher in the past two
sessions, drawing very near to a key breakout.  The stock had
already issued a PnF Buy signal with the rally off the March lows
that printed at the $83 box.  That gave a bullish price target of
$100, but after running into stiff resistance at the bearish
resistance line, a slight retracement was logical.  This rally
has already moved through the resistance line (now at $82) and
looks poised to deliver a major breakout.

Looking at the daily chart, today's trade above $83.20 could
certainly be labeled as a breakout.  But the fact that the bulls
couldn't hold above the early April highs suggests that we're
still waiting for the real breakout.  Looking at the PnF chart,
it looks like a trade at $84 will be necessary to achieve that
milestone, so we're going to use an $84 entry trigger.
Aggressive traders can enter on the initial break, while those
with a more conservative approach will want to wait for a
subsequent pullback to what should be strong support near $82
before playing.  There's likely to be some mild resistance found
near $86, but we're going to set our target a bit higher at $89,
looking for a retest of the January highs.  Initial stops will be
set at $79.25, just under the site of the converged 50-dma and
200-dma.

Suggested Options:
Shorter Term: The May $80 Call will offer short-term traders the
best return on an immediate move, as it is currently in the
money.

Longer Term: Aggressive longer-term traders can use the June $85
Call, while the more conservative approach will be to use the
June $80 Call.  Our preferred option is the June $80 strike, as
it is currently in the money and should provide sufficient time
for the play to move in our favor.

BUY CALL MAY-80 OMC-EP OI=1063 last traded @ $3.60
BUY CALL MAY-85 OMC-EQ OI= 936 last traded @ $0.70
BUY CALL JUN-80*OMC-FP OI= 160 last traded @ $4.30
BUY CALL JUN-85 OMC-FQ OI= 195 last traded @ $1.60

Annotated Chart of OMC:



Picked on May 4th at         $82.78
Change since picked:          +0.00
Earnings Date               4/27/04 (confirmed)
Average Daily Volume =     1.21 mln
Chart =



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

Amazon.com - AMZN - close: 43.95 chg: -0.46 stop: 46.35

AMZN closed below its 50-dma, an encouraging event for play
participants. AMZN continues trading within a pattern that may
well be a "b" distribution pattern.  This week's candles have
been closing below the midpoint of Friday's tall red candle.

Next, AMZN bears want to see a move below Friday's low, and
particularly a close below that level.  Those seeking new entries
could target a breakdown out of that possible "b" distribution
pattern, with that break occurring on a drop below Friday's low.
Remember, however, that such an entry will not give short-term
traders much leeway, as those traders should consider an exit
just above either $41.00 or $40.00.

Picked on May 02 at $ 43.60
Change since picked: + 0.35
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   8.4 million
Chart =


---

Capital One - COF - close: 66.81 chg: +1.19 stop: 67.81*new*

On Monday, COF announced its dividend payable on May 20 to
holders of record on May 10.  That day produced a small-bodied
candle with upper and lower shadows, a possible reversal signal.
Tuesday, COF bounced, but fell back from the day's high.  The
bounce turned RSI up through the signal line, but produced no
other oscillator commitment to the upside.  However, COF may be
beginning a bear-flag bounce from just above historical support
near $63.50.

The 10-dma has been dropping quickly along with the price, and we
lowered our stop accordingly, placing it just above that average.
Because COF's decline has been so prolonged, we think a potential
bear-flag bounce could take COF past our stop, so would not
suggest new entries at this time.

Picked on April 26 at $ 67.99
Change since picked:   - 1.18
Earnings Date        04/21/04 (confirmed)
Average Daily Volume:     2.2 million
Chart =


---

Loews Corp - LTR - close: 57.72 chg: -0.38 stop: 60.01

LTR hit our trigger Monday.  Now it needs to break below $57.25.
It's been holding at or above months-long support near $57.70
-57.80.  A break below $57.00-57.25 signals a break below the
horizontal trendline that defines support on LTR's possible
bearish right triangle.

Without that break, however, LTR may bounce again.  That bounce
would probably be a bounce into a lower high in accordance with
its pattern of lower highs, but we'd rather it didn't bounce at
all.  New entries could be found on a bounce and rollover from a
lower high or on a break below $57.00-57.25.

Picked on May 03 at $ 57.74
Change since picked: - 0.02
Earnings Date      04/29/04 (confirmed)
Average Daily Volume:   419 thousand
Chart =


---

Silicon Labs. - SLAB - close: 48.48 change: +1.34 stop: 50.40

Semiconductor stocks finally found a bit of buying interest
yesterday afternoon, with the SOX recovering to the $440 level by
the close and inching a bit higher today.  We saw similar price
action in our SLAB play, with the stock rebounding from below $46
on Monday and putting in a pretty bullish performance today,
closing back over $48, but just below the 200-dma ($48.73).  The
past 3 days leave behind a bullish looking candle pattern and
that doesn't bode well for our play at all.  The key will be
whether the stock is able to climb back over the $50 level or if
it rolls over below there.  A rollover can be used for aggressive
entries, while a break above the $50 mark will more than likely
have our $50.40 stop in danger of being clipped.  We're still
looking for that rollover to send the stock back south, but we'll
adhere to our stop, just in case.  With our final target for the
play at $43, it doesn't seem reasonable to consider new entries
on a breakdown below yesterday's low.  Rollover entries are the
only way to go right now, but we need to see confirmation of
sector weakness with the SOX rolling over in tandem with SLAB
before taking that plunge.

Picked on April 29th at       $50.03
Change since picked:           -1.55
Earnings Date                4/26/04 (confirmed)
Average Daily Volume =      1.30 mln
Chart =



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

Whirlpool Corp - WHR - close: 65.05 chg: -1.09 stop: 68.96

Company Description:
Whirlpool is one of world's leading manufacturers and marketers
of major home appliances, with annual sales of more than $12
billion, 68,000 employees, and nearly 50 manufacturing and
technology research centers. The company markets Whirlpool,
KitchenAid, Brastemp, Bauknecht, Consul and other major brand
names to consumers in more than 170 countries. (Source:  Company
Press Release.)

Why We Like It:
Tuesday, WHR announced the retirement of its CEO of the past 17
years, but we suspect that the recent decline has more to do with
the specter of rising interest rates than with that CEO's
retirement.  Rising interest rates means fewer new homes
purchased, but probably impacts refinancings and remodeling even
more than it does those new home sales.

Tuesday, WHR touched the probable neckline of H&S on the weekly
chart, with that formation taking most of this year to form.
While we wouldn't be surprised to see a reflexive bounce up from
this neckline, we're setting a breakdown entry, with that entry
at $64.69, just below Tuesday's low.  The downside target of that
H&S lies near $50.00, but we see possibly significant support
just under $58, so we're setting our profit target at $58.01.

Because of the possibility of that reflexive bounce, we'll
initially set a wide stop at $68.96, just above the 50-dma.

Suggested Options:
While aggressive traders might choose May options, the
possibility that WHR could see a reflexive bounce after hitting
that neckline, June options might be better.  We suggest the June
65.

BUY PUT JUN-70 WHR-RN OI=   918 Last traded @6.00
BUY PUT JUN-65 WHR-RM OI= 1,649 Last traded @2.50

Annotated Daily Chart for WHR:



Picked on May xx at $ xx.xx  (See Trigger)
Change since picked: - 0.xx
Earnings Date      04/21/04 (confirmed)
Average Daily Volume:   555 thousand
Chart =



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**********

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Contact Support


The Option Investor Newsletter                  Tuesday 05-04-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Real Bounce or Technical Bounce?  Tomorrow May Answer.
Spreads & Straddles: FOMC Decision Leaves Stocks In A Drift...
Premium Selling Plays: Naked Puts & Calls
Traders Corner: RING THAT BELL

**********
WATCH LIST
**********

Real Bounce or Technical Bounce?  Tomorrow May Answer.

_________________________________________________________________

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.
___________________________________________________________________

Schlumberger Ltd. - SLB - close: 59.18 change: -0.39

WHAT TO WATCH:  Last week, SLB tumbled below support near $60.80,
falling all the way to a 38.2 percent retracement of its rise off
the October lows.  That was a natural place to see a bounce, and
SLB has been bouncing over the last few days.  That bounce looks
suspiciously like a bear-flag rise into the broken resistance,
however.  We suspect that SLB may bounce up toward that
resistance and then roll over somewhere near $60.50-61.00.  Look
for a rollover entry.  There's gap support, with that support
confirmed by Friday's bounce, but we suspect that the next
rollover will see a deeper dip.  Target $55-56.00.

Chart=


---

Adobe Systems Inc. - ADBE - close: 45.90 change: +1.90

WHAT TO WATCH:  With a P&F upside target of $66.00 and a
confirmed reverse H&S on the weekly, and with the neckline
already tested, this looks like a bullish candidate.  There's a
problem with that conclusion.  ADBE has resistance at the current
level, resistance that may mean it's building a double-top
formation rather than an impending breakout.  That's not what
volume says, however.  That supports the bullish view.  Look for
a pullback toward the top of this week's gap and a bounce from
there.

ADBE is scheduled to release earnings June 17, so we've got a
while for this play to work.  A breakout entry would occur on a
move above Tuesday's high, although that's a riskier play, we
think.  Those who are interested in an unbiased view could also
watch for a rollover entry, on a break below $40.70.

Chart=



---

C A C I Int.  - CAI - close: 41.45 change:  -3.83

WHAT TO WATCH:  With Tuesday's big move, CAI fell all the way to
support near $40, and then bounced.  We think some technical
damage may have been done, however, with new sellers now lurking
near $43.50-44.00.  Watch for a bounce up to that level and a
rollover entry.  Make sure that such a bounce occurs on low
volume, however.  Tuesday's big volume drop may have signaled
that most who want to sell already have.

Chart=


---

Motorola Inc. - MOT - close: 18.65 change: +0.43

WHAT TO WATCH:  MOT has been trading in a wide shallow bowl on
the weekly chart, looking as if it's getting ready to break out.
It's been testing its mid-April gap, finding support on the 50-
dma.  We like the way that volume dropped as MOT pulled back to
test that gap.  Aggressive traders could risk a long entry here,
while others might wait for a break over the top of April's gap
or over the early April highs.  Breakout plays may be risky in
the current environment, especially heading into the summer
doldrums, so make sure that any breakout is attended with rising
volume.  Pass up the play if that doesn't happen.

Chart=



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*******************
SPREADS & STRADDLES
*******************

FOMC Decision Leaves Stocks In A Drift...
By Ray Cummins

The major equity averages ended little changed Tuesday after
the Federal Reserve said it was preparing to raise interest
rates, but also commented that any increases would come at a
"measured" pace.

The Dow Jones industrial average added 3 points to 10,317 as
Alcoa (NYSE:AA) led the blue-chip group higher while Wal-Mart
(NYSE:WMT) limited its gains.  The NASDAQ Composite closed up
11 points at 1,950 amid a late buying spree in communications
equipment shares.  The Standard & Poor's 500 Index finished 2
points higher at 1,119, with commodities-related stocks among
the day's best performers.  Trading volume was moderate with
1.67 billion shares changing hands on the Big Board while 1.85
billion shares crossed on the technology exchange.  Advancing
issues led declining stocks by roughly 3 to 2 on both the NYSE
and the NASDAQ.  Treasury prices drifted lower with the 10-year
note down 11/32 while its yield climbed to 4.54%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 05/03/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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.


PUT-CREDIT SPREADS

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

HSIC    75.81  70.76   MAY  65  70   0.45   69.55   0.45   Open?
NAV     49.90  45.60   MAY  40  45   0.60   44.40   0.60   Open?
DNA    112.00 122.45   MAY  95 100   0.50   99.50   0.50   Open
EBAY    75.94  81.85   MAY  65  70   0.65   69.35   0.65   Open
HDI     55.63  56.94   MAY  47  50   0.25   49.75   0.25   Open
PDCO    74.97  75.50   MAY  65  70   0.65   69.35   0.65   Open
CME    116.11 118.28   MAY 100 105   0.60  104.40   0.60   Open
MATK    65.12  66.55   MAY  55  60   0.60   59.40   0.60   Open
MTG     74.42  74.50   MAY  60  65   0.50   64.50   0.50   Open
BJS     47.30  45.04   MAY  42  45   0.30   44.70   0.30   Open?
NBR     47.03  45.49   MAY  42  45   0.30   44.70   0.30   Open?
AVP     84.00  84.98   MAY  75  80   0.45   79.55   0.45   Open
MUR     68.50  70.20   MAY  60  65   0.50   64.50   0.50   Open

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

The position in Silicon Labs (NASDAQ:SLAB) has previously been
closed to limit potential losses.  Bullish spreads on BJ Services
(NYSE:BJS), Nabors Industries (NYSE:NBR), Navistar (NYSE:NAV),
and Henry Schein (NASDAQ:HSIC) are on the "watch" list and should
be closed on any further downside activity.


CALL-CREDIT SPREADS

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

SOHU    25.46  17.07   MAY  35  30   0.60   30.60   0.60   Open
SFNT    31.65  22.18   MAY  40  35   0.70   35.70   0.70   Open
GENZ    46.40  44.07   MAY  55  50   0.60   50.60   0.60   Open
PRX     55.25  39.80   MAY  65  60   0.65   60.65   0.65   Open
MERQ    45.59  43.11   MAY  55  50   0.60   50.60   0.60   Open
NEM     42.86  37.38   MAY  50  47   0.25   47.75   0.25   Open
RYL     77.41  79.03   MAY  90  85   0.60   85.60   0.60   Open
AMZN    45.20  44.41   MAY  55  50   0.65   50.65   0.65   Open
BOBJ    27.85  21.84   MAY  35  30   0.75   30.75   0.75   Open
NTES    51.43  41.60   MAY  65  60   0.50   60.50   0.50   Open
VECO    27.43  23.28   MAY  35  30   0.55   30.55   0.55   Open
BSX     40.25  40.47   MAY  45  42   0.25   42.75   0.25   Open
RIMM    97.54  89.53   MAY 115 110   0.50  110.50   0.50   Open
MRVL    38.92  38.05   MAY  45  42   0.30   42.80   0.30   Open
OVTI    22.38  22.73   MAY  30  25   0.55   25.55   0.55   Open

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


DEBIT STRADDLES

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

SSYS    20.88  20.87   MAY    22    20     2.10    2.25    Open?
ZMH     80.84  82.08   MAY    80    80     4.90    6.15    Open?
AH      35.78  33.33   MAY    35    35     3.10    2.90    Open
QLTI    29.60  27.18   MAY    30    30     3.00    4.50    Open?
HOTT    22.26  22.41   MAY    22    22     1.80    1.60    Open
LF      19.67  21.09   JUN    20    20     3.50    5.25    Open?
BSTE    30.63  39.90   JUL    30    30     6.00   11.50    Open?
MKSI    23.10  19.85   JUL    22    22     4.70    5.50    Open

Biosite (NASDAQ:BSTE) has been the best performing position in
recent weeks, but Zimmer Holdings (NYSE:ZMH), LeapFrog (NYSE:LF),
MKS Instruments (NASDAQ:MKSI) and QLT Inc. (NASDAQ:QLTI) have
been active as well, providing favorable short-term gains.  The
position in Corinthian Colleges (NASDAQ:COCO) was not available
at the target entry price, due to the "gap-up" on the day after
the straddle was listed as a new candidate.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

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

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.

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

ERES - eResearch Technology  $32.29  *** 3-For-2 Split Coming! ***

eResearch Technology (NASDAQ:ERES) is a provider of technology and
services that enable the pharmaceutical, biotechnology and medical
device industries to collect, interpret and distribute cardiac
safety and clinical data more efficiently.  The company offers a
range of products and services, including Diagnostics Technology
and Services and Clinical Research Technology.  Their Diagnostics
Technology and Services include centralized diagnostic services
and clinical research operations, including clinical trial and
data management services.  Their Clinical Research Technology and
Services include the developing, marketing and support of clinical
research technology and services.

ERES - eResearch Technology  $32.29

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-27.50  UDB-QY  OI=814  ASK=$0.25
SELL PUT  MAY-30.00  UDB-QF  OI=434  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$29.75


__________________________________________________________________

ZBRA - Zebra Technologies  $74.62  *** Uptrend Intact! ***

Zebra Technologies Corporation (NASDAQ:ZBRA) and its wholly owned
subsidiaries design, manufacture and support a broad range of
direct thermal and thermal transfer bar code label and receipt
printers, plastic card printers, related accessories and support
software.  The company's main products consist of a broad line
of computerized printers for the production of bar code labels,
receipts and tags, and plastic cards, specialty bar code labeling
materials, ink ribbons for bar code and card printers, and bar
code label design software.

ZBRA - Zebra Technologies  $74.62

PLAY (conservative - bullish/credit spread):

BUY  PUT  MAY-65.00  ZBQ-QM  OI=203  ASK=$0.20
SELL PUT  MAY-70.00  ZBQ-QN  OI=231  BID=$0.55
INITIAL NET-CREDIT TARGET=$0.40-$0.45
POTENTIAL PROFIT(max)=8% B/E=$69.60



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

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.

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

AMZN - Amazon.com  $43.95  *** Downtrend Resumes? ***

Amazon.com (NASDAQ:AMZN) is a website where customers can find
and discover anything they may want to buy online.  The company
lists millions of items in categories such as books, music, DVDs,
videos, consumer electronics, toys, camera and photo items, PC
software, computer and video games, tools and hardware, outdoor
living items, kitchen and house-wares products, toys, baby and
baby registry, travel services and magazine subscriptions.  At
its Amazon Marketplace, Auctions and zShops services, businesses
and individuals can sell virtually any product to millions of
customers, and with Amazon.com Payments, sellers are able to
accept credit card transactions in addition to other methods of
payment.  The company operates a U.S.-based Website: amazon.com,
and four internationally focused Websites: www.amazon.co.uk,
www.amazon.de, www.amazon.fr and www.amazon.co.jp.

AMZN - Amazon.com  $43.95

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAY-50.00  ZQN-EJ  OI=16971  ASK=$0.15
SELL CALL  MAY-47.50  ZQN-EW  OI=18230  BID=$0.35
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$47.75


__________________________________________________________________

CHIR - Chiron  $45.58  *** Failed Rally? ***

Chiron Corporation (NASDAQ:CHIR) is a global pharmaceutical firm
that is focused on developing products for cancer and infectious
disease.  Chiron continues to build upon its cancer franchise,
which has three dimensions, including immune system modulators,
monoclonal antibodies and novel anti-cancer agents.  In the area
of infectious diseases, the company has a range of products.  The
company commercializes its products through three business units,
which include biopharmaceuticals, vaccines and blood testing.
Chiron Biopharmaceuticals discovers, develops, manufactures and
markets a range of therapeutic products.

CHIR - Chiron  $45.58

PLAY (conservative - bearish/credit spread):

BUY  CALL  MAY-50.00  CIQ-EJ  OI=1377  ASK=$0.15
SELL CALL  MAY-47.50  CIQ-ET  OI=2043  BID=$0.40
INITIAL NET-CREDIT TARGET=$0.25-$0.30
POTENTIAL PROFIT(max)=11% B/E=$47.75



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

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


*****************************************
PREMIUM-SELLING PLAYS: NAKED PUTS & CALLS
*****************************************

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 05/3/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

FWHT     MAY    17    17.15   20.85    0.35   4.19%   2.04%
MICC     MAY    17    17.15   24.53    0.35   4.31%   2.04%
MNST     MAY    22    21.95   25.85    0.55   4.39%   2.51%
HNT      MAY    22    22.00   25.50    0.50   4.76%   2.27%
IPXL     MAY    20    19.50   21.35    0.50   5.43%   2.56%
SSNC     MAY    22    21.60   24.43    0.90   7.85%   4.17%
TINY     MAY    15    14.70   17.29    0.30   4.60%   2.04%
IMM      MAY    15    14.70   18.25    0.30   4.66%   2.04%
IPXL     MAY    20    19.65   21.35    0.35   4.38%   1.78%
JBLU     MAY    22    22.15   28.79    0.35   3.65%   1.58%
LSCP     MAY    22    21.95   31.33    0.55   5.43%   2.51%
TINY     MAY    17    17.00   17.29    0.29   3.75%   2.94%
XMSR     MAY    25    24.50   25.32    0.50   4.35%   2.04%
ASKJ     MAY    30    29.50   38.28    0.50   4.47%   1.69%
BRCM     MAY    37    36.70   37.61    0.80   4.83%   2.18%
FWHT     MAY    20    19.35   20.85    0.65   7.29%   3.36%
IMM      MAY    17    17.05   18.25    0.45   6.91%   2.64%
HOLX     MAY    20    19.50   20.18    0.50   5.51%   2.56%
HSII     MAY    22    22.25   25.57    0.25   2.61%   1.12%
IMM      MAY    17    17.25   18.25    0.25   4.16%   1.45%
LF       MAY    20    19.55   21.09    0.45   5.16%   2.30%
TSAI     MAY    20    19.80   21.28    0.20   2.99%   1.01%
TSO      MAY    20    19.50   20.85    0.50   5.60%   2.56%
APPX     MAY    35    34.40   42.43    0.60   5.81%   1.74%
BLDP     MAY    10     9.75   10.57    0.25   6.55%   2.56%
ELN      MAY    17    17.30   22.03    0.20   4.01%   1.16%
ERES     MAY    25    24.50   32.31    0.50   6.05%   2.04%
HOLX     MAY    20    19.65   20.18    0.35   4.54%   1.78%
LSCP     MAY    22    22.10   31.33    0.40   5.49%   1.81%
PDII     MAY    22    21.75   26.09    0.75   8.99%   3.45%
TELK     MAY    22    22.20   23.76    0.30   4.32%   1.35%
TNOX     MAY    15    14.50   17.10    0.50   8.35%   3.45%
APPX     MAY    35    34.65   42.43    0.35   3.75%   1.01%
EYE      MAY    17    17.20   22.19    0.30   5.00%   1.74%
JCOM     MAY    22    22.30   23.28    0.20   2.82%   0.90%
MGAM     MAY    22    21.90   23.29    0.60   7.17%   2.74%
MICC     MAY    22    22.10   24.53    0.40   5.16%   1.81%
NIHD     MAY    33    32.88   35.50    0.50   4.38%   1.52%
PXLW     MAY    17    16.95   17.97    0.55   7.81%   3.24%
SNIC     MAY    17    17.15   17.90    0.35   5.76%   2.04%
CAMD     MAY    15    14.60   14.48   (0.12)  0.00%   2.74%
DNDN     MAY    12    12.25   13.54    0.25   6.83%   2.04%
FWHT     MAY    20    19.60   20.85    0.40   7.10%   2.04%
MICC     MAY    25    24.45   24.53    0.08   1.06%   2.25%
NIHD     MAY    35    34.50   35.50    0.50   5.01%   1.45%
OSTK     MAY    30    29.25   37.43    0.75   9.75%   2.56%
SNIC     MAY    17    17.20   17.90    0.30   6.05%   1.74%
TINY     MAY    17    17.20   17.29    0.09   1.98%   1.74%
UTHR     MAY    20    19.65   25.61    0.35   6.71%   1.78%
ALKS     MAY    15    14.70   15.42    0.30   6.80%   2.04%
ATRS     MAY    25    24.55   25.98    0.45   7.08%   1.83%
DRTE     MAY    17    17.20   16.81   (0.39)  0.00%   1.74%
FWHT     MAY    20    19.65   20.85    0.35   6.77%   1.78%
INSP     MAY    30    29.50   33.13    0.50   7.20%   1.69%
ISPH     MAY    15    14.50   16.61    0.50  11.39%   3.45%
PTEN     MAY    35    34.65   35.93    0.40   4.13%   1.01%
UTHR     MAY    22    22.10   25.61    0.40   6.82%   1.81%
ARTC     MAY    22    22.20   22.98    0.30   5.52%   1.35%
CPKI     MAY    20    19.70   20.84    0.30   6.19%   1.52%
HEW      MAY    30    29.50   32.09    0.50   6.70%   1.69%
ISPH     MAY    15    14.55   16.61    0.45  12.90%   3.09%
MGM      MAY    20    19.65   20.98    0.35   7.24%   1.78%
SONO     MAY    20    19.60   22.62    0.40   8.71%   2.04%
USPI     MAY    35    34.35   37.51    0.65   7.48%   1.89%

Positions in ADEX, CLZR, ESIO, GNTA, GVHR, INSP ($35 strike),
MRVL, NET, NFLX, PLMO, TOMO, and USG have previously been
closed to limit losses.  Pharmacopeia (NASDAQ:ACCL), which
is positive, has been removed from the portfolio because the
company has completed its planned spin-off of Pharmacopeia
Drug Discovery (NASDAQ:PCOP) and the play involves tracking
positions in two separate issues.  Due to the recent bearish
activity, virtually all of the portfolio issues are on the
"watch" list.


NAKED CALLS

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

AFCI     MAY    25    25.75   16.73    0.75   7.73%    2.91%
QLGC     MAY    37    37.95   26.89    0.45   4.22%    1.19%
AVCT     MAY    37    38.15   32.10    0.65   4.61%    1.70%
INTU     MAY    47    48.00   42.95    0.50   2.80%    1.04%
PPCO     MAY    20    20.30   17.83    0.30   6.92%    1.48%
SINA     MAY    45    45.55   28.89    0.55   6.61%    1.21%
NANO     MAY    20    20.40   11.65    0.40   10.66%   1.96%
PHTN     MAY    35    35.60   31.00    0.60   7.03%    1.69%
SFA      MAY    35    35.55   32.49    0.55   6.17%    1.55%
SOHU     MAY    25    25.75   17.07    0.75   11.61%   2.91%
SWIR     MAY    35    35.60   21.50    0.60   9.26%    1.69%
HOV      MAY    42    42.90   36.24    0.40   4.07%    0.93%
NFI      MAY    45    45.40   32.83    0.40   7.16%    0.88%
PHTN     MAY    35    35.30   31.00    0.30   6.07%    0.85%
RMBS     MAY    25    25.30   18.25    0.30   7.84%    1.19%
FLSH     MAY    20    20.25   17.82    0.25   8.55%    1.23%
BRCM     MAY    42    42.80   37.61    0.30   4.46%    0.70%

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.

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

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.

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

NEW NAKED-PUT CANDIDATES

Stock   Strike Strike Cost    Stock   Option   Max.   Simple
Symbol  Month  Price  Basis   Price   Price   Yield   Yield

DRIV     MAY    25    24.75   27.67    0.25   5.17%   1.01%
GPRO     MAY    35    34.70   38.22    0.30   4.34%   0.86%
JILL     MAY    20    19.60   21.70    0.40   9.70%   2.04%
MVSN     MAY    20    19.65   22.74    0.35   9.34%   1.78%
ORBZ     MAY    25    24.75   27.00    0.25   4.94%   1.01%
PDII     MAY    25    24.55   27.30    0.45   8.88%   1.83%
SYMC     MAY    45    44.65   49.15    0.35   3.95%   0.78%
VXGN     MAY    15    14.50   16.71    0.50  16.34%   3.45%

__________________________________________________________________

DRIV - Digital River  $27.67  *** Next Leg Up? ***

Digital River (NASDAQ:DRIV) is a provider of electronic commerce
outsourcing solutions.  As an application service provider, the
company enables its clients to access its proprietary electronic
commerce system over the Internet.  Their technology platform
allows the company to provide a suite of electronic commerce
services such as e-commerce development and hosting, transaction
processing, fraud screening, digital delivery, integration to
physical fulfillment and customer service.  Digital River also
offers analytical marketing and merchandising services to assist
clients in increasing Web page view traffic to, and sales through,
their Web commerce systems.

DRIV - Digital River  $27.67

PLAY (sell naked put):

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

SELL PUT  MAY 25    DQI QE    253   0.25  24.75   5.2%   1.0%


__________________________________________________________________

GPRO - Gen-Probe  $38.22  *** A Big Day! ***

Gen-Probe (NASDAQ:GPRO) is a leader in the development, production
and marketing of rapid, accurate and cost-effective nucleic acid
testing products used for the clinical diagnosis of human diseases
and for screening donated human blood.  Using its patented NAT
technology, Gen-Probe has received FDA approvals or clearances for
products that detect a variety of infectious microorganisms, such
as those causing sexually transmitted diseases, tuberculosis, strep
throat, pneumonia and fungal infections.  Additionally, the firm
developed and manufactures the only FDA-approved blood screening
assay for the simultaneous detection of HIV-1 and HCV, which is
marketed by Chiron Corporation.  Gen-Probe has 20 years of nucleic
acid detection research and product development experience, and its
unique products are used daily in laboratories and blood collection
centers throughout the world.

GPRO - Gen-Probe  $38.22

PLAY (sell naked put):

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

SELL PUT  MAY 35    PSU QG    1488   0.30  34.70   4.3%   0.9%


__________________________________________________________________

JILL - J. Jill Group  $21.70  *** Awesome Earnings! ***

The J. Jill Group (NASDAQ:JILL) is a specialty retailer of women's
apparel, accessories and footwear.  The firm markets its products
in catalogs, retail stores and on an e-commerce Website.  J. Jill
has two business segments, direct and retail, and each segment is
separately managed and utilizes distinct distribution, marketing
and inventory management strategies.  The direct segment markets
merchandise through catalogs and on the website while the retail
segment markets merchandise through retail stores.  The company's
target customers are active, affluent women ages 35 to 55 who buy
clothing styles from relaxed career wear to sophisticated casual
weekend wear.

JILL - J. Jill Group  $21.70

PLAY (sell naked put):

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

SELL PUT  MAY 20    JUI QD      67   0.40  19.60   9.7%   2.0%


__________________________________________________________________

MVSN - Macrovision  $22.74  *** Rally Mode! ***

Macrovision (NASDAQ:MVSN) develops and licenses rights management
and copy protection technologies.  The company's customers include
Hollywood studios, independent video producers, enterprise and
consumer software vendors, digital set-top box manufacturers and
digital pay-per-view (PPV) network operators. Macrovision provides
content owners with the means to market, distribute, manage and
protect video, software and audio content.  The company also is
in the business of consumer software copy protection.  Macrovision
offers CD-ROM copy protection and rights management technologies
to a wide variety of software publishers in the personal computer
games, education, information publishing and desktop applications
software markets.

MVSN - Macrovision  $22.74

PLAY (sell naked put):

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

SELL PUT  MAY 20    MVU QD      28   0.35  19.65   9.3%   1.8%


__________________________________________________________________

ORBZ - Orbitz  $27.00  *** Earnings Speculation! ***

Orbitz (NASDAQ:ORBZ) is an online travel company that enables
travelers to search for and purchase a broad array of travel
products, including airline tickets, lodging, car rentals,
cruises and vacation packages.  On its website, consumers can
search over two billion flights on hundreds of airlines, as well
as rates at over 45,000 lodging properties and at 23 car rental
companies.  Its search results are presented in an unbiased,
easy-to-use matrix display that provides a vast array of options
to consumers without favoritism toward any supplier, enabling
consumers to select the price and supplier that best meets their
individual travel needs.  Earnings are due May 5, 2004.

ORBZ - Orbitz  $27.00

PLAY (sell naked put):

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

SELL PUT  MAY 25    IRQ QE     260   0.25  24.75   4.9%   1.0%


__________________________________________________________________

PDII - PDI Incorporated  $27.30  *** Volatility = Premium! ***

PDI (NASDAQ:PDII) is an innovative healthcare sales and marketing
provider to biopharmaceutical and medical devices companies and
and the diagnostics industry.  Its three business units offer
service and product-based capabilities for companies seeking to
maximize profitable brand sales growth.  The three units include
PDI Pharmaceutical Products, PDI Sales and Marketing Services,
and PDI Medical Devices and Diagnostics.

PDII - PDI Incorporated  $27.30

PLAY (sell naked put):

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

SELL PUT  MAY 25    PKU QE     152   0.45  24.55   8.9%   1.8%


__________________________________________________________________

SYMC - Symantec  $49.15  *** Testing 2004 Highs! ***

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  $49.15

PLAY (sell naked put):

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

SELL PUT  MAY 45    SYQ QI    7003   0.35  44.65   3.9%   0.8% TS


__________________________________________________________________

VXGN - VaxGen  $16.71  *** Entry Point? ***

VaxGen (NASDAQ:VXGN) is a biopharmaceutical company engaged in
the development, manufacture and commercialization of biologic
products for the prevention and treatment of human infectious
disease.  The company is developing preventive vaccines against
anthrax, smallpox and HIV/AIDS and is the largest shareholder
in Celltrion Inc., a joint venture to build biopharmaceutical
manufacturing operations.  Celltrion was formed by VaxGen and
certain South Korean investors to provide manufacturing of
complex proteins made through mammalian-cell fermentation.
This type of manufacturing is used to make many of the drug
products developed by the biotechnology industry, including
monoclonal antibodies and therapeutic proteins.  Products under
development by VaxGen include an anthrax vaccine, a smallpox
vaccine and the AIDSVAX AIDS vaccine.

VXGN - VaxGen  $16.71

"SPECULATIVE" PLAY (sell naked put):

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

SELL PUT  MAY 15    UWG QC     293   0.50  14.50  16.3%   3.4%



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

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.

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

APPX - American Pharma Partners  $40.06  *** Trend Reversal? ***

American Pharmaceutical Partners (NASDAQ:APPX) is a specialty
drug company that develops, manufactures and markets injectable
pharmaceutical products, focusing on the oncology, anti-infective
and critical care markets.  The company is one of the largest
producers of injectables, with more than 130 generic products in
more than 350 dosages and formulations.

APPX - American Pharma Partners  $40.06

PLAY (sell naked call):

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

SELL CALL  MAY 50    AQO EJ    5670   0.55  50.55  11.5%   1.1% *
SELL CALL  MAY 45    AQO EI    9424   1.40  46.40  20.1%   3.0%


__________________________________________________________________

KG - King Pharmaceuticals  $16.40  *** Premium-Selling Only! ***

King Pharmaceuticals (NASDAQ:KG) is a vertically integrated
pharmaceutical company that develops manufactures, markets and
sells branded prescription pharmaceutical products.  The firm's
branded pharmaceutical products can be divided primarily into
the cardiovascular; endocrinology/women's health; orthopedic;
critical care; neurology/central nervous system; anti-infective;
respiratory, and bio-defense therapeutic areas.  King markets its
branded pharmaceutical products to general/family practitioners,
internal medicine physicians, cardiologists, endocrinologists,
obstetrician/gynecologists and hospitals across the U.S. and in
Puerto Rico.

KG - King Pharmaceuticals  $16.40

"SPECULATIVE" PLAY (sell naked call):

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

SELL CALL  MAY 20    KG ED     8566   0.25  20.25  12.7%   1.2% *
SELL CALL  MAY 17.5  KG EW     9831   0.75  18.25  21.7%   4.1%


__________________________________________________________________

SHRP - Sharper Image  $28.05  *** Sell-Off Underway! ***

Sharper Image (NASDAQ:SHRP) is a specialty retailer of products in
the electronics, recreation and fitness, personal care, houseware,
travel, toy, gifts and other categories.  The firm's merchandising
philosophy focuses principally on proprietary Sharper Image Design
products and exclusive Sharper Image branded products and, to a
lesser extent, on third-party branded products.  The firm designs
and develops its Sharper Image Design products, while Sharper Image
branded products are designed by third parties or jointly designed
with the Company.  The company markets its merchandise primarily
through three integrated sales channels: The Sharper Image stores,
sharperimage.com and The Sharper Image catalog, which includes any
revenue from direct marketing activities and infomercials.

SHRP - Sharper Image  $28.05

PLAY (sell naked call):

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

SELL CALL  MAY 30    SAU EF     525   0.45  30.45   8.3%   1.5%



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

SEE DISCLAIMER - SECTION 1

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


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RING THAT BELL
By Leigh Stevens
lstevens@OptionInvestor.com

There is a concept relating to a bell ringing as signaling danger
or something to stop and pay attention to that is often quite
meaningful in relation to trading index options.  That is the
concept of a bellwether stock or a bellwether sector, that by its
price action, can tip us off as to when a top or bottom is
forming in the Index.

In the Nasdaq, there are certain companies and market sector
(e.g., semiconductor stock – SOX index) indexes that by virtue of
their size or relative importance will be virtual "stand-ins"
for, or will be closely linked to, a market index or average.
And example I use in my book is of the earliest bellwether I know
of - the role the Dow Transportation average plays as a linked
average to the Dow Industrials -- if one average or the other
fails to also move to a new high or low, this is a bullish or
bearish divergence.

I've often written about the idea of where an Indicator, such as
the Relative Strength Index (RSI) fails to also make a new high,
or low, relative to what is happening with the price of the Index
itself – such divergences are often very good tip offs to an
impending top or bottom.  Having a good idea that a top, or
bottom, is forming is one of the most helpful things that can
occur in terms of buying index puts or calls before the market
breaks sharply from the existing trend.

An example of a bearish Price/RSI Divergence in the S&P Index is
highlighted in the following chart –

This is color coded so to speak.  While SPX was going up and
making new highs (green line), the 14-day RSI was making lower
relative lows as seen along the red down-sloping line at bottom –
a bearish price/RSI divergence.  While this doesn't tell you
exactly where to start buying Index puts, the worst that happened
in this situation was that you could have been early into them.
With a divergence like this after such a long strong run up, you
would not want to play front-month puts anyway.  The third high
was the charm – quite a break followed. And, the best profits
were made by buying puts before the first day or two of the sharp
break.




A bullish price/RSI divergence set up at the bottom, with the
green up-sloping line at bottom highlighting the higher low made
by the RSI versus the lower price low (new low) that occurred in
the Index.

Back to the bellwether idea, for a stock – the idea is that as a
bellwether goes, "so goes the market".

For example, Cisco Systems (CSCO) has been a key or bellwether
stock to follow if you wanted to track just one specific  stock
in the Nasdaq versus the Nasdaq Indices.  CSCO, along with Nasdaq
biggies, Microsoft Inc. (MSFT) and Intel Corp. (INTC), accounted
at one time for close to 25% of the entire value of the Composite
Index.

Size is not the only criteria for assuming a "bellwether" status.
As important, it must be a company that represents the leading
edge business that exemplifies that exchange – in the case of
Nasdaq, the need for internet and communications hardware has
Cisco still in forefront in very key and necessary tech
equipment.

Besides a key individual stock like Cisco, a related stock index
that is also a bellwether for Nasdaq, is the Russell 2000 (RUT).
You might figure that it was not too good in this role as RUT
went to new highs while the Nasdaq indices were falling to lower
lows – but, then the Russell also made a classic "rounding top"
pattern, so this Index was not saying that everything was go in
the Nasdaq. This chart is not shown – its "homework" to look it
and imagine the rounding top pattern.

The Semiconductor Index (SOX), as calculated by the Philadelphia
Options Exchange, in also a key related and underlying component
of high tech.  But back to the stock we want to look at.  I like
to look at bellwether stocks for some added they give – namely
that I can study volume for it.  Volume is a good secondary
indicator – for example, a drive to a new high is accompanied by
a decline volume trend – LOOK OUT.

NEXT CHART: Cisco (CSCO) versus the Nasdaq 100 (NDX) –

There are certain things that Cisco's price and volume action
pointed to that was not apparent in the NDX.  First, was the
churning around that the Index did at the top – but Cisco's On-
Balance Volume (OBV) was headed down-down-down (dark green line
at bottom) for at least 4-days while the Index was going
sideways.  [I'll say something about OBV further on - ]
So, our bellwether stock had a bearish volume divergent pattern.
This and the other divergence mentioned was a helpful tip off for
what was coming.

Next – the down trendlines have the same pattern on the decline,
"confirming" that the Nasdaq was in a downtrend; i.e., had a
pattern of lower rally highs.  There was one meaningful divergent
pattern with the 50 and 200-day moving averages however – CSCO
fell and stayed under its 50-day average, suggesting that the
rally in NDX late in April was not likely to "work" or last.

Now, the stock, unlike the NDX Index is trading under its 200-day
moving average – this may suggest that NDX will follow suit.
Stay tuned on that!




During the rally in the Nasdaq 100 and in Cisco Systems into
early-April, the daily volume (noted by the red down-sloping
line) trend was of trading volume that was declining, suggesting
a short-covering type rally without new net buying.  Interesting
clues – perhaps enough to keep a trader out of jumping into Index
calls too soon, at least for anything longer than very short-term
trading.

While the bellwether stock will often have the same technical
patterns or the index will sometimes lead the bellwether stock,
it’s the occasional instances where the bellwether leads or goes
against the pattern being made by the index that makes them
valuable for comparison.  The points where the bellwether is a
leading "indicator" can occur at a key turn or shift in the
trend.

About the OBV Indicator -
On Balance Volume is a cumulative running volume figure that
adds ALL the volume on an up date and subtracts ALL the trading
volume on down day.  If there is more trading volume on up days
then there is on down days, OBV rises. What we are concerned with
is the direction of line, up or down, not the actual number.

This indicator uses daily stock trading volume for its
construction. The insight it makes furthered Charles Dow’s
concept that volume should INCREASE in the direction of the
dominant trend.  On-Balance Volume provides some further
assessment of this idea.

For the NYSE Composite Index (NYA), the Dow 30 Average (INDU) and
the S&P Indices, a key bellwether stock is General Electric (GE).
This company is a major player in major areas of activity in the
mainstream economy (e.g., power, appliances, etc.) that is
represented by these averages.

There are some noteworthy comparisons to be made between GE and
the OEX in the next chart –

While the S&P 100 (OEX) was making a double, then triple top in
February – March, GE was in a definite downtrend, suggesting that
OEX would reverse to the downside at some point and probably
reverse significantly lower at that.

If traders were wondering if OEX was going to break out to the
upside at the blue arrow within the circle, as the Index popped
up above the down trendline on two days running – NOT! – at least
based on what GE was doing as it never got close to doing the
same.




Last but not least is a note about the break below the 200-day
moving average seen now twice in the stock, but not in the Index.
The first break (see circled price action in GE) was showing such
weakness that it was doubtful that the OEX was going to get far
in its rally after that.  Most recently in the price action shown
above, GE is having a difficult time getting back above the 200-
day moving average.

With such a key bellwether (GE), widely held in fund portfolios,
not able to get back above the most widely watched moving average
(200-day), its suggestive of institutional money not coming back
into it strongly.  Such action in this bellwether stock has me
doubtful that the OEX is going to get much of a rally going –
and, suggests another down swing lies ahead after the recent
oversold rebound.  Stay tuned on this of course, as more of this
picture will be filled in during the days and weeks ahead.

Something that has been strong in recent weeks, and is an
important bellwether sector index is the NYSE Financial Stock
Index ($NF or $NF.X are common quote symbols). This bellwether
bears watching and may turn out to be showing a more bullish path
ahead for the S&P.

Good Trading Success!


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