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Daily Newsletter, Sunday, 08/15/2004

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The Option Investor Newsletter                   Sunday 08-15-2004
Copyright 2004, All rights reserved.                        1 of 5
Redistribution in any form strictly prohibited.

Entire newsletter best viewed in COURIER 10 font for alignment

In Section One:

Wrap: Blame Game
Futures Wrap: See Note
Index Trader Wrap: CRUDELY PUT
Editor's Plays: See Note
Market Sentiment: No Reason
Ask the Analyst: The TRIN and Daily Pivot Analysis levels (day
    trader's only)
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 8-13         WE 8-06         WE 7-30         WE 7-23
DOW     9825.35 + 10.02 9815.33 -324.38 10139.7 +177.49 -177.56
Nasdaq  1757.22 – 19.67 1776.89 -110.47  1887.4 + 38.27 - 34.06
S&P-100  520.72 -  1.11  521.83 - 15.84  537.67 +  7.29 -  5.52
S&P-500 1064.80 +  0.83 1063.97 - 37.75 1101.72 + 15.52 - 15.20
W5000  10304.66 -  3.18 10307.84-393.81 10701.7 +147.83 -178.04
SOX      366.65 – 20.23  386.88 - 29.55  416.43 + 10.85 -  4.88
RUT      517.39 -  2.26  519.65 - 31.64  551.29 + 12.07 - 16.26
TRAN    2966.92 +  0.84 2966.08 -145.61 3111.69 + 68.25 - 44.89
******************************************************************

Blame Game
Linda Piazza

Jim is out of town through next week, attending a conference.

Dell's after-Thursday's-close earnings report was slated to be
the big news Friday, sending tech-related indices higher.  Pre-
market articles talked about the bounce that was to come, but the
day didn't unfold that way.

Instead, countries across the globe traded blame for
disappointing economic numbers reported Friday.  Commentators and
economists blamed lower U.S. consumer demand for discouraging GDP
numbers in Japan and the eurozone countries.  In the U.S.,
commentators blamed lower demand for goods exported to Japan and
the eurozone for the widening of the U.S. trade gap.  Those
economic releases revealed plenty of blame to parcel among the
various countries.  That blame settles on consumer demand in the
world's three largest economies, or more properly on the impact
of rising crude costs on consumer spending habits.

Japan's GDP number proved to be a shocker. GDP growth for the
second three months of this year surprised to the downside, at
0.4 percent falling far short of the forecasted 1 percent growth.
The annualized GDP rose by 1.7 percent, with some suggesting that
assessments for the Japanese economy's growth would require
adjustment. It was just Wednesday that the International Monetary
Fund raised its forecast for Japan's 2004 economic growth to 4.5
percent from the previous 3.4 percent.

Both private consumption and corporate capital expenditures
disappointed.  Corporate capital expenditures had been expected
to grow by 10 percent, but instead were flat.  The GDP deflator
indicated that Japan still suffers from "unwanted disinflation,"
as our FOMC members might have described it.  While some
economists disputed both the private consumption and corporate
capital expenditures numbers, they tanked the Nikkei, with that
index plunging lower by 270.87 points or 2.46 percent, to
10,757.20, its lowest close since May 18.

U.S. futures held up well while the Nikkei tanked.  Although they
stumbled slightly as the European Union released figures showing
the eurozone's GDP rising 0.4 percent against an expectation of a
0.5 percent rise, the U.S. futures still gave hope of a bounce.
The International Monetary Fund, the IMF, already estimates that
Europe's growth will be the lowest among the three largest
economies in the world, with Japan and the U.S. being the other
two.  In Germany in particular, stagnant consumer spending leads
the economy to depend on exports.

Clearly, consumer demand isn't rising as needed or expected. Last
month, the Commerce Department released figures showing slowing
consumer spending. In the eurozone as well as in the U.S.,
companies center hope on emerging markets, China, and Russia to
provide the needed growth in demand. After the release of the
eurozone's GDP and the resultant commentary, the FTSE 100, CAC
40, and DAX all headed lower, as did most eurozone bourses.

Still, after that slight stumble, U.S. futures regained their
footing and had attempted a couple of bounces by the release of
July's U.S. PPI and June's Trade Balance.  In June, the PPI
headline number had fallen 0.3 percent, but the ex-food-and-
energy number had risen 0.2 percent.  Expectations for July's
headline number had ranged from a decrease of 0.1 percent to a
rise of 0.2 percent, depending on the source, while expectations
for the ex-food-and-energy number had been for a rise of 0.1-0.2
percent, also depending on the source.  The released numbers
showed PPI rising 0.1 percent, with the ex-food-and-energy number
rising 0.1 percent, both numbers in line with expectations.
Dropping food costs offset rising energy costs, but companies
reported raising prices due to energy costs.  As quoted in one
article, an economics professor at Harvard raised the specter of
rising crude prices causing higher inflation coupled with slower
growth.

It was June's trade balance that started the blame game on the
U.S. side of the pond, though.  May's trade balance had measured
-$46 billion, with economists forecasting a $46-47 billion
shortfall for June.  Instead, the gap widened to a record $55.8
billion as the U.S. paid more for crude oil and other industrial
supplies and exported less.  The number revealed a widening trade
gap with Japan, Western Europe, Canada, and China, among other
countries.  Economists placed the blame for the biggest decline
in exports since September 2000 on lower demand from Japan and
the eurozone countries.

As happened with Japan's disappointing economic release, market
watchers began speculating that growth estimates for the U.S.
economy might need revision.  Some commented that the lower
estimate for June's trade gap had probably been folded into the
calculations for economic growth.

A dissection of the number revealed that inventories rose, a
comment that we've heard recently from reporting companies, too.
As Jim Brown commented in an earlier Market Wrap this week,
building inventories can be viewed in both a positive and a
negative light.  They can be a sign that sales have slumped,
making it difficult to move that inventory.  As Jim commented
earlier in the week, some information suggests that may be a
cause behind those building inventories, and the market treated
companies reporting building inventories as if that were the
case. They can also be a sign that companies expect growing
sales, too, as they look forward to a period of expected
expansion and are ramping up inventories to enable them to
fulfill orders.  In an effort to put the best spin on this
morning's widening trade balance, some commentators embraced the
latter interpretation today.  Those optimists also viewed rising
imports as a sign of increasing domestic demand rather than a
function of higher crude costs.

Despite the blows delivered by disappointing economic releases
across the globe, the Dow, TRAN, Nasdaq, S&P 500, OEX, and SOX
all opened in the green.  Early morning articles sported titles
such as "Stocks aim higher" and "Stocks bounce," featuring Dell's
likely positive effect on the markets.  Dell did perform
strongly, closing 4.19 percent higher, but its positive effect on
other than a few key sectors was dampened by the University of
Michigan Consumer Confidence number released soon after the open.
July's number had been 96.7, and expectations for August's
preliminary number had been for a rise to 97.00-97.50.  Instead
the sentiment index fell to 94.0.  The main culprit appeared to
be the component that measures future expectations.

Although the behaviors of the U.S. futures overnight and the cash
markets on the open had been those of steadiness in the face of a
number of adverse economic releases, the University of Michigan
report sent indices into their first declines of the day.  Some
had already seen their high of the day and would decline steadily
throughout the rest of the day.  The Dow Jones Transportation
Index proved to be one, with this oil-sensitive and economic-
recovery-sensitive index succumbing to dual pressures.  The TRAN
hit its 200-sma, bouncing minimally from that average into the
close and erasing all of this week's 110-point gain.  Producing
two reversal signals within one week, the TRAN made a round trip
back to that average from Friday to Friday.

Although the Dow's sister index held up well while crude prices
rose this week, Friday it returned to its typical trading pattern
of late, trading in direct opposition to the movement of crude
futures.

Annotated Five-Minute Charts of the TRAN and Crude Futures:



The TRAN appears poised to bounce from its 200-sma or tank
beneath it next week.  If the inverse relationship to the
movement of crude futures is to continue next week, making a
prediction proves particularly difficult.  This weekend includes
a close recall election in Venezuela, with violence possibly
escalating if the incumbent wins.  A historical basis for such a
concern exists, since output was trimmed during the last upheaval
involving President Chavez.  In addition, a BP plant in Indiana
suffered a fire that cut output; Russia's Yukos may be put on the
bidding block with uncertainty over whether the successful bidder
could meet the company's previous output, and worries about
developments in Iraq persist.  Hurricane Charley's threat to oil
and gas production had reportedly lessened at the time this
report was prepared, but traders pumped the crude futures with
event premium in case one or all of the threats to production
materialize.

If a truce is managed with Shiite militants in Iraq, other
terrorists vow to leave Iraq's pipelines alone, Venezuelan
elections proceed peacefully, and the markets find assurance that
Yukos can keep up production, some of that premium may seep out,
deflating crude prices.  Such a deflation might allow indices to
bounce, at least for a few days, but if crude prices continue
higher, pressures on equities could escalate.  Those believing
that $40.00/barrel prices were temporary and the pressures on the
economy transitory might be shocked out of that belief if crude
hits $50.00/barrel.  A CNBC Europe commentator mentioned a couple
of weeks ago that crude prices would likely reach $47.50 in the
short term and $57.00 ultimately, a claim that seemed unlikely at
the time.  He may be right about that $47.50 price, at least.
Crude futures came within a point of that figure on Friday.

It all sounds like doom and gloom, doesn't it?  It wasn't.
Across the U.S. markets, advancing issues and up volume proved
stronger than declining issues and down volume.  Adv:dec ratios
stood at 19:13 for the NYSE and 15:15 for the Nasdaq.  Total
volume was a light 1.2 billion for the NYSE and 1.3 billion for
the Nasdaq.  The Dow, Nasdaq, S&P 500, OEX, SOX, and Russell 2000
all ended the day flat or slightly higher.  Only the transports,
insurance sector, pharmaceuticals and biotechs declined
significantly.  Homebuilders, the XAU, the HMO, and some
computer-related indices performed strongly, as did the oil
services and natural gas sectors.  This article could have been
titled "The Bounce that Almost Happened."

Nevertheless, many indices teetered on the edge of a more severe
drop Friday, including the S&P 500.

Annotated Daily Chart of the SPX:



The SPX's daily chart presents a clear picture of an index poised
to bounce from bottom support on its descending regression
channel or to fall from that channel.  The SPX broke minimally
below the bottom support of its possible "b" distribution pattern
Friday, but was caught by 1060.  The bounce did not prove
convincing ahead of the weekend's uncertainty.

The big-cap OEX has broken below the bottom support of its "b"
distribution pattern and spent Friday trying to climb back inside
the bulb of the "b," without success.  The OEX did find support
near 520, but closed just below the 520.80 figure that has proven
to be support/resistance in the past.  Markets appear to have
long memories.

Annotated Daily Chart of the Russell 2000:



Like the SPX, the Russell 2000's daily MACD remains in full
bearish mode.  Stochastics have long been trending in levels
depicting oversold conditions, a state that often accompanies
steep declines.  Stochastics produced another bearish kiss.
Note, however, the equal lows on the RSI as the Russell 2000 hit
first the July low and then headed down to a lower low in August.
That's bullish divergence if it continues.  Note also that RSI
currently measures a higher level than at the August 9 low.  RSI
often serves as a leading indicator, but it's a fickle indicator,
too.  It should warn those in bearish positions to make plans to
protect profits, something that should have been done anyway as
indices approached key support levels, but it does not yet
promise a bounce.  Let RSI warn you and price action guide you.

The Nasdaq also balances on a key level.

Annotated Daily Chart of the Nasdaq:



Wednesday, I pointed out the approach of the 38.2 percent
retracement level drawn on the Nasdaq's daily chart, and the
Nasdaq did spend the rest of the week balancing on that line,
reinforcing its importance.  Despite Dell's influence, the Nasdaq
was not able to mount a bounce, instead producing an inside-day
candle.  If the Nasdaq does bounce early next week, first
resistance should be expected at 1800 and the gap level from
August 6. If the Nasdaq drops, round-number support should
perhaps be expected near 1750, and slight support appears to
exist near 1748 and again near 1740, but stronger support lies
nearer 1690-1700.

The Dow's chart shows some of the same characteristics seen on
other daily charts.

Annotated Daily Chart of the Dow:



The Dow's chart (using the DJX as a proxy to obtain all the daily
candles sometimes omitted on my daily chart) shows the new
bearish stochastics kiss, the full bearish mode of the MACD, and
the potential bullish price/RSI divergence.

One commentator on the crude markets commented that crude could
be $50 Monday or could be $40.00, depending on weekend
developments.  Those weekend developments and crude's resultant
price could drive our markets, too.  It appears difficult to
imagine that indices could make strong advances if crude prices
do not drop significantly, but Monday begins option expiration
week, with all the attendant inexplicable market movements.

As Jim Brown has mentioned in previous articles this week, the
good news is that volatility has returned to the markets.
Although all of us at OIN care about the health of our economy
and so would prefer seeing markets move higher, we options
traders can benefit from movement any direction as long as
there's movement.

We're in a good place for a bounce, but we're also in a good
place for a rollover down to a new leg down, a great opportunity
to profit from options plays.  Until we get past some of the
event risk, including the upcoming Olympics and perhaps even the
upcoming elections, and have evidence that the prevailing
downtrend has reversed, selling rallies remains the preferred
tactic, so at least part of next week could be spent sitting out
while markets bounce up to test resistance.  If a bounce begins,
many indices will be trading up through the bulb of a possible
"b" distribution pattern, a pattern that is deemed bearish until
proven otherwise.  That bulb portion may produce choppy trading
conditions.  In addition, another factor may work against the
aggressive trader willing to risk a countertrend play up through
a likely choppy zone:  options expiration week.  Unfortunately,
although once a bounce has begun, pent-up pressure may send
indices high enough to profit in a bullish play, it's not yet a
play I can recommend for any but the most adept scalpers who
don't need advice anyway.

Crude prices should be watched carefully Monday morning for signs
that some of that event premium is evaporating or that crude
prices instead are building.  Watch crude's effect on the TRAN,
with the TRAN so near the 200-sma that it should be easy to say
"bounce" or "drop."  Other indices' positions near key levels
also offer that ability, although Friday's trading proved that
even apparent breakdowns could whipsaw those entering bearish
trades.  Be prepared to be whipsawed if entering directional
plays.

Another index might offer guidance as to whether a bounce could
begin.  Although many indices produced doji or near-doji Friday,
only one among the ones charted here produced that doji at the
bottom of a steep decline.  The others produced doji at the
bottom of consolidation zones, not producing as strong a
possibility of those doji being reversal signals.  The SOX,
however, produced its doji at the bottom of a steep decline.

Annotated Daily Chart of the SOX:



Although a classic morning-star reversal signal requires a tall
red candle before the doji, we might give the SOX the benefit of
the doubt, as indices sometimes don't produce as classic
candlestick patterns as individual stocks might.  Those hoping
for a bounce want to see the SOX open Monday at or above its
Friday close, and then produce a strong white candle.  The mauve
horizontal line on the chart represents the 50 percent
retracement of the rally off the October 2002 low, an important
Fibonacci retracement level the SOX violated this week.  Those
hoping for a bounce want to see the SOX close above that mauve
line and above the bottom of the former descending regression
channel.  Otherwise the bounce remains suspect.  Those hoping for
a Nasdaq recovery also want to see the biotechs bounce, too.

Companies reporting Monday include Lowe's Companies (LOW), Sysco
Corporation (SYY), and Tandy Brands (TBAC), and possibly KMart
(KMRT), although I'm finding conflicting information about its
reporting date.  Each of those offers a measure of consumer
spending.  They might be closely watched.

Next week's economic releases number fewer than this week's, with
Tuesday being a heavy-weight day with regard to those releases.
Monday starts out slowly, with only the NY Empire State Index at
8:30 and the August NAHB Housing Market Index at 1:00.  Tuesday's
8:30 releases include Building Permits, Housing Starts, Capacity
Utilization, and Industrial Production, and Tuesday also includes
chain store sales, Redbook Retail Sales, and the ABC/Money
Consumer Confidence.  Wednesday has become a volatile day as the
Department of Energy and API release their disparate figures for
crude, distillate and gasoline inventories, and Wednesday has
also long been known as a possible trend-reversal day.  Thursday
rounds up the week's releases, with initial claims, natural gas
inventories, leading indicators and the Philadelphia Fed's
release.

Have a safe weekend.  Our thoughts and prayers go out to all
subscribers who live in areas affected by Hurricane Charley or
who have loved ones who live in those areas.


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

CRUDELY PUT
By Leigh Stevens
lstevens@OptionInvestor.com

THE BOTTOM LINE –
Similar to what a certain President said about the economy being
all-important: "it's the oil surge stupid".  It may not be so
smart in retrospect to have bought all those gas guzzling SUV's
or fast sportive cars with big engines like mine – not when oil
pipelines are being blown up, Russian oil supply gets chaotic and
Venezuela goes in turmoil again – all conspiring to drive up oil
prices to record levels during our big driving season.

What this has to do with stocks of course is that, when concern
already exists about any slowdown in consumer spending and the
strength of the economic recovery, such a spike in oil prices
could well put the brakes on a rebounding earnings trend. Since
earnings growth expectations that developed before this energy
price surge are priced in, the market has to adjust downward.

I anticipated rally potential last week but once again the
rebound was very short-lived.  However, by week's end bad news
had not driven at least the S&P indices to new closing lows –
Nasdaq went to a slightly lower weekly low and has now retraced a
full Fibonacci 38% of the late-'02 to early-'04 advance.

Holders of Index puts should be concerned about how much downside
is left here as time premiums erode in a sideways trend. Rally
potential is probably not big, but all my major Index indicators
are at or below the kind of oversold extremes which does signal
ongoing potential for a short-covering type rally, along with
some bargain hunting buying. Specifics further on.

FRIDAY'S TRADING ACTIVITY –

THE NUMBERS –
The S&P 500 (SPX) gained 1.57 points (+0.1%) to 1,064.8, for a
gain of less than a point on the week. The Dow Jones 30 (INDU)
Average closed up 10.7 points to close at 9,825.35.  The Dow
(INDU) only gained +0.1% on the week – but I see some
significance that the week to week decline stopped for now.

The Nasdaq Composite Index (COMP) gained 4.7 points (+0.3%) to
1,757.22, but well off its 1768 intraday top. Over the course of
the week, all three of the major indexes touched new lows for the
year. COMP fell on the week by 1.1%.

REPORTS & ECONOMIC NEWS –
The bombshell of the day was the U.S. Commerce Department report
that the U.S. trade (current account) deficit increased by 19% in
June to a record $55.8 billion, well above the consensus estimate
for around $47 billion.  This was the biggest 1-month jump in our
trade gap since early-99. This is the kind of thing that is not
watched a lot by consumers who like low prices above all, but is
a long-term concern for our economy if all those excess dollars
come out of where they are mostly parked: in the T-Bonds that
finance our burgeoning federal debt.

The Labor Department estimated that prices paid to U.S. producers
(PPI) increased only 0.1% in July, less than the 0.2% rise
expected. Core prices, excluding the more volatile food and
energy prices, rose 0.1% in July and consistent with
expectations.

Consumer sentiment was below expectations in another report from
the University of Michigan - it's August consumer sentiment index
fell to 94 from July's 96.7, versus expectations of 96.4.

OTHER MARKETS –

Oil futures broke above $46 a barrel Friday to an historic high,
for a gain of 6% on the week - traders bid up prices on September
futures in New York due to weekend concerns related to a
presidential recall vote in Venezuela and a possible battle
against Shiite militants in Najef in Iraq, site of the most holy
shrine for Shias everywhere. Such a battle could inflame the
country.  Such shrines can't be compared to anything we are
accustomed to, as physical place and pilgrimage is a very big
deal in Islam.

Traders were saying the lead futures contract could be up to $50
or back to $40 in short order depending on these events.

September crude futures closed at $46.58 a barrel, up $1.08 for
the day – wild to see dollar up a buck in a single day after
rising so much already: the gain was $2.63 for the week!

Sunday's recall referendum in Venezuela and its uncertain outcome
has caused the shorts to scramble to cover and high prices to get
traders to take the other side of those wanting to buy ahead of
the weekend.

The fear for the oil market is a close vote that could start a
cycle of violence, and violence could hinder oil exports to the
U.S.  Even a victory by President Chavez could see oil workers
going on strike again, due to their animosity to him.

The oil market remembers well the last time there was a major
uproar regarding President Chavez – a strike by oil workers cut
the country's output to 700,000 barrels per day in January '03
from a daily average of over 3 million barrels – the country is
the 5th-largest oil exporter globally.

In the currency market, the euro ran up a full percent to a 3-
week peak of $1.2373 as the U.S. trade data hurt the dollar. The
dollar was down 0.1 percent versus the yen at 110.07 yen.

U.S. Treasury bonds closed higher after the same trade data and
the PPI release. The 10-year T-Note closed up 15/32 to 100 9/32
for a yield of 4.22% and down from 4.28% Thursday.

MY INDEX OUTLOOKS –

S&P 500 Index (SPX) – Daily chart:

Last week I assessed the S&P as not having a large further
downside potential: ".. a mild rebound and then another slide to
the lows or a bit lower such as 1060-1058.."  I wish these things
would "behave" that well all the time in terms of predictability!

I also suggested that to .. "anticipate a rally back to the gap
area around 1080 .. which would then be met with renewed
selling.." I still see a close above 1080 as key to an ability to
get much of a rally going. 1090 is next resistance.

[Note how selling pressure or resistance comes in at some of
these key points – most recently, at the downside gap area –
before that, at the 200-day moving average which was former
support. The indices act pretty "technically" in terms of turning
points – individual stocks are more tricky.]

Support/buying interest has shown up around 1060 – next support I
estimate at 1050.




Another bullish reading occurred this past week on my Call to Put
daily CBOE equities options model. Because there are sometimes
clusters of these readings, as bearishness generates more put
activity, I tend to rely most on a overdone or bullish indication
in this Indicator only when the other key Index indicators line
up also, along with price action of course – the batch of my key
index technical indicators is shown further along.

While the S&P 500 (SPX) can certainly see lows "hugging" the
lower envelope line for some time, it more common for there to be
2-3 touches to it then a rebound – such as, at least, a rally
back up to the 21-day average such as seen week before last.

S&P 500 Index (SPX) – Hourly chart:

The hourly chart better highlights the downtrend channel that SPX
has been in, as well as resistance around 1080 - then in the
1090-1092 area.




Yah man, this Index is oversold.  This usually precedes at least
a limited rally such as occurred last week.  And, right into that
minor downside price "gap" area from awhile back - the area where
sellers didn't get much stock off (sold) before on the decline.
When it comes back to this zone, more (selling) comes in.

PRICE/KEY INDICATORS SUMMARY – S&P:

I know this chart is a bit of scroll, but it helpful to see em
lined up.  Price or the price pattern shows the recent closes at
the low end of my downtrend channel.  The slight turn up on
Friday is of interest.  I figure key closing level resistance
("R") at 1082-1083. A close under 1060 might suggest a new down
leg but I think the market's two oversold for that – it has to go
at least sideways for a while most likely. The S&P (both SPX and
OEX) is oversold and the RSI oscillator has a minor bullish
divergence with the higher low made by the indicator.




Very important on the chart above is that the 10-day average of
NYSE Up Volume is back at its recent "baseline" – a turn up in
the 10-day average would suggest some rally potential from here.
Lastly, my "Sentiment" indicator has had another bullish reading
as discussed above.  The indicators taken together suggest a low
probability for much of a further decline and moderate to good
potential for another rally.

S&P 100 Index (OEX) – Hourly chart:
I didn't see the OEX slipping much under 520 and that looked
again like an area to exit puts and do some limited call buying,
looking for about a 10-point rebound to the 530 area.  I peg
resistance ("R") at 529-532.  Support at 519-520, down to perhaps
513, at the low end of the hourly downtrend channel. If there was
a further drop to this area, buying some more OEX calls should
create a good average price.




Unless the Venezuela situation results in a bigger immediate
crisis leading to a final spike to the $50 area in crude, there's
better upside Index potential than downside, technically.

Dow 30 (INDU) – Daily chart:

As is often the case with the Dow 30 (INDU), there is a well-
defined price channel that can be drawn, with support suggested
around 9800 currently and with likely strong sell pressure coming
in between 10100 and 10200.




As is the case with other indices, there is slight bullish
divergence shaping with oscillators type indicators like
Stochastics and RSI as they have not gone to a lower low, at
least not yet.  However, I don't see this as signifying much more
than potential for an oversold rally at this juncture. A close
above 10200 might suggest potential to the top end of the channel
around 10400, where I would like to re-purchase DJX puts.

Nasdaq Composite (COMP) – Price/Key Indicators – Daily:

I was anticipating another rally attempt by this past Tuesday,
then another decline back toward the prior lows which then
carried on to a new low – so far, a bottom may have been reached
if my downtrend channel is valid.

Besides price considerations, always number 1 on my list, the
same oversold readings are seen in the RSI oscillator and the 10-
day average of Nasdaq daily Advancing (Up) Volume. The Nasdaq Up
Volume indicator doesn't have the same record of predictability
as the NYSE, but it's one I watch for upside reversals when the
other main indicators also get bullish, such as in March and May.




I use the same Call to Put ratio for the Nasdaq that I employ to
attempt to measure bullish or bearish extremes in "sentiment" in
the S&P and Dow Indices. The two extremes seen recently could be
joined by other such readings of course.  You never exactly know
with this Indicator, but it’s a good indication when the Volume
average also turns up which could happen within a day or two into
this coming week.

Nasdaq 100 (NDX) Index  – Daily:
I thought that "further lows around 1315-1310 will offer some
call buying potential, for at least a rally back up the 1350-1355
area at some point."  My view is pretty much unchanged.  The top
end of the overhead "gap" is at 1350; i.e., occurring on the
downside break as the next day(s) highs fell short of the prior
low.

Nasdaq looks weak, weak, weak overall.  The tech believers are
getting hammered – a recent example was provided by the pounding
that HPQ (Hewlett-Packard) took on their earnings warning and the
slowdown/shortfall from two key business units.




Hard to know if its time to exit puts, but it has been a 200-
point drop in a short while. Every dog has its day.  Watch the
21-day moving average: a close above it (1369 currently) would
suggest rally potential back to the 1400-1410 area.

Nasdaq 100 tracking Stock (QQQ) Daily:

Hey, I like it when I don't have to think of much more to say,
such as what I wrote last week, accompanied by the chart below –
34 is key resistance; it was the line of prior support – also,
the gap area that is outlined; that (the gap area) stopped this
past week's rally cold: " The downside gap area is typically a
place that prices come back to."

I also anticipated a 32 to 34 price range for a while.  QQQ has
reached the top bit of an area of support that extends to 21 –
this based on a number of prior lows going back a few months.




Volume seemed to be drying up some on the decline, suggesting
that those long have done significant liquidation and that the
shorts may be done covering many of their positions for now.

I would still go with my prior suggestion to do some buying in
the 32 area if reached, looking for a rebound back to 33.50-34.
Not a huge upside potential – some would prefer to see if there
is a greater rally (such as back into the 35-36 zone) to sell
(short) into again.

Good Trading Success!


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

Jim Brown is on vacation this week so there will be no
update to the Editor's plays column.  Please look for
the next update to appear on Sunday, August 29th.
Thank you.


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

No Reason
- J. Brown

The markets have suffered over the last few weeks because
investors have no reason to buy stocks right now.  The Q2
earnings season is essentially over and Wall Street is facing new
concerns that corporate profits may slide faster than previously
expected if the economy truly is slowing.  Traders are also
worried about rising geo-political tensions as the world listens
to reports of fierce fighting in Najaf (in Iraq), violence in
Palestine and news that Iran may have new missile capable of
hitting Europe and U.S. bases.

The threat of a terrorist event in Athens during the Olympics or
somewhere else in the world targeting the global oil supply
doesn't inspire confidence.  Traders saw crude prices close at
new all-time highs above $46 a barrel as they worried about the
outcome of elections in Venezuela, one of the world's largest
exporters, and the ongoing drama with Russian oil giant Yukos.
Here at home there were reports of a fire at an Indiana oil
refinery while down in Florida tropical storm Bonnie and
hurricane Charley forced evacuations from oil rigs and hampered
production along the coast.

The economic data on Friday was less than inspiring as well.  The
June trade gap hit a new high at $55.82 billion.  This suggests
that the final Q2 GDP numbers could be revised lower. Meanwhile
latest University of Michigan consumer confidence number slipped
to 94 while economists were looking for a rise to 97.5.  If
consumer confidence is sagging then that could weigh heavily on
the retailers and GDP since consumer spending represents more
than two-thirds of our economy.  Look for a number of retailers
to report Q2 earnings this week.

I seem to read or hear more and more stock and market analysts
reaching the same conclusion Jim did a couple of weeks ago.
There really is no catalyst to spark a market rally/turnaround
until after Labor Day.  Yes, we might see another oversold bounce
but at best we'll probably trade sideways for the next 2 1/2
weeks and at worse we'll resume hitting new lows.

Looking ahead to this week we have economic data coming out on
Tuesday and Thursday.  Most of it is second tier data but Wall
Street will be watching the July CPI, the housing starts and the
industrial production/capacity numbers which all come out on
Tuesday.  Thursday brings the Philly Fed index numbers.  Of
course next week will also host the bulk of the Olympics in
Athens, which began Saturday.  While there is not an easily
quantifiable affect on the markets it does create an undercurrent
of caution.  The high number of people throughout this event
causes a logistical nightmare despite of an impressive amount of
security.

On Thursday I mentioned the Stock Trader Almanac's factoid that
the last week of August has historically been very bearish for
six out of the last seven years.  It is certainly something to
consider when planning your trades and reinforces the issue that
investors have no reason to buy stocks now when they can probably
by them cheaper in September.


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9230
Current     :  9825

Moving Averages:
(Simple)

 10-dma:  9986
 50-dma: 10133
200-dma: 10238



S&P 500 ($SPX)

52-week High: 1163
52-week Low :  983
Current     : 1064

Moving Averages:
(Simple)

 10-dma: 1079
 50-dma: 1101
200-dma: 1108



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1246
Current     : 1307

Moving Averages:
(Simple)

 10-dma: 1343
 50-dma: 1402
200-dma: 1444



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

CBOE Market Volatility Index (VIX) = 17.98 –1.10
CBOE Mkt Volatility old VIX  (VXO) = 18.77 –0.39
Nasdaq Volatility Index (VXN)      = 27.46 –0.82


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

          Put/Call Ratio  Call Volume   Put Volume

Total          1.02        575,679       585,383
Equity Only    0.75        418,869       314,266
OEX            1.03         35,052        35,952
QQQ            0.62         28,162        17,391


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

Bullish Percent Data

           Current   Change   Status
NYSE          52.9    + 0     Bear Confirmed
NASDAQ-100    25.0    - 1     Bear Confirmed
Dow Indust.   46.7    + 0     Bear Confirmed
S&P 500       46.8    + 0     Bear Confirmed
S&P 100       45.0    + 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: 1.32
10-dma: 1.63
21-dma: 1.39
55-dma: 1.26


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    1526      1478
Decliners    1224      1492

New Highs      38        15
New Lows      108       126

Up Volume    732M      724M
Down Vol.    650M      570M

Total Vol.  1404M     1322M
M = millions


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

Commitments Of Traders Report: 08/10/04

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

There has been almost no change in the commercial traders'
positions for the large S&P 500 futures contracts.  They remain
marginally bearish.  Meanwhile small traders have upped their
bets in both longs and shorts but remain net bullish.

Commercials   Long      Short      Net     % Of OI
07/22/04      404,828   419,017   (14,189)   (1.7%)
07/27/04      397,354   422,914   (25,560)   (3.1%)
08/03/04      401,619   419,429   (17,810)   (2.2%)
08/10/04      397,576   419,734   (22,158)   (2.7%)

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
07/22/04      138,123    94,990    43,133    15.5%
07/27/04      135,136    90,433    44,703    19.8%
08/03/04      128,510    88,833    39,677    18.3%
08/10/04      135,689    93,897    41,792    18.2%

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


E-MINI S&P 500

Commercial traders have upped their stakes in both their
long and short positions but the net results was a small decrease
in bearishness.  Small traders pared back their longs and added
to their shorts to decrease their bullish stance some but they
remain net bullish (albeit the least bullish in a month).

Commercials   Long      Short      Net     % Of OI
07/22/04      309,972   428,240   (118,268)  (16.0%)
07/27/04      337,615   429,477   ( 91,862)  (12.0%)
08/03/04      340,053   428,736   ( 88,683)  (11.5%)
08/10/04      369,547   441,055   ( 71,508)  ( 8.8%)

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
07/22/04      212,078     62,416   149,662    54.5%
07/27/04      186,211     68,930   117,281    46.0%
08/03/04      195,105     68,717   126,388    47.9%
08/10/04      179,940     89,239    90,701    33.7%


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 was very little movement from the commercial traders.
They did add positions on both sides but the result was a
small move closer to neutral.  Small traders are really
undecided and a very close to a dead heat.

Commercials   Long      Short      Net     % of OI
07/22/04       45,069     37,975     7,094    8.5%
07/27/04       43,042     35,935     7,107    9.0%
08/03/04       42,771     36,863     5,908    7.4%
08/10/04       43,968     38,351     5,617    6.8%


Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:  25,160   - 06/01/04

Small Traders  Long     Short      Net     % of OI
07/22/04        9,398    11,776    (2,378)  (11.2%)
07/27/04       14,543    14,518        25     0.0%
08/03/04        8,995    13,901    (4,906)  (21.4%)
08/10/04       10,081    10,858    (  777)  ( 3.7%)


Most bearish reading of the year: (20,270) - 06/01/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Commercial traders reduced their short positions but a few
thousand which increased their bullish stature.  Small traders
naturally moved the opposite direction and increased their
shorts to boost their bearish outlook.

Commercials   Long      Short      Net     % of OI
07/22/04       27,957    20,389    7,568      15.7%
07/27/04       27,577    21,427    6,150      12.5%
08/03/04       30,118    25,029    5,089       9.2%
08/10/04       30,634    22,994    7,640      14.2%

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
07/22/04        4,857     7,297   (2,440)   (20.1%)
07/27/04        5,310     6,099   (  789)   ( 6.9%)
08/03/04        4,325     5,212   (  887)   ( 9.3%)
08/10/04        6,450     8,488   (2,038)   (13.6%)

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

The TRIN and Daily Pivot Analysis levels (day trader's only)

I've read various day trading articles on how to use the "Trin"
indicator, and quite frankly, I've had mixed results trying to
interpret the Trin and initiate a successful trade.  I've noticed
that you post the Trin in your market snapshots and from time to
time, you pill post an "alert" regarding Trin, and sometimes
follow that with a trade profile.  Some of your trades have been
quite successful, capture the bulk of the day's move in a rather
short period of time.  What do you see, that I'm not seeing?

Have you written any articles on the Trin?  How to interpret it?
If so, could you tell me where?

Reply:

Well, I'm not an expert on the TRIN by any means.  In fact, I
think I've mentioned it once in an Ask the Analyst, but all be
darned if I can remember what article at this point.

But!  You're correct in your observation that I've mentioned the
TRIN trading above, and below a certain "level" the past couple
of weeks, and here's something I found by accident.  Let me know
what you think.

First things first.

For those of us that aren't all that familiar with what the TRIN
is, its an indicator that combines the component of volume to
advance/decline statistics.  The formula is rather simple (that's
what I like to hear!); divide advancing issues by declining
issues to generate the numerator of the equation (A).  Then
divide the upside volume by downside volume for the denominator
of the equation (B).  TRIN is equal to A divided by B.

So, my mind is rather scrambled during a trading day as it is,
and I don't know of anyone who could possibly calculate the TRIN
on a second-by-second, or minute-by-minute basis.

Aha!  I know computers can calculate it on a second-by-second
basis.

Hmmmmm..... If I were a market maker, or a specialist, I'll bet
I could get a feel for ORDER FLOW (buy or sell induced trade)
and not unlike the TREN, get a sense, or feel for buy side
pressure versus sell side pressure.  Isn't that what the TRIN is
actually trying to measure?  Up volume versus down volume tied in
with the advance decline line?

I think so.

Now, I've always said that a market maker and specialist has an
advantage over most of us, as they are able to "sense" buying or
selling pressure, because buy and sell orders are coming to them
on a continual basis.  They "know" for the most part if a stock
is under accumulation or distribution base on order flow.

Since YOU and I aren't necessarily privy to this information,
traders will try and use the TRIN as a way to get a feel for
buy/sell pressure on the MARKET during any given point in time.
As each second, minute or hour passes, more observations can be
made.

Like YOU, I too have read some articles on the TRIN, and like
you, some of it seems practical in theory, but when put to use,
doesn't always pan out.

However.... here's something I stumbled upon a couple of weeks
ago, have been testing, and started profiling some day trades
from in the market monitor.  I can't say it is fool proof.  Like
they say.... create something that is fool proof, and only a fool
will end up using it.

A couple of weeks ago, I had my QCharts-derived daily and weekly
pivot analysis levels turned on as I was looking at a stock to
trade.  The major indices were hovering at some correlative
support levels in the Pivot Matrix, and I wanted to see where
this stock was trading, relative to its DAILY pivot levels.

Long story short, I had to get an intra-day update written, so I
never profiled the stock, and sure enough, the stock I "wished" I
had profiled moved in the direction I thought it might.  Later
that night, when I was reviewing the day's internals, I noticed a
sudden intra-day spike in the TRIN, and that's right when the
stock I was looking at shorting fell apart and headed lower.

I then looked at the TRIN chart, and I was rather "amazed" at
what I found.

Here's a comparison study of a TRIN chart, and the S&P 500 Index
(SPX.X), where I'm using last week's trade as the study set.  The
following charts are on 10-minute intervals, so we can look at
several days of trade, and make some observations.

Before we look at the charts, here is a simple train of thought a
TRIN trader might want to use.

1)IF TRIN is ABOVE 1.0, then bias is more bearish.  (Think of 1.0
as a waterline; above 1.0 bearish, below 1.0 bullish).  This
makes sense if we understand how TRIN is calculated/derived.

2)IF TRIN is ABOVE its DAILY PIVOT, then bias is further bearish.
If TRIN is BELOW its DAILY PIVOT, then bias is bullish.  This
makes sense if we believe that as TRIN rises, stocks should be
falling as more VOLUME is to the downside, with decliners
outnumbering advancers.

3)The DAILY PIVOT analysis levels, EVEN FOR TRIN, can give UPSIDE
and DOWNSIDE TRIN targets, should TRIN violate a DAILY PIVOT
analysis level.  Think about this.  If you are a computer, and
you're calculating buy/sell volume, at what point does the
computer limit its buying, if inventory is full, but sell volume
is increasing?  A LEVEL from TRIN could be used.  Remember,
computers don't "think," they operate as programmed, and are
unemotional.

4)  Now watch/observe, the security you're trading (index,
specific stock).  Is it trading at a LEVEL that is correlative to
what the TRIN is doing?  If the TRIN is saying "bearish" and the
security you're looking at trading is sitting on a level of
support, or better yet a level of resistance, then perhaps sell
volume is going to have that stock falling.  Conversely, if TRIN
is saying "bullish" and the security you're looking at trading is
sitting below a level of resistance, or better yet a level of
support, then perhaps buy volume is going to have that stock
rising.

Comparison of TRIN and SPX.X - 10-minute intervals



Let's start with the "basics" of TRIN again.  In the upper left
hand corner of the TRIN chart, I show the 1.0 level, with bearish
and bullish bias.  On the TRIN chart, you also see a "bold pink"
line running horizontal across the screen at 1.0 (this is you
waterline). I also show DAILY Pivot on the TRIN chart, with
bearish and bullish bias.

Now, the lower chart is the S&P 500 Index (SPX.X).  Here I mark
Daily Pivot with "bullish" above the pivot, and "bearish" below
the pivot.  Those of you that are using the daily pivot analysis
have come to learn that each level above a prior level is your
"risk" level, or your target level.  In essence, if you've fallen
from the Pivot to S1, then that's a potential lasting level of
support, until it is broken.  If S1 is broken to the downside,
then S2 becomes "in play" as a next level of support, or a target
if you're trading short/bearish.

Now, I'm lazy tonight, so I'm using the QCharts' derived pivot
levels.  I will note that these aren't "always the same" as what
I post in the OptionInvestor.com Index Trader Wraps, as I go
through each chart every night, and filter out any "bad ticks"
that can sometime throw off the pivot levels by a point or two
(as it relates to the SPX.X).

Now, lets look at point (A) on the TRIN chart.  On August 2, the
TRIN was either side of 1.0.  Hmmm.... am I bullish or bearish?
TRIN doesn't seem to help that day.  Neither does the DAILY PIVOT
analysis levels on the TRIN chart where the TRIN Daily S1 is also
at about 1.0.  Now look at the SPX.X chart.  Boom!  SPX finds
resistance most of the day at SPX.X DAILY Pivot, then a nice
little break higher.  What happened?  Maybe computers were
selling the DAILY Pivot, but just ran out of SPX.X to sell at
that programmed level, then "turned themselves off."

Let's move to August 3.  New day so TRIN starts anew.  TRIN opens
BELOW zero, so bullish bias.  Ooops!  TRIN moves ABOVE zero, so
"bearish bias" to at least the TRIN's DAILY Pivot.  Hmmmm....
BELOW TRIN Pivot is supposed to be bullish!  OK, one bearish
(above 1.0) and one bullish (below pivot).  Is a trader doing
anything at this point?  Turn to the SPX.X chart.  Yuck!  Either
side of its DAILY Pivot.  Can't do much here, I'm confused.  But
as the session progresses, what happens?  TRIN moves ABOVE its
DAILY Pivot (OK, now I'm above 1.0, and I'm above TRIN DAILY
Pivot) now I've got "bearish" and "bearish."  See what happens to
the SPX later in the afternoon?  It slips below its (SPX.X) Daily
Pivot .... again, but on the re-test...."whacko!"  What happened?
See how TRIN moved higher to its DAILY R1 and SPX moved LOWER to
its DAILY S1?  OK.... now we might be onto something.  We're
getting the feel for TRIN, tying it in with TRIN pivot levels and
correlating it with SPX.X pivot levels.

Let's move to August 4.  New day so TRIN starts anew.  TRIN opens
sharply higher ABOVE 1.0 (bearish) and its DAILY Pivot (bearish).
See how TRIN seemed to trade a range between its DAILY Pivot and
DAILY R1?  Hmmmm, now look at the SPX.X.  Bugger falls to its
DAILY S2 and trades either side for BULK of session.  Suddenly
TRIN falls BELOW its DAILY Pivot (bullish) at Point C and moves
toward 1.0 (as TRIN moves lower to 1.0, this means volume picking
up on the BUY side), look at the SPX.X!  Boom!  Breaks above
DAILY S1 and goes right to DAILY Pivot.  Hmmmm TRIN broke below a
pivot analysis level, gravitated to 1.0, the next level of
importance; SPX.X trades above a level, moves to next level.  On
this day, I profiled a bullish trade in Microsoft (MSFT) at
$28.08, just BELOW its DAILY Pivot ($28.17) as it was "certainly"
going to break higher and trade its DAILY R1 ($28.34).  Nope, got
stopped at $28.04 as the session drew to a close.

Let's move to August 5.  New day so TRIN starts anew.  TRIN opens
BELOW 1.0 so bullish, but TRIN also opens below DAILY Pivot, so
bearish.  SPX.X opens right at its DAILY Pivot.  Ah-oh!  TRIN
moves above 1.0 so bearish, SPX moves below pivot so bearish.
Question... Where could TRIN rally to?  Answer:  DAILY Pivot is
next level higher.  Goodness .... look at the SPX.X decline.
First S1, then S2 and close at the lows.  TRIN rose as high as
its DAILY R1!  Doesn't it seem like even though there were BUYERS
at SPX.X DAILY S2, the mounting sell side volume (rising TRIN)
simply exhausted computers that were set for buying?  This day,
it was as if computer were set to buy DAILY S2 again (like they
were on August 4), but sell volume (continued rising TRIN) was
simply overwhelming.  On this day, I profiled a short in Protein
Design Labs (PDLI) at $16.80, just ABOVE its DAILY Pivot ($16.72)
"certain" that TRIN and SPX action would find a gain.  Hey, not
bad to close out at $16.47 before the close for a 1.96% gain.

Let's move to August 6.  New day so TRIN starts anew.  TRIN Opens
ABOVE 1.0 so bearish, and also opens above its PIVOT and also
bearish.  SPX.X gaps lower between its DAILY S1 and DAILY S2.
OK, TRIN finds support at DAILY Pivot, SPX.X finds resistance at
DAILY S1.  Maybe we're shorting SPX.X with a stop just above
DAILY S1 and see what happens should TRIN try and trade up to
DAILY R1.  On this day, I profiled a short in Biogen/Idec (BIIB)
late in the afternoon (after it had bounced from below its DAILY
S2 to just under its DAILY Pivot of $57.57) at $57.10 "certain"
that BIIB would close at its lows of the session, and closed out
at $56.35, back below its DAILY S2 ($56.60) just before the
close.  Hey, not bad to close out with a 1.31% gain.

Let's move to August 9.  New day so TRIN starts anew.  TRIN Opens
at 1.0 so rather neutral.  Ugh!  I'm not sure if TRIN below its
DAILY S2 should be interpreted as bearish or not.  However, SPX
opens below its DAILY Pivot and for other than about 15-minutes
in the afternoon, stays pegged just below its DAILY Pivot.  Hmmm,
but with some success from fellow biotech trades in PDLI and
BIIB, a late session short in Amgen (AMGN) as it and the Biotech
Index ($BTK.X) started slipping below respective DAILY Pivots
($54.24 and 452.62) seemed appropriate.  Hey, not bad to short
AMGN at $53.95, close out below its DAILY S1 ($53.40) just before
the close at $53.32 for a 1.17% gain.

Conclusion:

I've read where "this level of TRIN" is bullish or oversold, or
"this level of TRIN" is bearish or overbought, and sometimes it
is, sometimes it isn't.

What I found interesting was how the TRIN itself seems to trade
DAILY Pivot levels, as well as the 1.0 level, which many traders
will automatically use as a waterline for bullish or bearish
bias.

Certainly there are going to be some days, where the MARKET
doesn't give a trader that much to work with, but there are days
where a nice trend in both the TRIN and a stock, or index just
plays out beautifully in the trader's favor.

What seems to be apparent to me is that the TRIN DAILY Pivot
analysis levels gives a trader the OBSERVATION of a RANGE that
the TRIN might be capable of trading that day.  Certainly, a
setup like that found on August 5 is the "ideal" bearish setup.

It would also seem to me that it may not necessarily MATTER that
the TRIN is at 2.0 and signaling "oversold" or "too bearish" if
the darned thing has just broken above a pivot analysis level of
"resistance" when the TRIN has room to a HIGHER level of TRIN,
where the security you're trading has further DOWNSIDE to a pivot
level of support.  Just the opposite is true.  So what if TRIN is
edging up the entire session at 1.6, 1.65, 1.70, 1.75 when the
darned thing opened up 3.75, while the security you're looking to
trade is solid as a rock at a level of support.  Be more alert to
a rebound and be ready to trade it if a TRIN level of intra-day
support finds the security you're looking to trade make the move
up from its level of support and next level of resistance.

What I find nice about the QCharts trading software and their
development of both DAILY and WEEKLY Pivot levels, is the trader
can make an interpretation of the TRIN, then a market like the
SPX, find a sector that is either leading the decline/advance,
and then quickly start "clicking" through some of your favorite
stocks in that sector to trade, where the QCharts software will
immediately be displaying the DAILY and even WEEKLY Pivot levels,
where a trader can then make a quick assessment of the stock's
technicals, to then trade upon.

Hey!  The TRIN is signaling some bullish implications as it falls
below its DAILY Pivot and there's room to TRIN 1.0.  Oooo!  The
Retail Index (RLX.X) has been holding unchanged, bucking some
early broader market weakness, now they're turning green.  Hey!
The RLX.X is moving above its DAILY Pivot and there's some upside
to DAILY R1.  Hey, their session low didn't come close to DAILY
S1.  Good gravy!  Look at Wal-Mart (WMT)!  It's holding above its
DAILY Pivot and there's some correlative upside to its DAILY R1
where a bullish trade is in order.  If WMT trades its DAILY R1
and TRIN is still falling with room to go to either 1.0 or the
TRIN DAILY S1, then WMT might still have some upside to its DAILY
R2.

Here's a comparison chart of TRIN and Wal-Mart (WMT)

Comparison of TRIN and Wal-Mart - 5-minute intervals (08/02/04)



Crazy!  Why did TRIN peg 1.74 at its open?  Was a decline below
its DAILY Pivot bullish?  What about TRIN falling below its 1.0
level and correlative DAILY S1?  Remember how the SPX found
immediate support at its DAILY S1?  Ooooo.... "Wally World"
looked rather bullish at its DAILY Pivot (stronger than SPX that
day?  A potential leader of a pending rally?)  We traded this one
bullish as profiled in the above chart.

What's really cool is when we use our day trader's 5-minute
retracement technique I've discussed in prior Ask the Analyst
columns (09/21/2003, 11/16/2003), on top of the Daily Pivot
levels.

TRIN / WMT with 5-MRT added - 5-minute intervals (08/02/04)



Now, Jim Brown like to tease me from time to time about my "5-
MRT" (5 Minute Retracement Technique) as Linda Piazza has so
eloquently named it, but I tell you what, it and the Pivot Matrix
levels really allow for traders to identify some zones.  I'm only
showing the "upper 5-MRT" but you can probably see how I used it
to establish the entry point (just above BLUE #1), the stop, and
the target (BLUE #5), which helped create the bullish target
zone.

There were NO guarantees that WMT could get above that little
sliver zone, but that's where TRIN analysis might have been
needed.  One could probably assume if TRIN rose back above its
DAILY Pivot, then WMT wasn't going to get above $53.42.

The TRIN can almost be thought of as "gas pedal," accelerating or
decelerating.

It fascinates me to no end how sometimes the "stars align," and
correlations really become rather clear.

Now, a WMT bull new a test was underway at around $53.40.  What's
TRIN going to do?  TRIN was in no man's land wasn't it?  Was it
BEARISH that TRIN had moved above 1.0?  Or was it still bullish
as it had fallen below TRIN DAILY Pivot, then 1.0 and TRIN Daily
S1?  I count 2 bulls and 1 somewhat bearish (TRIN above 1.0).

OK, so a day trader knows the test is upon the trade at WMT's
DAILY R1.  See how the 5-MRT and "Blue #2" serves the needed
support to allow the trader to give the trade time to work to the
eventual target zone?

Why does Blue #2 come into play?  Probably because computers sold
Blue #2 to feed some stock out.  But when TRIN turned BULLISH,
perhaps computers sensed the "buy side volume" and when BLUE #2
was broken to the upside, then that break of resistance then
became the near-term support.

Not only were day trade bulls looking at $53.72-$53.81 as a
target, but it appears computers were doing the same and once
they started distributing stock lower, the gig was up.

Anyway.... try some of this on your own.  I encourage traders to
always back test, as this back testing will hopefully have
traders picking up on things.  When does it work the best?  When
doesn't it work?  What's the sign?

Too many traders that do use TRIN think that TRIN by itself, and
some pulled out of the air level is "the level" to signal
bullishness and bearishness.

I think it depends on "where TRIN has been, where it is, and
where it is potentially going" that is key to the use of TRIN.

Jeff Bailey


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

-----------------
Earnings Calendar
-----------------

Symbol  Co               Date           Comment      EPS Est

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

POS    Catalina Mrktng CorpMon, Aug 16  -----N/A-----        0.16
TEU    CP Ships            Mon, Aug 16  -----N/A-----        0.40
DYS    Dist Servicio D&S SAMon, Aug 16  -----N/A-----         N/A
KMRT   Kmart               Mon, Aug 16  -----N/A-----        0.14
LBTYA  LIBERTY MEDIA INTL  Mon, Aug 16  -----N/A-----       -0.24
LOW    Lowe's Companies    Mon, Aug 16  Before the Bell      0.91
SRV    Service Corp IntrntlMon, Aug 16  -----N/A-----        0.06
SYY    SYSCO Corporation   Mon, Aug 16  Before the Bell      0.45
VAL    Valspar             Mon, Aug 16  Before the Bell      0.87


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

AMAT   Applied Materials   Tue, Aug 17  After the Bell       0.25
BJ     BJ's Wholesale Club Tue, Aug 17  -----N/A-----        0.37
BGP    Borders Group Inc.  Tue, Aug 17  After the Bell       0.07
DE     Deere & Company     Tue, Aug 17  Before the Bell      1.50
DKS    Dick's Sport Goods  Tue, Aug 17  Before the Bell      0.33
HD     Home Depot Inc      Tue, Aug 17  Before the Bell      0.64
JCP    JCPenney            Tue, Aug 17  Before the Bell      0.23
NTAP   Network Appliance   Tue, Aug 17  After the Bell       0.12
SKS    Saks Incorporated   Tue, Aug 17  Before the Bell     -0.12
SPLS   Staples, Inc.       Tue, Aug 17  -----N/A-----        0.22
EL     Estie Lauder Co     Tue, Aug 17  Before the Bell      0.32
TJX    The TJX Companies   Tue, Aug 17  Before the Bell      0.24


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

BHP    BHP Billiton Ltd    Wed, Aug 18  Before the Bell     0.59
BLI    Big Lots, Inc.      Wed, Aug 18  Before the Bell    -0.07
BRCD   Brocade Comm Sys    Wed, Aug 18  After the Bell      0.04
CAI    CACI International  Wed, Aug 18  After the Bell      0.58
DV     DeVry               Wed, Aug 18  After the Bell      0.23
EV     Eaton Vance Corp .  Wed, Aug 18  Before the Bell     0.49
HAR    Harman Intntl Ind   Wed, Aug 18  -----N/A-----       0.68
INTU   Intuit              Wed, Aug 18  After the Bell     -0.07
LII    Lennox InternationalWed, Aug 18  After the Bell      0.53
MDT    Medtronic Inc.      Wed, Aug 18  -----N/A-----       0.43
PETC   PETCO ANIMAL SUPPLY Wed, Aug 18  After the Bell      0.29
ROST   Ross Stores, Inc.   Wed, Aug 18  Before the Bell     0.29
SQM    Soc Quimica Minera  Wed, Aug 18  -----N/A-----        N/A
SNPS   Synopsys            Wed, Aug 18  After the Bell      0.32
TLB    Talbots             Wed, Aug 18  -----N/A-----       0.33


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

ARO    Aeropostale, Inc.   Thu, Aug 19  After the Bell      0.17
AMCR   Amcor Limited       Thu, Aug 19  -----N/A-----        N/A
ADSK   Autodesk, Inc.      Thu, Aug 19  After the Bell      0.30
BKS    Barnes&Noble        Thu, Aug 19  Before the Bell     0.15
CLE    Claire's Stores, IncThu, Aug 19  -----N/A-----       0.32
FLO    Flowers Foods       Thu, Aug 19  Before the Bell     0.35
FL     Foot Locker, Inc.   Thu, Aug 19  -----N/A-----       0.29
GPS    Gap Inc.            Thu, Aug 19  After the Bell      0.22
HRL    Hormel Foods Corp   Thu, Aug 19  Before the Bell     0.34
LANC   Lancaster Colony    Thu, Aug 19  Before the Bell     0.55
LTD    Limited Brands      Thu, Aug 19  Before the Bell     0.25
MRVL   Marvell Semicon Inc Thu, Aug 19  After the Bell      0.19
NAV    Navistar Intntnl    Thu, Aug 19  Before the Bell     0.69
JWN    Nordstrom           Thu, Aug 19  After the Bell      0.77
NOVL   Novell, Inc.        Thu, Aug 19  After the Bell      0.05
PETM   PetsMart            Thu, Aug 19  Before the Bell     0.23


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

WPPGY  WPP Group PLC       Fri, Aug 20  -----N/A-----        1.32


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

Symbol  Co Name              Ratio    Payable     Executable

QCOM    Qualcomm Inc              2:1      Aug  13th   Aug  16th
RNT     Aaron Rents, Inc          3:2      Aug  16th   Aug  17th
WIRE    Encore Wire Corporation   3:2      Aug  16th   Aug  17th
BOCH     Bank of Commerce Holdings3:1      Aug  16th   Aug  17th
IMGC    Intermagnetics Gen Corp   3:2      Aug  17th   Aug  18th
POT     Potash Corp Saskatchewan  2:1      Aug  17th   Aug  18th
JOSB    JoS A. Bank Clothiers Inc 5:4      Aug  18th   Aug  19th
HTLD    Heartland Express         3:2      Aug  20th   Aug  23rd
TOX     MEDTOX Scientific, Inc    3:2      Aug  20th   Aug  23rd
IVX     IVAX Corporation          5:4      Aug  24th   Aug  25th
ZBRA    Zebra Tech Corp           3:2      Aug  25th   Aug  26th
WOOF    VCA Antech, Inc           2:1      Aug  25th   Aug  26th
PGTV    Pegasus Comm Corp         2:1      Aug  26th   Aug  27th
BAC     Bank of America           2:1      Aug  27th   Aug  28th


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

Believe it or not we still have some Q2 earnings reports coming
out.  Wall Street will focus on the economic data due
out on Tuesday and Thursday.  Of course most of the world will
probably be watching the Olympics in Athens all week.

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

----------------
Monday, 08/16/04
----------------
NY Empire State Index (BB) Aug  Forecast:    32.3  Previous:     36.5


-----------------
Tuesday, 08/17/04
-----------------
Housing Starts (BB)        Jul  Forecast:   1890K  Previous:    1802K
Building Permits (BB)      Jul  Forecast:   1950K  Previous:    1945K
CPI (BB)                   Jul  Forecast:    0.1%  Previous:     0.3%
Core CPI (BB)              Jul  Forecast:    0.2%  Previous:     0.1%
Industrial Production (BB) Jul  Forecast:    0.5%  Previous:    -0.3%
Capacity Utilization (BB)  Jul  Forecast:   77.5%  Previous:    77.2%


-------------------
Wednesday, 08/18/04
-------------------
None


------------------
Thursday, 08/19/04
------------------
Initial Claims (BB)      08/14  Forecast:     N/A  Previous:     333K
Leading Indicators (DM)    Jul  Forecast:    0.0%  Previous:    -0.2%
Philadelphia Fed (DM)      Aug  Forecast:    30.0  Previous:     36.1
SEMI Book to Bill Report

----------------
Friday, 08/20/04
----------------
None


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 08-15-2004
Sunday                                                      2 of 5

In Section Two:

Watch List: Oil to Fashion to Homes and more!
Dropped Calls: None
Dropped Puts: CAT, DGX


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

Oil to Fashion to Homes and more!

___________________________________________________________________

How to use this watch list:
  Readers can use the candidates below as a springboard for their
  own research.  Many are in the process of breaking support or
  resistance or in the process of starting new trends or
  extending old ones.  With your own due diligence these could be
  strong potential plays.
___________________________________________________________________


ChevronTexaco - CVX - close: 95.60 change: +1.23

WHAT TO WATCH: CVX has been consolidating along support at its
rising 40 and 50-dma's.   Friday's rally back above $95.00 looks
like a potential entry point for calls.  Bulls could target a run
toward the $100 level.  CVX's bullish P&F chart points to a $111
target.  There was some talk on Friday about how oil analysts are
still using $30 a barrel for their earnings estimates on all the
big oil companies.  Now that $30 a barrel looks too low they'll
be forced to raise estimates, which should boost the stock.

Chart=


---

Chicos FAS - CHS - close: 39.20 change: -0.39

WHAT TO WATCH: Retail stocks haven't been doing that well and the
recent consumer confidence numbers don't inspire a lot of
confidence in the sector.  CHS has been slipping lower on rising
volume and that's never a good sign.  Thursday's failed rally at
the 21-dma and 200-dma represent another lower high and Friday's
drop was a close under its exponential 200-dma.  The P&F chart is
bearish and points to a $29 target.  We believe that traders
might be able to target a drop toward $35.00 over the next four
to six weeks.

Chart=


---

Linear Technology - LLTC - close: 35.44 change: -0.61

WHAT TO WATCH: If you believe the SOX semiconductor index is
oversold enough to produce a bounce soon then keep an eye on
LLTC.  Shares have fallen to the bottom of their five-month
trading range and they're trying to bounce.  If the SOX does
begin to bounce then traders could target a move to the simple
200-dma (near $39-38.50) in LLTC.  Use a stop under the recent
low.

Chart=


---

Pulte Homes - PHM - close: 56.57 change: +1.27

WHAT TO WATCH: There's not much weakness in homebuilder PHM.
Most of the market has gone south in August and PHM has broken
out over the $55 level.  Now we're seeing a bounce from $55 after
some consolidation.  Readers might want to consider bullish
positions if PHM can breakout over the $58 level.  The P&F chart
is bullish and points to a $72 target.

Chart=



---

Netease.com - NTES - close: 30.01 change: -1.25

WHAT TO WATCH: The Chinese Internet stocks look sick again.
After six weeks of consolidating above the $30.00 mark NTES broke
through it on Friday.  It did manage to rebound back above this
pivotal level by the closing bell but only by the slimmest of
margins.  Consider new bearish positions if NTES trades under
$28.50.  The bottom of the wide descending channel appears to be
the $20.00 region.  P&F chart readers will note that Friday's
drop produced a quadruple-bottom breakdown sell signal with a $19
target.

Chart=



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

SI $66.02 +0.54 - Electronics conglomerate Siemens is slowly
fading toward support at the $65.00 level.  If it breaks it
consider buying puts with an immediate target of $60.

HSY $47.71 +0.38 - Hershey is holding on to its gains pretty
well.  This might be a covered call candidate.

KO $44.37 +0.53 - Dow-component Coca-Cola is trying to put in a
bottom.  Consider long positions on a push through the $45 level.

OSIP $53.71 -1.86 - Traders can watch OSIP for a breakdown under
support at $50.00 and target a drop toward support at $40.

AVE $81.36 +0.82 - We've been waiting and watching for AVE to
breakout over resistance and top of its trading range near
$81.00.  It finally happened.  Yet we hesitate to suggest it as a
call play because stock volume is light and option volume is
light as well.  Only aggressive traders should consider it.

PIXR $69.93 +0.49 - PIXR has tried to breakout over the $71.00
level again and failed again but it's getting closer.  It may be
important to wait for a close over this level instead of an
intraday spike.


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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
^^^^

Caterpillar - CAT - close: 71.75 change: -0.01 stop: 73.25

We're suggesting caution is the better part of valor here.  The
lack of participation in the Industrials recent declines is
unnerving.  CAT may still be trading under minor resistance at
$72.00 but we don't like the bullish "buy" signal in its MACD
indicator.  Should CAT turn around and trade back under the
$70.00 or $69.00 levels we may reconsider put plays.  More
speculative traders may want to keep a very small position open
on the chance that the UAW labor union rejects CAT's last
proposal.  Expect losses in any bearish position should UAW agree
to CAT's offer.

Picked on August 5th at $70.75
Change since picked:    + 1.01
Earnings Date         07/22/04 (confirmed)
Average Daily Volume =     2.4 million
Chart =


---

Quest Diagnostic - DGX - close: 82.38 chg +0.72 stop: 82.51

We're cutting DGX loose.  The stock is still in a trend of lower
highs but it's not showing the kind of weakness we want to see
given the current market environment.  DGX never broke support at
the $79.00 mark so we were never triggered.

Picked on August xth at $xx.xx <-- see TRIGGER
Change since picked:    - 0.00
Earnings Date         07/22/04 (confirmed)
Average Daily Volume =     602 thousand
Chart =



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


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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DISCLAIMER
**********

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The Option Investor Newsletter                   Sunday 08-15-2004
Sunday                                                      3 of 5

In Section Three:

Current Calls: POT, SYMC, TXT
New Calls: AET
Current Put Plays: AMZN, AZO, HIG, LM, RIMM, WHR
New Puts: SPW


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

Potash - POT - close: 99.92 change: +0.06 stop: 97.51

Company Description:
Potash Corporation of Saskatchewan Inc. is the world's largest
fertilizer enterprise producing the three primary plant nutrients
and a leading supplier to three distinct market categories:
agriculture, with the largest capacity in the world in potash,
fourth largest in phosphate and third largest in nitrogen; animal
nutrition, with the world's largest capacity in phosphate feed
ingredients; and industrial chemicals, as the largest global
producer of industrial nitrogen products and one of only three
North American suppliers of industrial phosphates.
(source: company press release)

Why We Like It:
We initially added POT to the call list this past week as a
momentum play.  The stock has been bucking the downtrend in the
markets and broken out above major resistance at the $100 mark.
The stock is due to split 2-for-1 on Wednesday August 18th and we
expected the momentum to continue.  Unfortunately, the sharp drop
in the major indices has prompted some profit taking in POT and
shares have slipped back under the $100 mark.  This is
discouraging but not a mortal wound.  We can still play a bounce
from the $98.00 level but we'd prefer to consider new plays on a
move over the $101 level.  Normally we don't like to hold over a
split because some stocks can undergo a post-split depression if
they enjoyed a decent pre-split run up.   At this point we might
hold the play due to POT's bullish fundamentals.

Suggested Option:
We're going to suggest the September calls.
We like the September 100s.  Remember that after the split the
September 100s will become calls at the $50 strike.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY CALL SEP  95 POT-IS OI= 74 current ask $6.50
BUY CALL SEP 100 POT-IT OI= 72 current ask $3.80
BUY CALL SEP 105 POT-IA OI=102 current ask $1.85

Annotated Chart:




Picked on August 10th at $102.17
Change since picked:      - 2.25
Earnings Date           07/29/04 (confirmed)
Average Daily Volume =       180 thousand
Chart =


--

Symantec - SYMC - close: 45.22 change: -0.49 stop: 44.49

Company Description:
Symantec is the global leader in information security providing a
broad range of software, appliances and services designed to help
individuals, small and mid-sized businesses, and large
enterprises secure and manage their IT infrastructure. Symantec's
Norton brand of products is the worldwide leader in consumer
security and problem-solving solutions. Headquartered in
Cupertino, Calif., Symantec has operations in more than 35
countries. (source: company press release)

Why We Like It:
SYMC has made a valiant effort to maintain its gains throughout
the month of August.  The GSO software index has slipped about 7
percent while SYMC has only fallen 3 percent.  Furthermore SYMC
has managed to remain above support at the $44 and $45 levels.
However, we're starting to see signs of fatigue.  The technicals
are rolling over and SYMC's MACD indicator is very close to
producing a new "sell" signal.  Right now we're somewhat torn.
This is not a positive environment to be considering bullish
plays and while SYMC has held up pretty well it may end up
playing catch up with its peers, especially if the GSO keeps
dropping.  We are NOT going to suggest new bullish positions at
this time unless SYMC can trade over $46.50.   Conservative
traders may even go so far as to exit now in an effort to
preserve their capital.  We're going to keep the play open and
leave our stop loss at $44.49 for now but inching it up another
quarter to $44.74 wouldn't hurt either.  If the GSO can mount any
sort of oversold rebound then SYMC might be free to rally again..
The P&F chart remains bullish with a $60 target.

Suggested Options:
We are not suggesting new bullish positions at this time unless
SYMC can trade above $46.50.

!Alert - August options EXPIRE this Friday, Aug. 20th!

Annotated chart:



Picked on July 27 at $ 44.91
Change since picked:  + 0.31
Earnings Date       07/21/04 (confirmed)
Average Daily Volume:    5.4 million
Chart =


---

Textron - TXT - close: 61.79 change: +0.09 stop: 59.99*new*

Company Description:
Textron Inc. is a $10 billion multi-industry company with more
than 43,000 employees in nearly 40 countries. The company
leverages its global network of aircraft, industrial and finance
businesses to provide customers with innovative solutions and
services. Textron is known around the world for its powerful
brands such as Bell Helicopter, Cessna Aircraft, Kautex,
Lycoming, E-Z-GO and Greenlee, among others.
(source: company press release)

Why We Like It:
We remain impressed by TXT's relative strength in the face of so
much weakness in the Dow Industrials.  TXT has held support at
the $61.00 level and is now slowly building a new trend of higher
lows.  The technical picture is mixed as TXT consolidates but if
the market manages to bounce at all we expect TXT to out perform.
Aggressive traders may want to consider new positions but we
suggest confirming a bullish market direction in the major
averages first.  There's no reason to buy calls if the Dow is
sinking again.  We're going to raise our stop loss to $59.99.
The P&F chart remains bullish with a $76 target.

Suggested Options:
Our favorites are currently the September strikes.  The 60s
look good.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY CALL SEP 55 TXT-IK OI= 586 Current Ask $7.20
BUY CALL SEP 60 TXT-IL OI= 446 Current Ask $2.85
BUY CALL SEP 65 TXT-IM OI=1465 Current Ask $0.60

Annotated Chart:



Picked on July 26th at $60.72
Change since picked:   + 1.07
Earnings Date        07/22/04 (confirmed)
Average Daily Volume =    622 thousand
Chart =



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

Aetna - AET - close: 90.72 change: +1.12 stop: 87.50

Company Description:
As one of the nation's leading providers of health care, dental,
pharmacy, group life, disability and long-term care benefits,
Aetna puts information and helpful resources to work for its
approximately 13.4 million medical members, 11.4 million dental
members, 8.1 million pharmacy members and 12.6 million group
insurance members to help them make better informed decisions
about their health care and protect their finances against
health-related risks. Aetna provides easy access to cost-
effective health care through a nationwide network of more than
633,000 health care professionals, including over 377,000 primary
care and specialist doctors and 3,866 hospitals.
(source: company press release)

Why We Like It:
There's a definite lack of weakness in shares of AET.  The market
may be slipping lower but it's not affecting Aetna.  The company
reported strong Q2 results in late July that beat estimates by 11
cents.  Management then followed up by raising its full year 2004
outlook.  Business is improving with higher premiums and
increases membership.  Plus the company said they would spend a
good chunk of its $740 million tax refund on stock buybacks.
Wall Street approved.  On August 3rd Merrill Lynch upgraded AET
from a "neutral" to a "buy".  On August 12th Bear Stearns
upgraded AET from "peer perform" to an "out perform".  Investors
have responded by pushing shares through resistance at $88.00 and
again through round-number resistance at $90.00.

We certainly like the technical breakout over $90.00.  The
bullish P&F chart shows a fresh triple-top breakout buy signal
with a $106 price target.  We believe that bulls could probably
target the $100 level while short-term traders may want the easy
exit near $95.  We're going to start the play at current levels
with a $100 target.

Suggested Options:
We like the September calls.  Our favorites are the $90 strikes
although the $95s work well too.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY CALL SEP  90 AET-IR OI=4313 current ask $3.80
BUY CALL SEP  95 AET-IS OI=6267 current ask $1.55
BUY CALL SEP 100 AET-IT OI= 203 current ask $0.55

Annotated Chart:



Picked on August 15th at $90.72
Change since picked:     + 0.00
Earnings Date          07/29/04 (confirmed)
Average Daily Volume =      1.4 million
Chart =



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CURRENT PUT PLAYS
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Amazon.com - AMZN - close: 36.13 change: -0.16 stop: 37.51*new*

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, refurbished 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:
Is AMZN ready for its next leg down?  We had suspected that the
$35.00 level would be support and that its simple 10-dma would
act as the first level of overhead resistance.  Both proved to be
true but after two days of testing resistance at the 10-dma AMZN
managed to breakout to the upside, on an intraday basis, on
Thursday.  Fortunately, that rally faded and now AMZN looks ready
to test the $35.00 level again.

This would appear to be a failed rally worth shorting again but
we're feeling a bit cautious.  Initiating new bearish positions
this close to support at $35.00 doesn't make sense.  Readers
looking for new positions can wait for the breakdown under
support.  Those readers who already have positions will want to
consider lowering their stop losses.  We're going to lower ours
to $37.51, which is several cents above the recent high.  We're
still looking for a drop toward $32.50-30.00 but AMZN needs to
reverse the new bullish "buy" signal in its MACD (this
development should deter new bearish positions).  AMZN's P&F
chart helps eliminate some of this noise and continues to point
to a $15 target.

Suggested Options:
We're not suggesting new plays until AMZN trades under the $35
level.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY PUT SEP 32.50 ZQN-UZ OI= 4018 Current Ask $0.95
BUY PUT SEP 35.00 ZQN-UG OI=11715 Current Ask $1.70
BUY PUT SEP 37.50 ZQN-UU OI= 5594 Current Ask $2.95
BUY PUT SEP 40.00 ZQN-UH OI= 2888 Current Ask $4.70

Annotated chart:



Picked on August 3rd at $37.61
Change since picked:    - 1.48
Earnings Date         07/22/04 (confirmed)
Average Daily Volume =     8.3 million
Chart =


---

AutoZone - AZO - close: 74.15 change: +0.55 stop: 76.51

Company Description:
As of May 8, 2004, AutoZone sells auto and light truck parts,
chemicals and accessories through 3,337 AutoZone stores in 48
states plus the District of Columbia in the U.S. and 60 AutoZone
stores in Mexico. Each store carries an extensive product line
for cars, sport utility vehicles, vans and light trucks,
including new and remanufactured automotive hard parts,
maintenance items and accessories. Many domestic stores also have
a commercial sales program that provides commercial credit and
prompt delivery of parts and other products to local, regional
and national repair garages, dealers and service stations.
AutoZone also sells ALLDATA brand diagnostic and repair software.
(source: company press release)

Why We Like It:
It has been a volatile week for shares of AZO.  The stock
continued to bounce from last Friday's rebound and actually broke
back above the pivotal $75.00 level.  After failing at resistance
near $76 the stock quickly dropped back below $75.00 offering
traders another chance to consider bearish positions.  Friday's
rebound appears to be a smaller oversold bounce from Thursday's
drop.  As long as AZO remains under the $75.00 mark bears should
be okay.  We continue to see AZO at current levels as an entry
point for bearish plays.  The stochastics have already rolled
over into a new sell signal. Our short-term target remains the
$70.00 region but we suspect AZO can trade even lower.  The
bearish P&F chart points to a $51 target (it used to be $59).
We're not going to change our stop loss just yet.

Suggested Options:
We are suggesting the September puts.  Right now our favorite
is the SEP 75s.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY PUT SEP 80 AZO-UP OI= 763 current ask $6.70
BUY PUT SEP 75 AZO-UO OI=1532 current ask $3.40
BUY PUT SEP 70 AZO-UN OI=2098 current ask $1.50

Annotated chart:



Picked on August 4th at $74.60
Change since picked:    - 0.45
Earnings Date         05/26/04 (confirmed)
Average Daily Volume =     1.0 million
Chart =


---

Hartford - HIG - close: 58.54 change: -0.63 stop: 62.01

Company Description:
The Hartford is one of the nation's largest financial services
and insurance companies, with 2003 revenues of $18.7 billion. The
company is a leading provider of investment products, life
insurance and group benefits; automobile and homeowners products;
and business property-casualty insurance.
(source: company press release)

Why We Like It: (Original Play from Thursday)
We were drawn to HIG as a put play based on its bearish breakdown
under support at the $60.00 level.  The stock had been trading in
a wide range between $61 and $67 for months and has now fallen
through the bottom of this trading range.  The move has produced
a very bearish quadruple-bottom breakdown sell signal on its P&F
chart with a $53.00 price target.  We're further drawn toward HIG
as a put because we know why investors are selling.  Florida is
currently facing the possibility of two hurricanes hitting at the
same time with the larger threat from Hurricane Charley, which is
currently a category 2 storm.  The IUX insurance sector index is
trading lower on the news with State Farm and AllState as the two
biggest insurers to be hit by these storms in Florida.  HIG has a
large presence in Florida as well and if Charley turns into a
category 3 storm as meteorologists suspects it will then
investors may choose to sell first instead of wait it out.

We're going to start the play with a stop loss at $62.01 and a
target in the $55-53 range.

Weekend Update:
It will be interesting to see how insurance stocks trade on
Monday as authorities and insurance companies try to assess the
damages caused by Hurricane Charley.  The storm had been upgraded
to a category 4 hurricane before it hit the Florida coast.  At
least 10 people lost their lives as 145 MPH winds ripped across
the western edge of the state.  Damage estimates have varied
widely from $10 billion to $25 billion.  Should HIG bounce look
for the $60 level to act as the first level of overhead
resistance.

Suggested Options:
We're going to suggest the September puts.  It would appear that
our only choices are the $65s and $60s.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY PUT SEP 60 HIG-UL OI= 494 current ask $3.00
BUY PUT SEP 65 HIG-UM OI= 388 current ask $7.00

Annotated Chart:



Picked on August 12 at $59.17
Change since picked:   - 0.63
Earnings Date        07/21/04 (confirmed)
Average Daily Volume =    1.4 million
Chart =


--

Legg Mason - LM - close: 75.87 chg: -0.48 stop: 80.01

Company Description:
Legg Mason, Inc., headquartered in Baltimore, is a holding
company that provides asset management, securities brokerage,
investment banking and related financial services through its
subsidiaries. (source: company press release)

Why We Like It: (Thursday's Original Update)
The XBD broker-dealer index is trading lower in a descending
channel.  More importantly it has been consolidating near the top
of the channel and it looks ready to drop lower.  Looking over
the various broker/investment stocks to find an appropriate play
to capture a drop in the group we found LM.  The company's recent
earnings report was disappointing and management tried to soften
the sting by announcing an increase in their cash dividend and a
3-for-2 stock split for the end of September.  It would appear
that investors aren't buying it.  The stock consolidated under
the $80.00 level for a couple of weeks and is now edging lower.
The daily chart also offers traders a bearish Head & Shoulders
pattern that should point to a $60.00 target (give or take a few
points).  The Point & Figure chart is bearish and points to a $57
target.  Given the outlook we feel confident shorting the recent
bounce and new lower high.  More conservative traders may want to
look for some confirmation with a drop under $75.00.

We're going to start the play with a stop loss at $80.01 and a
short-term target of $70.00 but we believe LM could trade lower.

Weekend Update:
So far so good.  LM continues to sink under its trendline of
resistance and is now approaching the $75.00 level.  Once LM
breaks under $75 the decline could pick up speed.


Suggested Options:
We're going to suggest the September puts.  Our favorites would
be the $80s, 75s and 70s.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY PUT SEP 80 LM-UP OI=  67 current ask $5.60
BUY PUT SEP 75 LM-UO OI= 367 current ask $2.65
BUY PUT SEP 70 LM-UN OI=  16 current ask $1.00

Annotated Chart:



Picked on August 12 at $79.35
Change since picked:   - 0.48
Earnings Date        07/19/04 (confirmed)
Average Daily Volume =    508 thousand
Chart =


--

Research In Motion - RIMM - close: 53.29 chg: -0.07 stop: 57.01

Company Description:
Research In Motion is a leading designer, manufacturer and
marketer of innovative wireless solutions for the worldwide
mobile communications market. Through the development of
integrated hardware, software and services that support multiple
wireless network standards, RIM provides platforms and solutions
for seamless access to time-sensitive information including
email, phone, SMS messaging, Internet and intranet-based
applications. RIM technology also enables a broad array of third
party developers and manufacturers to enhance their products and
services with wireless connectivity to data. RIM's portfolio of
award-winning products, services and embedded technologies are
used by thousands of organizations around the world and include
the BlackBerry. wireless platform, the RIM Wireless Handheld(TM)
product line, software development tools, radio-modems and
software/hardware licensing agreements. Founded in 1984 and based
in Waterloo, Ontario, RIM operates offices in North America,
Europe and Asia Pacific. (source: company press release)

Why We Like It:
The overall weakness in the NASDAQ and tech stocks in general
continues to weigh on shares of RIMM.  Investors seem to be
rotating out of high P/E stocks and RIMM certainly qualifies with
a P/E of 86, at least that's the case for now.  There are
probably bulls out there just waiting to jump on another momentum
filled run in RIMM.  Currently the trend is down and we're
encouraged by the lack of bounce in RIMM on Friday when most of
the technology-related sectors managed to close in the green.
We're also encouraged by RIMM's drop under its simple 100-dma,
which acted as support back in May.  Short-term traders can
target the $50.00 level but we feel that RIMM could drop toward
$47.50.  See chart for details.

Suggested Options:
We like the September strikes.  We think the 57.50s, 55s, 52.50s
and even the 50s can work well for this play.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY PUT SEP 57.50 RUP-UY OI=5322 current ask $6.70
BUY PUT SEP 55.00 RUP-UK OI=6658 current ask $5.10
BUY PUT SEP 52.50 RUP-UX OI=3124 current ask $3.90
BUY PUT SEP 50.00 RUP-UJ OI=9086 current ask $2.80

Annotated Chart:



Picked on August 6th at $54.50
Change since picked:    - 1.21
Earnings Date         06/29/04 (confirmed)
Average Daily Volume =     6.7 million
Chart =


---

Whirlpool - WHR - close: 59.49 change: +0.54 stop: 61.51

Company Description:
Whirlpool Corporation is the world's leading manufacturer and
marketer of major home appliances, with annual sales of over $12
billion, 68,000 employees, and nearly 50 manufacturing and
technology research centers around the globe. 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:
WHR continues to suffer from investor fears of an economic slow
down and the weaker than expected consumer confidence numbers on
Friday certainly don't help matters.  The stock continues to sink
under a trend of lower highs and remains under the $60.00
support-resistance level.  Readers may consider new bearish
positions at current levels or at a failed rally under the $61.00
mark although if WHR did rally to $61 we'd prefer to see it fall
back under $60 before initiating positions.  The bearish P&F
chart points to a $53 target but given the trendline of long-term
support we're going to target a drop to $55 (see chart).

Suggested Options:
We're going to suggest the September 60 and 55 puts.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY PUT SEP 60 WHR-UL OI=1936 current ask $2.85
BUY PUT SEP 55 WHR-UK OI= 361 current ask $1.00

Annotated Chart:



Picked on August 6th at $58.71
Change since picked:    + 0.78
Earnings Date         07/21/04 (confirmed)
Average Daily Volume =     849 thousand
Chart =



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

SPX Corp - SPW - close: 36.50 change: -0.83 stop: 38.26

Company Description:
SPX Corporation is a global provider of technical products and
systems, industrial products and services, flow technology,
cooling technologies and services, and service solutions.
(source: company press release)

Why We Like It:
It would be misleading to say the troubled started on August 2nd.
That is when shares of SPW traded sharply lower and broke support
at the $40.00 level as investors reacted to its disappointing
earnings report.  The company misses analysts' expectations by 6
cents as operations suffered from higher material costs and
productivity issues.  The next day (Aug. 3rd) Bank of America
reiterated its "sell" rating on the stock and Standard & Poor's
lowered its credit/debt outlook on SPW from "stable" to
"negative".  The following session (Aug. 4th) Lehman Brothers
downgraded SPW from "over weight" to "equal weight".

Now after producing an oversold bounce from the $36 level shares
of SPW look ready for its next leg lower.  Technicals are all
negative and its P&F chart points to a $32 target.  We believe
SPW can trade lower.  Our target is the $31-30 area, which
appears to be support on SPW's weekly chart.

Readers have a couple of choices for entry points.  More
aggressive traders may consider entries now at current levels
under $38.00.  More conservative traders might feel better
waiting for a new relative low under $35.76.  We're going to
choose the latter and issue a TRIGGER to buy puts at $35.75.
We'll start the play with a stop loss at $38.26.

Suggested Options:
We like the September puts.  Our favorites are the $37.50s
and $35s.

!Alert - August options EXPIRE this Friday, Aug. 20th!

BUY PUT SEP 37.50 SPW-UU OI=3336 current ask $2.55
BUY PUT SEP 35.00 SPW-UG OI=1140 current ask $1.35
BUY PUT SEP 32.50 SPW-UZ OI=  23 current ask $0.65

Annotated Chart:



Picked on August xxth at $xx.xx <-- see TRIGGER
Change since picked:     - 0.00
Earnings Date          08/02/04 (confirmed)
Average Daily Volume =      814 thousand
Chart =



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The Option Investor Newsletter                   Sunday 08-15-2004
Sunday                                                      4 of 5

In Section Four:

Leaps: Rally Ahead
Option Spreads: It’s August “Hypothetical Quickie” Time
Traders Corner: Nasdaq Up Volume at bottoms


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*****
LEAPS
*****

Rally Ahead

I know it is out there somewhere but it could be weeks
before it makes an appearance. My target would be for
a post labor day bounce that takes us off the lows and
a post election bounce that takes us into 2005. Now if
only my targets came to pass we would all make a lot of
money.

I think we can be assured that baring any serious
terror event between now and the election we will
see those rally appear, only the strength will be
in question.

I am preparing this section on Thursday night this
week. I am leaving for vacation and a seminar and
wanted to get this ready before I left. The prices
will be a day old when you get this but the
opportunities will still be ahead of us.


Juniper $20.19 LEAP Calls

Our target price on JNPR was $20.00 and at $20.19 today
I am going to call it triggered and you should enter
the position when ready. Juniper was knocked for a
loss after the Cisco earnings but managed to hold a
few cents over $20 for two days in a very negative
market. It may go lower and those wishing to wait
may want to set a buy stop at $21 in case the market
surprises us and then enter when you feel it has
bottomed.

JNPR 2006 $25 call WBW-AE $3.70
Insurance = SEP-$17.50 Put JUX-UW @ 50 cents

http://members.OptionInvestor.com/leaps/Lp_072504_1.asp

JNPR Chart





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


Hoping for another drop

The market weakness over the last week has not done
much to good companies. Techs have been getting
killed on a daily basis but the really big giants
are barely moving. High liquidity and strong profits
provide a refuge in times of stress.

I mentioned WMT and GE last week and I am making
it official this week.

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

WMT - Wal-Mart $52.65 Target $51.00

I should have taken the Wal-Mart entry last week at
$51.20. The consumer king said on Thursday that
profits rose +8.6% and beat the street by a penny.
Despite the slow consumer WMT continues to add
revenue and profits.

I may be taking a risk with WMT at $51 in a down
trending market but options are cheap and we can
get a Sept $50 insurance put for only 65 cents.
This allows us almost no risk other than the price
of the put and we will be ready to profit from an
end of year rebound.


2006 $55 LEAP Call WW-TAK 5.00

Insurance = Sept-$50 Put WMT-UJ @ 65 cents

WMT Chart




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

GE $31.60 LEAP Call

I know GE has no sex appeal but they have promised
to produce double digit profits in 2005. I know they
promised it in 2003 and 2004 but this time I think
they will make it. GE is big enough to control
their own fate and they appear to be doing just
that. They are dumping slow growth businesses in
favor of adding high growth, high margin businesses.
The are getting out of high risk products like
insurance in this age of terrorist events.

GE may not have any sex appeal but it refuses to
drop below $30 despite all the market challenges.
Options are very cheap and with a solid uptrend
in place we should not have any trouble profiting
from any post election rebound.

If GE falls back to our $30 target I would suggest
the $30 leap as the best value.

Target GE at $30 to enter the position.

2006 $30 LEAP Call WGE-AF $4.20, target $3.50
2006 $35 LEAP Call WGE-AG $2.00, target $1.75

I am not suggesting insurance on GE but the
December $27.50 put is only 40 cents. We would
need a serious national disaster to see GE break
$30 and I think it would only be temporary.

GE Chart



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

Portfolio Updates:

HD - Home Depot - $32.92   ** Dropped **
Leap Put

After all the negative market sentiment, complaints
about slow consumer demand and drop in home sales
HD has failed to move off the same $32.90 level it
held last week. Their recently announced increased
share buyback may be holding them up. Either way I
have grown tired of this dead money and I am dropping
it.

2005 $35 LEAP Put HD-MG  cost $2.95 current $3.30
2006 $35 LEAP Put WHD-MG cost $4.50 current $4.70
May $40 Insurance put - expired - cost $.55

HD Chart



TYC - Tyco - $30.11   ** STOP CHANGE **
LEAP Call

TYCO is holding the line in a down market but Thursday
it was stretched almost to the breaking point. I like
TYCO and I want to keep this play if at all possible.
I am lowering the stop to $28.00 and the 200dma.

RHAT - RedHat - $14.08 (stop $12.50)
LEAP Call

RHAT was knocked backwards on the Cisco earnings but
we are in no danger of being stopped. Holding on for
the September rebound.


SMH Holders $28.78  Puts - Target $28

So far so good. The SOX continues to fall and our
puts continue to rise. No complaints here.

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

Current Portfolio:

SMH - Semiconductor Holders $28.78
Entry $32.50 August 2nd
Profit Target = SMH $28

Current position:
Nov-$30 Put SMH-WF cost $1.40 current $2.85
Nov-$35 Put SMH-WG cost $3.80 current $6.40

Initial play description:
http://members.OptionInvestor.com/leaps/Lp_080104_1.asp

SMH Chart




RHAT Red Hat $14.08, stop $12.50
Entry $14.81   Recommended July-18th

Current position:
2006 $20 LEAP Call YFX-AD cost $2.75 Current $2.50
Sept $12.50 ins put RCV-UV cost $0.55 Current 0.65

Initial play description:
http://members.OptionInvestor.com/leaps/Lp_071804_1.asp


Red Hat Chart




TYC Tyco $30.22 Stop $28.00
Entry $28.32

2005 $30 LEAP Call TYC-AF cost $2.15 current $2.50
2006 $30 LEAP Call WPA-AF cost $4.00 current $4.50
July $25 insurance put - expired - cost $.55

Tyco Chart




Position Summary Graph




LEAPS Watch List

**Editors Note** In the event of a market drop due to a
terrorist attack on U.S. soil all entry targets should be
immediately cancelled.


Watch List Update:

With the market dropping sharply and creating bargains
on a daily basis we are very close to our entry points
on nearly all of the watch list candidates. I would be
a buyer of these leaps if our targets are hit despite
the market weakness.



EBAY - EBAY $77.51 target entry $71.00

2006 $80 LEAP Call YEU-AP currently $13.70

http://members.OptionInvestor.com/leaps/Lp_072504_1.asp

EBAY Chart




MER - Merrill Lynch $48.02 target entry $46.00

2006 $50 LEAP Call WZM-AJ Currently $5.97 target $5.80

http://members.OptionInvestor.com/leaps/Lp_071804_1.asp

MER Chart




INTC - Intel $21.24 target entry $20.00

2006 $22 LEAP Call WNL-AX currently $3.30
2006 $25 LEAP Call WNL-AE currently $2.20

http://members.OptionInvestor.com/leaps/Lp_071804_1.asp

INTC Chart





MMM - 3M Company - $77.79

Target entry $75, add to position at $70.

2006 $80 LEAP Call VMU-AP current $10.10 target $8.00
2006 $85 LEAP Call VMU-AQ current $8.00 target $6.00

http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

MMM Chart




C - Citigroup $43.88 LEAP Call

Citigroup rebounded from the last Friday lows and
moved as high as $44.50 before beginning to decline
once again.

Enter 1/2 position at $42.50
Enter 1/2 position at $40.00

2006 $45 LEAP Call WRV-AI current $3.80, target $3.00

http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

Citigroup Chart




SYMC - Symantec - $45.71  - Target $41

Symantec dipped on various news stories last week but
did not break under $44.80. Still hoping to see another
strong drop.

2006 $45 LEAP Call YAG-AI current $9.20, target $6.00
2006 $50 LEAP Call YAG-AJ current $7.10, target $5.00

http://members.OptionInvestor.com/leaps/Lp_080804_1.asp

SYMC Chart




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Option Spread Strategies
************************

It’s August “Hypothetical Quickie” Time
By Mike Parnos

Thanks for all the “welcome back” emails.  I was all choked up.
Not entirely from the emails.  It was partially due to a piece of
piece of fried chicken that took a wrong turn on its way to the
black hole I call my stomach.   Needless to say, it eventually
found its way to fried chicken nirvana.
___________________________________________________________

Plans For Adjustment
Two of our portfolio positions are at risk.  RUT is slightly below
our short strike price (520) and BBH is slightly above its short
strike ($130).  What am I going to do if these continue down?
Well, I’ve scoped out different positions to roll into.  You have
to do this ahead of time.  When the time comes to close out a
failing position, it’s going to be pretty chaotic – at least
emotionally.  If you have a plan in place, you know what you’re
going to.  It makes it easier to pull the trigger.

As for a position to roll into, I like a September SPX Iron Condor
consisting of a 995/975 bull put spread and the 1125/1140 bear
call spread.  It has a huge range and offers reasonable premiums.
You’ll have to adjust the number of contracts you’ll trade to how
much you have to replenish from closing out a failing position.

Keep in mind, also, that those traders with limited trading
accounts may not be able to make up the entire amount in one
month.  Don’t get aggressive.  Maintain a wide range on your
condors or you may find yourself right back in a similar situation
next month.  Don’t use up all your trading capital in a single
month.  Keep some powder dry.  You never know when you’re going to
need it.
____________________________________________________________

AUGUST QUICKIES
The market has been trending down.  That makes it particularly
difficult to select quickies.  For these quickies to be
successful, we much prefer a market that is consolidating.  It
looks like the market is at a support level and has been trying,
for the past few days, to hold it.  For our purposes, it only
needs to hold it for another four-five days.  It’s risky.

Also, remember that the prices below are based on Friday’s closing
figures.  On Monday, there will likely be less premium available.
Arbitrarily, placing orders with the prices below is rather
foolish (that’s nicer than “stupid”).  Take a look at what the
current bids and asks are for the options you’re trading and
adjust your requests accordingly.   If you take in a little less,
the trades still have good potential and decent chances of
success.  The figures below also include a small shaving of
premium from the bid/ask spreads.  Don’t get too greedy or you
won’t get filled?

August Quickie #1 – OEX Siamese Condor – 520.72
Sell 10 August OEX 520 puts @ $3.50 ($3,500)
Sell 10 August OEX 520 calls @ $4.80 ($4,800)
Total credit of $8,300

Buy 10 August OEX 500 puts @ $.45 ($450)
Buy 10 August OEX 540 puts @ $.25 ($250)
Total debit of $700

Total net credit of $7.60 ($7,600).  The closer OEX finishes near
520, the more money you will make.  Your profit parameters at
expiration are from 512.40 to 527.60 – a 15-point range.  Those
should also be your bailout points.  Let your risk tolerance be
your guide.  The maintenance required will be $20,000, but it will
only be for a week.  Remember, if you have a chance to close out
the position with a 70% profit, it’s a good idea to grab it.
There’s no point in risking your 70% to get the other 30%.

August Quickie #2 (Plan A) – RUT Iron Condor – 517.39
Sell 10 August RUT 510 puts
Buy 10 August RUT 500 puts
Credit of about: $1.65 ($1,650)

Sell 10 August RUT 530 calls
Buy 10 August RUT 540 calls
Credit of about: $1.05 ($1,050)

Total net credit of $2,700.  Maximum profit range: 510 to 530.
Safety range, at expiration: 507.30 to 532.70.  Maintenance:
$10,000.  Potential return on risk: 37%.

August Quickie #2 (Plan B) – RUT Iron Condor – 517.39
For those who have a slightly bearish bias or who want to be more
aggressive, you can lower the bear call spread to 520/530.

Sell 10 August RUT 510 puts
Buy 10 August RUT 500 puts
Credit of about: $1.65 ($1,650)

Sell 10 August RUT 520 calls
Buy 10 August RUT 520 calls
Credit of about: $3.10 ($3,100)

What this does is to allow you to take in more premium, but your
max profit range is narrowed by 10 points.  It gives you roughly
two additional points of protection on the downside, but reduces
your cushion to the upside.  Your maximum catastrophic loss is
$5.25 ($5,250).

Total net credit of $4,750.  Maximum profit range: 510 to 520.
Safety range, at expiration: 505.25 to 524.75.  Maintenance:
$10,000.  Potential return on risk: 90%

Tempting, isn’t it?  Well, you should let your risk tolerance be
your guide.  All of the above hypothetical “quickie” positions
should be monitored closely.  When you have an opportunity to take
a significant portion of your profits, go for it.  If the trade
goes against you, know your exit points – and adhere to them.  If
you can’t adhere to them, you won’t be trading much longer.
___________________________________________________________

Putting Life Into Perspective
Q: What's the difference between a girlfriend and a wife?   A: 45
lbs.
Q: What's the difference between a boyfriend and a husband?   A:
45 minutes.
Q: What is it when a man talks nasty to a woman?  A: Sexual
harassment.
Q: What is it when a woman talks nasty to a man?  A: $3.99 a
minute.
___________________________________________________________

AUGUST POSITIONS
August Position #1:  SPX Iron Condor – 1064.80
We sold 5 SPX August 1050 puts and bought 5 SPX August 1025 puts
For a credit of about $2.40 ($1,200).  Then we sold 5 SPX August
1155 calls and bought 5 SPX August 1180 calls for a credit of
about $1.60 ($800).  Potential profit of $2,000.  Maximum profit
range: 1050 to 1155.  Breakeven points: 1046 & 1159.  Maintenance:
$12,500.

August Position #2 – RUT Iron Condor – 517.39
We sold 10 RUT August 520 puts and bought 10 RUT August 510 puts
for a credit of about $1.20 ($1,200).  Then we sold 10 RUT August
600 calls and bought 10 RUT August 610 calls for a credit of about
$.75 ($750).  Potential profit: $1,950.  Maximum profit range: 520
to 600.  Breakeven points: 518.05 & 601.95.  Maintenance: $10,000.

Note:  Recently, it’s become increasingly difficult to get fills
on the RUT.  So, I repeat, the idea is to not get too greedy.
It’s better to get filled than to spend half the day cursing at
the market makers.

August Position #3 – BBH Iron Condor - $130.50
We sold 10 BBH August $130 puts and bought 10 BBH August $120 puts
for a credit of about $.60 ($600).  Then we sold 10 BBH August
$150 calls and bought 10 BBH August $160 calls for a credit of
about $.70 ($700).  Profit potential: $1,300.  Maximum profit
range: $130 to $150.  Breakeven points: $128.70 & $151.30.
Maintenance $10,000.  With BBH trading so close to the short
strike, stay on your toes.

August Position – SPX – 1063.23
Don’t forget that our “Credit Spread Boogie” position was rolled
out to August.  That should be fun to watch.  And, be alert.  We
have to be prepared to adjust when necessary.  Originally we had a
July bullish position, we then adjusted it to a bearish August
position.  If the SPX closes below 1125 (which seems likely), we
will keep our accumulated profit of $2,370.
___________________________________________________________

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $32.52
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.
June $34 calls and $37 puts -- total net credit of $750.  We
rolled out to the July $34 calls ($.20 credit) and $37 puts ($.60
credit) and took in a credit of $.80 ($800).  We rolled to the
August $34 calls and $37 puts, taking in a credit of $900.  For
the September cycle, we rolled to the Sept. $34 calls and $37
puts, only yielding $.45 or $450 for the cycle. Our new total
credit is now $11,750.

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 – 520.72
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.
Our current position:  We own 3 OEX December 2006 540 calls @ $81
(x 300 = $24,300).  Our cash position as of May expiration was
$4,390 plus unused $1,700 = $6,090.  From the June option cycle,
we are able to officially add $1,175 to our cash position – that
now stands at $6,265 As of July expiration we were able to add
$1,350 to our previous balance of $6,090 for a total of $7,440.

New Zero Plus Positions For August
August bull put spread 515/505 for credit of $.80 x 5 contracts =
$400.  Short 565 call for credit of $1.10 x 5 = $550.  If all goes
well, we’ll be able to add $950 to our cash position as we wait
for the market to move up.
________________________________________________________________

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 "Spreads &
Combos." 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.
Mike Parnos
Options Therapist and CPTI Master Strategist



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


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

Nasdaq Up Volume at bottoms
By Leigh Stevens
lstevens@OptionInvestor.com

As I said in my last Trader's Corner article, there is a Nasdaq
Up volume pattern associated with bottoming action when used in
conjunction with some other key index indicators of Price
(patterns), Oscillator extremes (e.g., 14-day RSI at or below 30)
and "Sentiment"; i.e., the same CBOE daily call to put ratio I
use for the S&P.

By the way, the aforementioned prior article can be perused at –
http://www.OptionInvestor.com/traderscorner/tc_080504_2.asp

The way I remember to go down my checklist of these indicators
for bottoms is by remembering "POVS" – Price, Oscillator, Volume
and Sentiment. The reason I say "for bottoms" is that my "volume"
indicator is an NYSE or Nasdaq daily Up Volume 10-day average and
mostly useful in sizing up a major or intermediate-term bottom
only.

When the market has been trending higher for a long time and
could be making a top, I may look at the 10-day Up Volume average
line but it does not have a reliability in pointing out topping
action - I rely for this mostly on Price action/patterns,
Oscillator extremes (e.g., overbought readings), and Sentiment
(i.e., extremes of bullishness in daily call to put option ratios
for equities.

Back to Volume –
I use either a 10-day average of NYSE total daily Up Volume
($UVOL) for the S&P and Dow indices and a 10-day average of
Nasdaq Up Volume ($UVOLQ) for the Nasdaq and look for when the
average pulls back to a "baseline" and then turns up. This has to
happen along with extremes in two other indicators – the trigger
is pulled on buying index puts or calls when price action has
reversal type action; e.g., a key reversal: a decisive new low
followed by a close higher than the prior day's close; e.g., a
double bottom - a bottom is made at a prior significant low.

[More on the use of a 10-day average of Up Volume is found at –
http://www.OptionInvestor.com/traderscorner/tc_072204_2.asp ]

Price is number one, so of course it comes first in finding
market turning points. For example, is there a possible double
bottom (or top) shaping up or did a key upside (or downside)
reversal occur, etc.

Oscillator extremes refer to when a Stochastic or RSI indicator
of at least 14-days duration is at or below 30 or above 65/70 in
the case of the RSI. Oscillators are this type of indicator that
fluctuates between 1 and 100 – as opposed to the MACD for
instance.

Sentiment extremes or bullish or bearish readings in my CBOE
equities options Call to Put ratio. More on this is found at -
http://www.OptionInvestor.com/traderscorner/tc_021904_2.asp

To look at where this "model" so to speak is at based on today's
close, when yet another rally this week fell apart in a pretty
relentless 6-week decline, can be examined on the chart below –

The Index is the Nasdaq Composite (COMP) on a closing price only
basis (a line chart).  Prices may be near the low of a downtrend
channel but this is only a possibility – there is none of the
more definite signs of a bottom like I spoke about, such as an
apparent upside reversal, etc.

Next in my "POVS" checklist for the conditions that would be
fertile for a bottom or upside reversal is to look at whether
there is an oscillator extreme, such as with the 14-day RSI
(Relative Strength Index), which is the 2nd part of the chart
below. COMP is showing an oversold RSI reading. One indicator is
at the condition for a typical bottom.




Next, and a key indicator for a bottom is what is showing in a
10-day average of daily Nasdaq Up Volume in relation to a
"baseline" where this index has tended to bottom in recent
months.  This average is in the territory where significant
bottoms have tended to occur when the other indicators are also
at extremes, especially my Call/Put ratio, and price action
concurs. Keep in mind that the Up Volume indicator tends to
bottom sometime ahead of the others – "volume precedes price".
The requirement is that it reach the baseline area and then trend
higher from there.

Last but not least is the same daily ratio of CBOE Call to Put
volume for equities (excludes index option volume) that I use for
the S&P. Such extreme readings have usually suggested turning
points in both Nasdaq and the S&P if the other indicators have
also lined up.

Notice that after the July instance shown above when Nasdaq up
volume pulled back to its baseline (extreme), accompanied by a
price rebound and RSI extreme, the Call/Put reading did not also
drop to a bullish area.  This broad trading "model" is self-
correcting in that sense.  If one indicator does not line up,
especially if it is the Volume or Sentiment reading, it is most
often not a major tradable turning point – it often suggests a
good short-term trade trigger however.

Summing up the current snapshot of Price action and my indicators
shown above, I can reasonably predict that when the 10-day up
volume average for Nasdaq turns up and, thereafter, there is a
indication of an upside reversal price action, a significant call
buying opportunity will exist for Nasdaq index calls like the NDX
or in QQQ.

Of more immediate importance is that such action will suggest
exiting index puts.  Does it mean that this will mean the
absolute most profit? – no, but it does suggest that the
probability of an upside reversal is quite high so the risk to
reward potential in staying in is not favorable.  Of course, many
traders, especially those with fat profits, will prefer to wait
until a reversal is more assured – there have been two short-term
rebounds in as many weeks, but nothing sustained yet.

I was going to also go into the so-called broadening formation,
as in a broadening top or broadening bottom, but the subject is a
bit large to go fully into here and should be the focus of a
entire article – also, the examples of broadening formations
tends to occur in the indices more often on hourly charts.  For
example, the broadening top seen in the Dow hourly chart –




This pattern is of special interest, as pointed out in my book
(Essential Technical Analysis), due to a study done on technical
chart patterns that had a good degree of predictability by Dr.
Andrew Lo, an MIT professor and researcher in the area of the
financial markets.  He and a group of MIT assistants working
under him, made a comprehensive study of whether technical price
"patterns" had future predictive value – assuming you could
define the characteristics of a chart pattern well enough to set
up the conditions for a computer search of historical stock
market data – they used individual stocks.

By the way, the 5 technical patterns that yielded "statistically
significant test results" (for predicting a trend change) were
the Head & Shoulders (H&S) top and bottom pattern, 2.) a double
top, 3.) rectangle top, 4.) a rectangle bottom and 5.) the
Broadening bottom formation – they didn't find the top pattern to
have the same degree of reliability as the bottom formation of
this type.

I used a broadening top pattern illustration above as it was the
last broadening index pattern that came up in the indices, but
more on all this next time on Trader's Corner. Maybe by that time
I could point to a broadening bottom.


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The Option Investor Newsletter                   Sunday 08-15-2004
Sunday                                                      5 of 5

In Section Five:

Spreads and Straddles: "No Reason To Be Buying Stocks..."
Premium-Selling Plays: Naked Puts and Calls


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

"No Reason To Be Buying Stocks..."
By Ray Cummins

That observation was made Friday by Joe Liro, equity strategist
at Stone & McCarthy Research Associates, and it appears to echo
the sentiment of most investors in the current market.

He went on to say, "There's nothing on the horizon that would
get me excited right now.  Holding cash isn't a bad strategy
until some of the geopolitical risks are settled down or there's
a better read on whether the economy is going to reaccelerate."
Despite another record high for crude and a widening U.S. trade
deficit, the Dow Jones Industrial Average closed up 10 points at
9,825 with Coca-Cola (NYSE:KO), Wal-Mart (NYSE:WMT), ExxonMobil
(NYSE:XOM), Boeing (NYSE:BA) and IBM (NYSE:IBM) among the few
bullish issues.  The NASDAQ Composite Index finished up 4 points
at 1,757 after Dell (NASDAQ:DELL) reported Thursday that profit
rose 29% from year-earlier levels, meeting expectations for the
quarter.  The S&P 500 added 1 point to end at 1,064 with metal,
oil & gas, homebuilding, and department store stocks enjoying
small gains.  In the broader market, advancers paced decliners
3 to 2 on the New York Stock Exchange but breadth was neutral on
the NASDAQ.  Big Board volume ended near 1.2 billion shares and
technology volume topped 1.3 billion shares.  Treasuries closed
higher after the soft economic data.  The benchmark 10-year note
gained 15/32 to 100 9/32, yielding 4.22%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 08/13/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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   Mon  L/P   S/P  Credit   CB     G/L   Status

FRE    63.57  66.15  AUG  55.0  60.0  0.55   59.45   0.55   Open
POT    98.08  99.92  AUG  85.0  90.0  0.60   89.40   0.60   Open
FAST   54.74  59.33  AUG  45.0  50.0  0.60   49.40   0.60   Open
PD     79.00  76.68  AUG  65.0  70.0  0.60   69.40   0.60   Open
FSH    58.66  57.00  AUG  50.0  55.0  0.65   54.35   0.65   Open?
WBSN   38.19  38.38  AUG  30.0  35.0  0.45   34.55   0.45   Open
RTP   105.00 100.45  AUG  95.0 100.0  0.55   99.45   0.55   Open?
FRE    65.04  66.15  SEP  55.0  60.0  0.40   59.60   0.40   Open
FPL    67.73  67.67  SEP  60.0  65.0  0.45   64.55   0.45   Open
MCO    67.33  66.50  SEP  60.0  65.0  0.65   64.35   0.65   Open
BSTE   44.14  42.95  SEP  35.0  40.0  0.55   39.45   0.55   Open
ISCA   53.40  51.77  SEP  45.0  50.0  0.55   49.45   0.55   Open

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

Issues on the "watch" list include: Fisher Scientific (NYSE:FSH)
and Rio Tinto (NYSE:RTP).  Spreads on Apple Computer (NASDAQ:AAPL),
Anyss (NASDAQ:ANSS), and Gilead Sciences (NASDAQ:GILD), which are
currently profitable, as well as Anthem (NYSE:ATH), BJ Services
(NYSE:BJS), University of Phoenix Online (NASDAQ:UOPX), and
Wellpoint (NYSE:WLP), have previously been closed to limit losses.


CALL-CREDIT SPREADS

Stock  Pick   Last   Mon  L/C   S/C  Credit   CB    G/L   Status

LLTC   36.74  35.44  AUG  42.5  40.0  0.30   40.30  0.30   Open
XLNX   31.53  27.08  AUG  37.5  35.0  0.25   35.25  0.25   Open
MERQ   46.17  34.01  AUG  55.0  50.0  0.65   50.65  0.65   Open
SMH    34.58  28.95  AUG  42.5  40.0  0.30   40.30  0.30   Open
TLB    33.04  26.26  AUG  40.0  35.0  0.60   35.60  0.60   Open
VAR    77.24  32.12  AUG  90.0  85.0  0.50   85.50  0.50   Open
KLAC   43.33  35.78  AUG  50.0  47.5  0.25   47.75  0.25   Open
NVLS   29.23  23.85  AUG  35.0  32.5  0.20   32.70  0.20   Open
BZH    90.65  93.03  AUG 105.0 100.0  0.45  100.45  0.45   Open
LLY    64.67  61.57  AUG  75.0  70.0  0.65   70.65  0.65   Open
ACS    51.80  49.43  AUG  60.0  55.0  0.45   55.45  0.45   Open
DIGE   33.08  23.50  AUG  40.0  35.0  0.55   35.55  0.55   Open
SRCL   48.00  46.32  AUG  55.0  50.0  0.30   50.30  0.30   Open
PDCO   73.40  75.39  SEP  85.0  80.0  0.55   80.55  0.55   Open
CDWC   59.25  57.20  SEP  65.0  60.0  0.45   60.45  0.45   Open
KMRT   64.60  64.90  SEP  80.0  75.0  0.60   75.60  0.60   Open
VIP    85.00  84.56  SEP 100.0  95.0  0.45   95.45  0.45   Open

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


DEBIT STRADDLES

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

DVN     69.40  66.10   AUG   70.00  70.00   5.00    5.00    Open
TBL     60.26  53.45   AUG   60.00  60.00   4.75    6.75    Open?

The Timberland (NYSE:TBL) straddle recently traded near a credit
of $6.75 for the bearish portion of the straddle, thus providing
a favorable "early-exit" opportunity in the position.

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

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

LEND - Accredited Home Lenders  $33.89  ** Interest-Rate Play! **

Accredited Home Lenders Holding (NASDAQ:LEND) is engaged in the
business of making mortgage loans to borrowers across the United
States.  The company's business includes originating, selling and
servicing first and junior-lien mortgage loans primarily secured
by single-family (one- to four-family) residences.  Accredited
Home focuses on borrowers who do not meet conforming underwriting
guidelines because of higher loan-to-value ratios, the nature or
absence of income documentation, limited credit histories, high
levels of consumer debt or past credit difficulties.

LEND - Accredited Home Lenders  $33.89

PLAY (less conservative - bullish/credit spread):

BUY  PUT  SEP-25.00  QFW-UE  OI=278  ASK=$0.30
SELL PUT  SEP-30.00  QFW-UF  OI=830  BID=$0.85
INITIAL NET-CREDIT TARGET=$0.60-$0.65
POTENTIAL PROFIT(max)=14% B/E=$29.40


__________________________________________________________________

PIXR - Pixar  $69.93  *** Approaching 2004 Highs! ***

Pixar (NASDAQ:PIXR) is a digital animation studio with the
creative, technical and production capabilities to create a
new generation of animated feature films and related products.
Pixar's objective is to develop and produce computer-animated
feature films with a three-dimensional appearance.  Since its
inception, Pixar has created and produced a large number of
full-length animated feature films, Toy Story, A Bug's Life,
Toy Story 2, Monsters, Inc., and Finding Nemo, most of which
were marketed and distributed by The Walt Disney Company.

PIXR - Pixar  $69.93

PLAY (conservative - bullish/credit spread):

BUY  PUT  SEP-60.00  PQJ-UL  OI=1753  ASK=$0.40
SELL PUT  SEP-65.00  PQJ-UM  OI=1678  BID=$0.80
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$64.55



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

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.

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

BGG - Briggs & Stratton  $69.80  *** Downtrend Underway! ***

Briggs & Stratton (NYSE:BGG) is a producer of gasoline engines
for outdoor power equipment.  The company designs, manufactures,
markets and services these products for customers worldwide.
These engines are primarily aluminum alloy gasoline engines
ranging from three to 31 horsepower and are marketed under
various brand names, including Classic, Sprint, Quattro,
Quantum, INTEK, I/C, Industrial Plus and Vanguard.  Through
its wholly owned subsidiary, Briggs & Stratton Power Products
Group, LLC, the firm designs, manufactures and sells portable
generators, pressure washers and related accessories.

BGG - Briggs & Stratton  $69.80

PLAY (conservative - bearish/credit spread):

BUY  CALL  SEP-80.00  BGG-IP  OI=30  ASK=$0.30
SELL CALL  SEP-75.00  BGG-IO  OI=14  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$75.45


__________________________________________________________________

DNA - Genentech  $44.23  *** Avastin Warning = Sell-Off! ***

Genentech (NYSE:DNA) is a biotechnology firm using human genetic
information to discover, develop, manufacture and commercialize
biotherapeutics for significant unmet medical needs.  The company
manufactures and commercializes biotechnology products directly
in the United States.  The company also licenses other products
to various partners and its development efforts, including those
of its collaborative firms, cover a range of medical conditions,
including cancer, respiratory disorders, cardiovascular diseases,
endocrine disorders and inflammatory and immune problems.

DNA - Genetech  $44.23

PLAY (less conservative - bearish/credit spread):

BUY  CALL  SEP-52.50  DNA-IX  OI=3436  ASK=$0.35
SELL CALL  SEP-50.00  DNA-IJ  OI=5454  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.35-$0.40
POTENTIAL PROFIT(max)=16% B/E=$50.35



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

SHRP - The Sharper Image  $17.80  *** Earnings Speculation! ***

The Sharper Image (NASDAQ:SHRP) is a retailer of products in the
electronics, recreation and fitness, personal care, houseware,
travel, toy, gifts and other categories.  The Sharper Image
designs and develops its Sharper Image Design products, while
Sharper Image branded products are generally designed by the
company with third parties.  It markets its merchandise through
three integrated sales channels: The Sharper Image stores, The
Sharper Image catalog, which includes revenue from all direct
marketing activities and TV infomercials, and the Internet.
The company's quarterly earnings report is due August 19, 2004.

SHRP - The Sharper Image  $17.80

PLAY (speculative - neutral/debit straddle):

BUY CALL  AUG-17.50  SAU-HW  OI=30  ASK=$0.80
BUY PUT   AUG-17.50  SAU-TW  OI=1   ASK=$0.55
INITIAL NET-DEBIT TARGET=$1.20-$1.25
INITIAL TARGET PROFIT=$0.40-$0.75


__________________________________________________________________

UTSI - UTStarcom  $15.00  *** 10Q Filing Delay! ***

UTStarcom (NASDAQ:UTSI) designs, manufactures and markets
telecommunications equipment and products, and provides
services associated with their operation.  Its products and
technologies, which are based on global communications
standards, fall into three major categories: Wireless, a
technology that enables end users, or subscribers, to send
and receive voice and data while mobile and using wireless
devices; Wireline, a technology that satisfies customer
demand for high-speed, cost-effective data, voice and media
transport and carriage, and Switching, a diverse assembly of
software- and hardware-based networking elements designed to
replace central office telephone switches.

UTSI - UTStarcom  $15.00

PLAY (very speculative - neutral/debit straddle):

BUY CALL  AUG-15.00  UON-HC  OI=1619  ASK=$0.55
BUY PUT   AUG-15.00  UON-TC  OI=1279  ASK=$0.50
INITIAL NET-DEBIT TARGET=$0.90-$1.00
INITIAL TARGET PROFIT=$0.35-$0.60



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

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 08/13/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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

NFI      AUG    30.00   29.20   37.84    0.80   5.99%    2.74%
PETD     AUG    25.00   24.35   28.15    0.65   4.86%    2.67%
NFI      AUG    30.00   29.40   37.84    0.60   4.68%    2.04%
SCHN     AUG    30.00   29.00   27.04   (1.96)  0.00%    0.00%
FRO      AUG    30.00   29.30   36.71    0.70   4.97%    2.39%
GIVN     AUG    30.00   29.45   31.45    0.55   4.21%    1.87%
ATI      AUG    15.00   14.50   16.93    0.50   7.89%    3.45%
BEIQ     AUG    25.00   24.00   25.85    1.00   7.61%    4.17%
AMHC     AUG    25.00   24.25   26.39    0.75   5.98%    3.09%
VTS      AUG    22.50   21.85   22.34    0.49   4.31%    2.97%
ATI      AUG    15.00   14.75   16.93    0.25   4.68%    1.69%
EYET     AUG    30.00   29.55   33.30    0.45   3.85%    1.52%
CTSH     AUG    22.50   22.05   24.85    0.45   4.61%    2.04%
STLD     AUG    30.00   29.60   30.03    0.40   3.50%    1.35%
SRDX     AUG    20.00   19.50   23.80    0.50   7.27%    2.56%
NFI      AUG    35.00   33.85   37.84    1.15   9.90%    3.40%
ISG      AUG    30.00   29.05   29.50    0.45   3.60%    3.27%
DHB      AUG    12.50   12.15   12.16    0.01   0.24%    2.88%
MSO      AUG    10.00    9.65   11.35    0.35   9.88%    3.63%
EENC     AUG    12.50   12.25   13.75    0.25   4.83%    2.04%
IDCC     AUG    17.50   17.05   14.82   (2.23)  0.00%    0.00%
NFI      AUG    35.00   34.25   37.84    0.75   7.63%    2.19%
CERN     AUG    35.00   34.35   43.55    0.65   6.54%    1.89%
VLCCF    AUG    25.00   24.35   26.06    0.65   8.65%    2.67%
KRON     AUG    40.00   39.40   40.23    0.60   6.74%    1.52%
UTHR     AUG    22.50   22.20   28.54    0.30   6.05%    1.35%
CYTC     AUG    22.50   22.10   22.55    0.40   7.64%    1.81%
TOY      AUG    15.00   14.75   14.97    0.22   6.55%    1.69%
IDCC     AUG    17.50   17.20   14.82   (2.38)  0.00%    0.00%
KYPH     AUG    25.00   24.50   23.90   (0.60)  0.00%    0.00%
TOY      AUG    15.00   14.75   14.97    0.22   7.30%    1.69%
KIND     AUG    22.50   22.10   25.23    0.40   8.57%    1.81%
ODSY     AUG    17.50   17.25   17.64    0.25   6.78%    1.45%
NFI      AUG    30.00   29.55   37.84    0.45   9.02%    1.52%
KYPH     AUG    25.00   24.35   23.90   (0.45)  0.00%    0.00%
AH       AUG    35.00   34.60   32.79   (1.81)  0.00%    0.00%
ING      AUG    22.50   22.25   23.25    0.25   7.30%    1.12%
IVX      SEP    20.00   19.55   23.60    0.45   5.52%    2.30%
MCIP     SEP    15.00   14.30   16.60    0.70   8.50%    4.90%
PAAS     SEP    12.50   12.05   13.57    0.45   6.87%    3.73%
UTHR     SEP    25.00   24.70   28.54    0.30   3.01%    1.21%
AMED     SEP    25.00   24.25   28.10    0.75   6.54%    3.09%
PHM      SEP    50.00   49.25   56.57    0.75   3.32%    1.52%
KOSP     SEP    30.00   29.25   35.22    0.75   5.48%    2.56%
GLBCE    SEP    12.50   11.90   15.28    0.60  11.90%    5.04%
ECLP     SEP    12.50   12.10   13.71    0.40   6.90%    3.31%
OMM      SEP    12.50   12.10   12.58    0.40   6.51%    3.31%
CNCT     SEP    25.00   24.10   27.13    0.90   7.11%    3.73%
TOY      SEP    15.00   14.45   14.97    0.52   7.10%    3.81%
ACF      SEP    20.00   19.25   19.57    0.32   3.06%    3.90%
KYPH     SEP    25.00   24.60   23.90   (0.70)  0.00%    0.00%
PLMO     SEP    30.00   29.45   38.00    0.55   5.05%    1.87%
ION      SEP    25.00   24.50   25.05    0.50   4.17%    2.04%
ESLT     SEP    20.00   19.20   20.68    0.80   7.95%    4.17%

Some new stocks are now on the "early exit" list including: AH,
KYPH, IDCC and SCHN.  They join ACF, BEIQ, CYTC, DHB, ION, ISG,
KRON, OMM, ODSY, STLD, TOY, VLCCF and VTS on a list of issues
to "watch" closely.  A long list of plays; ARXX, BLUD, BR, CRK,
CACS, CBST, CRDN, ELN, ERES, ESIO, EYET, FARO, GPRO, KWK, JCOM,
JNPR, LCAV, MGAM, NVTL, OSTK, TECH, and TASR, have previously
been closed to limit potential losses.


NAKED CALLS

Stock   Strike  Strike  Break  Current   Gain    Max    Simple
Symbol  Month   Price   Even    Price   (Loss)  Yield   Yield

SLAB     AUG    50.00   51.00   30.39    1.00   5.30%   1.96%
SINA     AUG    40.00   40.85   19.78    0.85   7.85%   2.08%
ATRS     AUG    30.00   30.85   23.50    0.85   6.52%   2.76%
MRVL     AUG    27.50   27.85   19.77    0.35   3.98%   1.26%
MACR     AUG    25.00   25.40   18.65    0.40   4.55%   1.57%
ISIL     AUG    20.00   20.45   15.70    0.45   5.72%   2.20%
FLML     AUG    25.00   25.50   14.97    0.50   8.15%   1.96%
OTEX     AUG    30.00   30.65   21.63    0.65   6.12%   2.12%
TELK     AUG    25.00   25.45   15.93    0.45   5.60%   1.77%
ASKJ     AUG    40.00   40.50   23.98    0.50   5.97%   1.23%
DRIV     AUG    30.00   30.85   22.97    0.85   7.92%   2.76%
SINA     AUG    35.00   35.45   19.78    0.45   6.42%   1.27%
BSX      AUG    40.00   40.50   32.37    0.50   3.58%   1.23%
ICUI     AUG    30.00   30.80   27.58    0.80   8.64%   2.60%
WMGI     AUG    35.00   35.65   24.68    0.65   5.46%   1.82%
LSCP     AUG    30.00   30.70   16.33    0.70  11.15%   2.28%
ERICY    AUG    30.00   30.65   24.11    0.65   8.01%   2.12%
NTES     AUG    40.00   40.45   30.01    0.45   6.31%   1.11%
SPW      AUG    45.00   45.40   36.50    0.40   5.03%   0.88%
MXIM     AUG    50.00   50.45   43.31    0.45   5.06%   0.89%
YHOO     AUG    32.50   32.70   27.49    0.20   4.20%   0.61%
MRVL     AUG    25.00   25.30   19.77    0.30   8.23%   1.19%
CRDN     SEP    40.00   40.50   31.80    0.50   5.29%   1.23%
SWIR     SEP    35.00   35.60   23.80    0.60   7.40%   1.69%
AVID     SEP    50.00   50.50   41.52    0.50   3.56%   0.99%
USPI     SEP    37.50   38.05   33.34    0.55   3.90%   1.45%
BDY      SEP    25.00   25.75   22.41    0.75   7.42%   2.91%
DRIV     SEP    30.00   30.30   22.97    0.30   4.51%   0.99%
SINA     SEP    30.00   30.35   19.78    0.35   5.84%   1.15%

There was no viable position in Eon Labs (NASDAQ:ELAB), Accredo
Health (NASDAQ:ACDO) or Ultralife Batteries (NASDAQ:ULBI), due
to "gap-down" trading activity after those plays were listed.

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

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

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  Last    Option    Option Last Open Cost  Days Simple Max
Symbol Price   Series    Symbol Bid  Int. Basis Exp. Yield Yield

WBSN   38.38  SEP 35.00  DQH-UG 1.25  263 33.75  34   3.3%  8.5%
NTMD   17.52  SEP 12.50  QNR-UV 0.35   61 12.15  34   2.6%  8.1%
UTHR   28.54  SEP 25.00  FUH-UE 0.70 1120 24.30  34   2.6%  7.3%
CNCT   27.13  SEP 25.00  UXU-UE 0.70 1055 24.30  34   2.6%  6.6%
DDS    22.35  SEP 20.00  DDS-UD 0.50   79 19.50  34   2.3%  6.3%
MEE    25.76  SEP 22.50  MEE-UX 0.50   50 22.00  34   2.0%  5.9%
FOSL   26.45  SEP 25.00  FUA-UE 0.65   95 24.35  34   2.4%  5.9%
HUM    18.67  SEP 17.50  HUM-UW 0.40  693 17.10  34   2.1%  5.3%
SCSC   57.23  SEP 50.00  UHI-UJ 0.60  338 49.40  34   1.1%  3.3%

Abbreviations:

LB-Last Bid price, OI-Open Interest, CB-Cost Basis or break-even
point, DE-Days to Expiry, SY-Simple Yield (monthly basis without
margin), MY-Maximum Yield (monthly basis with margin), TS-Target
Shoot.

__________________________________________________________________

WBSN - Websense  $38.38  *** A Big Day! ***

Websense (NASDAQ:WBSN) provides employee Internet management
products that enable organizations to analyze, report and
manage how their employees use computing resources, including
Internet access, instant messaging, peer-to-peer file sharing,
network bandwidth and desktop applications.  The company's
primary product offering is the Websense Enterprise software
application, its central policy engine and management console.
Websense Enterprise also serves as a platform for related
Websense add-on modules such as Client Application Manager,
Bandwidth Optimizer, instant message Attachment Manager and
Client Policy Manager, and supports a variety of reporting
options that allow organizations to document patterns of
employees' use of computing resources.

WBSN - Websense  $38.38

SEP 35.00 DQH-UG LB=1.25 OI=263 CB=33.75 DE=34 TY=3.3% MY=8.5%


__________________________________________________________________

NTMD - NitroMed  $17.52  *** Premium-Selling Only! ***

NitroMed (NASDAQ:NTMD) is an emerging pharmaceutical company
with substantial expertise and intellectual property in nitric
oxide-based drug development.  The firm is applying its nitric
oxide technology to develop new pharmaceuticals, as well as
safer and more effective versions of existing pharmaceuticals
to target diseases and commercial markets.  Its lead nitric
oxide-enhancing medicine, BiDil, which is being developed to
reduce mortality and hospitalization and to improve quality of
life for African Americans diagnosed with heart failure is the
subject of a Phase III confirmatory clinical trial.

SEP 12.50 QNR-UV LB=0.35 OI=61 CB=12.15 DE=34 TY=2.6% MY=8.1%


__________________________________________________________________

UTHR - United Therapeutics  $28.54  *** New Entry Point? ***

United Therapeutics (NASDAQ:UTHR) is a biotechnology company
focused on the development and commercialization of therapeutics
to treat chronic and life-threatening diseases in 3 therapeutic
areas: cardiovascular medicine, infectious disease and oncology.
It has 5 therapeutic platforms: Prostacyclin analogs are stable
synthetic forms of a molecule that has effects on blood-vessel
health and function; Remodulin has been approved in the United
States for the treatment of pulmonary arterial hypertension in
patients with New York Heart Association Class II-IV symptoms;
Immunotherapeutic monoclonal antibodies are antibodies that
activate patients' immune systems to treat cancer; Glycobiology
anti-viral agents are a class of small molecules that may be
effective as an oral therapy for hepatitis C or other infections,
and Telemedicine involves portable digital devices that enable
physicians to remotely monitor patients' bodily measurements.

UTHR - United Therapeutics  $28.54

SEP 25.00 FUH-UE LB=0.70 OI=1120 CB=24.30 DE=34 TY=2.6% MY=7.3%


__________________________________________________________________

CNCT - Connetics  $27.13  *** Bullish Profit Outlook! ***

Connetics Corporation (NASDAQ:CNCT) is a specialty pharmaceutical
company focusing exclusively on the treatment of dermatological
conditions.  It markets two pharmaceutical products: OLUX Foam
and Luxmq Foam.  On February 9, 2004, the company announced that
it had entered into a binding purchase agreement with Roche to
acquire exclusive U.S. rights to Soriatane-brand acitretin, an
approved oral medicine for the treatment of severe psoriasis in
adults.  Soriatane, a once-a-day oral retinoid approved in the
United States, is used for the treatment of severe psoriasis in
adults.

CNCT - Connetics  $27.13

SEP 25.00 UXU-UE LB=0.70 OI=1055 CB=24.30 DE=34 TY=2.6% MY=6.6%


__________________________________________________________________

DDS - Dillard's  $22.35  *** Strong Sector!  ***

Dillard's (NYSE:DDS) operates retail department stores located
primarily in the Southwest, Southeast and Midwest United States.
The company's stores are located in suburban shopping malls and
offer a wide selection of fashion apparel and home furnishings.
Dillard's markets products under the following merchandising
categories: cosmetics, women's and juniors' clothing, children's
clothing, men's clothing and accessories, shoes, accessories and
lingerie and home.

SEP 20.00 DDS-UD LB=0.50 OI=79 CB=19.50 DE=34 TY=2.3% MY=6.3%


__________________________________________________________________

MEE - Massey Energy  $25.76  *** Energy Sector Hedge! ***

Massey Energy (NYSE:MEE) produces, processes and sells bituminous,
low sulfur coal of steam and metallurgical grades through its 19
processing and shipping centers, called resource groups, many of
which receive coal from multiple coal mines.  The firm's resource
groups or mining complexes blend, process and ship coal that is
produced from one or more mines, with a single complex handling
the coal production of as many as eight distinct underground or
surface mines.  These mines are at strategic locations in close
proximity to the Massey preparation plants and rail facilities.
Coal is transported from its mining complexes to customers by
means of railroad cars or trucks.  Massey operates 30 underground
mines and 13 surface mines in West Virginia, Kentucky and Virginia.
The company's steam coal is primarily purchased by utilities and
industrial clients as fuel for power plants.

MEE - Massey Energy  $25.76

SEP 22.50 MEE-UX LB=0.50 OI=50 CB=22.00 DE=34 TY=2.0% MY=5.9%


__________________________________________________________________

FOSL - Fossil  $26.45  *** A Timely Stock!  ***

Fossil (NASDAQ:FOSL) designs, develops, markets and distributes
contemporary, fashion watches and accessories.  The company's
brands in its line of fashion watches include Fossil (which it
developed), Relic, Zodiac, Burberry, Diesel, DKNY and Emporio
Armani.  It offers a range of accessories including small leather
goods, belts, handbags and sunglasses under the Fossil and Relic
brands, jewelry under the Fossil and Emporio Armani brands and
Fossil brand apparel.

SEP 25.00 FUA-UE LB=0.65 OI=95 CB=24.35 DE=34 TY=2.4% MY=5.9%


__________________________________________________________________

HUM - Humana  $18.67  ***  Bottom-Fishing In Healthcare  ***

Humana (NYSE:HUM) offers coordinated health insurance coverage
and related services through traditional and Internet-based
plans for employer groups, government-sponsored programs and
individuals.  The company has approximately 6 million members
in its medical insurance programs and nearly 2 million members
in its specialty products programs.  Approximately 70% of its
premiums and administrative services fees result from members
in Florida, Illinois, Texas, Kentucky and Ohio.

HUM - Humana  $18.67

SEP 17.50 HUM-UW LB=0.40 OI=693 CB=17.10 DE=34 TY=2.1% MY=5.3%


__________________________________________________________________

SCSC - ScanSource   $57.23  *** Solid Earnings = Rally! ***

ScanSource (NASDAQ:SCSC) is a wholesale provider of specialty
technology products, providing both value-added distribution
sales to technology resellers and e-logistics services to
specialty technology markets.  The company markets automatic
identification and data capture and point-of-sale products
through its ScanSource sales unit; voice, data and converged
communications equipment through its CatalystTelecom sales unit,
and converged communications products through its Paracon sales
unit.  In addition to the basic order fulfillment and credit
services that conventional wholesale distributors typically
provide to resellers, the company differentiates itself by
providing an array of value-added services and business tools
that assist resellers to provide more complete solutions and
improve customer service.

SEP 50.00 UHI-UJ LB=0.60 OI=338 CB=49.40 DE=34 TY=1.1% MY=3.3% TS



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

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.

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

DKS - Dick's Sporting Goods  $26.88  *** Pre-Earnings Slump? ***

Dick's Sporting Goods (NYSE:DKS) is a full-line sporting goods
retailer offering a broad assortment of brand name sporting
goods equipment, apparel and footwear in a specialty store
environment.  The company offers a full range of sporting goods
and active apparel at each price point in order to appeal to the
beginner, intermediate and enthusiast sports consumer.  Sales of
hard-line items such as hunting and fishing gear, sporting goods
equipment and golf equipment account for over 50% of revenue.
The quarterly earnings report is due Tuesday, August 17, 2004.

DKS - Dick's Sporting Goods  $26.88

PLAY (sell naked call):

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

SELL CALL  SEP 30    DKS-IF    802    0.40  30.40   4.5%   1.3%


_________________________________________________________________

ERES - eResearch Technology  $18.64  *** Near 2004 Lows! ***

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.  The
company's Diagnostics Technology and Services group provides
centralized diagnostic services and clinical research operations,
including clinical trial and data management services, while the
Clinical Research Technology and Services offers marketing and
support of clinical research technology and services.

ERES - eResearch Technology  $18.64

PLAY (sell naked call):

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

SELL CALL  SEP 22.5  UDB-IX    627    0.30  22.80   6.7%   1.3%


_________________________________________________________________

MRVL - Marvell Technology  $19.77  *** Earnings Speculation! ***

Marvell (NASDAQ:MRVL) designs, develops and markets integrated
circuits utilizing proprietary communications mixed-signal and
digital signal processing technology for communications-related
markets.  Marvell offers its customers a wide range of integrated
circuit solutions using proprietary communications mixed-signal
processing and digital signal processing technologies.  Marvell's
product groups include: storage products, consisting of a variety
of read channel, system-on-chip and preamplifier products; and
broadband communications products, consisting of a variety of
transceiver products, switching products, internetworking
products and wireless LAN products.  Earnings are due 8/19/04.

MRVL - Marvell Technology  $19.77

PLAY (sell naked call):

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

SELL CALL  SEP 25    UVM-IE    1718   0.40  25.40   8.2%   1.6%



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

SEE DISCLAIMER - SECTION 1

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


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