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Daily Newsletter, Monday, 06/14/2004

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The Option Investor Newsletter                   Monday 06-14-2004
Copyright 2004, All rights reserved.                        1 of 2
Redistribution in any form strictly prohibited.


In Section One:

Wrap: A "Measured" Decline
Futures Wrap: See Note
Index Trader Wrap: Gravitational force
Traders Corner: More Intermarket Relationships


Posted online for subscribers at http://www.OptionInvestor.com
*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
     06-14-2004            High     Low     Volume Advance/Decline
DJIA    10334.73 - 75.37 10401.30 10307.05 1.43 bln    534/2337
NASDAQ   1969.99 - 29.88  1987.83  1963.48 1.38 bln    779/2297
S&P 100   550.06 -  4.84   554.90   548.18   Totals   1313/4634
S&P 500  1125.29 - 11.18  1136.47  1122.16
RUS 2000  557.67 - 11.45   569.12   557.66
DJ TRANS 2993.97 - 30.74  3024.13  2987.60
VIX        16.07 +  1.03    16.36    15.54
VXO        16.07 +  2.24    16.33    15.48
VXN        22.24 +  1.01    22.86    22.16
Total Volume 3,137M
Total UpVol    576M
Total DnVol  2,516M
52wk Highs     100
52wk Lows      146
TRIN          1.24
PUT/CALL      1.32
*******************************************************************

A "Measured" Decline
by James Brown

Monday proved to be a defeat for the bulls as stocks slid lower
in a very widespread decline.  Traders once again obsessed over
concerns that the Federal Reserve may have to raise rates faster
than previously expected.  Through most of May the fed's mantra
was one of a "measured" response suggesting they would only raise
rates in small intervals so as not to disrupt the U.S. and global
economies.  Hawkish comments from a few fed governors late last
week, including some comments made on Friday while the markets
were closed, have suddenly thrown doubt over the Fed's next move.

Last Friday Jack Guynn and Sandra Pianalto, both Fed Presidents
in their districts, issued specific comments suggesting that if
inflation rises too fast the FOMC could be forced to react much
more quickly to keep inflation under control.  Normally the Fed
tends to telegraph their next move and the next FOMC meeting is
only two weeks away.  After a month of hearing the "measured"
response to questions on policy investors were not ready for
these new comments.

This morning's economic reports didn't help matters.  The
Commerce Department released the import/export numbers and the
trade gap jumped an unexpected 3.8% in April.  Economists were
expecting the gap to narrow to $45.1 billion but the trade
deficit surged to $48.3 billion, the second record high in a row.
March's trade gap was widened from $46.0 billion to $46.7
billion.  Morgan Stanley chose to raise their Q2 GDP forecasts
from 4% to 4.3% on the news.  Echoing the strong demand numbers
was the U.S. retail sales report for May.  The Commerce
Department said sales jumped 1.2% in May compared to a 0.6% drop
in April.  The good news here is that demand is up and it
reflects the stronger economy.  The bad news here is that demand
is up and it is probably pushing inflation higher as well.

Bank of America and the Standard & Poor's Investment Policy
Committee both issued comments out today suggesting that
investors reduce their exposure to stocks.  The S&P press release
said, "Standard & Poor's recommends that investors take advantage
of recent price strength by reducing their exposure to domestic
and foreign equities and increasing their exposure to cash."
Both advisory firms pointed to increased risk with a rising
interest rate environment.  It's easy to see why tomorrow's
Consumer Price Index (CPI) is so important.  The CPI is a key
gauge of inflation and economists are expecting the sixth monthly
gain in a row tomorrow with a 0.2% increase for May.  Currently
investor fears are projecting a 32% chance of a 50-point rate
hike at the June FOMC meeting.  Any tick higher in the CPI and
that chance is bound to go up.

The markets have already baked in a 25-point hike.  That's why a
sudden shift in expectations that we could get a 50-point hike
has investors hitting the sell button and hit the sell button
they did.  Stocks were down around the globe.  The Japanese
NIKKEI slipped 35 points to 11,491 but the Hang Seng index fell
close to 320 points to end at 12,076.  European exchanges saw
some hefty declines with the English FTSE down almost 51 points
to 4433.  The French CAC was down 52 points to 3647 and the
German DAX slid nearly 66 points to 3948.

Here at home in the U.S. selling was stronger in the interest
rate sensitive issues.  Homebuilders were an easy target but so
were the growth-sensitive tech sectors.  The SOX semiconductor
index's 2.26% decline helped lead the NASDAQ lower after UBS
lowered their outlook on the semiconductor industry.  Intel
happened to be the Dow's biggest decliner.  Gold stocks were the
worst performers with a 3.6% drop in the XAU gold and silver
index.  Gold futures fell $2.40 to $384.20 an ounce on concerns
that the dollar will rise with interest rates.  At the end of the
day no one sector-specific index remained green.

The Dow Jones Industrials lost 75 points but managed a meager
bounce from the 10,300 level to close at 10,334.  The tech-rich
NASDAQ lost 30 points (1.49%) to close right on its simple 200-
dma and above its early June lows.  Market internals were sharply
bearish.  Declining stocks outnumbered advancing stocks 23 to 5
on the NYSE and 23 to 8 on the NASDAQ.  Down volume outpaced up
volume by more than 5 to 1 on the NYSE and 3 to 1 on the NASDAQ.
Overall volume remained exceptionally low.

Chart of the Dow Jones Industrials:



Chart of the NASDAQ Composite:



Pressuring the Dow and the retail sector were comments from
retail giant Wal-Mart (WMT).  The Bentonville, Arkansas-based
company reaffirmed its June same-store sales forecast for 4% to
6% growth but warned that they would probably fall toward the low
end of this range.  Shares dropped 1.43% and closed under
technical support at their simple 200-dma.  Another retailer,
this one in the dollar-store niche, sent investors running.  An
earnings warning sent shares of 99 Cent Only Stores (NDN) to a
31% loss and shares closed at $14.10.  The stock gapped lower
after the company lowered its profit forecast from 19-20 cents
per share to 4-7 cents per share.  A couple of Wall Street's
biggest brokers downgraded NDN to a "sell" or "underweight".
What could be worse than an earnings warning?  Why an earnings
warning and a management shake up.  Shares of Drugstore.com
(DSCM) tumbled more than 37% to $3.06 per share after warning of
a wider than expected loss and the abrupt departure of its CEO
last Friday.

Finish mobile phone maker Nokia (NOK) made headlines today after
lowering its estimated first quarter market share forecast from
35% to 32%.  Rivals like Motorola (MOT) have been catching up so
NOK is introducing five new models while simultaneously slimming
down its total product line from 40 to 35 models.  NOK may have
lowered its Q1 market share number but they are sticking to their
40% market share goal.  NOK also raised its estimates on global
mobile phone usage 27% to 600 million units.  Long-term the
company believes worldwide usage will hit 2 billion in 2007.
Speaking of forecasts and milestones XM Satellite Radio (XMSR)
announced this morning that it had reached its 2 millionth
subscriber.  The satellite radio provider forecasts it will have
20 million subscribers by 2010.

It wouldn't be a Monday without some merger news.  The big news
today came from the gambling/casino sector.  MGM Mirage (MGG) has
upped its bid for rival Mandalay Resort (MBG) from $68-per share
($7.6 billion) to $71-per share ($7.9 billion).  MBG is
considering the new offer but questions remain whether the deal
would pass regulatory approval.   The next largest deal announced
today was in the drug sector.  QLT Inc (QLTI) declared it would
buy Atrix Laboratories (ATRX) for $855 million.  The third deal
announced today was a merger between HealthTronics Surgical
(HTRN) and Prime Medical Services (PMSI) valued at $145.9
million.

There were a few noteworthy headlines after the closing bell.
Aerospace giant, defense contractor and Dow-component Boeing (BA)
beat out rival Lockheed Martin for a $3.9 billion deal with the
U.S. Navy.  BA will design a replacement for the Navy's
submarine-hunting P3 aircraft.  BA was not expected to win the
contract so shares are likely to rise tomorrow.  Meanwhile
trucking company Yellow Roadway (YELL) surged in after hours
trading after lifting its earnings forecast.  YELL is raising its
profit outlook from 70-75 cents per share to 85-90 cents per
share.  The consensus analyst estimate was 74 cents.  In the
company's press release Yellow's CEO said, "All our business
units continue to perform very well," and "The improvement in our
second quarter earnings outlook is being driven by excellent
execution along with favorable economic conditions."  Bulls
should take notice.  Dow Theory suggests that the transports need
to rally in order to sustain any prolonged bull market.  If YELL
can do this well given the rise in fuel costs business must be
good.

Tomorrow's market action will be driven by the economic data
released.  Wall Street will be focused on the CPI number,
specifically if the core rate of inflation rises more than 0.2%
in May.  The CPI report comes out at 8:30 a.m. ET so we could see
the markets gap open (up or down).  Ninety minutes later will
begin the Senate nomination hearings for Greenspan's next term of
office.  We might look for the trading to slow down as traders
turn their ears to hear if Alan offers any more hints about the
next interest rate decision.  Tuesday will also unveil the
University of Michigan's preliminary June consumer confidence
numbers and the New York Empire State index for June.

Keep in mind that even if we have good news gains may be
restrained. Terrorism concerns are heightened with the June 30th
Iraq handover so close.  This past Saturday Iraq's deputy foreign
minister was killed in Baghdad and we'll likely to hear more
stories about Americans and westerners being kidnapped in Iraq
and Saudi Arabia.  Many market pundits feel we'll be range bound
until the June 29/30th FOMC finally alleviates the mystery of the
Fed's next move and America takes one more step to getting out of
Iraq.


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

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


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

Gravitational force

The major indices have that look of continued Triple Witch
expiration, where the S&P 500 (SPX.X) 1,125.29 -0.98% looked a
bit like a heatseeking missile as it gravitated toward heavy open
interest at the 1,125 strike in today's session, where after a
rather narrow range of trade last week, the bulk of equity-based
indices within our pivot matrix now rest just above this week's
WEEKLY S2s.

Market Snapshot / Internals - 06/14/04 Close



Today's internals look very similar to those found Wednesday of
last week, and further below, I'll make my case for another
session that was largely manipulated into Thursday's index
expiration.  While both the NYSE and NASDAQ 10-day Average NH/NL
ratios slip lower, we have not yet seen a 3-box reversal (6%
reversal) to 74% for the NYSE, or 66% for the NASDAQ.

Volumes remain light, thus the thought that it may not be too
hard to be pushing things around.

On Thursday, the NYSE NH/NL 5-day Average ratio was even with the
10-day at 80.5%, but moves below the 10-day today at 73.4%.
After falling below its 10-day NH/NL Average ratio on Wednesday
at 72.2%, the NASDAQ's 5-day NH/NL Average ratio is picking up
some downside momentum at 64.6% at today's close.

Pivot Analysis Matrix -



All equity-based indices, except for the Semiconductor Index
(SOX.X) 465.47 -2.26% managed to finish Thursday's session above
their WEEKLY Pivots, but this morning's open found a gap lower
below the WEEKLY Pivots.  Some notes made late Thursday
afternoon, along with today's gap lower, which would have caught
any bull somewhat flatfooted, looks very similar to Wednesday's
trade, and smells of additional manipulation into this week's
option/futures expiration.

Today's session lows for the NDX/QQQ, SOX.X and BIX.X came just
shy of their WEEKLY S2's.  I should note that since I wrote last
Wednesday's Index Trader Wrap, OEX "Max Pain" edged up one strike
to 550 from 545.

I may be splitting hairs on the BIX.X, but I'm showing intra-day
bar chart review had BIX.X not quite touching its WEEKLY S2 of
344.29.  Still, as I discuss a potential trade in the SPX for
tomorrow and selling of SPX June 1,115 puts, I'd be more
comfortable doing so if BIX.X were hanging at, or above its DAILY
S1.

The most correlative and notable correlative support looks to be
within 10-points of INDU DAILY S1 and WEEKLY S1.  Should the INDU
give up this level, say 10,285, be alert to the potential for
"mass dumping" of stock, but keep a close eye on the VIX.X and a
sharp move up in the VIX.X.  Should the INDU show an aggressive
move below 10,285, combined with an aggressive move up in the
VIX.X, this could be an alert that a lot of in the money covered
calls were written into the recent relative highs, with full
intention of selling some positions into this week's Triple
Witch.

However, I think we're going to see more of an SPX range trade
that is about 5-points either side of 1,125 into Thursday's
close.

Market Monitor Observations - 06/10/04 VIX.X /SPX call activity



Today's (Monday) trade is just a bit too similar to what traders
were alerted to in Thursday's 01:00 PM EDT update, combined with
something I had noted later that afternoon in the Market
Volatility Index (VIX.X) 16.07 +6.84%, where volatility spikes.
I'd be taking note of the 1,135 strike as correlative with this
WEEK's Pivot, and would have to believe the SPX gets "sold hard"
on any type of bounce back near that level between now and
Thursday.  The profitable trade with relatively low risk I see in
the making is any type of SPX decline to 1,120 and selling of SPX
1,120 puts.

S&P 500 Index (SPX.X) June Option Chain - 06/14/04 Close



The "dashed BLUE" is where the SPX was trading "at the money" and
1,135 late Thursday afternoon.  The "solid BLUE" is not "at the
money" with the SPX just happening to close near 1,125 and all
that open interest we noted in Thursday's 01:00 Update.  If I
were an options market maker, I might try and fake a move lower
lower to the 1,120 level early tomorrow, but note how our PINK
arrows at 1,120 and 1,130 open interest aren't too far off from
each other.  If options market makers can get the fake move lower
near 1,120, they might just influence some 1,120 and 1,115 put
buying at both strikes.

Note:  Today's high for the SPX 1,125 puts was $7.90, not $34.00,
which I did edit to reflect $7.90.  However, I scratched out the
Avg OHLC calculation for today's trade of $12.10, which would be
inaccurate.

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



I'm not certain an SPX drop to 1,115 would come tomorrow, but if
it did, I'd be looking to sell an SPX June 1,115 strike as a
premium erosion trade into this week's expiration.  A quick yet
steady drop on Wednesday, a slight rebound and reclamation of
about 1/2 of those losses on Thursday, and another sudden and
steady drop back to 1,125 and all that open interest at the 1,125
strike just seems like a lot of option-related manipulation in a
light volume market to me.

Dow Industrials (INDU) Chart - Daily Intervals



The INDU's MONTHLY R1 now becomes more of a significant level of
resistance, but remains a relatively stronger than the other
indices.  However, we've seen how the INDU, SPX/OEX and QQQ/NDX
have had a tendency to "trade off" for weakness and strength the
past couple of months, at various times.  With the INDU having
shows some recent relative strength the past couple of weeks,
this may well be the index to be looking for some near-term
declines as it plays "catch up" to the downside.

DIA and DJX June Option Chains - 06/14/04 Close



It's "easier" to look at an Option chain in the SPX or OEX to get
a feel for just who option market makers are going to try and
mess with.  With the Dow derivatives, you kind of have to look at
both the DIA and DJX option chains, and just kind of eyeball
things.  Since it is a widely held theory that most call open
interest is "long" then a close below DIA $104 wipes out June
$104 call gains at this point.  There's some "go get'em" at the
$102 call (DIAFX), where with rather light open interest at the
DIA $103 put (DIARY), an options market maker may have more to
gain than lose if he/she can get a DIA back near $102 by Friday's
close.  A close back near $102 from current levels also eats away
at some of that open interest lower at the in the money DIA June
$100 call (DIAFV), but does little to harm the options market
maker's June 100 put (DIARV) short position (if he/she has been
selling those puts to buyers).

However, DJX is a slightly different story isn't it?  Note the
rather "light" open interest at DJX $102 Call (compared to DIA
$102 call).  Can never be sure, but probably the difference of
just one or two trades at some point, where the DIA was preferred
option at that time (liquidity most likely).  The "mess with
them" trade again looks to be something below $103, where the
closer to $102 a market maker can get it, then some erosion to
the DJX $100 call open interest of 27,612 for those option
contracts that were opened with a bullish bias.  Still, we can
NEVER know for sure if the whole mess at $100 call wasn't a
covered call, where the sellers of those calls are ready, willing
and ABLE to deliver $100 strike.

NASDAQ-100 Tracker (QQQ) - Daily Intervals



Today's 52.49 million share volume a slight increase from
Thursday's 38.82 million.  These are "featherweight" type of
volumes.  There was a "bad tick" in this afternoon's trade, but
it came to $35.20 as the QQQ was trading $36.20, so to answer a
couple of questions from traders, I think that back tick was a
keypunch error, and may not have been a program being set up.
Still, good observations from traders regarding that "bad tick"
as being highly correlative with MONTHLY 61.8% retracement, but
I'd only grow suspicious near-term, should the SPX fall much
below its rising 200-day SMA.

Jeff Bailey


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

More Intermarket Relationships

Just as the old saying goes, "One does not live by bread alone,"
one cannot do a proper analysis of the U.S. stock market without
taking into consideration intermarket relationships. Intermarket
relationships between four broad categories: bonds, commodities,
stocks and the dollar. I have investigated these relationships in
earlier articles but would now like to hone in on two basic
intermarket principles.

The basic principles I would like to look at in depth are:

1. U.S dollar trends in the opposite direction to commodities.

2. Commodities generally trend in the same direction as interest
rates.

This article in an investigation of how well these relationships
have worked in the past and how well they are working in our
current environment.

In my analysis I will be using $CRB (Commodity Research Bureau
Index), a basket of commodities generally used for charting
commodities to represent "commodities" and the yield on the 10-
year to represent "interest rates."

U.S dollar trends in the opposite direction to commodities

Let's look the first principle mentioned, the dollar trends in the
opposite direction to commodities:



In 1996 commodities peaked and started a decline that never ended
until 1999. In 1996 the dollar bottomed and started a rally that
peaked mid 1998. Up to this point the relationship is behaving
like it was supposed to, dollar up, commodities down. Then in
early 1999 both commodities and the dollar started a rally and
this relationship became uncoupled. The CRB rally ended in early
2001 but the dollar rally never ended until early 2002 (after a
very ominous triple top). From early 2002 the commodity/dollar
relationship recoupled and they started moving in opposite
directions again.

Now let's take a little closer look at what was going on from 1999
to 2004. Here is a perf chart from stockcharts.com of the $CRB and
the U.S. dollar for that period.




During 1999-2000 the dollar/commodity relationship "decoupled"
(both move together) but the bond/stock relationship (both move
together) also become decoupled during this time frame and it was
all due to global deflation (for an explanation of this decoupling
please read my article at
http://www.OptionInvestor.com/traderscorner/tc_051304_2.asp).
However, late 2000/early 2001 $CRB hit a top and the dollar hit a
bottom and the relationship coupled once again. In July 2001 the
dollar went on to hit a high of 119.60 and started a decline that
never ended until the double bottom made in the first quarter of
2004.  In October, three months after the dollar made its July
2001 high, $CRB hit a low of 184 and started a rally, which never
ended until March 2004. The $CRB and the U.S. dollar were once
again moving in opposite directions. Of course the $64,000
question is "Is the dollar decline over and is the commodity rally
over?"

Let's examine this a little closer and zoom in on what has been
going on since 2003.




In June of 2003, the dollar looked like it was making a bottom and
the $CRB was making a series of lower highs, which could have been
construed as a top. The dollar started a rally but was only able
to make a lower high before it resumed its decline. On the other
hand the $CRB made a higher low before it resumed its rally. We
are seeing a similar pattern now. The dollar made a bottom in the
first quarter of 2004 and the $CRB made a top in March of 2004.
Now we look for divergences from the pattern we are currently
seeing to the pattern made in 2003. A divergence would be the
dollar's rally making a higher high than the high made in November
2003 and the $CRB making a lower low than the one made in the same
month.

Or you could use a ratio chart like this one.



This is a chart of the $CRB divided by the U.S. dollar and shows
how strong the $CRB has been in relation to the dollar since
January 27th 2002, when the trend started. As you can see the
trend line has not been breached for over 2 years and a break of
this trend line would tell me the dollar is strengthening in
relation to the $CRB and the trend may be changing. If the trend
line is breached we should be looking for lower commodity prices
and a higher dollar.

Commodities and interest rates Trend Together

Now lets look at the intermarket relationship commodities and
interest rates trend together.




Comparing these two markets you see that they normally trend in
the same direction. They peaked in 1996 and dropped until the end
of 1998, then rose together in 1999.  When stocks peaked in March
of 2000, rates had already peaked in January and commodities
peaked early 2001. 2001 saw both rates and commodities fall
together when they both found a bottom in late 2001.

Here is a closer look at late 1999 through 2001 using a perf
chart.



From early 1999 to the interest rate peak at 4.49% in January of
2000 the $CRB and interest rates pretty well followed the same
trajectory, up. Interest rates then started a decline but $CRB
continued its rally until it hit its peak at 230 in October 2000,
then another peak in December 2000 and a final peak January 2001.
Then once again both markets followed the same trajectory but this
time down. From this chart we saw interest rates peaking about 10
months before commodities.

Let's now fast forward to late 2001 to today.



For the most part since the 2nd quarter of 2002 to mid 2003 the
interest rate/commodity relationship broke down and become
uncoupled. One possible explanation for this decoupling was the
reason behind bonds and stocks becoming uncoupled, global
deflation. Japan was still stuck in deflation and global interest
rates were dropping bringing U.S. rates along for the ride.
Another explanation was the bear market in stocks caused a flight
to safety in bonds driving bond prices up and yields down.

Now that bonds and stocks have recoupled (according to John
Murphy) I'm thinking the CRB and interest rates should have also,
which is what you have been seeing since the June 2003 lows in
rates, sort of.

Here is a closer look at the timeframe from mid 2002 to today.



The blue arrows show the time the relationship worked and the red
arrows show when the relationship did not. Since June of 2003 the
relationship has generally held up but it has been a wild ride and
tenuous. I would not base any investment decisions of this
relationship but use it to confirm others.  With that said, if you
think rates are on their way up you could say commodities are
supposed to go up also.

Here's a brainteaser for you.  Since commodities and the dollar
trend opposite but commodities and interest rate trend together
what is the relationship between the dollar and interest rate. You
could extrapolate that the dollar and interest rates must move
opposite also. Now if you believe interest rates are on their way
up then which direction would the dollar have to take? Down.
Wouldn't it be nice if it were that easy and for the longer term I
believe it is but as investors and traders we have to live with
the red arrows in between (please refer to my last chart).

Remember plan your trade and trade your plan.

Jane Fox


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The Option Investor Newsletter                   Monday 06-14-2004
Copyright 2004, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.


In Section Two:

Stop Loss Updates: CCMP, KSS, GDW (NOTE)
Dropped Calls: None
Dropped Puts: None
Watch List: Technology Leading Again


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

CCMP - put play -
 lower stop from $31.35 to $30.65

---

KSS - put play -
 lower stop from $50.01 to $49.01

---

GDW - call play -
  No change in stop.  We remain un-triggered.


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

None


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

None


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

Technology Leading Again

Silicon Laboratories Inc. - SLAB - close: 47.01 change: -1.54

WHAT TO WATCH: Semiconductor stocks led the weakness in the
Technology sector on Monday and it looks like this group is
setting up for a test of the lows from earlier in the year.  SLAB
rolled over just under its 50-dma, plunged through the 200-dma and
looks headed back to test the May lows near $45.  Use a trigger
below those May lows and target a drop to what should be strong
support at $40.

Chart=


---

Goldman Sachs - GS - close: 91.53 change: -1.48

WHAT TO WATCH: It looks like it is time to take another swing at a
bearish play on GS, with the entire Brokerage sector (XBD.X)
heading back to test the early May lows.  We tried playing GS to
the downside last week, but things didn't work out, with our $90
trigger level never being reached.  Now GS looks poised to take
another run at that level and a breakdown should serve as a solid
entry point.  Target a move down to the $85 area.

Chart=


---

Invtrogen Corp. - IVGN - close: 63.26 change: -1.29

WHAT TO WATCH: After rolling over at the 30-dma again, shares IVGN
have plunged back below the 200-dma and this time it looks like it
may really result in a breakdown.  Use a trigger under $62.50 for
entry and look for an initial move to support in the $57-58 area.
If the bears really get carried away, we could be looking at a
drop all the way down to $50.  Note that the PnF chart is
currently bearish, with a downside price objective of $48.

Chart=


---

Mohawk Industries Inc. - MHK - close: 69.41 change: -1.79

WHAT TO WATCH: Rising interest rates are on their way and it isn't
just the home builders that are being sold in anticipation of the
change of Fed policy.  Companies that sell into the home building
industry are feeling the pinch as well and MHK broke under recent
support today on strong volume.  Aggressive traders can consider
playing on a break below today's low, while the more conservative
approach will be to wait for a break under stronger support at
$67.  Look for initial support near $65 and the target a drop to
$60.

Chart=


---


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

WY $59.21 - It looks like the upside on WY has just about played
itself out, with the stock rolling over just under the 200-dma and
with the 50-dma just about to cross down through the 200-dma.  Use
an entry trigger at the 30-dma and target a move down to retest
the May lows near $55.

LXK $91.65 - After several failed attempts to push to new highs,
LXK appears to have lost its way and it looks like we should
expect a breakdown sooner, rather than later.  Use an entry
trigger at $89.75 (just under the recent lows) and target an
initial move to the $84-85 area.




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