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Daily Newsletter, Sunday, 05/23/2004

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The Option Investor Newsletter                   Sunday 05-23-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

In Section One:

Wrap: Bullish Signs Appearing?
Futures Market: See Note
Index Trader Wrap: TRACTION
Editor's Plays: Back From the Dead
Market Sentiment: Investors Still Cautious
Ask the Analyst: Economics 101
Coming Events: Earnings, Splits, Economic Events


Posted online for subscribers at http://www.OptionInvestor.com
******************************************************************
MARKET WRAP  (view in courier font for table alignment)
******************************************************************
        WE 5-21         WE 5-14         WE 5-07         WE 4-30
DOW     9966.74 - 46.13 10012.9 -104.47 10117.3 -108.23 -247.27
Nasdaq  1912.09 +  7.84 1904.25 - 13.71 1917.96 -  2.19 -129.62
S&P-100  534.33 -  1.14  535.47 -  1.88  537.35 -  3.53 - 15.92
S&P-500 1093.56 -  2.10 1095.66 -  3.03 1098.69 -  8.61 - 33.30
W5000  10625.10 -  9.61 10634.7 - 51.33 10686.0 -107.62 -356.76
SOX      458.18 +  7.19  450.99 -  6.02  457.01 + 13.52 - 44.50
RUT      545.81 +  2.05  543.76 -  4.80  548.56 - 11.24 - 30.91
TRAN    2861.75 + 12.86 2848.89 +  2.71 2846.18 - 40.26 -115.27
******************************************************************

It may be far too soon to make any definite bullish predictions
but there are some signs that there may be a bounce ahead. With
the very low volume the last several days it would be tough to
apply much validity to improving technicals but they are there
just the same. It could be that the bears are just getting
tired more than the bulls staging a rebound but next week
should supply the answers.

S&P-500 Chart – Daily


Dow Chart – Daily


Nasdaq Chart – Daily


SOX Chart - 90min



The only economic report for Friday was the Internet Commerce
Sales for Q1 and at $15.52 billion it was the second highest
quarter on record and a +28% jump over last year. Sales only
dipped -$2B from the record holiday sales in the 4Q. This is
a very strong confirmation that the Internet is not only here
to stay but picking up speed and acceptance by consumers.

We need to shift some of those Internet sales back into tech
stocks which posted their sixteenth straight week of outflows
from tech funds. Overall fund outflows eased to a negative
outflow of only $600 million for the week ended Wednesday.
This was far less than I expected and far less than the
-$2.5B outflows for the prior week. Considering the drop by
the Dow to the lows for the year at 9852 on Wednesday a week
ago I had thought the outflows would increase. Chalk up one
point for a potential bounce ahead.

Oil prices fell again as OPEC prepared to meet this weekend
in Amsterdam to discuss raising production quotas. Saudi
Arabia Oil Minster Ali al-Naimi said he would ask OPEC to
raise production quotas by more than two million barrels per
day. Saudi wants to knock prices down below $40 to prevent
long term damage to oil demand. As long as prices are high
the sales outlook for gas guzzlers drops sharply. Automakers
and consumers revert back to high mileage vehicles. This does
produce a longer term lessening of demand and eventually it
lowers oil prices. With oil prices high companies begin to
explore alternate energy sources for new plants. Again, the
long term demand then declines. With prices high the demand
for new domestic drilling as well as drilling in non OPEC
countries skyrockets. This brings on new supply and depresses
the prices OPEC receives. OPEC wants to keep the prices in
the sweet spot where demand and prices are balanced and they
control the cash register. They have to raise production
targets this weekend to prevent these things from taking
place. Wal-Mart said on Friday that customers in their
survey were losing $7 per person per week in buying power
due to high oil prices. Falling oil prices ahead? Chalk up
another point for a potential bounce.

The Fed is going out of their way to press the point that
rates will only rise if the economy rises. This seems to
point to a Fed that is not sure the economy has risen to
the level where a rate hike is necessary. The bond market
has already priced in several hikes as well as the stock
market. If those hikes were to be pushed later into the
year then the market may be under priced. Bernanke hammered
this point home once again as did McTeer with their "rate
of increases dependent on the economy" comments. Fed fund
futures are now showing only a 94% chance of a rate hike
in June. Cracks are beginning to show in the prior premise
that it was guaranteed. They are however still predicting
a 25 point hike in August. A potentially friendlier Fed?
Chalk up another point for a potential bounce.

Volume for the past week has been very light despite some
rather big swings. For three of the last four days up
volume was significantly above down volume despite the
failure of a bounce to hold. Over the last four days up
volume accounted for 8.7B shares compared to only 5.3B on
the down side. New 52-week lows have fallen to only 167 on
Friday compared to 1181 on the big drop on May 10th. Friday
had the fewest 52-week lows since April 22nd. Improving
internals? Chalk up one more reason.

For the last two weeks the markets have plateaued at support
across all the varied indexes. The SPX came to a dead stop
at the 200dma at 1080 last week and tested it on three
separate days. For the last four days the SPX support has
risen to 1090 and it has defended it very aggressively.
The SOX appeared to make a low the first week of May at 435
and has been making progressively higher highs and lows ever
since. We are not seeing a charging bull in the SOX but more
of creeping support now in the 455 range. The very strong
Book-to-Bill report Thursday night should provide additional
support for the semi sector.

The major indexes all seem to have found a support level
that they can defend. The Wilshire-5000 defended 10500 last
week and 10600 this week. The Nasdaq defended 1880 last week
but upped the ante to 1900 this week. The $BKX.x banking
index hit a low of 90.62 on May 10th and has been moving
progressively higher for two weeks and closed right at a
two week high on Friday. If financials are back can the
other sectors be far behind? This outlook is not without
its problem child. The Dow has been defending 9900 for the
last two weeks but is showing little signs of mounting a
real rally. Because of the very narrow representation in
the 30-stock Dow I am giving it less weight in light of
the improvement in the broader indexes. Support that can't
be broken? Chalk up another point in favor of a rebound
attempt.

Three times last week the markets tried to produce a rally.
Three times they failed but the low for the week was on
Monday. There are buyers coming back into the market as
evidenced by the 50% higher up volume than down. The real
problem was simply overhead supply waiting for any rebound
attempt. Eventually that supply has to be depleted. There
is also a chance the rallies failed (or were caused) by
option expiration activity. There was huge open interest
in the index options and ETFs and hedge funds with billions
under management can push low volume markets around like
leaves in a tornado. Program trading for the week was 50.5%
of total volume. This is NOT arbitrage programs that just
key on fair value discrepancies as they only came to 13.8%
of the total. These are programs triggered by very big
players with one thing in mind and that is getting in or
out of positions in a hurry. Considering the low volume
and the amount of program trading and the extremely high
option open interest I think the fact we did NOT break
support is bullish. Chalk up another point.

GE is being bought. The low print for GE was Monday's open
and it was all up from there. The gap open on Wednesday was
hit hard by that monster sell program Wednesday afternoon
but Friday saw those losses almost erased. GE has fought
for support at $30 for the last month. Five times that
support was broken intraday and each time it was quickly
bought. Monday was the last time it traded under $30. If
GE, the proxy for the economy, has successfully defended
$30 for the last time and is being bought then can a real
rally be that far away? Get the chalk again.

Throughout this commentary we have been making points in
chalk, not permanent marker. While there are some serious
yet subtle signs of a potential rebound there are still
some problem areas. The Dow is one of those areas. Several
stocks in the Dow are spiraling into rapidly lower lows.
For instance, GM, PFE, VZ, UTX, C, MO, CAT and MCD to name
a few. They are offset by some of the others like HD, INTC
and AXP that have strong uptrends in place but it will still
be the weaker index.

There are still some negatives in our future and they include
the Iraq turnover and the FOMC on June-30th. You have the
FBI issuing new warnings about suicide bombers in the U.S.
and attacks a multiple McDonalds abroad. The election will
continue to be a producer of uncertainty but Bush appears
to be weathering the storm. CNBC did a survey of 28 market
analysts and all 28 said the market favored a Bush victory
over Kerry. Assuming there are no new surprises like the
Iraq prisoner abuse and oil prices do moderate I think
traders will begin to ignore the election risk. That leaves
us with the normal summer doldrums ahead and the earnings
warnings in June just before the Fed meeting. There is
still a rocky road to be traveled but most of the risk
is still a month away.

Just because there may be another rebound in our future
does not mean it will stick. We saw what happened to a
couple +100 point moves last week. They evaporated as
quickly as they appeared. For the Dow the 10050 resistance
appears solid but a strong break there could trigger
substantial short covering with initial higher resistance
not until 10200 then 10300. That would be a huge rebound
and I would be surprised if that is in the cards for next
week. If we could just get over 10100 I would be pleased.
The Nasdaq has strong resistance at 1935-1960 and a move
over 1960 would be a strong move.

The key point is not that there might be a rebound attempt
in our immediate future but that it may be too early to
expect it to succeed. The lack of any real selling pressure
last week may have just been a pause for option expiration
or a pause in hopes we do get a real bounce they can sell
into. You just never know until it happens. The SPX 200dma
is still intact at 1081 and still the line in the sand that
any rebound will be built on. Should that line fail we could
easily see Dow 9600.

I would also remind everyone that our biggest drops lately
have been on external events like the change in the Indian
government. These things can never be predicted and will
pop up when they can do the most harm. Always keep your
stops in place whether long or short the market. Monday
after option expiration is not normally a strong day in
either direction as there is too much settling in progress
to enter new trades. This produces somewhat higher volume
but on both sides of the ledger. If my speculation is
correct and we do get a rebound attempt next week I would
watch prior resistance levels very carefully for signs of
weakness. If sellers are still waiting overhead then don't
fight it. If we do fail again and our current support levels
are retested (9900/1880/1080) I would not hesitate to buy
the dip but be prepared for a potential support failure.
One more test could just be a strong bottom forming but a
failed test could produce a significant drop.

I received an email this week that said essentially "don't
take both sides, are we going up or down?" I seriously do
not think I take both sides. I do paint the picture for
both sides so everyone can understand the pros and cons of
the current market. However, I think I have been explicit
in telling you to "sell the rallies" for several weeks.
Last Tuesday was the first time I recommended a neutral
position because I saw support strengthening. Of course
Wednesday was a monster rally that should have been sold
again. Hindsight is always 20:20. Okay, to avoid confusion
for Monday and using the SPX as a guide, buy a bounce from
1080 and sell a failure at 1120. Under 1080 begins a new
leg down. The game plan is simple. I hope everybody is
now on the same page.

Enter Very Passively, Exit Very Aggressively!

Jim Brown


**************
FUTURES MARKET
**************

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


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

TRACTION
By Leigh Stevens
lstevens@OptionInvestor.com

THE BOTTOM LINE –

We have to distinguish to some degree between the most important
New York Stock Exchange index and the key Nasdaq index.  The
former is having trouble gaining any traction here in trying to
re-gain some upside momentum.

Given that the S&P 500 (SPX) is holding at and above its 200-day
moving average [even though the S&P 100 (OEX) and the Dow 30
(INDU) are not], that this index is now oversold on both daily
and weekly charts and that trader "sentiment" is at the level of
bearishness we commonly see at market turning points, I think
most if not all of the gains from SPX, OEX and DJX puts has been
realized. As I noted last week as areas to watch, SPX has also
held above key support at 1080 and above 527-530 in the OEX.

The Nasdaq Composite (COMP) is not as oversold yet as SPX, but is
getting there.  COMP appears to be digging into support on dips
below 1900 and has made an approximate double bottom relative to
the late-March lows.  There is probably not a lot of downside
left – and the Nasdaq 100 (NDX) has actually held above its late-
March low on what liked a reversal day at the beginning of this
past week (17th) and forming a rounding bottom on hourly charts.

That is the technical picture and consistent with fundamentals:
an improving economy and earnings picture eventually outweighs
the predictable rebound in interest rates and other shorter-term
factors like the spike in energy prices. Iraq is the wild card
but has more political than economic fallout at this point.

FRIDAY'S TRADING ACTIVITY –

Market volume was light, as traders and investors were gun shy
and reluctant to take on positions ahead of the weekend and after
a choppy trade all week.

Stock market participants have been keeping one eye on the nearby
July crude oil futures, which ended down 87 cents (at 39.93)
after Saudi Arabia said it would suggest to OPEC members at a
weekend meeting – not a formal production get together - to raise
oil production by more than 2 million barrels per day.

Expiration of options on stocks indexes and individual stocks
seemed to lift volume early in session, trading slowed way down
as the day went on.

The S&P 500 Index (SPX) gained 4.4 points to 1,093.5.  The Dow 30
(INDU) closed at 9966, up 29 points.

The Nasdaq Composite (COMP) ended at 1912, up 15.5 points and the
Russell 2000 index (RUT) was up not quite 1 percent to close
545.8.

Federal Reserve Governor Bernanke helped lift stocks in the
morning after saying Thursday at a luncheon and that was quoted
as:

"The good news is that, because of the impact of private-sector
expectations about policy on current long-term rates, a
significant portion of the financial adjustment associated with
the tightening cycle may already be behind us. As we look ahead,
core inflation appears likely to remain in the zone of price
stability during the remainder of 2004 and into 2005."

The Governor also spoke about the inflationary price trend for
commodity prices, when he also said that there were signs that
commodity prices, with the exception of oil, "may be peaking."

Well, what about oil prices – guess he didn't want to go out on a
limb and predict that one.

The Semiconductor sector rallied (SOX index) from a Thursday
night report from Semiconductor Equipment and Materials
International that indicted North America-based chip equipment
orders for April totaled $1.59 billion, up 16% from the $1.38
billion in March and up 111%  from the $757 million in April
2003. The April book-to-bill ratio, which measures the value of
orders received against the value of products shipped, was 1.14,
up from 1.09 March.  Good News although the rally was limited –
the SOX ended up 4.3, to 458.2.

OTHER MARKETS –

Bonds were up early and then fell back from early highs, as the
yield on the benchmark 10-year Treasury note ticked up .05
percent to 4.762

The dollar fell .4% against the euro to $1.2006, dropped 0.7
percent against the British pound to $1.7892 and lost 0.5 percent
vs. the yen to 112.14.


MY INDEX OUTLOOKS –

S&P 500 Index (SPX) – Daily chart:

I am still of the same view that as long as the S&P 500 (SPX) can
hold above 1080, at both some key prior chart support and its
200-day moving average that a bottom is forming – this as opposed
to a pause on the way still-lower.  This view suggests what the
criteria is to suppose that another down leg lies ahead – a daily
close below 1080; better evidence even is two consecutive closes
under 1080.

Forming still more lows in at and above the 1080 area might go
for awhile – if so, the stronger would I expect a next rally to
be.

Resistance is at 1100 at the down trendline and extends up to
1107.  A close over 1107, the current level of the 21-day moving
average, is what is needed turn the technical picture a bit more
bullish.  Stay tuned!

Above 1105-1107, further resistance can be anticipated in the
1120 area. A close over 1120 would suggest upside potential of
another 20 points higher from there – toward the upper trading
(red) band or envelope line.




My Put to Call to Put indicator gave the most bullish reading in
a while last week, as the level of put activity picked up. Such
readings by themselves don't get me into index calls, but given
the other things that suggest that SPX is digging into support
and finding buying interest for stocks there, I anticipate a
strong rebound soon – within a few days more.  The market is more
likely to "find" some good news when it gets oversold like now.

S&P 500 Index (SPX) – Hourly chart:

Resistance, at the hourly down trendline still is apparent around
1100, then at the prior hourly high at 1105. SPX has not yet been
able to achieve an upside penetration of the upper end of its
bearish downtrend channel. It seems to me that the Index either
breaks out above 1100 soon or there is another downswing.

If there is another swing lower potential support is at 1087 (see
highest most green arrow), at the  minor up trendline that has
been traced out recently on the hourly chart. Next, we should
look to the prior hourly low at 1076 as a possible low again.





S&P 100 Index (OEX) – Daily & Hourly charts:

528-530 is key support - the ability of the S&P 100 (OEX) Index
to hold this area will be my gauge of rally potential. Near
resistance is at 538, then around 540.  448-550 is the next area
of expected resistance and anticipated selling pressure.




533 is near support – at the trendline on the hourly chart at
right. The 527-528 area, at the prior lows of earlier in the
month, is key support with a close under this area suggesting
that the 520-521 area could be seen in OEX.

Dow Industrials (INDU) Daily:

The Dow 30 Average still trades under its 200-day moving average
which is bearish overall.  I'm keying in however more on the 9850
level – the area of the prior lows that is seen at the dashed
green level line.  9600 is the next level of support below these
prior lows and dates back to another set of lows.

Resistance has been seen at 10,060, then is anticipated around
10,200 – and, lastly, up in the 10,400 area at the intersection
of the down trendline currently.





Nasdaq Composite (COMP) Index  – Daily:

Key technical resistance is at the down trendline first – this
intersects in the 1920 area.  If the recent low at 1865 doesn't
hold if there is another decline – and that day had the look of
an upside reversal and possible "exhaustion gap" – then my next
downside target is to around 1850 at the lower envelope line.

A close or two back above the 21-day moving average would suggest
potential to 1965-1975, possibly back to the 2000 area on a
rebound.




The COMP is oversold as registered by the 14-day RSI but could
get a bit more oversold still judging by the weekly RSI (not
shown and using a "length" setting of 8).

Nasdaq 100 (NDX) Index  – Daily & Hourly:

The last daily low was at a level above the prior low as seen on
the daily chart below left.  This fact and the possible rounding
bottom formation that has been traced out on an hourly basis
could be an indication of a bottom – particularly the daily low
and reversal that occurred from a price area a bit higher than
the last low. (The rounding pattern is of interest but is not as
reliable as if seen over a longer period on the daily chart.)

The 1380 area still looks to be the key support. Key resistance
is at 1435-1438. A close over this area is needed to suggest that
a strong rally might be underway.





Nasdaq 100 tracking Stock Daily & Hourly (AMEX:QQQ):

35.5 – 35.7 is key near resistance as is highlighted on the
hourly chart at right below.  Resistance then comes in just over
36.  A close over 36.75 would be a breakout above the down
trendline on the Daily chart (left, below).

34 still looks like key support.  I would trade next only when
this sideways price range resolves itself with a breakout higher
– I would say lower also, but am not inclined to play the short
side when an index is oversold.

I would rather wait to buy QQQ at some point as I figure my risk
to reward potential is better on this side of the market – except
for a "scalping" type trade I don't see big potential in shorting
on a further rally.  Well, maybe shorting on a move back up the
36.25 area, with a tight stop at 35.50 and an objective to 34.25.





Good Trading Success!



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**************
Editor's Plays
**************

Back From the Dead

Tyco has come back from the dead after being beaten to
within an inch of its life with the Kozlowski scandal.
The stock sank to $7 in 2002 as the magnitude of the
problem became apparent.

Tyco is a huge company with revenues of $10 billion per
quarter and profits of $750 million. Even Kozlowski could
not spend all the money they make. The rebound in the
stock is proof that investors are confident there are
no further revelations in the pipeline.

The stock fell from a high over $60 when the scandal
hit the press and should return there eventually.

Currently the stock is pressing against resistance at
$30 which has held for the last three months. A break
over $30 should produce significant short covering and
breakout buying. Next real resistance is around $35 and
then again at $40.

There are multiple ways to play this. A simple straight
June $30 call is only 60 cents but only has four weeks
to run. I like Tyco for the longer term and would go for
the July-$30 call at $1.00 or January $35 call for 85 cents.

Either option requires a break over $30 to be profitable
but once that break occurs I expect a significant move.
Strictly personal opinion on my part. You should notice
that TYC has moved up +$3 in the last two weeks on less
then favorable market conditions.

July $30 Call TYC-GF $1.00
Jan $35 Call TYE-AG $0.85

TYC Chart – Weekly





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

PNRA Put Update $33.24

The stock is still falling despite a slight bullish uptick
in the market. Target for the June $30 put UPA-RF is still
$1.00.

http://members.OptionInvestor.com/editorplays/edply_051604_1.asp


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


EBAY Put Update  $80.30

We are not seeing any drop in EBAY and while our profiled
June-$80 put rose to $5.30 from the $2.45 when profiled we
did not exit because EBAY did not hit our target of $76.
The low was $76.85 on May 10th. In hindsight we should have
exited but with EBAY trading under $78 as late as May-17th
I kept thinking we would get one more dip. With the market
firming slightly I am going to recommend closing the position
Monday for a breakeven before time decay becomes a material
problem.

The problem with a weekly recommendation is the inability
to react to a near hit on the price until a week later.

http://members.OptionInvestor.com/editorplays/edply_042504_1.asp


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


News Corp Update $35.49

NWS continues to hold over its 200dma and should follow the
market from here. We are looking for some bullishness to
return to allow us to sell come covered calls against our
leaps to reduce our cost.

Current position: Long (6) Jan-2006 $40 Calls WLN-AH @ $3.83

http://members.OptionInvestor.com/editorplays/edply_041104_1.asp

http://members.OptionInvestor.com/editorplays/edply_041804_1.asp


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

Investors Still Cautious
- J. Brown

May has been a tough month for the markets but most of the pain
all happened in the first week.  The last couple of weeks have
been generally sideways and if you're a chart reader one might
suspect that we could have a new bottom in place.  At least
that's the train of thought if you're an optimist.  Bears might
say that the last two weeks are merely a consolidation of the
previous declines before we see more.  After all May is the first
month in the "worst six months" of the year theory.

Fueling the rally this past Friday were two issues.  Oil and the
Fed.  Oil lifted the markets because OPEC was meeting informally
in Amsterdam on Saturday and the Saudi minister had already
suggested that OPEC raise production by 2 million barrels a day
to ease demand and price issues.  Jim offers a good explanation
in the weekend wrap on why it's important that OPEC should curb
these record high prices so I won't go into detail.  It's
important to the stock market because oil prices and record gas
prices are taking a huge toll on our economy at the consumer
level.  Two-thirds of our GDP is based on consumer spending and
right now Americans are forking over a lot of cash to fill up
their cars everyday.  Wal-mart (WMT) went so far as to quantify
the damage as $7 per week per WMT customer is being lost to
higher gas prices.  The bad news is that OPEC's informal meeting
didn't offer any decisions and they did not discuss the Saudi
proposal to raise output.  That's going to be a wet blanket on
the markets come Monday.  OPEC meets formally on June 3rd in
Beirut.

The Fed helped ease some market concerns when a couple of the
Federal Reserve governors issued calming comments late this week
suggesting that a rate hike isn't necessarily imminent.  Their
focus now seems to be that they'll hike rates if the economy
continues to improve and only if it continues to improve.  Now
given the positive economic data over the past few months most
still believe that a rate hike before the November election is a
guarantee but the question is by how much will the FOMC raise
rates.  There is a growing camp that believes the Fed is "behind
the curve" which would force them to hike rates faster and higher
than we might expect.  Furthermore the recent comments creates a
stronger focus on the next round of economic data as Wall Street
ponders how each report may or may not influence monetary policy.

Speaking of economic reports next week is full of them.  Monday
is empty but Tuesday offers the Consumer Confidence numbers.
Wednesday the durable goods orders.  Thursday brings the
preliminary GDP while Friday unveils the Michigan Sentiment and
Chicago PMI and that's not even the complete list of reports due
out next week.  However, it's also noteworthy to mention that the
President is expected to offer a prime-time speech on Iraq this
Monday but I'm not sure how that will affect investor sentiment.
In the mean time the ongoing geo-political risk (a.k.a. terrorism
threat) is an underlying concern that will only heat up and sap
the strength in any market rally as we approach the June 30th
Iraq handover.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  8540
Current     :  9966

Moving Averages:
(Simple)

 10-dma:  9979
 50-dma: 10257
200-dma: 10041




S&P 500 ($SPX)

52-week High: 1163
52-week Low :  927
Current     : 1093

Moving Averages:
(Simple)

 10-dma: 1091
 50-dma: 1117
200-dma: 1082



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1123
Current     : 1408

Moving Averages:
(Simple)

 10-dma: 1402
 50-dma: 1435
200-dma: 1420




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

CBOE Market Volatility Index (VIX) = 18.49 -0.18
CBOE Mkt Volatility old VIX  (VXO) = 19.16 -0.20
Nasdaq Volatility Index (VXN)      = 24.90 -0.64


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

          Put/Call Ratio  Call Volume   Put Volume

Total          1.21        868,694       973,948
Equity Only    0.81        661,326       534,158
OEX            1.41         82,978       117,042
QQQ            0.71        101,300        71,859


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

Bullish Percent Data

           Current   Change   Status
NYSE          61.9    + 0     Bear Confirmed
NASDAQ-100    30.0    + 0     Bear Confirmed
Dow Indust.   66.7    + 0     Bear Confirmed
S&P 500       58.8    + 0     Bear Confirmed
S&P 100       61.0    + 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: 1.21
10-dma: 1.11
21-dma: 1.17
55-dma: 1.15


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    1865      1931
Decliners     933      1081

New Highs      31        58
New Lows       45        64

Up Volume   1024M      973M
Down Vol.    501M      316M

Total Vol.  1544M     1345M
M = millions


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

Commitments Of Traders Report: 05/18/04

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

Commercial traders remain net short and seem to be increasing
their bearish sentiment.  Small traders are net bullish and in
mirror-like fashion are growing more bullish compared to the
big traders.

Commercials   Long      Short      Net     % Of OI
04/27/04      406,927   416,244   ( 9,317)   (1.1%)
05/04/04      397,964   417,175   (19,211)   (2.4%)
05/11/04      401,365   421,672   (20,307)   (2.5%)
05/18/04      394,352   423,258   (28,906)   (3.5%)

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
04/27/04      133,775    90,535    43,240    19.3%
05/04/04      137,112    80,201    56,911    21.6%
05/11/04      135,534    76,987    58,547    27.5%
05/18/04      139,647    74,597    65,050    30.4%

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

The four-week trend for the commercial traders has been a bullish
one as they increase their long positions.  Meanwhile the small
traders have been busy shuffling money around and reducing their
long and short positions.

Commercials   Long      Short      Net     % Of OI
04/27/04      291,365   370,549    (79,184)  (12.0%)
05/04/04      316,840   370,781    (53,941)  ( 7.8%)
05/11/04      378,696   362,887     15,809     2.1%
05/18/04      390,484   357,157     33,327     4.5%

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
04/27/04      175,788     69,613   106,175    43.3%
05/04/04      119,308     74,407    44,901    23.2%
05/11/04      101,199     94,408     6,791     3.5%
05/18/04       62,216     87,269    25,053    16.8%

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 continues to be very little movement in the commercial
traders' positions.  Small traders have reduced their short
positions somewhat.

Commercials   Long      Short      Net     % of OI
04/20/04       54,852     35,964    18,888   20.8%
04/27/04       54,196     33,948    20,248   23.0%
05/04/04       56,931     35,209    21,722   23.6%
05/18/04       58,376     37,528    20,848   21.8%

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:  21,722   - 05/04/04

Small Traders  Long     Short      Net     % of OI
04/27/04        9,008    20,347   (11,339)  (38.6%)
05/04/04       10,247    24,764   (14,517)  (41.5%)
05/11/04        9,716    21,072   (11,356)  (36.9%)
05/18/04        9,843    18,935   ( 9,092)  (31.6%)

Most bearish reading of the year: (14,517) - 05/04/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

The dead heat between longs and shorts for the commercial
traders has grown even thinner.  Small traders have moved
from net bearish to net bullish on the Industrials.

Commercials   Long      Short      Net     % of OI
04/27/04       23,676    22,009    1,667       3.6%
05/04/04       24,296    22,181    2,115       4.6%
05/11/04       22,614    21,507    1,107       2.5%
05/18/04       22,257    22,444   (  187)     (0.4%)

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
04/27/04        5,998     8,868   (2,870)   (19.3%)
05/04/04        6,262     8,155   (1,893)   ( 9.2%)
05/11/04        7,009     7,640   (  631)   ( 4.3%)
05/18/04        9,098     6,591    2,507     16.0%

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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***************
ASK THE ANALYST
***************

Economics 101

It's summer time in the northern hemisphere and kids are looking
forward to some time off from school, but this week's e-mail was
largely comprised of questions centering around inflation, and
various economic indicators.

While I'm not an economists, my business marketing/finance degree
in college required me to sit in many a class and listen to the
professor spew out tons of information and theory on economic
indicators and how a student studying business should have a firm
grasp of various economic indicators.

One thing I learned, which didn't become a core belief until
after I got out in the "real world," was that you can give 5
economists or analysts the same set of data, and the odds are
that you would get back 5 very different answers as to what the
economic data was saying.

Gone now are some of the concerns for deflation that usually come
from an economic recession, and sure enough, its inflation that
is on everyone's mind as the U.S. and global economy improves.

Is there one single economic indicator that is MOST important to
follow, or understand?

My answer, would be emphatically... NO!

That's why we get hammered with so many economic reports each
week.  And with these reports can come confusion, and sometimes a
"rush to judgment" as to what that economic report may have
suggested.

Based on some of the questions received this week, I thought I'd
pick out a few economic reports that are released each month,
place them in a table where we could look at some of the data,
and try to understand, or get a feel, for how the various
economic reports all mesh together, where somehow, the various
markets we may be trying to trade/invest in, always seem to get
it right, as they correctly predict the eventual outcome of what
the economic data was saying.

Certainly there are times when the MARKET suddenly realizes it
was wrong in its original analysis, and when it does (the MARKET
that is), it is quick to adjust and make appropriate corrections.

I went through a very long list of various economic reports we
are hammered with each month, and tried to pick out some of those
that I feel can be of focus at this point in time.

During the recent recession, it was the housing market that was
of great focus as the industrial and service portions of the
economy were in decline, where construction of homes was one of
the key drivers for keeping some pulse in the economy.  While the
homebuilding market will always be a key part of the U.S.
economy, we won't be discussing those economic data in this
column.

Certainly I will have left out something that you deem overly
necessary to have considered, but by the time most of us get the
crash course in Econ. 101, we will have had enough from some of
the basics.

One of the most often-asked questions after an economic report
has been released is "why did the market do this, and not that?"

Like I said.... give 5 economists the same set of data, and
you'll probably get 5 different analysis of that data.

Hopefully I can try and walk through some of the things I've
learned not only in college, but in life and from other business
people, are how to at least think about various economic
readings/reports, to try and build a foundation of just what the
MARKET is thinking, and where we can look for clues for further
confirmation of our economic analysis.

You may want to print the following table out in order to follow
along with today's discussion.

Table of Economic Reports - Dec. 2003 to May 2004




Good gravy!  This is the reduced version?  Don't worry, I'm not
going to go into great detail on every single number, but I
wanted to at least give us 5-months of various economic report
observations, so we can get a feel for what some of the economic
reports have been.

At the top is quarterly Gross Domestic Product (GDP), where in
the fourth quarter of 2003, the economy grew at a 4.1% annual
rate.  Recent economic data showed the economy grew at a 4.2%
annual rate, where on May 27, we're going to get a potentially
revised reading on the first quarter's GDP, which economists are
currently forecasting an upward revision to 4.5%.

If you don't understand what Business Inventories are, or any of
the other economic reports about to be discussed in brief, most
of them are described in the EDUCATION section of the website
under GLOSSARY.

Business Inventories and Sales:  has been one of the most dynamic
and sometimes misinterpreted (in my opinion) pieces of economic
data.  One of the biggest "rush to judgment" analyses is when the
Business Inventory headline number is considered by itself,
without any regard as to sales trends.  One thing I learned from
a client of mine (he managed a manufacturing plant in Puerto Rico
for Hewlett Packard) was how a efficient corporations were
becoming in the management of inventory (especially at the
wholesale end of inventory).  I was shocked to learn that that
his plant actually overnight couriered in slats of
microprocessors just ahead of a large production run.  I told him
that that was way too expensive, but he explained that holding
INVENTORY of those processors (more storage space and that's
costly, buy those processors months in advance and that's dead
money sitting in storage until product is manufactured and then
sold, an earthquake or geopolitical event could become costly for
inventory held, etc.)  Perhaps you've heard the term "just in
time" inventory, where the concept is that your inventory shows
up just in time to get it into production, and not let it sit
around.  Just in time inventory plays a BIG ROLE in why inventory
to sales continues to decline.

An just what is "just in time" inventory a part of?
PRODUCTIVITY!!!!!!!

That's right!  PRODUCTIVITY which helps LOWER the COST of
manufacturing goods.  Fed Chairman Alan Greenspan and other Fed
governors are constantly talking about the rates of productivity
as being a key part of their inflation/deflation analysis.

Wholesale Inventories:  are the second stage of the manufacturing
process, and perhaps more difficult for a business unit to
handle, but can give important readings on demand for the
Business Inventories, or first stage of a products manufacture.
Certainly demand (sales) has been outstripping supply
(inventory).  Is this inflationary?  Or is this dynamic partially
created from PRODUCTIVITY?

Factory Orders:  Once you've gotten information from Wholesale
Inventories, the Factory Orders usually doesn't carry that much
weight, but can still be an important demand observation, which
helps separate out lower priced ticket items we call non-durable
goods.  This economic indicator can give us a QUANTITATIVE
reading on consumer spending, where Consumer Sentiment readings
are more anecdotal.  One "fear" among some economists is that the
recent rise in Treasury Yields, which has brought about a decline
in mortgage refinancing, is that the consumer will not have has
much money to spend.  Factory Orders may give future insight to
these fears being correct, or incorrect.

Durable Orders:  or the Durable Goods report is the rate of
spending (up or down) on big-ticket items that we expect to last
at least three years.  Televisions, refrigerators, office
furniture are products that make up this category, and similar to
the Factory Orders data, gives insight as to what types of
products consumers are buying.  Are we rewarding ourselves with a
new shirt or blouse this month, or are we feeling wealthier and
buying that flat panel TV that just came out?

Industrial Production:  was one of my FAVORITE classes in college
was industrial production.  Running all those simulators and
trying to forecast what demand would be in order to set up my
production to efficiently meet that demand.  This is one of those
economic reports that can also be grossly misinterpreted.  Did
industrial production fall because of accurately perceived
economic slowing?  Or did industry underestimate demand one
month, and have to ramp up production the next month to catch up?
We would be encouraged to monitor SALES at both the Business and
Wholesale level when trying to analyze Industrial Production
figures.

Capacity Utilization : is released along with Industrial
Production.  Capacity Utilization at 100% would consider all
AVAILABLE production capacity, even if a portion of that capacity
had been shut down for 2-years.  Capacity Utilization can be a
key reading in regards to inflation.  Is there enough capacity
still yet to be utilized before "full capacity" is reached, where
demand is so great, that higher prices can be charged?  12 months
ago, capacity utilization was 74.2 and considered a recessionary
figure.  Current levels are just starting to show Industrial
Production starting to build and economic slack from the
recession being absorbed.

Productivity:  we touched on earlier.  The United States is
thought to be a leader in technological advancements, and it is
from technological advancement that productivity can thrive.
Productivity measures are one of the key measures we should use
when interpreting other economic readings.

Nonfarm Payrolls:  have been showing some life the past two
months.  Here again, think about PRODUCTIVITY and what its impact
may have had, or still does have on the amount of workers needed
to perform a task.  PRODUCTIVITY is good for cost efficiency, but
because of higher productivity rates, it may only take the work
of 1 to do what 2 workers did years ago.  Earlier this year, it
was thought by some that the economy wasn't going to start
generating a meaningful number of jobs until early 2005.  We've
seen the bond market's reaction to the stronger than expected
nonfarm payroll data the past two months.

Average Workweek:  speaks to PRODUCTIVITY, but gives greater
insight as to demand building or contracting among businesses.
Since I started working for a living at age 18, I can't remember
working less that 40 hours a week.

Hourly Earnings:  will be measured for a sense of not only wage
inflation, but the "quality" of job that might have been created.
This is another number that can be misconstrued if not looked
into.  Is wage inflation being found if hourly wages rise?  Or
are higher paying jobs being generated?  This data can be found
inside the nonfarm payrolls data, and is broken down into many
categories like temporary help, leisure/hospitality, financial,
manufacturing, construction and several others.  At this stage of
the economic recover, hourly earnings and wage costs are not an
overriding employment concern, where many economists also cite
strong PRODUCTIVITY growth trends limiting rising wage costs.

Consumer Confidence:  is largely driven by a consumers view of
job availability, income, geopolitics and believe it or not....
stock market gains and losses.  The reading indicated are derived
from survey questions, where responses are considered anecdotal.
Reading will be observed, but history shows that respondents
don't necessarily always ACT as they say they FEEL.  I tend to
think of this as an emotional survey, where emotions can change
quickly.

PPI and Core PPI:  give us insight as to rising (inflation) or
falling (deflation) prices at the production/manufacturing level.
Many will dispute if these reading are an accurate measure of
prices at the manufacturing level.  The Core PPI excludes the
more volatile food and energy components, as sometimes brief
imbalances in supply/demand due to weather or geopolitical events
should be brought into consideration when trying to interpret
price volatility at the manufacturing level.

CPI and Core CPI:  give insight as to rising (inflation) or
falling (deflation) prices at the consumer level.  Not unlike the
PPI data, there are disputes if these readings are accurate.
Here again, PRODUCTIVITY rates should be observed when making a
comparison of PPI to CPI data.  While higher prices at the
producer level can be found, high rates of PRODUCTIVITY can allow
for steady pricing at the consumer level.

Treasury Budget:  is a monthly account of the U.S. government's
surplus (more receipts than outlays) or deficit (more outlays
than receipts).  The year-to-date deficit worsened by $80 billion
from a year earlier, while the 12-month deficit stands at $454
billion.  My personal view is that while the deficit matters, at
this point of an economic cycle, which certainly appears to be
robust, tax receipts should begin to rise and help stem the rise
in the deficit.  Economists currently see the 2004 deficit at
$370 billion, while the White House forecast is higher at $521
billion.  I was critical of the Treasury when it told investors
it would cease auctioning off 30-year debt, when the long bond's
yield was falling.  In my mind, if my cost of borrowing (when the
government sells/auctions off its bonds it is borrowing) is
falling, and I can borrow longer-term at a lower cost to borrow,
then that's where I would want to try and borrow.  There are
criticisms to the size of the deficit and I have my criticisms
too.  But if you're going to build a deficit in order to try and
turn an economy around to growth, while at the same time funding
a war, then the "best time" to do it is at 45-year lows rates of
borrowing.  My core belief is that a strong economy will pay down
a deficit, and a weak economy will usually find a rising deficit.
Nonfarm payroll figures will be monitored closely as an
additional generator of tax receipts will be needed to eventually
pay down the deficit.

M2 Money Supply:  shows growth, where this growth in money supply
has fueled what many economists call a "monetary led expansion."
Monthly M2 Money growth and velocity provide a very rough read on
the growth/inflation outlook over the intermediate term.  Over
the long term, inflation is thought to be led by money growth.
However, this has become a point of dispute as recent evidence
isn't all that convincing as the 2001 M2 growth rate ran at the
fastest pace since 1983 as continued strong M2 growth in 2002 and
early 2003 had the Fed concerned about DEFLATION risks.  In late
2003, M2 fell as economic growth surged and money flowed to
higher yielding investments from commercial banks, which is not
Fed policy related.  Some of the inflation fears you may be
hearing about, in regards to the surge in money supply may not
fully account for the possibility that the renewed growth in
money supply may not necessarily be Fed driven, but commercial
banks capturing profit from prior investments.  In a prior Ask
the Analyst (07/20/03) column titled "Money supply is surging,
but where's it going?" greater detail of M1, M2 and M3 money
supply is discussed.  Has anyone noticed that stock prices have
fallen lately, while money supply has grown?  Is Fed policy
currently in error and the rise in money supply a sign of
inflation?

Well that's it for Econ 101.

Below these various economic indicators/reports, I've placed the
recent closing values of various market indices we will discuss
and analyze throughout time.  Only the Fed funds rate is derived
by one body, the Federal Open Market Committee, while all others
are derived by the MARKET (you, me and others).

The one point I would want to make is in regards to questions
regarding just ONE economic report and trying to analyze the
stock or bond market in the scope of that one specific report.

Late last year, one analyst said he thought stock prices were
going to fall because M2 had stalled and actually showed a
decline.  That looks to have been a good call.

It's interesting though that while M2 was growing rabidly in
2003, it was the rising price of gold that was this signal along
with a rising M2 that was spelling future inflation.

That is until gold fell, but now M2 rises, that gold is not
really the indicator for inflation, but instead, its M2.  Wait,
no.... M2 was rising in 2003 and there wasn't inflation.

Oh... wait a minute.  The rising dollar is the signal for
inflation that will bust the stock market bubble.  Ooops!  The
dollar was strong during the great bull market of the 1990's.

Aha!  It's the rising deficit and lack of job growth combined
with rising commodity prices that will.......

Don't get confused and feel that you have to FULLY comprehend
every detail of economic data, and fully comprehend what that ONE
single report is saying, but it does help to have a basic
understanding of how many of the reports combined create the
bigger economic picture.

Don't be confused, or swayed by the friend that tells you just
because Business Inventories are trending lower, that it is a
sure sign of economic slowing.  Ask them what there views are on
the decline in Business Inventories as it relates to rising sales
and the current rate of productivity.

Is the disparity between Producer Prices and Consumer Prices a
governmental plot to mislead economists and investors?  Or does
productivity, have something to do with the disparity?

Jeff Bailey



*************
COMING EVENTS
*************

Symbol  Co               Date           Comment      EPS Est

------------------------- MONDAY -------------------------------

CPB    Campbell Soup         Mon, May 24  Before the Bell     0.32
DY     Dycom Industries      Mon, May 24  After the Bell      0.23
MDT    Medtronic Inc.        Mon, May 24  4:15 pm ET          0.46
NOVL   Novell, Inc.          Mon, May 24  After the Bell      0.03


------------------------- TUESDAY ------------------------------

CPRT   Copart                Tue, May 25  After the Bell      0.21
EASI   Engineered Support SysTue, May 25  Before the Bell     0.64
HNZ    H.J. Heinz Company    Tue, May 25  Before the Bell     0.58
HUG    Hughes Supply         Tue, May 25  After the Bell      0.92
KKD    Krispy Kreme Doughnut Tue, May 25  Before the Bell     0.24
LZB    La-Z-Boy Inc.         Tue, May 25  -----N/A-----       0.43
SPI    ScottishPower         Tue, May 25  Before the Bell      N/A
SMTC   Semtech               Tue, May 25  During the Market   0.18
TKA    Telekom Austria AG    Tue, May 25  Before the Bell      N/A
TTC    Toro                  Tue, May 25  Before the Bell     1.83
VOD    Vodafone Group Public Tue, May 25  Before the Bell      N/A
WSM    Williams-Sonoma       Tue, May 25  Before the Bell     0.16


------------------------ WEDNESDAY -----------------------------

AZO    AutoZone Inc.         Wed, May 26  Before the Bell    1.55
BMO    Bank Of Montreal      Wed, May 26  -----N/A-----       N/A
BCM    Canadian Impl Bank ComWed, May 26  -----N/A-----       N/A
DLTR   Dollar Tree Stores    Wed, May 26  After the Bell     0.29
DCI    Donaldson             Wed, May 26  After the Bell     0.31
MIK    Michaels Stores       Wed, May 26  After the Bell     0.37
NDSN   Nordson               Wed, May 26  Before the Bell    0.41
RL     Polo Ralph Lauren CorpWed, May 26  Before the Bell    0.78
TECD   Tech Data Corporation Wed, May 26  After the Bell     0.49
TOL    Toll Brothers         Wed, May 26  -----N/A-----      0.87


------------------------- THUSDAY -----------------------------

BFb    Brown-Forman Corp     Thu, May 27  After the Bell       N/A
CHS    Chico's FAS           Thu, May 27  After the Bell      0.39
COST   Costco Wholesale Corp Thu, May 27  Before the Bell     0.38
DG     Dollar General Corp.  Thu, May 27  -----N/A-----       0.20
FLO    Flowers Foods         Thu, May 27  Before the Bell     0.35
OTE    Hellenic Telecomm     Thu, May 27  -----N/A-----        N/A
PFP    Prem Farnell Plc (ADR)Thu, May 27  Before the Bell      N/A
RY     ROYAL BK CDA MONTREAL Thu, May 27  -----N/A-----        N/A
TKP    Technip               Thu, May 27  Before the Bell      N/A
TD     Toronto Dominion Bank Thu, May 27  -----N/A-----        N/A
VIP    Vimpel Communications Thu, May 27  -----N/A-----        N/A
V      Vivendi Universal     Thu, May 27  -----N/A-----        N/A


------------------------- FRIDAY -------------------------------

RDY    Dr. Reddy's Labs      Fri, May 28  -----N/A-----        N/A


----------------------------------------------
Upcoming Stock Splits In The Next Two Weeks...
----------------------------------------------

Symbol  Co Name              Ratio    Payable     Executable

CCNE    CNB Financial Corp        5:2      May  21st   May  24th
FBTC    First BancTrust Corp      2:1      May  21st   May  24th
ASBC    Associated Banc-Corp      3:2      May  21st   May  24th
SONC    Sonic Corp                3:2      May  21st   May  24th
RCI     Renal Care Group, Inc     3:2      May  24th   May  25th
BMRC    Bank of Marin             3:2      May  24th   May  25th
BFCF    BFC Financial Corp        5:4      May  25th   May  26th
ESCA    Escalade, Inc             2:1      May  25th   May  26th
ANN     AnnTaylor Stores Corp     3:2      May  26th   May  27th
ERES    eResearchTechnology, Inc  3:2      May  27th   May  28th
KIND    Kindred Healthcare, Inc   2:1      May  27th   May  28th
IEX     IDEX Corp                 3:2      May  28th   May  31st
CEDC    Central European Dist     3:2      May  28th   May  31st
QCRH    QCR Holdings, Inc         3:2      May  28th   May  31st
CNQ     Canadian Natural Res Lmtd 2:1      May  28th   May  31st
PVTB    PrivateBancorp, Inc       2:1      May  31st   Apr   1st
BNN     Brascan Corp              3:2      May  31st   Apr   1st
GSBC    Great Southern Bancorp    2:1      Apr   1st   Apr   2nd
BR      Burlington Resources      2:1      Apr   1st   Apr   2nd
FNLC    First Natl Lincoln Corp   3:1      Apr   1st   Apr   2nd


--------------------------
Economic Reports This Week
--------------------------

Wall Street will focus on economic data again as this week
brings forth a basket of reports.  Some of the more important releases
this week are the Consumer Confidence report, durable orders,
help wanted index, Michigan Sentiment and the Chicago PMI.

==============================================================
                       -For-

----------------
Monday, 05/24/04
----------------
None


-----------------
Tuesday, 05/25/04
-----------------
Consumer Confidence (DM)   May  Forecast:    94.0  Previous:     92.9
Existing Home Sales (DM)   Apr  Forecast:   6.48M  Previous:    6.48M


-------------------
Wednesday, 05/26/04
-------------------
Durable Orders (BB)        Apr  Forecast:   -0.8%  Previous:    -5.0%
New Home Sales (DM)        Apr  Forecast:   1200K  Previous:    1228K


------------------
Thursday, 05/27/04
------------------
Initial Claims (BB)      05/22  Forecast:    334K  Previous:     345K
GDP-Prel. (BB)              Q1  Forecast:    4.5%  Previous:     4.2%
Chain Deflator-Prel (BB)    Q1  Forecast:    2.5%  Previous:     2.5%
Help-Wanted Index (DM)     Apr  Forecast:      41  Previous:       39


----------------
Friday, 05/28/04
----------------
Personal Income (BB)       Apr  Forecast:    0.5%  Previous:     0.4%
Personal Spending (BB)     Apr  Forecast:    0.2%  Previous:     0.4%
Mich Sentiment-Rev. (DM)   May  Forecast:    94.6  Previous:     94.2
Chicago PMI (DM)           May  Forecast:    62.4  Previous:     63.9


Definitions:
DM=  During the Market
BB=  Before the Bell
AB=  After the Bell
NA=  Not Available


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The Option Investor Newsletter                   Sunday 05-23-2004
Sunday                                                      2 of 5

In Section Two:

Watch List: AVP, CAT, SUN, ASD, RIMM
Dropped Calls: None
Dropped Puts: None


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

Avon Products - AVP - close: 85.31 change: +0.75

WHAT TO WATCH: We strongly considered adding AVP to the OI call
list this weekend.  The stock has been relatively strong compared
to the major indices the past few weeks especially after its late
April earnings report and stronger earnings forecast.  Shares
appear to have new support at $82.00 and AVP is close to breaking
out over resistance at $86.00.  We would consider new long plays
on a breakout.



---

Caterpillar - CAT - close: 73.03 change: +0.77

WHAT TO WATCH: CAT appears to be struggling.  The Dow-component
and heavy machinery manufacturer has withered back towards key
support near $71-$70.  Its P&F chart also shows key support near
$71.00.  Also noteworthy is its P&F bearish price target near
$61.00.  Bullish traders can look for a breakout back above $76
and its 200-dma while bearish traders can look for that drop
under $71-70 to open plays.  Given the recent trend of selling
the rallies more aggressive traders might consider a bearish
position on a failed rally near $75.



---

Sunoco Inc - SUN - close: 58.56 change: -0.88

WHAT TO WATCH: Normally one would think that an oil refiner like
SUN who probably has more business than they can handle would
have a pretty strong share price.  That's exactly what we saw
from October of 2003 through April '04 but now we're beginning to
see some profit taking.  Traders might be able to capitalize on
any drop with a trigger under $58.00.  There is some support near
$55.00 but we might be able to target old support near $52.50
just above its 200-dma.



---

American Standard Co. - ASD - close: 107.83 change: +1.19

WHAT TO WATCH: ASD doesn't have much time left before its 3-for-1
stock split.  Shares are due to split near May 28th and that
doesn't give the split-momentum traders much time left if they
don't already have a position.  ASD has already bounced from the
$100 level but it would not surprise us to see it breakout over
resistance at its 40 & 50-dma's and the $110 mark before it
actually splits.



---

Research In Motion - RIMM - close: 109.02 change: +5.07

WHAT TO WATCH: Wow!  Something has reignited the fire under
shares of RIMM. It may have been the company's recent analyst
meeting as the stock has garnered a few more upgrades and
reiterations of positive outlooks lately.  The breakout over
resistance at $95 was sharp and cut through technical resistance
at its 40 & 50-dma's as well.  Now RIMM is challenging its all-
time highs.  It's easy to say that RIMM is now short-term
overbought but it has a tendency to be volatile and move farther
than one might expect.  A breakout over $110 might be a play for
the aggressive but we'd suggest tight stops!





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

GS $91.74 -0.66 - Keep an eye on Goldman Sachs.  A drop under
$90.00 and this might be a bearish play toward the $85 mark.

NMG.A $50.56 +1.51 - Upscale retailer Neiman Marcus is seeing
some strength in its stock price this week.  Friday's 3% gain
broke through resistance at $50.00 and its 200-dma.

ZMH $83.55 +1.42 - ZMH is another relative strength candidate.
The stock has been consolidating in a wide $6.00 range the last
few weeks but looks close to breaking out to new highs.



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**************************
PICKS WE DROPPED THIS WEEK
**************************

Remember that historically, when we drop a pick it will go up
10 to 15% the very next week. It is part of Murphy's Law.
Just because we drop a stock as a pick does not mean we are
advocating a "sell" on any position you have. We are simply
dropping our recommendation as a new play. Existing plays
can and do continue on and are usually profitable.


CALLS
^^^^^

None

PUTS
^^^^

None

***********
DEFINITIONS
***********

! Please note changes to the Option Chains for new call and put
  plays.  We are no longer listing a "SL" or Suggested Stop Loss
  on individual options.  Most brokers offer the ability to list
  a stop loss for your option on the underlying stock.

  All of OptionInvestor.com's directional call or put plays list
  a suggested stop loss for the stock itself and if the stock
  trades at or below that stop on an intraday basis we will
  close any hypothetical play at that time.

OI  = Open Interest - the number of open contracts outstanding.
Last Trade @ = Indicates where the option traded last.
ITM = In the money
ATM = At the money
OTM = Out of the money
ADV = Average Daily Volume

The options with a "*" by the strike price are our choices from the
group. If the stock moves as expected we feel they have the best
chance to substantially increase or double in price with the best
risk/reward ratio compared to the other options for the same stock.
You must determine if they fit your risk profile for time and price.

RISKS of SELLING PUTS:
The risk of selling naked puts is always the possibility
of a catastrophic event that drops the stock below the
strike price and could result in the stock being PUT to you.
Always protect yourself with a "buy to cover" limit order
to take you out before this can happen.


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The Option Investor Newsletter                   Sunday 05-23-2004
Sunday                                                      3 of 5

In Section Three:

Current Calls: ADP, ERTS, BCR, JNJ, LXK,
New Calls: QCOM
Current Put Plays: AMZN, APOL, CAKE, CTX, GM, GDT, WHR,
New Puts: FRX


! Please note changes to the Option Chains for new call and put
  plays.  We are no longer listing a "SL" or Suggested Stop Loss
  on individual options.  Most brokers offer the ability to list
  a stop loss for your option on the underlying stock.

  All of OptionInvestor.com's directional call or put plays list
  a suggested stop loss for the stock itself and if the stock
  trades at or below that stop on an intraday basis we will
  close any hypothetical play at that time.


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******************
CURRENT CALL PLAYS
******************

Auto. Data Proc. - ADP - close: 44.28 change: +0.01 stop: 43.25

Company Description:
Through its many subsidiaries, ADP is a provider of computerized
transaction processing, data communication and information
services.  The company's operations are divided into Employer
Services, Brokerage Services, Dealer Services and Claims Services.
Among the activities managed by the Employer Services division are
payroll, human resources, benefits administration, tax filing and
reporting and retirement plan services.

Why we like it:
To say that ADP has been a disappointment would be an
understatement, as the stock couldn't manage even one bullish
session last week.  The stock continued to see profit taking after
being rejected from the top of its rising channel 2 weeks ago.  It
was encouraging to see the 50-dma ($43.86) hold as support at the
end of the week and if there's going to be a rebound and another
run at resistance, this is the point from which it should start.
In conjunction with strong support at the 50-dma and horizontal
support near $43.50, we have the daily Stochastics now fully
oversold and attempting to turn bullish.  Traders unwilling to
take the plunge here after the stock has trended steadily lower
for two weeks will want to keep their eye on the $45 level.  A
breakout over that level looks like an excellent point to enter on
strength, as it would have the stock moving through short-term
resistance and back over both the 20-dma ($44.94) and the 30-dma
($44.95).  Maintain stops at $43.25.

Suggested Options:
Shorter Term: The June $45 Call will offer short-term traders the
best return on an immediate move, as it is currently near the
money.

Longer Term: Aggressive longer-term traders can use the August $45
Call, while the more conservative approach will be to use the
August $42 Call.  Our preferred option is the June $45 strike, as
it is currently at the money and should provide sufficient time
for the play to move in our favor.

BUY CALL JUN-42 ADP-FV OI=  58 last traded @ $2.35
BUY CALL JUN-45*ADP-FI OI=1357 last traded @ $0.80
BUY CALL AUG-42 ADP-HV OI=1062 last traded @ $3.20
BUY CALL AUG-45 ADP-HI OI=2576 last traded @ $1.75

Annotated Chart of ADP:




Picked on May 9th at         $46.03
Change since picked:          -1.75
Earnings Date               4/22/04 (confirmed)
Average Daily Volume =     2.06 mln

Chart =





Electronic Arts - ERTS - close: 48.71 change: +0.41 stop: 47.00

Company Description:
ERTS creates, markets and distributes interactive entertainment
software for a variety of hardware platforms, including Sony's
PlayStation 2, the PC, Nintendo GameCube and the recently
launched Xbox.  The company's EA.com business segment is engaged
in the creation, marketing and distribution of entertainment
software which can be played or sold online, as well as the
ongoing management of subscriptions of online games and Website
advertising.

Why we like it:
We knew it was an aggressive play, trying to pick the bounce
point in shares of ERTS, but so far things are proceeding
normally.  We would have liked to have seen the stock find
support above the $48 level, thus avoiding the PnF Sell signal,
but the bulls did finally step in towards the end of the week and
we have a hint of a rebound taking place on the daily chart.
ERTS found support just over the 200-dma ($47.72) and the rising
trendline, which is currently right at the same level.  The bulls
have their work cut out for them though, with solid resistance
waiting above at the $50 level and then at the shorter-term
descending trendline and 50-dma, currently converged near $51.
Right now, the best entries still look to be on rebounds from the
$48 level.  Traders that would prefer to enter on signs of
strength will want to see a move back over $49, taking ERTS
through the intraday resistance of the past 2 days.  We'll need
to see the breakout over the 50-dma before we'll know whether
we've got a runner on our hands though.  Maintain stops at $47.

Suggested Options:
Shorter Term: The June $47 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 $52
Call, while the more conservative approach will be to use the
June $50 Call.  Traders looking for more insulation against time
decay may want to consider the September strike.  Our preferred
option is the June $47 strike, as it is currently in the money
and should provide sufficient time for the play to move in our
favor.

BUY CALL JUN- 47*EZQ-FW OI=2607 last traded @ $2.55
BUY CALL JUN- 50 EZQ-FJ OI=6443 last traded @ $1.25
BUY CALL JUN- 52 EZQ-FX OI=2454 last traded @ $0.55
BUY CALL SEP- 50 EZQ-IJ OI=2082 last traded @ $3.50

Annotated Chart of ERTS:




Picked on May 18th at        $49.60
Change since picked:          -0.89
Earnings Date               4/29/04 (confirmed)
Average Daily Volume =     3.87 mln

Chart =


-------

Bard C R - BCR - close: 109.47 chg: -0.53 stop: 106.00

Company Description:
C. R. Bard, Inc. (www.crbard.com), headquartered in Murray Hill,
N.J., is a leading multinational developer, manufacturer, and
marketer of innovative, life-enhancing medical technologies in
the fields of vascular, urology, oncology, and surgical specialty
products. (source: company press release)

Why We Like It: (Original Play from Thursday)
It's been tough to find really enticing bullish play candidates
lately with the markets so weak the past few weeks so we've
decided to add BCR based on its relative strength.  The company
reported earnings on April 20th and smashed the estimates of
$1.03 with $1.19 per share.  The stock soared on the earnings
news and a 2-for-1 stock split announcement.  Since then we've
seen the stock consolidate those gains over the past month with
new support at the $105 level.  The gradual trend higher over the
last two weeks has now brought it back to the $110 level.  Its
MACD is about to produce a new buy signal and its faster momentum
oscillators are already pointing higher.

Now we will admit that BCR does look overbought, especially on
its weekly chart.  Yet there has been virtually no weakness the
past ten days even as the Industrials darted under the 10K mark.
There is also clear resistance at the $112 level and more
conservative traders may want to wait for BCR to trade and/or
close above this level.  The stock is set to split 2-for-1 on May
28th and begin trading split adjusted after the Memorial day
holiday when the markets open on June 1st.  BCR could see a
steady pre-split run up into this date.  Traders should also
remember that any options you hold over the split will have their
symbols change along with their strikes, value and open interest.
If you own one $110 call before the split you'll own two $55
calls after the split with the appropriate change in value.  We
are starting the play with a stop loss at $106.00.

Weekend Update:
We have nothing new to report on BCR after adding it Thursday
night.  The stock traded in a relatively tight range on Friday
near the $110 level.  The stock remains a relative strength play.
More aggressive traders willing to try and buy a dip might look
for a bounce from the $108 level.

Suggested Options:
Short-term traders will probably do best with June or July calls.
We're going to suggest the June's, especially the $110's, which
will become $55s after the split.

BUY CALL JUN 105 BCR-FA OI= 91 Last traded @ $6.10
BUY CALL JUN 110 BCR-FB OI=114 Last traded @ $2.90
BUY CALL JUN 115 BCR-FC OI=246 Last traded @ $1.05

Annotated Chart:





Picked on May 20 at $110.00
Change since picked: - 0.53
Earnings Date      04/20/04 (confirmed)
Average Daily Volume:   386 thousand




----
Johnson & Johnson - JNJ - cls: 54.94 chng: +0.36 stop: 53.50*new*

Company Description:
Johnson & Johnson is engaged in the manufacture and sale of
products related to human health and well-being.  Through over 200
operating companies, it conducts business worldwide.  The
company's business is divided into three segments: Consumer,
Pharmaceutical and Medical Devices and Diagnostics.  The Consumer
segment manufactures and markets a range of products used in the
baby and child care, skin care, oral and wound care and women's
healthcare fields, as well as nutritional and over-the-counter
pharmaceutical products.  The Pharmaceutical segment's principal
worldwide franchises are in the antifungal, anti-infective,
cardiovascular, contraceptive, dermatology, gastrointestinal,
hematology, immunology, neurology, oncology, pain management,
psychotropic and urology fields.  The Medical Devices and
Diagnostics segment includes a range of products used by or under
the direction of physicians, nurses, therapists, hospitals,
diagnostic laboratories and clinics.

Why we like it:
Just as we expected when we wrote the Thursday update, shares of
JNJ gravitated back to the $55 level on expiration Friday.  With
that artificial influence removed next week, we'll see JNJ trade
on its own merits and we'll see if there's any real life in this
bullish play.  The rebound over the past couple days is
encouraging, as it is pulling the daily oscillators into bullish
crossovers and it could very well be that we'll see some real
follow-through early next week.  Aggressive traders got their shot
at entries on the successful rebound from the $54 level last week
and we're still eyeing a breakout over $55 as the signal to take
entries on renewed strength.  That $54 support level is now being
reinforced by the 30-dma ($54.16).  If JNJ is indeed going to make
a bullish move, we really shouldn't see the $54 level violated, so
we're going to get more aggressive with our stop this weekend,
raising it to $53.50.

Suggested Options:
Shorter Term: The June $55 Call will offer short-term traders the
best return on an immediate move, as it is currently at the money.

Longer Term: Longer-term traders can use the July $55 Call.  Our
preferred option is the July strike, as it is currently at the
money and gives the stock plenty of time to move upwards without
a significant loss of time value.

BUY CALL JUN-55 JNJ-FK OI=12485 last traded @ $1.10
BUY CALL JUL-55*JNJ-GK OI=44737 last traded @ $1.55

Annotated Chart of JNJ:




Picked on May 9th at         $55.30
Change since picked:          -0.36
Earnings Date               4/13/04 (confirmed)
Average Daily Volume =     7.23 mln





Lexmark Intl. - LXK - close: 92.76 change: +1.06 stop: 89.75

Company Description:
Wrapping its arms around the entire life-cycle of printers, LXK
develops and manufactures a broad range of laser, inkjet and dot
matrix printers for the office and home markets.  The company is
also the exclusive source for new print cartridges for the laser
and inkjet printers it manufactures.  Additionally, LXK provides
supplies for IBM printers and offers after-market laser cartridges
for the large installed base of a range of laser printers sold by
other manufacturers.

Why we like it:
The past week has certainly bee interesting for LXK investors as
the stock has made alternating attempts at rallying and selling
off, none of which have been able to stick yet.  Resistance is
still holding firm just over $94, while except for Monday, the
stock has been adhering to support at the 50-dma ($91.81).
There's no telling how much of the back and forth action last week
can be attributed to options expiration, but with that artificial
influence removed next week, we ought to get some resolution of
the current impasse.  Recall that we're looking for a repeat of
the rebounds from the 50-dma that LXK has produced in recent
months.  If the pattern holds true, we should see the stock
getting serious about rallying early next week with a breakout
over the $94.50 level.  That breakout can be used for new momentum
entries, particularly with the daily oscillators hinting at
bullish reversals.  Maintain stops at $89.75.

Suggested Options:
Shorter Term: The June $90 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 $95
Call, while the more conservative approach will be to use the July
$95 Call due to the greater time until expiration.  Our preferred
option is the June $90 strike, as it is currently in the money and
should provide sufficient time for the play to move in our favor.

BUY CALL JUN-90*LXK-FR OI= 219 last traded @ $4.90
BUY CALL JUN-95 LXK-FS OI= 566 last traded @ $2.20
BUY CALL JUL-90 LXK-GR OI=1222 last traded @ $6.30
BUY CALL JUL-95 LXK-GS OI= 434 last traded @ $3.60

Annotated Chart of LXK:



Picked on May 13th at        $94.03
Change since picked:          -1.27
Earnings Date               4/19/04 (confirmed)
Average Daily Volume =     1.07 mln







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

QUALCOMM - QCOM - close: 65.40 chg: +1.20 stop: 63.50

Company Description:
QUALCOMM Incorporated (www.qualcomm.com) is a leader in
developing and delivering innovative digital wireless
communications products and services based on the Company's CDMA
digital technology. Headquartered in San Diego, Calif., QUALCOMM
is included in the S&P 500 Index and is a 2003 FORTUNE 500.
company. (source: company press release)

Why We Like It:
We continue to search out relative strength plays given the
markets overall weakness these last few weeks.  The expectation
is that if the market turns higher again these will outperform.
Fortunately, some of these are strong enough to march higher
without the market's help.  QCOM may be just that sort of
candidate.  The company issued positive earnings guidance a
couple of weeks ago with a better than expected forecast for the
June quarter.  They also raised their full year predictions with
business better than expected.  Following their announcement the
stock garnered three upgrades.

Meanwhile the stock price has been consolidating sideways the
entire month of May but now looks ready to breakout to the
upside.  We like the new buy signal on its MACD indicator but
we're going to wait and use a TRIGGER at $66.01 to open any
positions.  More aggressive traders might want to consider
positions now with Friday's move over its 50-dma and the $65
mark.  Support is down near $62.00 but we're going to try and
reduce our risk with a stop loss at $63.50.  Our first target is
$70.00 and our secondary target is $74.

Suggested Options:
Short-term traders should be looking at the June or July strikes.
Our favorites are the June 65s.

BUY CALL JUN 60 AAO-FL OI= 1738 Last traded @ $6.20
BUY CALL JUN 65 AAO-FM OI= 7198 Last traded @ $2.50
BUY CALL JLY 65 AAO-GM OI=21031 Last traded @ $3.70

Annotated Chart:



Picked on May xx at $  0.00 <-- see TRIGGER
Change since picked: + 0.00
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   9.6 million



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*****************
CURRENT PUT PLAYS
*****************

Amazon.com - AMZN - close: 41.17 chg: +0.19 stop: 44.05

Company Description:
Amazon.com, a Fortune 500 company based in Seattle, opened on the
World Wide Web in July 1995 and today offers Earth's Biggest
Selection. Amazon.com seeks to be Earth's most customer-centric
company, where customers can find and discover anything they
might want to buy online, and endeavors to offer its customers
the lowest possible prices. Amazon.com and other sellers offer
millions of unique new and used items in categories such as
health and personal care, jewelry and watches, gourmet food,
sports and outdoors, apparel and accessories, books, music, DVDs,
electronics and office, kids and baby, and home and garden.
(source: company press release)

Why We Like It:
We added AMZN to the put list three weeks ago on its technical
breakdown under $45.00 and its 50-dma.  Our short-term target was
the $40 region with a preferred target of its descending
trendline of lows (see chart below).  Since adding AMZN the stock
has found support at the $40.50 level twice with the latest
"bounce" this past Friday.  The bounce isn't very convincing but
this close to the round-number psychological support/resistance
level at $40.00 makes us hesitant to add new positions here.
Fortunately, the technical picture and P&F chart for AMZN remain
bearish but we're seeing a potential bullish turnaround in the
INX Internet index, which is trying to rebound from its own 200-
dma.

We continue to feel that investors are likely to shy away from
AMZN in this uncertain climate of geo-political tension and the
stock market is likely to see high P/E stocks consolidate lower.
Further depressing AMZN could be alternatives for investors'
capital like the recently launched Blue Nile IPO (NILE) and the
upcoming Google IPO.

However, even though we are listing options below we would not
open new plays until AMZN broke through the $40.00 mark.  More
aggressive traders willing to scalp a smaller move might look for
a bounce back to the $42.50 level and then short the rollover
back toward $40.00.  Something else to be aware of is AMZN's May
25th annual shareholding meeting.  While these meeting aren't
necessarily a stock-moving event you never know what news may
come out.

Suggested Options:
This close to the $40 level we are not suggesting new positions.
However, if AMZN breaks down below the $40 mark then we're game
for another leg down.  Our favorites are the June 42.50s and
June 40s.

BUY PUT JUN 37.50 ZQN-RU OI=2070 Last traded @ $0.75
BUY PUT JUN 40.00 ZQN-RH OI=3591 Last traded @ $1.50
BUY PUT JUN 42.50 ZQN-RV OI=5403 Last traded @ $2.75
BUY PUT JUN 45.00 ZQN-RI OI=4956 Last traded @ $4.50

Annotated Chart:



Picked on May 02 at $ 43.60
Change since picked: - 2.43
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   8.4 million




---

Apollo Group - APOL - close: 89.68 change: +1.43 stop: 92.00

Company Description:
The Apollo Group provides higher education to working adults.  The
company operates through its subsidiaries, The University of
Phoenix, Inc., Institute for Professional Development, The College
for Financial Planning Institutes Corporation and Western
International University, Inc.  APOL offers its programs and
services at 58 campuses and 102 learning centers in 36 states,
Puerto Rico, and Vancouver, British Columbia.

Why we like it:
Not wanting to be left out of the volatile expiration Friday
action, APOL reversed course after Thursday's apparent breakdown,
coming back to close very near the $90 level.  While the break and
close under the 50-dma ($89.45) did look ugly on Thursday, we
noted in our update the likelihood that the stock would come back
to close near $90 due to the normal option expiration antics.
That bounce leaves us with a clean slate heading into next week.
A break back under the 50-dma should have the lows from early May
being tested and a break under $87.50 still looks like a viable
momentum entry.  The concern is that daily oscillators are trying
to turn bullish and a strong upward day could give a confirmed
bullish cross.  Looking at APOL's subsidiary UOPX presents another
picture of concern as that stock broke out over near-term
resistance on Friday.  Aggressive traders can consider new entries
on a rollover below $91, but should confirm that the rally in UOPX
is failing before doing so.  Maintain stops at $92, which is above
solid resistance, as well as the 20-dma ($91.12) and the 30-dma
($91.76).

Suggested Options:
Aggressive short-term traders can use the June $85 strike,
although the more conservative approach will be to use the $90
strike.  Our preferred option is the June 90 strike, as it is
currently at the money and should provide ample time for the play
to move in our favor.

BUY PUT JUN-90*OAQ-RR OI= 1196 last traded @ $3.30
BUY PUT JUN-85 OAQ-RQ OI= 1146 last traded @ $1.60

Annotated Chart of APOL:



Picked on May 11th at         $90.32
Change since picked:           -0.64
Earnings Date                6/11/04 (unconfirmed)
Average Daily Volume =      1.72 mln



---

Cheesecake Factory - CAKE - cls: 38.20 chng: +0.02 stp: 40.75*new*

Company Description:
The Cheesecake Factory operated 61 upscale, full-service, casual
dining restaurants under The Cheesecake Factory mark in 20 states
and the District of Columbia as of March 3, 2003.  The company
also operated three upscale casual dining restaurants under the
Grand Lux Cafe mark in Chicago, Illinois, Los Angeles, California,
and Las Vegas, Nevada, as well as one self-service, limited-menu,
express foodservice operation under The Cheesecake Factory Express
mark inside the DisneyQuest family entertainment center in
Orlando, Florida.  It also operated a bakery production facility
in Calabasas Hills, California, which produces baked desserts and
other products for its restaurants and for other foodservice
operators, retailers and distributors. It also licensed three
bakery cafes under The Cheesecake Factory Bakery Cafe mark to
another foodservice operator.

Why we like it:
It had to happen eventually and CAKE rebounded slightly on Friday,
right from the $38 level, as we suspected it might.  The stock
performed quite nicely for us last week, rolling over just below
the 10-dma ($40.40) and plunging through support on Thursday.
Given that the stock has fallen so sharply recently, it really
didn't take a genius to figure out that a rebound was due,
especially with the normal artificiality that we normally see on
options expiration Fridays.  If the recent pattern repeats, then
we should see a few days of consolidation near the $38 level
before the downtrend continues down towards our $36 target for the
play.  Resistance should now be very strong near $40, with the 10-
dma bearing down and reinforcing that resistance.  Look for a mild
rebound and rollover in the $39.50-40.00 area to set up new
entries.  If that rebound fails to materialize, then look for
exits from the play in the $36 area.  Lower stops to $40.75.

Suggested Options:
Aggressive traders can use the $35 strike, while the more
conservative approach will be to use the in-the-money $40 strike.
Our preferred option is the June 40 strike, as it is currently in
the money and should provide ample time for the play to move in
our favor.

BUY PUT JUN-40*CFQ-RH OI=443 last traded @ $2.65
BUY PUT JUN-35 CFQ-RG OI= 12 last traded @ $0.50

Annotated Chart of CAKE:



Picked on May 13th at         $40.09
Change since picked:           -1.89
Earnings Date                4/20/04 (confirmed)
Average Daily Volume =         579 K



---


Centex Corp - CTX - close: 44.95 change: +0.90 stop: 47.50

Company Description:
Dallas-based Centex, through its subsidiaries, ranks among the
nation's largest home builders, mortgage originators and
commercial contractors. Centex was recently ranked No. 12 on
Business Week's annual list of the "Top 50 Best Performing
Companies" in the U.S. and consistently ranks among the most
admired companies in its industry, according to FORTUNE magazine.
(Source:  Company Press Release.)

Why We Like It:
Technically we liked CTX as a short due to its breakdown through
major support in early May.  Since that time the stock has
consolidated those losses in a sideways pattern around the $44-45
level.  Our plan was to go short (by buying puts) on a failed
rally under $47.00.  We wanted to see CTX rally upwards toward
$47, roll over, and then trade back down under $46 before opening
any hypothetical position.  This sort of action has not yet
happened and leaves us "untriggered" while we wait for the next
bump higher.  What is beginning to concern us is that we're now
beginning to see signs of a potential bullish turnaround.  CTX
has bounced twice from the $43.35 region in the last two weeks
just as the DJUSHB home construction index has bounced twice from
the 530 area.  Both CTX and the DJUSHB look oversold from their
three months of declines but Wall Street still seems unsatisfied
without how higher interest rates will affect the builders, even
though many builders have said they could withstand a significant
uptick in rates before it would affect their business.

We remain cautious but we're willing to hold on to our original
plan.  Look for the failed rally and the move back under $46.
Until then we'll sit out on the sidelines.  If this doesn't
materialize a drop through $43 could be an alternative put-buying
entry point.

Suggested Options:
Short-term traders can look to the June and July puts.  Our
favorites are the June 50s and 45s but the July 45s look good too.

BUY PUT JUN 45.00 CTX-RI OI=2846 Last traded @ $2.05
BUY PUT JLY 45.00 CTX-SI OI=1922 Last traded @ $2.80
BUY PUT JUN 50.00 CTX-RJ OI= 778 Last traded @ $5.60

Annotated Chart



Picked on May xx at $ xx.xx (See rollover entry.)
Change since picked: - x.xx
Earnings Date      04/20/04 (confirmed)
Average Daily Volume:   2.0 million



---
General Motors - GM - close: 43.08 change: -0.38 stop: 45.25*new*

Company Description:
General Motors Corporation provides automotive-related products
and services by primarily designing, manufacturing and marketing
vehicles, as well as providing communications services and
financial services.  The company operates in two segments,
Automotive, Communications Services and Other Operations, and
Financing and Insurance Operations.  It's automotive business
segment consists of General Motors Automotive, which encompasses
four regions: GM Norma America, GM Europe, GM Latin
America/Africa/Mid-East and GM Asia Pacific.  The communication
services include digital entertainment, information and
communications services and satellite-based private business
networks.  The company's other operations include the design,
manufacturing and marketing of locomotives and heavy-duty
transmissions.  GM's Financing and Insurance Operations primarily
relate to General Motors Acceptance Corporation (GMAC).

Why we like it:
Although it has been rather grudging about giving up ground, our
GM play is sticking to the script quite nicely.  The pattern of
lower highs and lower lows and GM made more progress towards its
next lower low on Friday.  Friday's close was the lowest close for
the stock since early December and was the first close under the
bottom of the early December gap.  We could still see another
rebound attempt, but with the way the daily Stochastics have now
tipped over in a bearish short-cycle reversal, the more likely
direction on Monday will be down.  Resistance is becoming firm in
the $44-45 area, with the 10-dma ($43.93) bearing down and making
entries on another failed bounce look favorable.  Aggressive
traders can consider new entries on a break under last Monday's
$42.88 low, but keep in mind that there's likely to be some strong
support at the $42 level, which will be the likely point from
which the next rebound attempt will begin.  When that rebound
attempt fails, we'll finally be able to set our sights on that
final target in the $39-40 area.  Lower stops this weekend to
$45.25, just over the May 11th intraday high.

Suggested Options:
Aggressive short-term traders will want to use the June 42 Put.
Those with a more conservative approach will want to use the June
45 put.  Traders looking for more insulation against time decay
can look out to the September strike.  Our preferred option is the
June 45 strike, as it is now in the money and should provide ample
time for the play to move in our favor.

BUY PUT JUN-45*GM-RI OI=23197 last traded @ $2.65
BUY PUT JUN-42 GM-RV OI=14117 last traded @ $1.30
BUY PUT SEP-42 GM-UV OI= 3873 last traded @ $3.20

Annotated Chart of GM:



Picked on May 9th at          $44.60
Change since picked:           -1.52
Earnings Date                4/20/04 (confirmed)
Average Daily Volume =      5.21 mln



---


Guidant - GDT - close: 59.15 chg: +2.04 stop: 60.26

Company Description:
Guidant Corporation is a world leader in the treatment of cardiac
and vascular disease. The company pioneers lifesaving technology,
giving an opportunity for better life today to millions of
cardiac and vascular patients worldwide. Driven by a strong
entrepreneurial culture of 12,000 employees, Guidant develops,
manufactures and markets a broad array of products and services
that enable less invasive care for some of life's most
threatening medical conditions. (source: company press release)

Why We Like It: (Thursday's Original Play Description)
It looks like Guidant could be a candidate for one of its own
defibrillators soon.  The stock has steadily slipped lower over
the past several weeks and has now broken through two levels of
major support.  Earnings were in late April and the company only
met expectations while guiding lower for the second quarter and
that's never a good sign.  This week the company also announced
that its CEO would retire at the end of the year.  This is not
necessarily a problem if they have a strong succession plan in
place but it can still cause investor nervousness.  Yesterday
Citigroup's Smith Barney division initiated coverage on GDT with
a "sell".  The downgrade came out one day ahead of GDT's news for
its COMPANION study.  The company published its positive results
in the May 20th edition of the New England Journal of Medicine.
Yet still the stock failed to react positively.  Instead we're
seeing GDT fail at the $60 level of resistance on Wednesday and
break through its simple 200-dma in Thursday's trading.

Chart readers will also note the head-and-shoulders pattern over
the last 4-to-5 months.  The neckline was in the $59.40 area and
that has clearly been broken.  If the H&S pattern holds true then
bears could target the $47.50 region.  That's close to its
bearish P&F chart of $44.00.  We're going to open the play at
current levels with a stop at $60.26.  Our first target will be
$52.50 but the $50.00 level looks good too.

Weekend Update:
Hmm... we were not expecting a 3.57% rebound in shares of GDT on
Friday.  Thursday's breakdown under the 200-dma on better than
average volume looked like the momentum entry we wanted.
Stranger still is that we can't find any catalyst for Friday's
rebound.  The BTK was relatively flat.  There was no new news for
GDT.  This good news is this may be offering us a better entry
point but we need to see it begin to roll over under $60.00
first.  More aggressive traders may want to widen their stops to
$61.00 but we're going to leave ours at $60.26.  One item of
concern is GDT's weekly chart.  The last candle now looks like a
"hammer", which can signal a bullish reversal.

Suggested Options:
We like the June and July puts for this trade.  Our favorite
would be the June 60's but the 55's look good too.

BUY PUT JUN 60 GDT-RL OI= 714 Last traded @ $2.85
BUY PUT JUN 55 GDT-RK OI=1646 Last traded @ $1.00
BUY PUT JUL 60 GDT-SL OI=2442 Last traded @ $3.70

Annotated Chart:




Picked on May 20 at $ 57.11
Change since picked: + 2.04
Earnings Date      04/22/04 (confirmed)
Average Daily Volume:   3.1 million





---

Whirlpool Corp - WHR - close: 64.42 chg: +0.39 stop: 65.76

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:
The chart on WHR continues to look ugly but we're not seeing much
momentum either direction.  The share price has been suffering as
investors rotate out of interest rate sensitive stocks.  WHR is
sensitive because higher rates mean fewer new homes sold and
fewer refi's.  New homes mean new appliances and refi's fund a
large portion of home improvements along with new appliances that
can go with it.  Rising steel costs is also an issue but
fortunately WHR has recently won a court order forcing its steel
supplier to continue to ship materials without added surcharges.

WHR is at a pivotal turning point just under resistance at $65-
66.  Unfortunately the stock's technical indicators are mixed and
don't offer a clear direction so we're going to depend on the
prevailing trend.  Normally opening bearish plays with the stock
near resistance can be an effective play if you use a tight stop
loss.

Suggested Options:
If you can afford them the June 70s are probably a good choice
but we also like the June 65s.

BUY PUT JUN-70 WHR-RN OI=  891 Last traded @6.20
BUY PUT JUN-65 WHR-RM OI= 6837 Last traded @2.70

Annotated Daily



Picked on May 05 at $ 64.69
Change since picked: - 0.27
Earnings Date      04/21/04 (confirmed)
Average Daily Volume:   555 thousand



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

Forest Labs - FRX - close: 59.20 chg: -1.63 stop: 63.00

Company Description:
Forest Laboratories develops, manufactures and markets
pharmaceutical products principally in the United States and
Europe. Forest's primary therapeutic markets include central
nervous system disorders, hypertension and pulmonary disorders.
Forest is currently developing additional compounds in these
areas as well as in pain management and gastrointestinal
disorders. Forest's principal products include Lexapro, a
selective serotonin reuptake inhibitor (SSRI) for the treatment
of depression; Celexa, also for depression; Benicar.,* an
angiotensin receptor blocker (ARB) for the treatment of
hypertension; and Aerobid., a metered dose inhaler for treating
asthma. (source: company website)

Why We Like It:
One of the worst performers in the biotech/drug sectors the past
two months has been FRX.  Shares have dropped from $75 to under
$60 and the slide appears to be picking up speed.  Investors have
ignored positive press releases from the company and some of its
clinical studies the past few weeks as the stock broke through
several levels of support.  We mentioned FRX in the MarketMonitor
on Thursday as a potential bearish play and Friday's drop through
its 200-dma and the $60.00 mark on big volume looks like an entry
point.  This is purely a momentum/technical play and we plan to
target the $55 mark.  Old support at $62.00 should now be new
resistance and we're going to start the play with a stop loss at
$63.00.  The P&F chart for FRX is very bearish and points to a
$52.00 price target.  Keep an eye on the BTK biotech index.  The
BTK looks poised for a breakdown under its 200-dma, which it has
been testing for the last two weeks.  A drop in this index and
FRX will have even less support from its peers.

Suggested Options:
Short-term traders can choose from the June or August puts.  Our
favorites would be the June 60s.

BUY PUT JUN 60 FHA-RL OI= 4530 Last traded @ $3.30
BUY PUT JUN 65 FHA-RM OI= 1931 Last traded @ $6.70

Annotated Chart:




Picked on May 23 at $ 59.20
Change since picked: - 0.00
Earnings Date      04/20/04 (confirmed)
Average Daily Volume:   1.9 million




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The Option Investor Newsletter                   Sunday 05-23-2004
Sunday                                                      4 of 5

In Section Four:

Leaps: Still Undecided
Option Spreads: Wow! It Doesn’t Get Any Better Than This


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*****
LEAPS
*****

Still Undecided
By Mark Phillips
mphillips@OptionInvestor.com

Here we are 3 weeks into the month of May and the "Sell in May and
go away" premise still seems to be valid.  It wasn't that many
years ago that we could count on the summer months to be rather
dull, as the professional traders closed up shop, focusing more on
fun in the sun.  The past 2 years have been exceptions to that
rule, with 2002 seeing a major selloff and last year, persistent
strength.  I've felt for some time that we'd be likely to see a
return to the old pattern this year.

Part of that belief comes from the need for the market to take a
rest, which it has clearly been doing the past few weeks.  The real
problem in the near-term is that there are no catalysts to drive
the market higher, and plenty of risks to keep risk-averse traders
on the sidelines.  Here are just some of the risks that traders
obviously have on their minds:

1. Political Uncertainty - With the presidential race showing as a
dead heat in the polls, investors are faced with the very real
possibility of a Kerry presidency.  Regardless of political
affiliation, we should all understand the impact this could have on
the markets, with the likelihood of the removal of several of the
fiscal stimulus measures put in place by the Bush administration,
not the least of which are the tax cuts.  The market priced in
those incentives and part of the current weakness is those
incentives being removed from the equation.

2. Iraq - There is a tremendous amount of uncertainty regarding
plans for the U.S to pull out of Iraq and we all know how the
market hates uncertainty.  The U.S. is incurring a large expense
for their activity in that county, but the market likes the
relative stability with the U.S. in control, even with the steep
costs, much better than most alternatives.

3. Economy - Investors are still having a hard time getting a read
on the economy.  Is it growing at a healthy rate or are we just
seeing the result of inflation creeping into the picture.  Is there
really sustainable job growth, or have we seen a couple of
anomalous employment reports?  How about the quality of the jobs
being created -- are they high-paying jobs in the professional
sector or just temporary and basic labor jobs.  It's not that any
one profession is better than another, but in terms of economic
growth, those professional jobs provide a much stronger vote of
confidence than do the lower wage positions.  For me, the really
big question is the degree to which we're seeing inflation appear
in the overall economy.  The official government reports are just
showing hints of mild inflation, but when we turn to the monetary
view, we see rampant inflation from the increase in the money
supply.  Just as a data point, the Fed goosed the money supply by
$104 billion in the first two weeks of May -- I'll save you the
math and tell you that this is a $2.7 trillion annual rate.  I
don't care how you slice it, that is frighteningly high level of
money supply growth.

4. Interest Rates - Now we come to the biggie.  Well, at least it
seems to be big with most investors right now.  As I've stated in
the recent past, I don't think we're going to see much of a rise in
interest rates ahead of the election in November.  Oh sure, we
might get a token 25 basis point hike at the June or August
meetings, but that's it.  Take a look at how far bond yields have
moved in the past couple months and I think it's clear that the
market has over-reacted to the prospects of inflation and rising
short-term rates.  Greenspan gets to keep his job for a while
longer, as long as his health holds up and I would expect him to
toe the line for the Bush administration, avoiding raising rates
any more than absolutely necessary prior to the election.

So let's see -- we have major uncertainty in the minds of investors
concerning the political reins of the country, what's going to
happen on the international stage (Iraq), inflation and interest
rates.  It's no great surprise that we've been seeing some solid
market weakness.  In all honesty, I'm a bit surprised we haven't
seen more weakness, especially in light of the collapse in the
internal strength of the overall market, with the dramatic reversal
between new highs and new lows.

If you were a mutual or hedge fund manager and you had just made a
solid gain for the past 12 months, how aggressive would you be
about locking in gains on those positions in light of all the
factors I listed above?  How eager would you be to put on large new
positions, either to the long or the short side?  That's exactly my
point!  There's no incentive to take the risk during the summer
months.

Of course there's also the picture being offered by the CRB index –
- to me, this is a much more reliable measure of inflation and with
the index charting to new 20 year highs earlier this year.  This
index measures the price of a basket of commodities.  If it is
breaking out through such major resistance, that ought to be
telling us something very important about the current rate of
inflation, don't you think?  In case there's any doubt, this latest
rally wasn't exactly a creeping one, as the CRB vaulted from the
185 area to the 285 area from late 2002 to March of this year.
That's a 54% gain in the price of a basket of commodities in a
period of less than 18 months.  Do you think it is any coincidence
that the rise coincided with the most flagrant period of Fed money
creation in history?

Which brings me to the good old dollar.  We've seen quite the rally
in the Dollar index (DX00Y) with this rebound off the lows near 85
over the past few months, now haven't we?  I seem to recall
suggesting that the 92 level was going to be a tough level to scale
in terms of resistance, as it is both strong horizontal resistance
(broken support) as well as the location of the declining trendline
from the 2002 highs.  Sure enough, the recent rally stopped right
at 92 and appears to be rolling over, with even the weekly
oscillators looking like they're ready to roll over. Ok, I'll grant
you that we saw an intraday high of 92.29 and we actually closed as
high as 92.02 before the rollover got started just over a week ago.
No reasonable technician would characterize either of those metrics
as any kind of breakout.

This dollar rally back to resistance has been driven by
expectations of rising interest rates in the U.S. making our
currency more attractive on the international market.  Well let's
just say I have my doubts about that.  I mean whether interest
rates rise or fall, the rampant money supply growth should still
create a very strong downward pressure on the dollar.  The only way
the DX00Y can put in a sustained rise in that environment is if the
other currencies in the basket are losing value at an even faster
rate.  That brings us right back to one of my favorite subjects,
the price of gold.  If all fiat currencies are continuing to fall,
then I have a very hard time seeing how the price of gold and
shares of the major gold mining stocks can't rise and rise sharply.

So is now the time to be jumping into new gold positions?  I really
don't think so.  Even with the rebound we saw last week, gold
futures are still on a PnF Sell signal.  My favorite gold stock,
NEM is still on a Sell signal as well.  But on an interesting note,
both the XAU and HUI mining indices generated new PnF Buy signals.
That tells me that the gold/mining area of the market is trying to
put in a solid bottom here near major support.  If my premise is
correct for the longer-term direction for the dollar and other
global currencies, then NEM and other strong gold stocks should be
on our Radar screen.

I'm not going to waste your time or mine going through the major
indices in any great detail this week because quite honestly
nothing of note transpired there last week.  We had attempted
selloffs that failed and attempted rallies that failed as well.
The consolidation range of the past 2 weeks needs to break to give
us any indication of what's next for the longer-term direction for
the market.  So here's the quick recap of the ranges that need to
break.

DOW - Break above 10,100 is mildly bullish, and break below 9850 is
bearish.  But we can expect strong resistance to come in starting
at the 10,200 area and strong support near 9600.

S&P 500 - Break above 1105 would be mildly bullish, but then strong
resistance is seen at 5 point increments all the way to 1140.  On
the downside, a break and close under 1080 would be bearish, but
then we have strong support waiting in the 1065-1070 area.

NASDAQ Composite - While a break under 1865 would have the bears
gaining traction, there's lots of support below, basically every
30-40 points.  On the upside we have lots of resistance too.  A
break above 1940 would get us out of the torturous range of the
past 2 weeks, but then lots more supply waiting at 1960, 1980 and
2000.

Like I said, there's not a lot to report on the action of the past
two weeks and it's going to take a solid catalyst to break any of
the major indices significantly beyond the current trading range.
For me, that's a large neon sign telling me to be very cautious
about placing long-term directional bets.  We've got a very small
set of plays to choose from right now, and hopefully you can see
the wisdom in doing so.  Let's go take a quick look and see what
merits our attention.

Portfolio:

HD - Expiration week failed to give us any resolution on our HD
play, as the stock rebounded from the $33 support level, but
stalled before reaching the $35 level, which is now resistance.
Recall that the PnF chart won't give a Sell signal until price
breaks below the $31 level, so that leaves us in no man's land.
The price chart still looks bearish, with the stock firmly below
the 200-dma and the 50-dma nearing the point where it will cross
the 200-dma, underscoring the near-term bearish tone.  But the fact
that we haven't gotten a PnF Sell signal is disconcerting,
especially with the weekly Stochastics now nearing oversold
territory.  We'll stick with the plan we've laid out, looking for
the break of $31 as the next sign that the bears are gaining
traction again.  Maintain stops at $38, just over the recent highs
and also the point at which the stock would see a confirming PnF
Buy signal.

CHK - With the rest of the market muddling around near critical
support/resistance levels, shares of CHK have had a hard time
building on the recent breakout over $14.  The past couple weeks
have seen the stock trading in a narrow consolidation range just
above $13, after the sharp drop back under $14 in early May. Weekly
Stochastics are now clearly bearish and it remains to be seen
whether the stock will be able to remain in its 4-month rising
channel, the bottom of which is now at $12.80.  The 200-dma
continues to rise to meet price and is now at $12.34.  The recent
weakness certainly can't be attributed to any weakness in the price
of Natural Gas, as the September futures contract continues to hold
well above $6.  Dips near the bottom of the rising channel still
look like favorable entry points for those traders still on the
sidelines.  The ideal scenario will see price trading sideways
until weekly Stochastics once again turn bullish, which will set
the stage for a solid run at a breakout over the recent highs.
Maintain stops at $12, which is well below the 200-dma and the
point at which the PnF chart would issue a Sell signal.

LUV - While the rest of the market languished just under strong
support levels that appear to be morphing to resistance, the DOW
Transports found support above the March lows and appear to be
trying to rebound.  The Airline sector (XAL.X) is showing renewed
signs of life after hitting a new low near $48, rallying strongly
into the end of the week.  Standing out as one of the stronger
stocks in the sector, LUV put in a solid bottom just above $13.50 a
couple weeks ago and rallied strongly last week, coming very close
to a breakout on Friday.  Resistance is at $15.30, which is just
pennies above Friday's close.  Technically we can call Friday's
action a breakout, as LUV posted its best close since late January.
Price action looks strong enough that we can raise our stop to
$13.50 this weekend in anticipation of a continued bullish move on
Monday.  At this point in the play, a break under that early May
low would be a very bad sign and make us want to exit the play if
hit.

TYC - I may be getting excited prematurely, but it looks to me like
our patience in picking the right entry point for TYC is going to
be rewarded.  After the recent rebound from near $27, the stock
satisfied our entry requirement last Friday and put in a
respectable performance last week, rising back into the broken
rising channel.  Additionally, the weekly Stochastics are really
trying to put in a bullish short-cycle reversal here.  We still
have a strongly bullish PnF chart and that view will be reinforced
if the stock can break out over the March highs and trade the $31
level.  That will give us a confirming PnF Buy signal and should
give the bulls enough fuel to take a serious run at the next level
of resistance at the 200 week moving average, just over $33.50.
We're looking for substantially higher prices in the months ahead,
but as we've discussed previously, we'll have to exercise a great
deal of patience, as we shouldn't expect any rapid movement from
the stock -- just a steady ascent.  Maintain stops at $24.50 until
we get that trade at $31 and then we can get more aggressive by
raising our stop to $26.  Not only is there strong support at that
level, but it is the level at which TYC would issue a new Sell
signal on its PnF chart.

Watch List:

AIG - So you don't think the PnF chart is a good tool for picking
important levels?  AIG's chart certainly provides a strong argument
in favor of the utility of the supply/demand charts.  Recall that
it would take a trade at $68 to turn AIG's PnF chart bearish.  The
bears have certainly had ample opportunity to take a serious run at
that level, but so far have been unsuccessful, as any dip below $69
has met with solid buying interest, keeping that PnF chart
nominally positive.  We're still waiting for confirmation that the
bulls are interested in driving price higher, keeping our entry
trigger as a close over the $72 level.  Not only would that break
the near-term declining trend, but would put price back over both
the 100-dma and the 50-dma, setting the stage for an initial move
back to the recent highs over $77.  Wait for the breakout and then
take entries according to your risk tolerance, using a firm stop at
$68.

GM - I think I blew it on this one.  GM finally gave a great
bearish entry point when it tipped over in January.  Unfortunately,
I failed to notice the rollover until the stock had fallen below
$50 and weekly Stochastics were nearly to oversold.  So I was
looking for a rebound back to the top of the long-term falling
channel to give us the ideal entry.  From the way the stock has
been trading the past couple weeks, it looks like it is probably
too late to play.  I would expect the current move to continue down
towards the $38 level, at which point, we'll probably see the bulls
step in.  That really doesn't give us enough room to work with on a
long-term play.  Should we get a strong rebound back to the listed
trigger, it MIGHT offer a nice entry point for aggressive traders,
but it isn't an entry I'm particularly interested in right here.
My inclination is to drop the play, rather than get caught in a bad
entry.  I'll monitor it for another week or two, but right now it
feels like we missed this one.

Radar Screen:

EK - Zzzzzzzzzzzzzzzzz...Oops, sorry -- I must have dozed off
there!  GRIN  I'm continually amazed how little this stock is
moving.  I have a very bearish view of the stock, both for the
short and long term, but you can't make any money on that bias if
the stock doesn't move.  EK appears to be finding equilibrium near
the $25 level and is doing so in a very erratic manner, failing to
give us any sort of viable trading pattern except for the fact that
it is continuing to hold below its multi-year descending trendline.
We have gotten the bearish cross of the 50-dma under the 200-dma
and price action is mostly remaining below both averages.  What we
need is some sort of rally to justify getting into that bearish
position, and with weekly Stochastics now clearly turned upward, we
may just get that chance in the weeks ahead.  But for now, we just
wait and watch.

QQQ - I think you can now see why I've been in no hurry to initiate
a new play on the QQQ here.  The stock continues to trade in a
narrow range, just above key support at $34.  And Friday's options
expiration pinned QQQ almost exactly to the $35 strike.  The market
is at a critical turning point, trying to decide if it wants to
head lower or rebound from here.  In all likelihood, we're probably
looking at rangebound trade through much of the summer, so there's
certainly no incentive to aggressively jump into a bearish position
here.  Likewise, I don't think it makes sense to play the upside,
with price holding under the 200-dma and the 50-dma threatening to
break below that 200-dma.  The only way I'll consider an actual
play here is if we see price get off the mat and bounce up towards
the descending trendline just under $37.  Shy of that, we're best
leaving this one alone.

$DJUSHB - I haven't forgotten about my promise to delve into a
study of where we ought to focus our attention to the downside in
the Housing sector.  A rash of personal distractions kept me from
doing the article last week, but I promise to tackle the topic in
my Trader's Corner article this week.  Recall that I'm not looking
for the real directional play to unfold until AFTER the Fed begins
the rate hike cycle, so at a minimum we have until late June to put
together an action plan.

NEM - From the commentary above, you had to know NEM was going to
show up on this list, right?  We're nowhere close to an actionable
point here, but the new PnF Buy signals on the XAU and HUI indices
are giving us a "heads up" warning to start getting our ducks lined
up.  We won't want to take the plunge until we see a new PnF Buy
signal on both the gold futures and on NEM, which gives us the
flexibility to just watch the price action unfold for now.

Closing Thoughts:
With all of the nerve-wracking factors listed at the top of this
week's column, I hope you can see why I've been so stingy of late
in terms of adding plays to either the Watch List or the Portfolio.
Unless I see something that appears to give us a strong possibility
of a nice gain, I'm likely to remain cautious in the weeks leading
up to the end of June.  Of course, I'll keep my eyes peeled for the
diamond in the rough and I'm always open to suggestions from all of
you.  As I've noted on more than one occasion, some of my best
ideas have come from my readers.

Have a great week!

Mark


LEAPS Portfolio

Current Open Plays





LEAPS Watchlist

Current Possibles

SYMBOL  SINCE    TARGET PRICE  TARGETED LEAP  SYMBOL

CALLS:
AIG    04/25/04   $71-72       JAN-2005 $ 75  ZAF-AO
                            CC JAN-2005 $ 70  ZAF-AN
                               JAN-2006 $ 75  WAP-AO
                            CC JAN-2006 $ 70  WAP-AN
                            PP AUG-2004 $ 65  AIG-TM



PUTS:
GM     05/09/04   $47-48       JAN-2005 $ 45  ZGM-MI
                               JAN-2006 $ 45  WGM-MI
                            PP SEP-2004 $ 50  GM -IJ



New Portfolio Plays

None

New Watchlist Plays

None


Drops

None



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Option Spread Strategies
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Wow! It Doesn’t Get Any Better Than This

By Mike Parnos, Investing With Attitude

Get U-Haul on the phone and order a truck.  No, not one of those
little 10-footers.  We’re going to need an 18-footer to haul this
month’s profits to the bank.  We may not be able to afford the gas
to get to the bank, but we can certainly fill up the truck with
money.  I hereby christen our trading method the “Green Machine.”
It has a nice ring to it.

While the directional traders are whining and crying about losing
money (what else is new?), we’re “magically” making money month
after month.  The irony is that the money we’re taking home comes
from the directional traders (bless them).

This month we set a CPTI record.  Our previous high monthly profit
was last month’s $6,050.  Well, everything went right this month
and we now have an additional $8,530 in our coffers, compliments of
option buyers everywhere.  We have every reason to celebrate.  Go
to Mickey D’s, take the whole family, and you have my permission to
“super size” everything.

The May option cycle was the seventh cycle in the second year of
tracking our Couch Potato Trading Institute portfolio.  With our
$8,530 of profits, we’ve now accumulated a total of $26,010 in
seven months.

May Trade Summary
SPX – Iron Condor – Profit:  $2,880
RUT – Iron Condor – Profit: $2,500
MNX – Iron Condor – Profit: $1,750
BBH – Iron Condor – Profit: $1,400
TOTAL PROFIT:  $8,530

Happy Returns Of The Day (Month)
I couldn’t resist.  I just had to calculate our hypothetical return
on our risk in this month’s portfolio trades.  The total amount of
maintenance in the above four trades was $35,500.  If we subtract
the $8,530 of premium we took in, we now have a real risk of
$26,970.  When we divide $26,970 into our $8,530 profit, we get a
return on risk of 31.6%.  Amazing, but true.  Some investors don’t
get that return in four years combined.
__________________________________________________________

MAY CPTI POSITION RESULTS

May Position #1 – SPX Iron Condor – 1093.56
We sold 10 SPX May 1080 puts and bought 10 SPX May 1070 puts for a
total credit of $1.90 ($1,900).  Then we sold 7 SPX May 1175 calls
and bought 7 SPX May 1190 calls for a credit of  $1.40 ($980).  Our
total net credit and potential profit was $2,880.  Our maximum
profit range was 1080 to 1175.  SPX finished over 1080.  PROFIT:
$2,880.

May Position #2 – RUT Iron Condor – 545.81
We sold 10 RUT May 620 calls and bought 10 RUT May 630 calls for a
credit of $1.20 ($1,200).  Then we sold 10 RUT May 540 puts and
bought 10 RUT May 530 puts for a credit of $1.30 ($1,300).  Our
total net credit and profit potential is $2,500.  Our maximum
profit range was 540 to 620.  RUT finished over 540 (just enough).
PROFIT:  $2,500.

May Position #3 – MNX Iron Condor - $140.82
We sold 10 MNX May $152.50 calls and bought 10 MNX May $157.50
calls for a credit of $.80 ($800).  Then we sold 10 MNX May $140
puts and bought 10 MNX May $135 puts for a credit: $.95 ($950).
Our total net credit and profit potential was $1,750.  Our maximum
profit range was $140 to $152.50.  MNX finished over $140 (just
enough).  PROFIT: $1,750.

May Position #4 – BBH Iron Condor - $145.15
We sold 10 BBH May $155 calls and bought 10 BBH May $165 calls for
a credit of $.70 ($700).  Then we sold 10 BBH May $135 puts and
bought 10 BBH May $125 puts for a credit of  $.70 ($700).  Our
total net credit and profit potential was $1,400.  Our maximum
profit range was  $135 to $155.  BBH finished at $145.15.  Profit:
$1,400.
_________________________________________________________________

MAY QUICKIE RESULTS
I can’t help it.  I have to gloat a little.  Well, OK, maybe more
than a little.  Do I get to take a victory lap?  Hell, I’ll settle
for a lap dance.  If you participated in this month’s quickies,
you’re probably buying a round of double cheeseburgers for everyone
in the joint.

May Quickie #1 – QQQ Call
This one was just based on a feeling.  I believed that, at some
point last week, the QQQs were going to bounce up to about $35.50.
It was going to take a few very strong days for that to happen.  I
said that you should buy the QQQ $35 calls at $.15 and then sell
them if it got up to $35.50.

Well, the QQQs dipped, and the $35 calls were available to buy at
$15.  Then came the two big up days.  The QQQs got as high as
$35.51.  Then, the $35 calls could have easily been sold at $.65.
I actually sold some at $.70.  It offered a PROFIT of $.50 x 20
contracts = $1,000.

May Quickie #2 – OEX Siamese Condor
I believed the QQQs would be in a pretty tight range for expiration
week.  We put on one of our Siamese Condors.  We sold 10 of the OEX
535 calls and sold 10 of the OEX 535 puts @ $4.60 for a total
credit of $9,600.  We protected ourselves by buying 10 OEX 555
calls @ $.25 and 10 OEX 510 puts @ $.50.

Our net credit was $8.85 ($8,850).  Our ABSOLUTE bailout points
were 543.85 on the topside and $526.15 on the bottom.  The closer
OEX closed to 535, the more money we would make.  OEX closed Friday
at 534.33.  We had to give back $.67 of our $8.60.  Our profit was
a WHOPPING $7,930!!!

May Quickie Position #3 – BBH Iron Condor
We sold 10 BBH $145 puts and bought 10 BBH $140 puts.  We then,
sold 10 BBH $150 calls and bought 10 BBH $155 calls.  Our total net
credit was $1,350.  BBH had to finish between $145 and $150.
Surprise, surprise.  The damn thing finished at $145.15 – inside
the range.  Our PROFIT was another $1,350.

Quickie Summary
Wow!!  These are the kind of hypothetical results dreams are made
of.  They sure aren’t going to happen every month, but it sure
helps perk up the averages.  Our quickie PROFITS totaled:  $10,280
– for ONE WEEK!  Absurd, but a thing of beauty.
________________________________________________________

NEW JUNE POSITIONS

June Position #1 – SPX Iron Condor – 1093.56
Let’s establish a nice large 125-point range and take in a few
bucks.  We’re being a little more conservative this month.
Sell 5 SPX June 1150 calls
Buy 5 SPX June 1170 calls
Credit: $1.20 (x 5 contracts = $600)

Sell 7 SPX June 1125 puts
Buy 7 SPX June 1110 puts
Credit: $1.00 (x 7 contracts = $700)

Total net credit of $1,300.  Maintenance: $10,500.  Maximum profit
range of 1025 to 1150.  Lots of room for the SPX to roam.
Potential profit is $1,300.

June Position #2 – BBH Iron Condor - $145.15
This one gave us a scare early in the May cycle, but there’s still
money to be made in another nice wide spread.
Sell 10 BBH $155 calls
Buy 10 BBH $165 calls
Credit: $.70 (x 10 contracts = $700)

Sell 10 BBH $135 puts
Buy 10 BBH $125 puts
Credit: $.90 (x 10 contracts = $900)

Sell 10 BBH $155 calls
Buy 10 BBH $154 calls
Credit: $65 (x 10 contracts = $650)

Total net credit of $1,550.  Maintenance: $10,000.  Maximum profit
range of $135 to $155.  Lots of room to roam.  Potential profit:
$1,550.

June Position #3 – RUT – Iron Condor – 545.81
I think we can make some good “hypothetical” money with a 100 point
spread.
Sell 10 RUT 590 calls
Buy 10 RUT 600 calls
Credit: $.80 (x 10 contracts = $800)

Sell 10 RUT 490 puts
Buy 10 RUT 480 puts
Credit: $1.00 (x 10 contracts = $1,000)

Total net credit of $1,800.  Maintenance $10,000.  Maximum profit
range of 490 to 590.  Lots of room.  Potential profit: $1,800.

June Position #4 – MNX – Iron Condor - $140.82
Here’s another opportunity to take in respectable premium and
create a relatively large range.
Sell 10 MNX 147.50 calls
Buy 10 MNX 152.50 calls
Credit: $.70 (x 10 contracts = $700)

Sell 10 MNX $132.50 puts
Buy 10 MNX $127.50 puts
Credit: $.60 (x 10 contracts = $600)

Total net credit of $1,300.  Maintenance: $10,000.  Maximum profit
range of $132.50 to $147.50.  Profit potential: $1,300.
__________________________________________________________

Those Friendly Reminders
The premiums quoted on the above educational trades were based on
Thursday’s closing bid/ask prices.  On Monday, the premiums will
surely be slightly different due to market movement and/or the
additional day of time erosion.  You may not be able to get the
above “hypothetical” quoted premiums.  Even if you come reasonably
close, these should still be good “hypothetical” trades.

In a few instances, when the bid/ask spread is wide, we figure you
may be able to shave off a nickel here and there.  Be careful.  If
a stock gaps up or down, it may change the entire dynamic of the
trade.  Don't skydive without a parachute.  Just because you have a
pulse and evidence of brain activity doesn't mean you a trader.
And make sure you thoroughly know the intricacies of a strategy
before you trade.  The money you save may be your own.

__________________________________________________________

ONGOING POSITIONS

QQQ ITM Strangle – Ongoing Long Term -- $34.85
We bought 10 contracts of the 2005 QQQ $39 puts and 10 contracts of
the 2005 QQQ $29 calls for a total debit of $14,300.   We make
money by selling near term puts and calls every month.  Here's what
we've done so far:
Oct. $33 puts and Oct. $34 calls – credit of $1,900. Nov. $34 puts
and calls – credit of $1,150. Dec. $34 puts and calls – credit of
$1,500.  Jan. $34 puts and calls – credit of $850.  Feb. $34 calls
and $36 puts – credit of $750. Mar. $34 calls and $37 puts – credit
of $1,150. Apr. $34 calls and $37 puts – credit of $750.  May $34
calls and $37 puts – credit of $800.

We rolled out the May $34 calls to the June $34 calls for a credit
of $.60 and then the May $37 puts to the June $37 puts for credit
of $.15.  The total net credit was $.75 ($750).  Our new total
credit: $9,600.

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

ZERO-PLUS Strategy.  OEX – 533.20
In my Feb. 8th column, I outlined a strategy based on an initial
investment of $100,000.  $74,000 was spent on zero coupon bonds
maturing in seven years at a value of $100,000.  The principal
$100,000 investment is guaranteed.  We’re trading the remaining
$26,000 to generate a “risk free” return on the original
investment.

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

The May 560 OEX call and the OEX 530/520 bull put spread expired
worthless.  We added $1,750 to our cash position. Our new cash
position as of May expiration is $4,390 plus unused $1,700 =
$6,090.

June Zero Plus Positions.
We established a June OEX bull puts spread 515/505, taking in a
credit of $1.15 x 5 contracts = $575.  We also sold the June 560
call taking in a credit of $1.20 x 5 contracts = $600.

Some people have asked about why I’m using a five contract position
when we only own 3 OEX Dec. 2006 calls.  Well, we have $74,000
worth of zero coupon bonds that are certainly marginable and years
to go to maturity.  If violated, we can roll these spreads out
however long is necessary to retain our profits.  We’ll be
adequately covered by the margin from the zeroes.

OSX Calendar Spread Plus - $95.86
OSX is the Oil Index. This was a play based on the belief that oil
prices will continue to move up.  Well, the oil prices have gone
up, but the index hasn’t.  Bought 10 OSX June $115 calls and sold
10 OSX April $115 calls at a cost of $2.15 ($2,150). We also put on
an April $100/$90 bull put spread and took in an extra $.70 ($700)
to reduce the cost basis to $1.45 ($1,450). We rolled out our April
$115 call and took in $1.20 - further reducing our cost basis to
$.20. Then, aggressive traders (which we are in this strategy) put
on the May $100/$90 bull put spread and took in $.95. So, we were a
"plus" $.75 ($750).

The May $115 call expired worthless.  For June, on Thursday, we
sold the June $105 call for $.70 against the June $115 call we
still own.  We closed our May bull put spread for a loss of $3.25
and rolled it out to the June $95/$85 bull put spread for a credit
of $2.25.  We had to trade 15 contracts of the bull put spread to
cover what we spent to close the May $100/$90 bull put spread.

We now have a positive $1.45 ($1450) -- $750 from before and
another $700 from selling the $105 June call.  We bought ourselves
another month for the OSX to behave.  We’re scrambling and I’ll be
glad to be out of this damn trade with my butt still attached.
That’ll teach me to try something directional.  Never fear, we
shall persevere.
__________________________________________________________

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

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

Mike Parnos
CPTI Master Strategist and HCP
__________________________________________________________

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



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The Option Investor Newsletter                   Sunday 05-23-2004
Sunday                                                      5 of 5

In Section Five:

Spreads and Straddles: Bulls Regain Control...Barely!
Premium-Selling Plays: Naked Puts and Calls
CONSERVATIVE STOCK OWNERSHIP: COVERED-CALLS

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

Bulls Regain Control...Barely!
By Ray Cummins

U.S. stocks closed higher Friday as investors crept back into the
equity markets in the wake of easing crude prices and a cautiously
optimistic outlook for inflation.

The Dow Jones industrial average closed up 29 points at 9,966 with
twenty-three of the thirty blue-chip components ending in positive
territory.  The NASDAQ broke its three-week losing streak, rising
15 points to 1,912 on strength in semiconductor shares.  Standard
and Poor's 500 stock index added 4 points to finish at 1,093, with
steel, homebuilding, gold, casino and airline shares enjoying some
renewed buying interest.  In the broad market, advancing stocks
trounced decliners by roughly a 2 to 1 margin on both the NYSE and
the NASDAQ.  The expiration of options on stocks and stock indexes
helped boost volume in the early going, but activity slowed as the
day progressed.  Big Board volume finished near 1.26 billion while
the technology exchange crossed 1.37 billion shares.  Bonds backed
down from earlier-session highs with the yield on the 10-year note
note closing up 0.05 percentage points at 4.76%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 05/21/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

DNA     56.00  59.61   MAY   47  50   0.25   49.75   0.25  Closed
EBAY    75.94  80.34   MAY   65  70   0.65   69.35   0.65  Closed
HDI     55.63  56.43   MAY   47  50   0.25   49.75   0.25  Closed
PDCO    74.97  70.59   MAY   65  70   0.65   69.35   0.65  Closed
CME    116.11 124.56   MAY  100 105   0.60  104.40   0.60  Closed
MATK    65.12  61.60   MAY   55  60   0.60   59.40   0.60  Closed
MTG     74.42  69.74   MAY   60  65   0.50   64.50   0.50  Closed
AVP     84.00  85.31   MAY   75  80   0.45   79.55   0.45  Closed
MUR     68.50  63.77   MAY   60  65   0.50   64.50  (0.73) Closed
ERES    32.29  33.30   MAY   27  30   0.25   29.75   0.25  Closed
ZBRA    74.62  80.08   MAY   65  70   0.40   69.60   0.40  Closed
ERTS    51.88  48.72   JUN   45  47   0.35   47.15   0.35   Open
IMDC    61.17  58.51   JUN   50  55   0.50   54.50   0.50   Open
GPRO    38.30  37.13   JUN   30  35   0.70   34.30   0.70   Open
MATK    68.01  61.60   JUN   55  60   0.65   59.35   0.65   Open
ASD    107.89 107.83   JUN   95 100   0.50   99.50   0.50   Open
IMCL    71.36  70.24   JUN   50  55   0.50   54.50   0.50   Open
CSC     42.17  41.89   JUN   35  40   0.65   39.35   0.65   Open
GILD    62.54  63.33   JUN   55  60   1.00   59.00   1.00   Open
RIMM    99.98 109.02   JUN   80  85   0.45   84.55   0.45   Open

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

Bullish positions in BJ Services (NYSE:BJS), Nabors Industries
(NYSE:NBR), Navistar (NYSE:NAV), Henry Schein (NASDAQ:HSIC) and
Silicon Labs (NASDAQ:SLAB) have previously been closed to limit
potential losses.


CALL-CREDIT SPREADS

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

SOHU    25.46  18.70   MAY   35  30   0.60   30.60   0.60  Closed
SFNT    31.65  21.91   MAY   40  35   0.70   35.70   0.70  Closed
GENZ    46.40  41.63   MAY   55  50   0.60   50.60   0.60  Closed
PRX     55.25  40.06   MAY   65  60   0.65   60.65   0.65  Closed
MERQ    45.59  45.39   MAY   55  50   0.60   50.60   0.60  Closed
NEM     42.86  38.40   MAY   50  47   0.25   47.75   0.25  Closed
RYL     77.41  74.50   MAY   90  85   0.60   85.60   0.60  Closed
AMZN    45.20  41.17   MAY   55  50   0.65   50.65   0.65  Closed
BOBJ    27.85  20.45   MAY   35  30   0.75   30.75   0.75  Closed
NTES    51.43  39.05   MAY   65  60   0.50   60.50   0.50  Closed
VECO    27.43  24.05   MAY   35  30   0.55   30.55   0.55  Closed
BSX     40.25  37.90   MAY   45  42   0.25   42.75   0.25  Closed
RIMM    97.54 109.02   MAY  115 110   0.50  110.50   0.50  Closed
MRVL    38.92  44.09   MAY   45  42   0.30   42.80  (1.29) Closed
OVTI    22.38  20.59   MAY   30  25   0.55   25.55   0.55  Closed
AMZN    43.95  41.17   MAY   50  47   0.25   47.75   0.25  Closed
CHIR    45.58  42.60   MAY   50  47   0.25   47.75   0.25  Closed
BCSI    38.55  38.35   MAY   50  45   0.40   45.40   0.40  Closed
CFC     56.30  62.77   MAY   65  60   0.45   60.45  (2.32) Closed
CTX     44.80  44.95   JUN   55  50   0.50   50.50   0.50   Open
IVGN    67.61  66.16   JUN   80  75   0.55   75.55   0.55   Open
NTLI    55.28  56.47   JUN   65  60   0.80   60.80   0.80   Open
VIP     91.45  95.18   JUN  110 105   0.50  105.50   0.50   Open
CERN    41.33  39.89   JUN   50  45   0.55   45.55   0.55   Open
SEPR    45.06  43.31   JUN   55  50   0.60   50.60   0.60   Open

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

The "watch-list" position in Countrywide Financial (NYSE:CFC)
should have been closed early in the week, when the stock moved
above the sold (call) strike, for a smaller than published loss.


DEBIT STRADDLES

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

ZMH     80.84  83.55   MAY    80    80     4.90    6.15   Closed
AH      35.78  34.98   MAY    35    35     3.10    2.90   Closed
QLTI    29.60  23.42   MAY    30    30     3.00    6.70   Closed
HOTT    22.26  21.05   MAY    22    22     1.80    3.40   Closed
LF      19.67  19.99   JUN    20    20     3.50    5.25   Closed
BSTE    30.63  38.26   JUL    30    30     6.00   11.50   Closed
MKSI    23.10  20.58   JUL    22    22     4.70    5.50   Closed

Biosite (NASDAQ:BSTE) was the "Straddle of the Month," however
Hot Topic (NASDAQ:HOTT), Zimmer (NYSE:ZMH), LeapFrog (NYSE:LF),
MKS Instruments (NASDAQ:MKSI), QLT Incorporated (NASDAQ:QLTI),
and Stratasys (NASDAQ:SSYS) also offered potential gains in May.
Corinthian Colleges (NASDAQ:COCO), although very volatile, was
not a viable position due to the "gap-up" on the day after the
straddle was listed as a 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.

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

QCOM - Qualcomm  $65.40  *** Uptrend Intact! ***

Qualcomm (NASDAQ:QCOM) is the leading developer and supplier of
code division multiple access (CDMA)-based integrated circuits
and system software for wireless voice and data communications
and global positioning system (GPS) products.  Qualcomm offers
complete system solutions, including software and integrated
circuits for wireless handsets and infrastructure equipment.
This complete system solution approach provides customers with
advanced wireless technology and enhanced component integration
and interoperability, as well as reduced time to market.

QCOM - Qualcomm  $65.40

PLAY (conservative - bullish/credit spread):

BUY  PUT  JUN-55.00  AAO-RK  OI=1944    ASK=$0.20
SELL PUT  JUN-60.00  AAO-RL  OI=112251  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.45-$0.55
POTENTIAL PROFIT(max)=9% B/E=$59.55


__________________________________________________________________

ZBRA - Zebra Technologies  $80.08  *** Bullish Outlook! ***

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  $80.08

PLAY (less conservative - bullish/credit spread):

BUY  PUT  JUN-70.00  ZBQ-RN  OI=70    ASK=$0.35
SELL PUT  JUN-75.00  ZBQ-RO  OI=1574  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.65-$0.75
POTENTIAL PROFIT(max)=15% B/E=$74.35



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

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.

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

BSC - Bear Stearns  $80.02  *** In A Trading Range? ***

Founded in 1923, Bear Stearns Companies Inc. (NYSE:BSC) is the
parent company of Bear, Stearns & Co. Inc., a leading investment
banking and securities trading and brokerage firm.  With over $37
billion in total capital, Bear Stearns serves global governments,
corporations, institutions and individuals worldwide.  The firm's
business includes corporate finance and mergers and acquisitions,
institutional equities & fixed income sales, trading and research,
private client services, derivatives, foreign exchange and futures
sales and trading, asset management and custody services.  Through
Bear, Stearns Securities, it offers financing, securities lending,
clearing and technology solutions to hedge funds, broker-dealers
and investment advisors.

BSC - Bear Stearns  $80.02

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-90.00  BSC-FR  OI=964  ASK=$0.15
SELL CALL  JUN-85.00  BSC-FQ  OI=912  BID=$0.60
INITIAL NET-CREDIT TARGET=$0.50-$0.55
POTENTIAL PROFIT(max)=11% B/E=$85.50


__________________________________________________________________

FRX - Forest Labs  $59.20  *** Sell-Off Underway! ***

Forest Laboratories (NYSE:FRX) develops, manufactures and sells
both branded and generic forms of ethical drug products that
require a physician's prescription, as well as non-prescription
pharmaceutical products sold over-the-counter.  The company's
most important U.S. products consist of branded ethical drug
specialties marketed directly, or "detailed," to physicians by
its Forest Pharmaceuticals, Therapeutics and Specialty sales
forces.  The company's many products include those developed by
Forest and those acquired from other pharmaceutical companies
and integrated into Forest's marketing and distribution systems.

FRX - Forest Labs  $59.20

PLAY (conservative - bearish/credit spread):

BUY  CALL  JUN-70.00  FHA-FN  OI=2229  ASK=$0.20
SELL CALL  JUN-65.00  FHA-FM  OI=1714  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$65.55


__________________________________________________________________

MDT - Medtronic  $47.66  *** Pre-Earnings Slump? ***

Medtronic (NYSE:MDT) is a medical technology firm that provides
lifelong solutions for people with chronic disease.  With roots
in the treatment of heart disease, Medtronic has expanded beyond
its historical core business and provides a range of products
and therapies that help solve many challenging, life-limiting
medical conditions.  The company operates in five major business
segments that make and market device-based medical therapies.
These are: cardiac rhythm management, vascular, cardiac surgery,
neurological and diabetes and spinal and ear, nose and throat.

MDT - Medtronic  $47.66

PLAY (less conservative - bearish/credit spread):

BUY  CALL  JUN-55.00  MDT-FK  OI=1363  ASK=$0.10
SELL CALL  JUN-50.00  MDT-FJ  OI=8453  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$50.60



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
DEBIT SPREADS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This strategy offers a risk-reward outlook similar to credit
spreads, however there is no margin requirement as the initial
debit for the position is also the maximum loss.  Since these
positions are based primarily on technical indications, traders
should review the current news and market sentiment surrounding
each issue and make their own decision about the outcome of the
position.


SUPPLEMENTAL CANDIDATES

The following group of issues is a list of additional candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays. Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in the
weekly portfolio summary.
__________________________________________________________________

CALL DEBIT SPREADS

Stock   Current Long    Ask    Short   Bid    Cost   Spread  Max
Symbol  Price   Call   Price   Call    Price  Basis  Debit   ROI%

PHRM    38.56   JUTFE  14.00   JUTFG   5.10   33.90   8.90   12.4
DRIV    32.38   DQIFX  10.20   DQIFF   3.50   29.20   6.70   11.9
IMCL    70.24   QCIFK  16.00   QCIFL  11.50   59.50   4.50   11.1
KMRT    49.11   KTQFH   9.80   KTQFI   5.30   44.50   4.50   11.1
DNA     59.61   DNAFJ  10.00   DNAFK   5.50   54.50   4.50   11.1
GPRO    37.13   PSUFF   7.60   PSUFG   3.10   34.50   4.50   11.1
IMDC    58.51   UZIFJ   9.00   UZIFK   4.50   54.50   4.50   11.1
GILD    63.33   GDQFJ  13.80   GDQFL   4.70   59.10   9.10    9.9
ANF     34.33   ANFFY   7.00   ANFFZ   2.40   32.10   4.60    8.7


PUT DEBIT SPREADS

Stock   Current Long    Ask    Short   Bid    Cost   Spread  Max
Symbol  Price   Put    Price   Put     Price  Basis  Debit   ROI%

OVTI    20.59   UCMRY   7.30   UCMRX   2.95   23.15   4.35   14.9
OSTK    31.13   QKTRH   9.70   QKTRG   5.30   35.60   4.40   13.6
XMSR    23.29   QSYRF   6.80   QSYRE   2.35   25.55   4.45   12.4
APPX    32.20   AQORI  13.00   AQORG   4.10   36.10   8.90   12.4
ENDP    20.90   IUKRE   4.70   IUKRX   2.45   22.75   2.25   11.1
RMBS    18.29   BNQRX   4.60   BNQRD   2.35   20.25   2.25   11.1
LEND    27.46   QFWRG   7.80   QFWRF   3.30   30.50   4.50   11.1
NTAP    18.67   NULRX   3.90   NULRD   1.65   20.25   2.25   11.1
NTES    39.05   NQGRJ  11.20   NQGRI   6.70   45.50   4.50   11.1
MYGN    15.88   GSQRD   4.40   GSQRW   2.15   17.75   2.25   11.1
NBIX    55.19   UOTRM  10.40   UOTRL   5.90   60.50   4.50   11.1


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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.
__________________________________________________________________

GRMN - Garmin  $32.60  *** Recent Volatility ***

Garmin (NASDAQ:GRMN) is a worldwide provider of navigation,
communications and information devices, most of which are
enabled by global positioning system (GPS) technology.  The
company designs, develops, manufactures and sells a diverse
family of handheld, portable and fixed-mount GPS-enabled
products and other navigation, communications and information
products for the general aviation and consumer markets.  Each
of Garmin's GPS products utilizes its proprietary integrated
circuit and receiver designs to collect, calculate and display
location, direction, speed and other information in optimized
formats for specific uses.

GRMN - Garmin  $32.60

PLAY (speculative - neutral/debit strangle):

BUY CALL  JUL-35.00  GQR-GG  OI=332  ASK=$1.20
BUY PUT   JUL-30.00  GQR-SF  OI=167  ASK=$1.20
INITIAL NET-DEBIT TARGET=2.10-$2.25
INITIAL TARGET PROFIT=$0.95-$1.25


_________________________________________________________________

KKD - Krispy Kreme Doughnuts  $19.63  *** Earnings Play! ***

Krispy Kreme Doughnuts (NYSE:KKD) is a specialty retailer of
doughnuts.  It owns and franchises Krispy Kreme doughnut stores
where over 20 varieties of doughnuts, including its Hot Original
Glazed variety, are made and sold.  Each of its stores is a
doughnut factory with the capacity to produce from 4,000 dozen
to over 10,000 dozen doughnuts on a daily basis.  The company's
sales channels consist of "on-premises" sales and "off-premises"
and it has two complementary business units: its company and
franchised stores, which Krispy Kreme refers to, collectively,
as Store Operations and Manufacturing and Distribution (KKM&D).
The quarterly earnings report is due Wednesday, May 26, 2004.

KKD - Krispy Kreme Doughnuts  $19.63

PLAY (very speculative - neutral/debit straddle):

BUY CALL  JUN-20.00  KKD-FD  OI=824   ASK=$1.40
BUY PUT   JUN-20.00  KKD-RD  OI=7348  ASK=$1.75
INITIAL NET-DEBIT TARGET=2.95-$3.05
INITIAL TARGET PROFIT=$1.00-$1.45



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

SEE DISCLAIMER - SECTION 1

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



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*****************************************
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 05/21/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   20.43    0.35   4.19%   2.04%
MICC     MAY    17    17.15   21.50    0.35   4.31%   2.04%
MNST     MAY    22    21.95   24.20    0.55   4.39%   2.51%
HNT      MAY    22    22.00   22.35    0.35   3.33%   2.27%
IPXL     MAY    20    19.50   19.64    0.14   1.52%   2.56%
SSNC     MAY    22    21.60   22.67    0.90   7.85%   4.17%
IPXL     MAY    20    19.65   19.64   (0.01)  0.00%   1.78%
JBLU     MAY    22    22.15   28.38    0.35   3.65%   1.58%
LSCP     MAY    22    21.95   28.18    0.55   5.43%   2.51%
USG      MAY    15    14.25   14.28    0.03   0.41%   5.26%
ASKJ     MAY    30    29.50   35.94    0.50   4.47%   1.69%
BRCM     MAY    37    36.70   40.75    0.80   4.83%   2.18%
FWHT     MAY    20    19.35   20.43    0.65   7.29%   3.36%
MRVL     MAY    42    41.55   44.09    0.95   4.95%   2.29%
NFLX     MAY    27    27.10   31.26    0.40   3.84%   1.48%
HOLX     MAY    20    19.50   19.76    0.26   2.86%   2.56%
GVHR     MAY    25    24.65   25.16    0.35   4.00%   1.42%
HSII     MAY    22    22.25   28.40    0.25   2.61%   1.12%
LF       MAY    20    19.55   19.99    0.44   5.05%   2.30%
TSAI     MAY    20    19.80   19.53   (0.27)  0.00%   1.01%
TSO      MAY    20    19.50   21.85    0.50   5.60%   2.56%
APPX     MAY    35    34.40   32.20   (2.20)  0.00%   1.74% *
ELN      MAY    17    17.30   21.30    0.20   4.01%   1.16%
ERES     MAY    25    24.50   33.30    0.50   6.05%   2.04%
HOLX     MAY    20    19.65   19.76    0.11   1.43%   1.78%
LSCP     MAY    22    22.10   28.18    0.40   5.49%   1.81%
PDII     MAY    22    21.75   27.97    0.75   8.99%   3.45%
TELK     MAY    22    22.20   21.98   (0.22)  0.00%   1.35%
TNOX     MAY    15    14.50   16.66    0.50   8.35%   3.45%
APPX     MAY    35    34.65   32.20   (2.45)  0.00%   1.01% *
EYE      MAY    17    17.20   22.56    0.30   5.00%   1.74%
JCOM     MAY    22    22.30   22.55    0.20   2.82%   0.90%
MGAM     MAY    22    21.90   21.39   (0.51)  0.00%   2.74%
NIHD     MAY    33    32.88   34.72    0.50   4.38%   1.52%
SNIC     MAY    17    17.15   18.35    0.35   5.76%   2.04%
FWHT     MAY    20    19.60   20.43    0.40   7.10%   2.04%
NIHD     MAY    35    34.50   34.72    0.22   2.21%   1.45%
OSTK     MAY    30    29.25   31.13    0.75   9.75%   2.56%
SNIC     MAY    17    17.20   18.35    0.30   6.05%   1.74%
UTHR     MAY    20    19.65   23.96    0.35   6.71%   1.78%
ATRS     MAY    25    24.55   25.08    0.45   7.08%   1.83%
FWHT     MAY    20    19.65   20.43    0.35   6.77%   1.78%
INSP     MAY    30    29.50   32.30    0.50   7.20%   1.69%
ISPH     MAY    15    14.50   17.45    0.50  11.39%   3.45%
PTEN     MAY    35    34.65   29.34    0.40   4.13%   1.01%
UTHR     MAY    22    22.10   23.96    0.40   6.82%   1.81%
HEW      MAY    30    29.50   31.19    0.50   6.70%   1.69%
ISPH     MAY    15    14.55   17.45    0.45  12.90%   3.09%
MGM      MAY    20    19.65   20.33    0.35   7.24%   1.78%
SONO     MAY    20    19.60   20.91    0.40   8.71%   2.04%
USPI     MAY    35    34.35   37.35    0.65   7.48%   1.89%
DRIV     MAY    25    24.75   32.38    0.25   5.17%   1.01%
GPRO     MAY    35    34.70   37.13    0.30   4.34%   0.86%
JILL     MAY    20    19.60   19.57   (0.03)  0.00%   2.04%
MVSN     MAY    20    19.65   22.71    0.35   9.34%   1.78%
PDII     MAY    25    24.55   27.97    0.45   8.88%   1.83%
SYMC     MAY    45    44.65   46.80    0.35   3.95%   0.78%
VXGN     MAY    15    14.50   15.64    0.50  16.34%   3.45%
ADP      MAY    45    44.65   44.28   (0.37)  0.00%   0.78%
BCGI     JUN    10    9.65    10.35    0.35   7.73%   3.63%
ERES     MAY    30    29.70   33.30    0.30   7.04%   1.01%
FARO     MAY    20    19.75   25.75    0.25   9.82%   1.27%
LPNT     JUN    35    34.30   36.16    0.70   4.03%   2.04%
MXIM     MAY    45    44.70   47.38    0.30   4.57%   0.67%
NCF      MAY    30    29.50   31.40    0.50  11.10%   1.69%
NSM      MAY    20    19.70   20.32    0.30   9.79%   1.52%
ASCA     JUN    30    29.35   32.87    0.65   5.02%   2.21%
DRIV     JUN    25    24.25   32.38    0.75   7.04%   3.09%
FARO     JUN    20    19.45   25.75    0.55   7.32%   2.83%
GIVN     JUN    30    29.25   32.66    0.75   7.01%   2.56%
MVSN     JUN    20    19.65   22.71    0.35   4.54%   1.78%
PDII     JUN    22    22.00   27.97    0.50   6.67%   2.27%
SMTC     JUN    20    19.50   23.04    0.50   6.25%   2.56%
CELG     JUN    45    44.40   54.42    0.60   4.75%   1.35%
ELN      JUN    17    17.05   21.30    0.45   8.73%   2.64%
FARO     JUN    20    19.45   25.75    0.55   8.04%   2.83%
FRO      JUN    25    24.50   32.16    0.50   6.48%   2.04%
IMMU     JUN     5     4.75    5.42    0.25  13.52%   5.26%
LNCR     JUN    32    32.05   34.41    0.45   3.60%   1.40%
MCK      JUN    32    32.00   33.61    0.50   3.76%   1.56%
NFLX     JUN    25    24.45   31.26    0.55   7.36%   2.25%
PHRM     JUN    20    19.65   38.56    0.35   5.67%   1.78%
RTN      JUN    32    32.00   32.51    0.50   3.62%   1.56%
VXGN     JUN    12    12.10   15.64    0.40  10.35%   3.31%
ARTI     JUN    22    22.00   24.39    0.50   6.11%   2.27%
AVID     JUN    45    44.30   50.30    0.70   4.62%   1.58%
BLUD     JUN    25    24.70   28.45    0.30   3.54%   1.21%
DIGE     JUN    35    34.25   39.59    0.75   6.16%   2.19%
DRIV     JUN    25    24.60   32.38    0.40   5.37%   1.63%
NUE      JUN    55    54.25   62.35    0.75   3.96%   1.38%
PHRM     JUN    20    19.70   38.56    0.30   5.30%   1.52%
SPLS     JUN    25    24.60   26.72    0.40   4.24%   1.63%
YHOO     JUN    25    24.60   28.55    0.40   4.64%   1.63%

Positions in ADEX, ALKS, BLDP, CAMD, CLZR, CPKI, DRTE, DNDN,
ESIO, GNTA, GVHR, IMM, INSP ($35P), MICC ($22.5P), MRVL, NET,
NFLX, ORBZ, PLMO, PXLW, SSTI, TINY, TOMO, USG and XMSR were
previously closed to limit potential losses.  Issues on the
"watch" list are: Given Imaging (NASDAQ:GIVN) and Raytheon
(NYSE:RTN).  The bullish position in American Pharmaceutical
Partners (NASDAQ:APPX) should have been closed, for a smaller
than published loss, when the issue moved below the sold (put)
strike at $35.


NAKED CALLS

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

AFCI     MAY    25    25.75   18.97    0.75   7.73%   2.91%
QLGC     MAY    37    37.95   26.67    0.45   4.22%   1.19%
AVCT     MAY    37    38.15   33.05    0.65   4.61%   1.70%
INTU     MAY    47    48.00   37.95    0.50   2.80%   1.04%
PPCO     MAY    20    20.30   11.00    0.30   6.92%   1.48%
SINA     MAY    45    45.55   30.01    0.55   6.61%   1.21%
NANO     MAY    20    20.40   11.77    0.40  10.66%   1.96%
PHTN     MAY    35    35.60   28.48    0.60   7.03%   1.69%
SFA      MAY    35    35.55   32.30    0.55   6.17%   1.55%
SOHU     MAY    25    25.75   18.70    0.75  11.61%   2.91%
SWIR     MAY    35    35.60   23.83    0.60   9.26%   1.69%
HOV      MAY    42    42.90   32.82    0.40   4.07%   0.93%
NFI      MAY    45    45.40   33.30    0.40   7.16%   0.88%
PHTN     MAY    35    35.30   28.48    0.30   6.07%   0.85%
RMBS     MAY    25    25.30   18.29    0.30   7.84%   1.19%
FLSH     MAY    20    20.25   15.98    0.25   8.55%   1.23%
BRCM     MAY    42    42.80   40.75    0.30   4.46%   0.70%
APPX     MAY    50    50.55   32.20    0.55  11.50%   1.09%
KG       MAY    20    20.25   13.09    0.25  12.67%   1.23%
SHRP     MAY    30    30.45   26.10    0.45   8.28%   1.48%
ATRX     MAY    30    30.35   25.60    0.35   9.16%   1.15%
KOSP     MAY    40    40.65   32.75    0.65  12.52%   1.60%
PBY      MAY    27    27.85   24.25    0.35  10.04%   1.26%
IACI     JUN    32    33.15   30.06    0.65   5.22%   1.96%
OVTI     JUN    30    30.80   20.59    0.80  11.79%   2.60%
SLAB     JUN    55    55.50   47.25    0.50   4.93%   0.90%
PHTN     JUN    35    35.35   28.48    0.35   4.69%   0.99%
ENDP     JUN    25    25.70   20.90    0.70  11.16%   2.72%
IPXL     JUN    22    23.05   19.64    0.55   8.75%   2.39%
MMR      JUN    15    15.25   13.53    0.25   7.20%   1.64%

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

ARO      JUN   23.37   23.03   25.16    0.35   4.75%   1.52%
CRDN     JUN   25.00   24.65   29.99    0.35   5.57%   1.42%
ERES     JUN   27.50   27.05   33.30    0.45   6.61%   1.66%
FARO     JUN   22.50   21.85   25.75    0.65   9.88%   2.97%
ISPH     JUN   15.00   14.55   17.45    0.45  10.57%   3.09%
IDEV     JUN    5.00    4.70    8.61    0.30  17.36%   6.38%
PDII     JUN   22.50   22.20   27.97    0.30   5.83%   1.35%
SSYS     JUN   22.50   21.85   25.14    0.65   9.43%   2.97%
SLXP     JUN   25.00   24.70   34.68    0.30   4.85%   1.21%

__________________________________________________________________

ARO - Aeropostale  $25.16  *** Bullish Retailer! ***

Aeropostale (NYSE:ARO), together with its subsidiary, Aeropostale
West, is a mall-based specialty retailer of casual apparel and
accessories that target both young women and young men aged 11
to 20 years.  The firm provides its customers with a selection
of active-oriented, fashion basic merchandise.  Aeropostale
maintains control over its proprietary brand by designing and
sourcing all of its merchandise.  The company's products can be
purchased only at its stores or organized sales events at college
campuses.  The company plans to open approximately 95 new stores
in fiscal 2004.

ARO - Aeropostale  $25.16

PLAY (sell naked put):

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

SELL PUT  JUN 22.5  IRO RX      0   0.35  23.03   4.7%   1.5%


__________________________________________________________________

CRDN - Ceradyne  $29.99  *** Consolidation Complete? ***

Ceradyne (NASDAQ:CRDN) develops, manufactures and sells advanced
technical ceramic products and components for defense, industrial,
automotive and commercial applications.  The company's primary
products include lightweight ceramic armor for soldiers and
military helicopters; aesthetic ceramic orthodontic brackets;
durable, reduced friction, ceramic diesel engine components;
ceramic-impregnated dispenser cathodes for microwave tubes,
lasers and cathode ray tubes, and ceramic industrial components
for erosion and corrosion resistant applications.

CRDN - Ceradyne  $29.99

PLAY (sell naked put):

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

SELL PUT  JUN 25    AUE RE    279    0.35  24.65   5.6%   1.4%


__________________________________________________________________

ERES - eResearch Technology  $33.30  *** Entry Point? ***

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  $33.30

PLAY (sell naked put):

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

SELL PUT  JUN 27.5  UDB RY    392    0.45  27.05   6.6%   1.7%


__________________________________________________________________

FARO - FARO Technologies  $25.75  *** Next Leg Up? ***

FARO Technologies (NASDAQ:FARO) designs, develops, markets and
supports portable, software-driven, 3-D measurement systems used
in a broad range of manufacturing and industrial applications.
The firm's principal products are the Faro-Arm Control Station
and Control Station Pro (articulated measuring devices), the Faro
Laser Tracker and Laser Control Station and their companion Soft
Check Tool and CAM2 software, respectively, which provide for
computer-aided design (CAD)-based inspection and factory-level
statistical process control.  Faro's products bring precision
measurement, quality inspection and specification conformance
capabilities, integrated with CAD software, to the factory floor.

FARO - FARO Technologies  $25.75

PLAY (sell naked put):

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

SELL PUT  JUN 22.5  QEJ RX    304    0.65  21.85   9.9%   3.0%


__________________________________________________________________

ISPH - Inspire Pharma  $17.45  *** Favorable Drug Data! ***

Inspire Pharmaceuticals (NASDAQ:ISPH) is a development-stage
company engaged in the discovery and development of novel
pharmaceutical products that treat diseases characterized by
deficiencies in the body's innate defense mechanisms of mucosal
hydration and mucociliary clearance, as well as other non-mucosal
disorders.

ISPH - Inspire Pharma  $17.45

PLAY (sell naked put):

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

SELL PUT  JUN 15    JPU RC    127    0.45  14.55  10.6%   3.1%


__________________________________________________________________

IDEV - Indevus Pharmaceuticals  $8.61  *** Drug Speculation! ***

Indevus Pharmaceuticals (NASDAQ:IDEV) is a biopharmaceutical
company engaged in the development and commercialization of a
diversified portfolio of product candidates, including multiple
compounds in late-stage clinical development.  The company has
a number of compounds in development: trospium for overactive
bladder, pagoclone for panic and generalized anxiety disorders,
citicoline for ischemic stroke, IP 751 for pain and inflammatory
disorders, PRO 2000 for the prevention of infection by the human
immunodeficiency virus and other sexually transmitted pathogens
and aminocandin for treatment of systemic fungal infections.

IDEV - Indevus Pharmaceuticals  $8.61

"SPECULATIVE" PLAY (sell naked put):

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

SELL PUT  JUN  5    QUF RA    405    0.30   4.70  17.4%   6.4%


__________________________________________________________________

PDII - PDI Incorporated  $27.97  *** In A Trading Range? ***

PDI Inc. (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 are: PDI Pharmaceutical Products, PDI Sales and Marketing
Services, and PDI Medical Devices and Diagnostics.

PDII - PDI Incorporated  $27.97

PLAY (sell naked put):

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

SELL PUT  JUN 22.5  PKU RX    106    0.30  22.20   5.8%   1.4%


__________________________________________________________________

SSYS - Stratasys  $25.14  *** Recovery Underway? ***

Stratasys (NASDAQ:SSYS) manufactures and sells a line of rapid
prototyping and three-dimensional printing devices that create
physical models from computerized designs.  The company's rapid
prototyping systems are based on its patented fused deposition
modeling technology or on its patented Genisys technology.  The
company is also involved in the office prototyping market (rapid
prototyping) and develops, manufactures and markets a family of
rapid prototyping devices and 3-D printers that enable engineers
and designers to create physical models, tooling and prototypes
out of plastic and other materials directly from a computer-aided
design workstation.

SSYS - Stratasys  $25.14

PLAY (sell naked put):

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

SELL PUT  JUN 22.5  QQG RX     50    0.65  21.85   9.4%   3.0%


__________________________________________________________________

SLXP - Salix Pharmaceuticals  $34.68  ** Pure Premium-Selling! **

Salix Pharmaceuticals (NASDAQ:SLXP) is a specialty pharmaceutical
company engaged in acquiring, developing and commercializing
prescription drugs used in the treatment of a wide variety of
gastrointestinal diseases that affect the digestive tract.  The
company's four products are balsalazide disodium, which it sells
in the United States under the brand name Colazal; three dosage
strengths of azathioprine, a FDA-approved product licensed by the
company, launched in the United States in February 2004 under the
brand name Azasan; rifaximin, if approved by the FDA, is intended
to be sold in the United States for the treatment of travelers'
diarrhea, and a granulated formulation of mesalamine, if approved
by the FDA, is intended to be sold in the United States to expand
the range of treatment options for ulcerative colitis.

SLXP - Salix Pharmaceuticals  $34.68

PLAY (sell naked put):

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

SELL PUT  JUN 25    PQN RE     26    0.30  24.70   4.9%   1.2%



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

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  $32.30  ** Downtrend Resumes! **

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  $32.30

PLAY (sell naked call):

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

SELL CALL  JUN 40    AQO FH    3219   0.40  40.40   6.8%   1.0%


__________________________________________________________________

OVTI - OmniVision Technologies  $20.59  *** Premium-Selling! ***

OmniVision Technologies (NASDAQ:OVTI) designs, develops and
markets high-performance, cost-efficient semiconductor image
sensor devices.  The company's main product, an image sensing
device called the CameraChip, is used to capture an image in
a variety of consumer and commercial mass market applications,
including digital still cameras, cellular telephones, security
and surveillance cameras and video game consoles.  The firm's
CameraChips are manufactured using the complementary metal oxide
semiconductor (CMOS) process, the most widely utilized method of
producing modern integrated circuits.

OVTI - OmniVision Technologies  $20.59

PLAY (sell naked call):

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

SELL CALL  JUN 27.5  UCM FY    3496   0.25  27.75   6.7%   0.9%


__________________________________________________________________

WSM - Williams-Sonoma  $30.27  *** Recent Slump! ***

Williams-Sonoma (NYSE:WSM) is a specialty retailer of products
for the home.  The company has two primary segments, retail and
direct-to-customer.  The retail segment sells products for the
home, while the direct-to-customer segment sells a collection of
similar products through direct-mail catalogs and e-commerce web
sites.  Williams-Sonoma's stores offer a selection of culinary
and serving equipment, including cookware, cookbooks, cutlery,
informal dinnerware, glassware, table linens, specialty foods
and cooking ingredients.  The company's core brands in retail
and direct-to-customer are Pottery Barn, which sells contemporary
tableware and home furnishings; Williams-Sonoma, which markets
cookware essentials, and Pottery Barn Kids, which sells stylish
children's furnishings.

WSM - Williams-Sonoma  $30.27

PLAY (sell naked call):

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

SELL CALL  JUN 32.5  WSM FZ     413   0.50  33.00   5.6%   1.5%



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

SEE DISCLAIMER - SECTION 1

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


*******************************************
CONSERVATIVE STOCK OWNERSHIP: COVERED-CALLS
*******************************************

Many investors find that writing "in-the-money" covered-calls
fits their criteria for a conservative, easy-to-manage options
strategy.
__________________________________________________________________


The market is offering little in the way of bullish stocks with
robust call-option premiums, so this week's section is simply a
list of...

SUPPLEMENTAL COVERED-CALL CANDIDATES

The following group of issues is a list of potential candidates
to supplement your search for profitable trading positions.  As
with any investment, you must decide if the selections meet your
criteria for potential plays.  Only you can know what strategies
and positions are suitable for your experience level, risk-reward
tolerance and portfolio outlook.  They will not be included in
the weekly portfolio summary.
__________________________________________________________________

Sequenced by Target Yield (monthly basis)

Stock   Last   Option    Option  Last  Open  Cost  Days Target
Symbol Price   Series    Symbol  Bid   Int.  Basis Exp. Yield

SLXP   34.68  JUN 30.00  PQN-FF  6.50  193   28.18  26   7.6%
INSP   32.30  JUN 30.00  IOU-FF  3.60  235   28.70  26   5.3%
UTHR   23.96  JUN 20.00  FUH-FD  4.80  21    19.16  26   5.1%
NVTL   17.29  JUN 15.00  NVU-FC  2.90  82    14.39  26   5.0%
KERX   14.21  JUN 12.50  QKY-FV  2.20  89    12.01  26   4.8%
IDEV    8.61  JUN  5.00  QUF-FA  3.80  306    4.81  26   4.6%
NKTR   18.13  JUN 15.00  QNX-FC  3.70  10    14.43  26   4.6%
DRIV   32.38  JUN 30.00  DQI-FF  3.50  816   28.88  26   4.5%
MICC   21.50  JUN 20.00  CQD-FD  2.20  47    19.30  26   4.2%
ENER   11.21  JUN 10.00  EQI-FB  1.55  2384   9.66  26   4.1%
DYAX   14.00  JUN 12.50  DQA-FV  1.90  173   12.10  26   3.9%
WEBM    8.18  JUN  7.50  QNM-FU  0.90  10     7.28  26   3.5%

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

SEE DISCLAIMER IN SECTION ONE

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


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