Option Investor
Newsletter

Daily Newsletter, Thursday, 11/04/2004

HAVING TROUBLE PRINTING?
Printer friendly version
The Option Investor Newsletter                Thursday 11-04-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Bush Bounce
Futures Wrap: See Note
Index Wrap: The only thing missing was volume
Market Sentiment: Stocks Rally, Day Two 


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      11-04-2004           High     Low     Volume   Adv/Dcl
DJIA    10314.76 +177.70 10318.23 10127.98 2.25 bln 2510/ 742
NASDAQ   2023.63 + 19.30  2023.72  1992.07 1.85 bln 1858/1238
S&P 100   555.62 +  8.89   555.62   546.16   Totals 4368/1980
S&P 500  1161.67 + 18.47  1161.67  1142.34 
W5000   11371.20 +166.41 11371.20 11190.33
SOX       412.72 +  2.60   414.15   404.02
RUS 2000  602.13 +  6.80   602.13   591.77
DJ TRANS 3562.84 + 68.20  3565.73  3492.96
VIX        13.97 -  0.07    14.02    12.95
VXO (VIX-O)14.21 +  0.03    14.35    13.05
VXN        20.16 -  0.66    20.90    19.73 
Total Volume 4,460M
Total UpVol  3,274M
Total DnVol  1,108M
Total Adv  4967
Total Dcl  2252
52wk Highs  672
52wk Lows    80
TRIN       0.80
NAZTRIN    0.82
PUT/CALL   0.87
************************************************************

Bush Bounce
by Jim Brown

It appears on the surface a bull market has broken out
and while many credit Bush it may be just a relief rally
now that the election is over. Two days without constant
campaign ads could make any trader happy but more than
likely it is relief that there were no terrorist events
and the election outcome was settled in only one day. 

Dow Chart

 
Nasdaq Chart

 



The bull may be recovering his strength but his diet of
economic reports has not been helping his fitness program.
The Monster Employment Index this morning came in at 114
and exactly where it was in September. This could be a 
topping process as the index has been stuck in the 112-
114 range for the last three months. The 114 level is 
the highest reading for the year and is +21 points over
last October's level. Job listings dropped slightly in 
eight of the nine regions. The numbers for the index 
were rescaled beginning in Oct and the 114 headline 
equates to a prior reading of 151.

Jobless Claims fell slightly to 332,000 to continue the
EKG style volatility of the last ten weeks with alternating
numbers 20,000 claims apart. This is a pre hurricane level
but there is no indication that it will hold at this range.

Both of the above reports set the stage for tomorrows
jobs report and the consensus is for a gain of +160,000
jobs. We have a consecutive streak of positive job gains
dating back to September 2003 and Friday is not expected
to disappoint. At least it is not expected to be negative.
The whisper numbers have been less than exciting and if
anything the expectations are for a consensus miss at
+125,000. Friday's release is expected to set the stage
for next weeks Fed meeting and the guidance that comes
from that meeting. Nothing is expected to prevent them
from hiking rates another 25 points but the guidance for
the December meeting is the key. The Fed does not like
to hike rates just before the holidays but will do it 
if forced. I suspect the weak economics and a weak labor
market could put them on hold for December. Currently
the Fed Funds Futures are only showing a 51% chance of
a rate hike in December. 

Productivity rose slightly more than expected at +1.9%
but slower than the +3.5% average over the last three
quarters and +5.1% over the last six quarters. This
slower growth trend is encouraging because it shows
a level of growth that can be sustained. On the down
side unit labor costs rose +1.6% and the highest rate
of increase since Q1-2003. There was talk about the
slowing productivity suggesting longer term problems
for the economy. Higher productivity suppresses 
inflation and rising wage costs increases it. This
could be the beginning of a turning point. It was the
smallest increase in productivity since 2002. 

In stock news today the semiconductor sector took yet
another hit with BAC downgrading some of the big names.
KLAC and AMAT were cut to a SELL from neutral. BAC said
a glut of chip inventory and strong overcapacity in the
LCD market would depress earnings for quarters to come. 
AMAT, KLAC, LRCX, ASYT all fell on the news. The SOX
struggled to breakout of negative territory despite
the strong rally in progress. The SOX ended up only
+2.64 points and refuses to move over 415. 

The Dow took a hit early as Pfizer was slammed on 
comments in a Canadian newspaper that 14 people had
died while taking Celebrex. Pfizer fell -2.50 on the
news before the Canadian equivalent of our FDA said
there was no relationship between the deaths and
Celebrex. Pfizer also fired back that there was no 
proof in any form of a relationship, was misleading
and not supported by clinical facts. Pfizer repeated
that historical long term studies on more than 30,000
patients had shown no cardiac risks for Celebrex. If
they are lying or misrepresenting the facts it would
put them out of business. I believe they are being
painted with the same Merck brush and at $29 this is
a buying opportunity. Merck on he other hand is in
serious trouble. A FDA study posted yesterday showed
that VIOXX raised heart attack risk +370% over those
patients on Celebrex. Also, news continues to suggest
that Merck has known this and kept it quiet for at
least four years. With 30 million people having taken
VIOXX the outlook for Merck is not good. We have been
holding puts on MRK in the editors play section since
October 10th at $30.35. MRK closed today at $27 and
I am looking for it to drop into the teens once they
slash the dividend to pay for litigation and settlement
expenses. 

A major component to the equity rally today was a strong
drop in oil prices with a close at $48.85, -2.05 for the
day. I have been saying in this column for months that
I expected oil prices to fall after the election but
only on a temporary basis. The risk of a terrorist
attack designed to disrupt oil before the election has
passed and oil inventories rose +6.3 million bbls on
Wednesday. Saudi cut prices on two grades of crude due
to falling demand. Need I say more? The speculation
event is over and we could just wander until we see
what the winter brings in terms of weather. A cold
winter could put the pressure back on and a mild winter
could keep supplies intact and prices on hold. This is
only a temporary dip and should be used as a long term
buying opportunity for oil stocks. Fred Bergsten with 
the Intl Institute of Economics said today that we would
likely be seeing $60 to $70 oil soon based on long term
demand and current production trends.

Yassar Arafat died this morning at a hospital in France
but was resurrected after lunch. News stories abounded
all morning that he had died. Even Bush was asked during
his morning press conference how he felt about Arafat's
death. Later in the afternoon a carefully worded statement
from the hospital said Arafat had not died but was in a
grave condition. Rumors were flying that he was brain
dead and being kept clinically alive on life support 
until arrangements for transfer of power had been made.
The hospital said they made the statement at the request
 of his wife, "with respect to the discretion demanded 
by his wife". Another quote from a high-level Palestinian
official tonight says "Arafat is unconscious and has 
undergone a general systems collapse. He is being aided
by respiratory machines and his condition appears 
irreversible, but reports of his death are not true." 
Obviously we are all subject to the rumors in the press
and we will not know the real story until it plays out
but I think we can read between the lines.  

Google was knocked for a loss and traded down to $180
based on current expiring lockups, evaluation concerns
and a downgrade from UBS. UBS cut GOOG to a sell and
set a price target of $160. 39 million shares will come
out of lockup on Nov-15th and that will triple the current
shares available to trade. GOOG traded to a high of $201
on Wednesday. 

None of the above events slowed the post election bounce
and resistance levels were breaking across the board. 
The Dow rallied to close at 10314 and a gain of +177
points. Resistance at 10200 and 10250 were bowled over
with hardly a sign they were crossed. The longer term 
down trend from February is in danger of breaking and 
opening the way for a much stronger move higher. While
it is far too soon to be projecting new Dow highs for 
the year or a multi month rally ahead it does look 
promising. The Dow has a first test of out of trend 
resistance at 10350 and we could easily reach that 
level tomorrow. Should that level be broken the next 
really significant resistance range is 10450-10550. 
That is only a days trade away from our close tonight
if we could tack on one more triple digit move to the
current string of gains. Unfortunately the current 
nine-day rebound from 9708 has added +605 points in a
very short period of time. That could be stressing the
realm of potential for this week. 

The SPX has managed an even more impressive feat of
rebounding from its 1090 low on Oct-25th to close only
-2 points from a new high for the year. This is a major
move and we have seen multiple resistance levels fail
to make this happen. While I am very bullish on the 
outlook for the market as represented by the SPX I 
still have concerns about tomorrow. Just hitting a 
new high for the year at 1163 would be resistance 
enough but the 50% retracement level for the entire
bear market drop is 1061. That is EXACTLY where the
bounce on Thursday stopped. This is a major resistance
point and a breakout here would be huge with no real
resistance between the current level and 1250 other
than a speed bump at 1075 for the 2002 resistance highs.
I can't stress enough how important this resistance 
test will be. It is like the final hurdle in a race
and having nothing but open track remaining to the 
finish line. Let the sprint begin!

SPX Chart

 
Russell Chart

 

Adding to this euphoria was a remarkable day by the
Russell which closed at 601.63 and only five points
from a new all time closing high at 606. This is a
major breakout about to happen and a move over 606
will trigger the booster rockets for the current rally.
Again, like the SPX this 606 level has been resistance
for all of 2004 and was resistance at the top in 2000
as well. The all time intraday high was 614 in March
of 2000 but 606 was the close. This is a major hurdle
but I am more confident of the Russell trading higher
than the SPX on Friday. Actually I would not bet on
either until next week but I would happily be wrong. 

I saved the worst for last with the Nasdaq tacking on
a measly +19 point gain. The SOX weakness was a bitter
pill for tech traders and soured their appetite for
chip stocks. The Nasdaq has posted some big gains over
the last month when the Dow was lagging but has failed
to keep pace with the new highs of the Russell and SPX.
The Nasdaq did manage to close well over 2000 and the
next major resistance is 2050 with 25 point resistance
increments above 2050. Nasdaq 2116 is the 25% retracement
level of the bear market drop but we need another +100
points before we start worrying about that psychological
trip wire. 

SOX Chart

 
NYSE Composite Chart

 

One indicator of real market strength is the NYSE
Composite Index. ($NYA) Because the Dow is only 30 
stocks and can be significantly impacted by only one
stock, like the +4.23 gain in MO today, the NYA is a
better gauge of NYSE strength. The NYA closed at 6885
today and that is an ALL TIME HIGH for the index. Yes,
higher than 2000, higher than any prior level. The prior
high was 6812 back in Sept-2000. With the NYA in breakout
mode the next resistance could be near 7100 and again
at 7500. These numbers are air pockets more than real
resistance based on the recent gains. 

Also hitting resistance highs was the Wilshire 5000 at
its 11371 close. This equals the high for all of 2004
and is also a three year high. Like I said, bullishness
is breaking out all over. 

Wilshire 5000 Chart

 

As a trader I see these resistance highs being tested
across the board on the Russell, SPX and Wilshire and
think logically that we should see some profit taking.
One small fact always gets in the way. Logic rarely
works in the markets. While I was cautious in the
markets at the close today and took a winning futures
position off the table I believe the risk is to the
upside not the downside. 

A contrarian factor was the low on the VXO this morning
at 13.05. While this should have been a warning it was
justified by the strong order flow to the upside. The
A/D line was 6:1 advancers to decliners and the new
highs hit 674 across all markets a number we have not
seen since March 8th at 704. New lows were only 84. 
The internal strength was very strong and it was strong
yesterday as well. It definitely appears a bull market
rally has broken out as analysts expected. The VXO rose
in the afternoon as the rally progressed and indicated
traders were increasing their put buying and not entirely
confident the bounce would stick. This is good news and
represents a healthy market. 

Oil is moving lower and terror concerns have passed with
no attacks despite significant public events. Bush won
and he was the market favorite for his tax cuts and
business friendly positions. Traders on the floor clapped
and cheered on Wednesday when news broke about the Kerry  
concession. Think what you want about the candidates but
the market has clearly shown which it favored with the
Kerry drop on Tuesday and the bounce once Bush won. A
word of caution however, oil has rebounded from the 50
day average on every sell off for the last year. That
average tonight is 48.70. The close was $48.75.

Crude Oil Chart

 

This market picture should produce some exciting days 
ahead. Whether or not Friday will be one of them is up
for grabs. If we had a strong Jobs Report tomorrow I
think the odds are good we could see some further moves
higher. Even if it is weak I think the market would 
ignore it but a negative number could spoil the party
at least for Friday. Next Wednesday is a Fed meeting
but I doubt it will slow the buying. According to 
TrimTabs.com investors poured $1.8B into stock funds
this week with $1B going into ETF stocks alone over 
the last three days. The fund inflows more than doubled
last weeks numbers and money was coming out of bond funds
and international funds. The bull is back and the bears
have gone into hibernation. At least that is the way it
looks tonight but two days does not make a post election
market. Until the trend changes the game plan will be 
to buy the dips. Let's just hope the dips are small and
the rebounds are strong. 
  
Sell Too Soon! 

Jim Brown
Editor


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


************************Advertisement*************************
 
SEE WARREN BUFFETT'S LATEST DISCLOSED STOCK PORTFOLIO
 
 
Now you can follow the investment master's actual moves.
 
To get a FREE report that details Warren Buffett's strategy and 
reveals his most recently disclosed, ACTUAL stock picks, Click HERE!
 
 
http://www.bigmoneywatch.com/default.asp?aid=626
 
**************************************************************


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

The only thing missing was volume

Stocks surged on Thursday with the big board trading all-time, 
yes all-time highs as oil prices saw sharp declines to close back 
below $49.

I (Jeff Bailey) thought today's third-quarter productivity growth 
of +1.9%, which was down from 3.9% growth in the second quarter 
was a positive for the job market going forward.  I say this as 
it relates to the May 23, 2004 Ask the Analyst column titled 
"Economics 101" and our discussion regarding high rates of 
productivity and nonfarm payrolls.

And going forward, should productivity rates begin to flatten a 
bit, as Fed Chairman Alan Greenspan said they should, equity 
bulls and inflation hawks will want to see oil prices abate.

Prediction:  Bears have been harping that lack of jobs bad for 
economy.  My prediction will be that once we get job growth, 
bears will be harping on the fact that wages are rising.  On any 
pullback in the major indices, smart bears and bulls will be 
buying aggressively.

NYSE Composite ($NYA.X) - Daily Intervals

 

With the institutionally held NYSE Composite ($NYA.X) breaking to 
and closing at all-time highs, I've been forced to "stack" our 
conventional retracement on itself.  All I do here is clone the 
BLUE 6,211-6,789 retracement, and stack it on top of itself.  I 
still have my PINK fitted 38.2% retracement on the chart, and 
generally like the yellow "zones" that it helped create below 
6,735.

I'd almost be willing to bet that if I "fit" that 38.2% to that 
September 21, 2004 close of 6,633, the resulting 61.8% 
retracement would mark today's close on the NYSE.

With October nonfarm payrolls due out tomorrow, I've marked the 
October 7th market response to when the September nonfarm payroll 
data was released.

NYSE Composite ($NYA.X) Chart - 20-point box

 

The current column of "X" building on the NYSE supply/demand 
chart follows a second column of "X" from 6,240-6,620 where it 
looks like somebody (most likely institutions) were eager to 
defend the bullish support trend.  

Now, if I have one cautious critique for euphoric bulls it would 
be that today's session lacked volume.  Don't worry.  We'll get 
it.  Something in the order of 2.3 to 2.5 billion is what I'd 
like to see on the NYSE.

If I were to make a guess just when we might see that type of 
volume as the NYSE breaks out of its summer's base, it would be 
on any pullback near the 6,700 level.  The volume won't just come 
from bulls; there will be plenty of bears looking for offers too.

Market Snapshot / Internals - 11/04/04 Close

 

Good Gravy!  The NYSE 5-day NH/NL ratio is up at 94.3% as the 
number of new highs explodes to 453 versus just 8 new lows.  I'm 
rather intimate with two of the stocks that traded new lows on 
the NYSE in Pfizer (PFE) and Forrest Labs (FRX), both have a 
"drug" theme to them.  

Were traders holding back in today's session?  While volumes were 
brisk/heavy, neither the NYSE or NASDAQ breached the 2 billion 
share mark.  Gut feel based on observation is that buyers are 
hoping for a pullback, a little hesitant to chase.  But if the 
nonfarm payroll numbers are to the MARKET's liking, then all he-
double-toothpicks could break loose to the upside, especially 
among 1, 2 and 3-lettered stocks where overhead supply becomes 
non-existent.

Who would have thought the NYSE would ever trade all-time highs 
again?  Especially in a cyclical bear market (grin).

NASDAQ Composite (COMPX) Chart - Daily Intervals

 

The very broad NASDAQ Composite (COMPX) broke above its 
"cheater's trend" on Monday, and while it is still well off its 
52-week high of 2,153, bulls look to be gaining ground where 
support should be firming from 1,952-1,971.

I added a "fitted" 38.2% retracement at 1,971 where I found 
closes at for October 6 and October 27.  Once we found a close 
there, we did come back below.  As such, I deem support in the 
1,952-1,971 area, and would tie that to the NYSE 6,686-6,734 
zone.

While today's volume has me thinking traders were still taking a 
bit of a wait and see approach, hopeful for a pullback, average 
daily volumes remain brisk at both the NYSE and NASDAQ.  NYSE 
average daily volume is up a healthier 10% so far in November.

Broker/Dealer Index Chart - Daily Intervals

 

There's a lot of 1, 2 and 3-lettered brokers in the NYSE and the 
brokers have been an important part of the SPX/OEX gains.  Bear 
Stearns (NYSE:BSC) $97.52 +1.9% closes at an all-time high.  
Morgan Stanley (NYSE:MWD) $53.78 +1.62% is working its way above 
its 200-day SMA.

S&P 500 Index Chart - Daily Intervals

 

Shorts are on the move after the "little" head/shoulder top 
failed at the right shoulder.  A MASSIVE looking reverse head and 
shoulder pattern (look at a weekly interval chart) has unraveled 
in a bull's favor and its neckline looks to be 1,144.

Today's trade saw the broader S&P 500 Bullish % ($BPSPX) rise 1% 
with a net gain of 5 stocks to a reversing higher point and 
figure buy signal.  Still "bull correction" status at 66% and 
would need a reading of 68% to achieve bull confirmed status.

Pivot Matrix -

 

Jeff Bailey


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

Stocks Rally, Day Two
- J. Brown

Stocks soared for a second day in a row as Wall Street celebrates 
a relatively clean end to the election.  The fact that the 
election is over and without any terror incident is a big 
confidence booster for investors.  Adding to the bullish euphoria 
was a four-percent drop in crude oil prices.  The December 
contract for crude closed under $49 a barrel for the first time 
in over a month.  

Overall the market internals were very bullish.  Advancing stocks 
outnumbered declining stocks by 11-to-3 on the NYSE and 18-to-11 
on the NASDAQ.  New highs soared for the second day in a row.  
Today there was more than 500 new highs between the NYSE and 
NASDAQ.  Up volume was more than three times down volume on the 
NYSE and about twice the down volume on the NASDAQ.  Overall 
volume was heavy with a very strong day for the Big Board.  These 
kind of bullish internals are exactly what traders want to see in 
a rally.  

Traders witnessed tons of bullish breakouts in individual stocks.  
One in particular was Dow-component Wal-mart (WMT), which soared 
3.2 percent and broke out over resistance at $55 and its simple 
200-dma.  The company gave a mixed October sales report.  
Revenues were low but gross margins were stronger than expected.  
A change in the tax rate helped and the company guided net 
profits toward the upper end of its guidance.  WMT's strength 
helped propel the RLX retail index to new all-time highs.  

Investors have been expecting a post-election, fourth quarter 
rally and so far it's coming true.  The Dow Industrial's breakout 
over resistance at the top of its downward channel is very 
bullish.  The S&P 500's breakout over 1160 to hit new 2 1/2 year 
highs is very bullish.  The NASDAQ's move over 2000 is 
encouraging.  Everything seems poised to run.  The only thing 
that really concerns me is that so many stocks and so many 
sector-specific indices look overbought already.  Yet even though 
stocks probably need to pause they might not.  Anyone waiting on 
the sidelines doesn't want to be left behind.  This has pushed 
the VIX/VXO indicators to bearish reversal levels.  Normally this 
would be a caution flag and not a good spot to consider new 
bullish positions.  You can bet that there is probably a crowd 
just waiting to buy the dips.  

Tomorrow will be influenced by the Jobs report.  Estimates range 
from +160,000 to +180,000 jobs.  As long as the number is close 
stocks should weather the news pretty well.  Odds are growing 
that after a week of gains stocks probably need to see a little 
profit taking.  If the jobs number severely disappoints it could 
exacerbate any dip. 


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9497
Current     : 10314

Moving Averages:
(Simple)

 10-dma:  9997
 50-dma: 10110 
200-dma: 10248



S&P 500 ($SPX)

52-week High: 1163
52-week Low : 1018
Current     : 1161

Moving Averages:
(Simple)

 10-dma: 1125
 50-dma: 1118
200-dma: 1119



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1301
Current     : 1516

Moving Averages:
(Simple)

 10-dma: 1477
 50-dma: 1430
200-dma: 1437



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

CBOE Market Volatility Index (VIX) = 13.97 -0.07
CBOE Mkt Volatility old VIX  (VXO) = 14.21 +0.03
Nasdaq Volatility Index (VXN)      = 20.16 -0.66 


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.87      1,044,648       910,493
Equity Only    0.64        735,009       469,860
OEX            1.15         66,948        77,306
QQQ            0.58         46,415        26,731


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

Bullish Percent Data

           Current   Change   Status
NYSE          66.8    + 1.8   Bear Correction
NASDAQ-100    55.0    + 2     Bull Confirmed***
Dow Indust.   56.6    + 6.6   Bear Correction***
S&P 500       66.0    + 2.4   Bear Correction
S&P 100       65.0    + 4     Bear Correction


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: 0.90
10-dma: 0.93
21-dma: 1.05
55-dma: 1.04


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    2218      1814
Decliners     609      1181

New Highs     378       139
New Lows        9        29

Up Volume   1755M     1156M
Down Vol.    448M      605M

Total Vol.  2224M     1813M
M = millions


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

Commitments Of Traders Report: 10/26/04

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

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

S&P 500

Commercial traders don't seem willing to place any big 
directional bets ahead of the Nov. 2nd election.  The longs
and shorts are pretty much dead even.  Small traders are 
also narrowing their bullish bias a bit.

Commercials   Long      Short      Net     % Of OI
10/05/04      421,217   435,736   (14,519)   (1.7%)
10/12/04      423,472   436,780   (13,308)   (1.5%)
10/19/04      432,945   441,041   ( 8,096)   (0.1%)
10/26/04      441,263   445,992   ( 4,729)   (0.0%)

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
10/05/04      137,210   114,489    22,721     9.0%
10/12/04      139,175   113,903    25,272     9.9%
10/19/04      147,148   124,827    22,321     8.2%
10/26/04      138,201   121,275    16,926     6.5%

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

Commercials have added to their longs and reduced some shorts
but they remain strongly net bearish here.  Small traders
reduced both their longs and shorts with almost no change in
their bias.

Commercials   Long      Short      Net     % Of OI 
10/05/04      248,190   476,608   (228,418)  (31.5%)
10/12/04      258,457   517,805   (259,348)  (33.4%)
10/19/04      264,860   531,541   (266,681)  (33.4%)
10/26/04      276,128   509,552   (233,424)  (29.7%)

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
10/05/04      308,021     80,373   227,648    58.6%
10/12/04      309,720     62,502   247,218    66.4%
10/19/04      353,903     66,027   287,876    68.5%
10/26/04      345,908     64,061   281,847    68.7%

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 is still very little change in commercials' NDX positions.
Actually there is very little change in the small-traders'
positions too.

Commercials   Long      Short      Net     % of OI 
10/05/04       55,640     32,872    22,768   25.7%
10/12/04       52,572     32,775    19,797   23.2%
10/19/04       52,630     31,940    20,690   24.4%
10/26/04       53,233     31,323    21,910   26.2%

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
10/05/04       12,254    30,693   (18,439)  (42.9%)
10/12/04        8,756    24,400   (15,644)  (47.2%)
10/19/04       10,462    25,243   (14,781)  (41.3%)
10/26/04       10,521    25,388   (14,867)  (42.8%)

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 hedged their bets even more ahead of
the Nov. 2nd election so there is no clear up or downside
bias.  Small traders remain net bullish after the big
change two weeks ago.

Commercials   Long      Short      Net     % of OI
10/05/04       27,498    25,772    1,726       3.2%
10/12/04       24,150    22,849    1,301       2.7%
10/19/04       25,385    24,213    1,172       2.3%
10/26/04       25,707    24,855      852       1.6%
 
Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
10/05/04        5,531     5,539   (    8)   ( 0.0%)
10/12/04        8,814     9,167   (  353)   ( 1.9%)
10/19/04        8,327     6,015    2,312     16.1% 
10/26/04        8,405     6,336    2,069     14.3%

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


************************Advertisement*************************
 
Insiders are Buying these 6 Rocket Stocks.
 
 
In the last few weeks, we have pinpointed insider buying on six 
stocks that have the potential to deliver stratospheric gains. 
 
Click here for our SPECIAL REPORT on these 6 stocks insiders are 
buying and why you should too. 
 
 
http://www.insidermoves.com/default.asp?aid=618
 
**************************************************************


FREE TRIAL READERS
******************
If you like the results you have been receiving we
would welcome you as a permanent subscriber.

The monthly subscription price is $49.95. The quarterly
price is $129.95 which is $20 off the monthly rate.

We would like to have you as a subscriber. You may
subscribe at any time but your subscription will not
start until your free trial is over.

To subscribe you may go to our website at

www.OptionInvestor.com

and click on "subscribe" to use our secure credit
card server or you may simply send an email to

 "Contact Support"

with your credit card information,(number, exp date, name)
or you may call us at 303-797-0200 and give us the
information over the phone.

You may also fax the information to: 303-797-1333


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support




The Option Investor Newsletter                 Thursday 11-04-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: SBUX 
Dropped Puts: MMM
Call Play Updates: COP, DHR, FDX, GS, IBM, ITT, ITW, LEH, TOT
New Calls Plays: None
Put Play Updates: APOL
New Put Plays: None


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

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


CALLS:
*****

Starbucks - SBUX - close: 54.65 chg: +1.17 stop: 47.95      

SBUX made it!  We've been targeting a move into the $54.00-55.00 
range and after flirting with the lower edge of our profit target 
the last few sessions SBUX finally surged higher.  The move was 
part post-election bounce and part-strong same-store sales.  The 
company reported October same-store sales of +11 percent last 
night.  Here's an excerpt from the company's press release: 
"Fiscal 2005 is off to a great start for the Company as reflected 
by our strong October sales results," stated Jim Donald, ceo 
designate. "Innovation, as well as our store partners' on-going 
ability to deliver the Starbucks Experience, contributed to our 
25 percent revenue growth during the month. The very successful 
debut of Pumpkin Spice Latte, which has been enthusiastically 
received by our customers, is creating momentum as we head into 
the holiday season."  I have to agree.  The pumpkin spice latte 
is pretty good.  While we believe SBUX has plenty of momentum 
left in it we are exiting per our trading plan.  Should shares 
dip we'd watch for a bounce from the $51.50 region. 

Picked on October 17 at $49.47 
Change since picked:    + 5.18
Earnings Date         11/10/04 (confirmed)
Average Daily Volume =     3.3 million 
Chart =




PUTS:
*****

3M Company - MMM - close: 78.08 change: +2.79 stop: 78.01

Well now!  So much for any weakness in MMM.  At least we didn't 
have to wait very long to see if MMM was going to cooperate.  
Dow-component MMM completely ignored the Dow's post-election 
rally yesterday and looked poised to breakdown under the $75.00 
level after failing at $78.00 resistance several times in the 
last couple of weeks.   Maybe it was panicked shorts covering 
with the Industrials up almost 300 points in the last two 
sessions.  Whatever the case MMM has stopped us out at $78.01.  
If shares can breakout over $80 and/or its simple 200-dma we 
might suggest bullish positions. 

Picked on November 03 at $75.29
Change since picked:     + 2.79
Earnings Date          10/18/04 (confirmed)
Average Daily Volume =      2.9 million 
Chart =




************************Advertisement*************************
 
SEE WARREN BUFFETT'S LATEST DISCLOSED STOCK PORTFOLIO
 
 
Now you can follow the investment master's actual moves.
 
To get a FREE report that details Warren Buffett's strategy and 
reveals his most recently disclosed, ACTUAL stock picks, Click HERE!
 
 
http://www.bigmoneywatch.com/default.asp?aid=626
 
**************************************************************


********************
PLAY UPDATES - CALLS
********************

ConocoPhillips - COP - close: 87.35 change: +1.85 stop: 81.50

Day two of the post-election rally sent most of the market higher 
on Thursday.  That included COP and the oil stocks despite a 4 
percent drop in crude prices.  The slide in crude back under the 
$50 mark may become an issue but we suspect news of Arafat's 
impending death fueled speculation in oil companies.  If a new 
leader arises for the Palestinians there is hope for more success 
in the peace process, which of course is good news for business 
and oil companies.  COP added 2 percent and closed at a new 
three-week high.  The MACD is very close to a new buy signal. 

Picked on November 03 at $85.50
Change since picked:     + 1.85
Earnings Date          10/27/04 (confirmed)
Average Daily Volume =      3.0 million 
Chart =



---

Danaher - DHR - close: 56.96 change: +1.31 stop: 51.99

Shares of DHR finally decided to join the rally today after 
sitting out Wednesday's market move.  We like the bounce from the 
$55 region and DHR looks poised for more gains.  There is no news 
and no change in our strategy with DHR.  If a dip occurs look for 
any bounce above $55 but more likely in the 55.65-56.00 range.

Picked on October 27 at $54.99
Change since picked:    + 1.97
Earnings Date         10/21/04 (confirmed)
Average Daily Volume =     1.3 million 
Chart =


---

Fedex Corp - FDX - close: 91.48 change: +1.32 stop: 84.99

The Dow Jones Transportaion index soared another 1.95 percent to 
yet another new five-year high.  The four percent slide in crude 
oil only boosted the already bullish move in the group.  Shares 
of FDX, which had been digesting gains above the $90.00 mark, 
bounced again but remains under the $92 level.  Traders looking 
for new positions can watch for another bounce from $90.00 or a 
move over $92.00.  No change in our strategy.  We continue to 
target $100.  Conservative traders can probably get away with a 
tighter stop loss.

Picked on October 21 at $89.45 
Change since picked:    + 2.03
Earnings Date         09/22/04 (confirmed)
Average Daily Volume =     1.5 million 
Chart =


---

Goldman Sachs - GS - close: 100.00 change: +0.63 stop: 94.50*new*

The rally continues for the XBD broker-dealer index.  The group 
has been so strong it's actually looking pretty overbought now.  
Yet the momentum may not stall until the XBD index nears the all-
time highs from last February near the 149 level.  Shares of GS 
continue to look bullish as well.  The P&F chart now points to a 
$114 target.  We suggested short-term traders target round-
number, psychological resistance at $100. Now that GS is here 
it's time to do some profit taking.  We are targeting a move to 
$105.  Given the move from $91 to $100 we suspect that GS needs a 
rest.  Readers can watch for a dip in the $97-98 range as an 
entry point.  We are raising our stop loss to $94.50.

Picked on October 27 at $96.10
Change since picked:    + 3.90
Earnings Date         09/21/04 (confirmed)
Average Daily Volume =     3.2 million 
Chart =


---

Intl Business Mach. - IBM - close: 92.38 chg: +1.18 stop: 87.00*new*

The GHA hardware index continues its winning ways and IBM 
follows.  The post-election rally has given Big Blue a big boost 
and the stock has now cleared the congestion/resistance in the 
$91 region dating back to June.  The next hurdle is the $94-95 
range as IBM moves toward our end-of-year target at $100.  Should 
shares dip we would buy any bounce above the $90 mark.  In the 
meantime we're raising our stop loss to $87.00. 

Picked on October 27 at $90.00
Change since picked:    + 2.38
Earnings Date         10/18/04 (confirmed)
Average Daily Volume =     4.7 million 
Chart =


---

ITT Industries - ITT - close: 83.85 chg: +1.50 stop: 77.50

ITT is another example of how the post-election rally encouraged 
investors to do a little buying.  The stock broke through 
resistance at $81.50 on Wednesday and hit our trigger to go long 
at $81.51.  On Thursday ITT added another 1.8 percent with both 
Wednesday and Thursday turning in above average volume.   
Remember that our short-term target is the $86 region.  If ITT 
dips we'd look for a bounce from $82.00. 

Picked on November 03 at $81.51
Change since picked:     + 2.34
Earnings Date          10/21/04 (confirmed)
Average Daily Volume =      460 thousand
Chart =


---

Illinois Tool Works - ITW - close: 94.67 chg: +2.22 stop: 89.99*new*

Our bullish play in ITW is working out very well. The post-
election boost has sent shares soaring back towards the top of 
its trading range.  Remember, we are suggesting readers exit as 
ITW approaches $96.00-96.50.  We are going to set an official 
exit price of $96.00 and if ITW trades there intraday we'll close 
the play.  Should ITW dip we'd use a bounce from $92.00 or above 
as an entry point.  We are raising our stop loss to $89.99.

Picked on October 27 at $90.89
Change since picked:    + 3.78
Earnings Date         10/19/04 (confirmed)
Average Daily Volume =     1.2 million 
Chart =


---

Lehman Brothers - LEH - close: 84.97 chg: +1.93 stop: 79.95*new*

The XBD broker-dealer index has been very strong and the post-
election boost certainly didn't hurt the bulls.  Yet now the XBD 
is starting to look a little overbought.  LEH is looking a little 
overbought too.  Our short-term target was $85.00 and LEH is 
there already.  Traders have to choose between taking profits now 
or holding on for additional gains.  If you're a short-term 
trader it may be a good idea to take some profits now or exit 
near $86.00.  We believe the trend through the rest of the year 
is likely to be up for the sector so we're willing to hold on to 
some ups and downs in LEH.  Our new target is the March highs 
near $89.  We are going to raise our stop loss to $79.95.  If LEH 
dips we'd use a bounce from $82 or above as an entry point.  

Picked on October 26 at $80.60 
Change since picked:    + 4.37
Earnings Date         09/21/04 (confirmed)
Average Daily Volume =     2.0 million 
Chart =



---

Total S.A. - TOT - close: 107.80 change: +1.71 stop: 102.00

The French may not be celebrating Bush's win but this French oil 
stock is.  The stock produced some follow through on yesterday's 
breakout over resistance despite a drop in crude oil prices.  
Volume was strong again for the second day in a row and its MACD 
has produced a new buy signal.  If shares dip we'd look for a 
bounce anywhere above $106.

Picked on November 03 at $106.09
Change since picked:      + 1.71
Earnings Date           00/00/00 (unconfirmed)
Average Daily Volume =       672 thousand   
Chart =


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

None


************************Advertisement*************************
 
Trade Smarter Using the latest Insider Trades
 
Is the CEO selling off? Has a key insider loaded up on shares 
before a big price jump? 
 
Find out now. Get your free download of Real Time insider trades:
 
http://www.realtimeinsider.com/default.asp?aid=637
 
**************************************************************


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

Apollo Group - APOL - close: 62.96 chg: -0.91 stop: 68.51*new*

This has been a good week for APOL bears.  The stock has been 
slowly sliding all week and totally ignoring the post-election 
bounce.  Today's 1.4 percent decline can be attributed to a 
downgrade by UBS.  The firm cut its price target from $65 to $60 
and reiterated their "reduce" rating.  Volume was way above 
average on today's decline reaffirming more weakness ahead.  Our 
target remains the $60 region.  We are lowering our stop loss to 
$68.51.  If shares bounce we'll look for APOL to roll over in the 
$64.50-65.00 range.  Just because we're targeting $60 doesn't 
mean you have to.  The options we suggested are up substantially.  
Feel free to exit with a profit whenever you want to. 

Picked on October 10 at $69.81
Change since picked:    - 6.85
Earnings Date         10/05/04 (confirmed)
Average Daily Volume =     3.3 million 
Chart =


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

None


************************Advertisement*************************
 
Get your FREE weekly charts of the NASDAQ!
 
Hot Stix’ stock market report reveals simple, powerful strategies 
for profiting from the QQQ - whether down or up!
 
http://www.hotstix.com/public/weekly.asp?aid=755
 
**************************************************************


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support




The Option Investor Newsletter                 Thursday 11-04-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Oil to Retail and more! 
Combos/Straddles: Circling The Wagons, Preparing For The Mierde  
                  Storm  

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

Oil to Retail 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: 54.38 change: +1.21 

WHAT TO WATCH: The rebound from the $52.00 level and its simple 
50-dma looks like a bullish entry point.  Short-term oscillators 
like the RSI and stochastics are bullish.  Plus, the MACD is 
nearing a new buy signal.  The move over $54.00 is also a bullish 
breakout.  The P&F chart is very bullish with a $107 target.  We 
would target the $60 region.

Chart=


---

Toyota Motor Corp - TM - close: 78.64 change: +0.94

WHAT TO WATCH: We don't normally play a lot of ADRs or ADSs 
stocks, which are foreign equities traded both in their home 
country and here in New York.  TM is one that might be an 
exception.  The stock has been consolidating under a trend of 
lower highs since July.  Today (Thursday) saw TM breakout over 
resistance near $78.50 and break its trend of lower highs.  The 
Japanese markets are bouncing with us after the election and TM 
could be a leader. A move over $79 would produce a new P&F buy 
signal.

Chart=


---

Wal-Mart - WMT - close: 56.26 change: +1.78

WHAT TO WATCH: WMT turned in a very strong session on Thursday.  
Shares climbed 3.2 percent on strong volume to breakout over 
resistance at $55.00 and its simple 200-dma.  Considering the 
strength in the retail sector and the normally strong fourth 
quarter we would consider WMT a bullish candidate for an end-of-
year run.  Watch for a dip back to $55.00 and buy a bounce.  
Target $60.00 by December 31st or buy the January calls.

Chart=


---

Zimmer Holdings - ZMH - close: 79.84 change: +1.97

WHAT TO WATCH: Medical device maker ZMH has made a strong 
recovery from its October lows.  Now shares have broken through 
technical resistance at all its major moving averages including 
the exponential 200-dma, the simple 100-dma, and the simple 200-
dma.  Now ZMH needs to push through historical and psychological 
resistance at $80.00.  If this occurs bulls can target a run 
toward $90.00.

Chart=



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

FRX $41.01 -1.25 - No participation in the rally.  Looks like a 
bearish entry point to us.

GOOG $184.70 -6.97 - GOOG has a huge lock up expiring soon.  This 
could easily drag down shares.  

WLS $67.58 -2.12 - The trend for this homebuilder is bearish and 
the failed rally under its 20-dma looks like a bearish entry 
point.  Unfortunately, there aren't any options to trade.

WWY $67.66 +0.51 - Wow!  The rally just keeps going in WWY.  
Volume continues to be strong.

MRK $27.02 -0.85 - MRK continues to sink despite the market 
rally.


************************Advertisement*************************
 
Get your FREE weekly charts of the NASDAQ!
 
Hot Stix’ stock market report reveals simple, powerful strategies 
for profiting from the QQQ - whether down or up!
 
http://www.hotstix.com/public/weekly.asp?aid=755
 
**************************************************************

****************
Combos/Straddles
****************

Circling The Wagons, Preparing For The Mierde Storm

By Mike Parnos

I'm a lucky man.  No, not because our Iron Condor trades usually 
work out well.  That's great, but there's a lot more to life than 
money -- like friendship.  

I spent last weekend with 25 of my dearest friends -- friends I had 
never met in person before.  This was a group of people, most of 
whom I had been corresponding and speaking with for a long time.  
This was a group of truly fine people who have something in common 
-- they've put up with me for the last two years.  That's an 
accomplishment in and of itself -- only surpassed in longevity by 
my two ex-wives and a couple of cats.

For two full days we talked about life, about trading, about 
problems, and about solutions.  Knowledge and laughter filled the 
room.  It was fascinating to hear, and learn from, the diverse 
experiences and perspectives.  All had something to contribute – 
something of value.

Everyone sat a little taller in their seats because, to a man (and 
woman) because their wallets were a little fatter as a result of 
what they've learned over the last year or two.  But their hearts 
were full too.  Last weekend had the feeling of a family reunion as 
much as anything else.

Seeing those smiles and feeling their confidence made me realize 
just how fortunate I am to have these people in my life.   I know I 
was richer for the experience -- in many ways.  Food and hotel 
rooms you can always buy with a MasterCard.  The friendship and 
what was learned last weekend -- priceless.
_________________________________________________________

Where Is John Wayne When We Need Him?
Did you ever watch westerns when you were young?  Of course you 
did.  There was even a show called "Wagon Train" that showed the 
trials and tribulations of settlers as they made their way from the 
east to the west.  When threatened by a potential Indian attack, 
they would circle the wagons to be able to better defend 
themselves.  They wanted to be prepared.  And so do we!

Our current situation is actually pretty rare with our Iron Condor 
strategy, but, obviously, it happens.  Prepare yourself for the 
possibility that we may have to take a loss -- or two, or three.  
Three out of four of our Iron Condor positions are currently at 
risk.  We must have a plan for each.  It may be the same plan, but 
a plan nevertheless.  With the election out of the way, the Friday 
morning "jobs" number has the potential of moving the market.  If 
it's a strong number, and the market reacts, we should be prepared 
to close our bear call spreads.  If it's a weak number, we could 
get a reprieve and it could bounce down significantly from the 
resistance.

The SPX has not had a losing session in the last nine.  It's due 
for a rest or a retracement, but we can't let it go too far.   If 
it more than a few dollars against us, and stays there, we must act 
-- in self-defense.  It may cost $8-9 to get out, but remember, 
it's a cost of doing business

The OEX is also trading a little over our short strike price (555).  
In late April, and again in June, the OEX moved a few points above 
this level and came tumbling back down.  Let's hope history repeats 
itself.  However, if it doesn't, we must be prepared to act.  The 
next resistance level is a little over 560.

The RUT has been moving up steadily.  We're in a slightly (and I 
mean "slightly" better position.  We're about eight points below 
our short strike (610).  There should be a lot of resistance here 
because the RUT hasn't traded above 606 -- period!  It was up there 
in Jan/Feb 2000 and again a few times in Jan - April of 2004.  
Should be interesting.

If you have to act, be decisive.  When you're taking a loss, you'll 
find it's a huge emotional relief to finally click that mouse and 
have it be done.  

How Do We Make The Money Back?
Assuming for a moment that we'll be taking a loss on one or more of 
our positions, we want to have a plan in place to begin replacing 
what we spent to close out our bear call spreads.

How will we make the money back?  With brand new Iron Condors.  In 
other words, we'll be going from position in which we had less than 
a 50% chance of success to a position where we return to our comfy 
80-85% chance of success. 
 
Did You Keep Some Powder Dry?
This is one of the scenarios in which your extra margin (cash or 
equities) will prove useful.   If/when you close out your bear call 
spread, you will probably be able to close out your bull/put spread 
for $.05 or $.10.  You'll need to do that to free up your 
maintenance dollars to be used on a new Iron Condor.  Also, if the 
brokerage is holding $20,000 in maintenance for 10 contracts of 
your 20-point spreads, you may use up $8,000 of the $20,000 to 
close the bear call spread.  That will leave you $8,000 shy of 
being able to put on another 10-contract position.  You'll need to 
replace the $8,000.  Then, should you want to do additional 
contracts, you'll need that much more maintenance.

Have You Done Your Homework?
Hopefully, you've been researching prospective strike prices in the 
December option chain of the respective indexes in which you have 
positions.  It's better to have some strikes already calculated and 
written out rather than having to scramble around, making quick 
calculations.  It's easy to make mistakes when you're scrambling.  
A little research ahead of time can help prevent adding to the 
chaos of the rolling out process.

If things get out of hand, just keep calm, sit back and take a few 
deep breaths.  This is all a part of owning a business -- and 
that's exactly what we do when we trade.  We're in a business.  
Don't jump into a new position without making sure you're 
comfortable with the strikes, the range and the premiums.  We 
manage to spend most of our time on the couch.  Tomorrow, we may 
have to get up.  Be ready and be smart!
_________________________________________________________

NOVEMBER CPTI POSITIONS
November Position #1 - SPX Iron Condor - 1160.16
We sold 12 SPX November 1185 calls and bought 12 SPX November 1200 
calls with a credit of about $1.25 ($1,500).  Then we sold 9 SPX 
November 1070 puts and bought 9 SPX November 1050 puts for a credit 
of about $1.65 ($1,485).  Total credit and potential profit of 
about $2,985.  The maximum profit range is from 1070 to 1185.  Can 
this 115-point range withstand the market's emotional highs and 
lows?  Let's hope so.  The maintenance is $18,000.  The potential 
return on risk is about 20%.

New November Position #2 - SPX Iron Condor - 1160.16
Considering the downward market movement, I felt it is appropriate 
to initiate a SPX position with different parameters.  We sold 10 
SPX Nov. 1160 calls and bought 10 SPX Nov. 1180 calls for a credit 
of about $1.40 ($1,400).  Then we sold 13 SPX Nov. 1025 puts and 
bought 13 SPX Nov. 1005 puts for a credit of about $1.20 ($1,560). 
Maximum profit potential of about $2,960.  Max profit range of 1025 
- 1160.  Maintenance: $20,000.

November Position #3 - OEX Iron Condor - 554.88
We sold 10 OEX Nov. 500 puts and bought 10 OEX Nov. 490 puts for a 
credit of about $.70 ($700).  Then we sold 10 OEX Nov. 555 calls 
and bought 10 OEX Nov. 565 calls for a credit of about $.60 ($600).  
Total net credit and maximum profit of $1.30 ($1,300).  Max profit 
trading range of 500 to 555.  Maintenance $10,000.

November Position #4 - RUT - Iron Condor - 600.75
We sold 10 RUT Nov. 520 puts and bought 10 RUT Nov. 510 puts for a 
credit of about $.70 ($700).  Then we sold 10 RUT Nov. 610 calls 
and bought 10 RUT Nov. 620 calls for a credit of about $.60 ($600).  
Total net credit and maximum profit of $1.30 ($1,300).  Max profit 
range of 520 to 610.  Maintenance $10,000.
____________________________________________________________

ONGOING POSITIONS
QQQ ITM Strangle – Ongoing Long Term -- $37.62
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.  We rolled to the Sept. 
$34 calls and $37 puts, yielding $.45 or $450 for the cycle. For 
October we were again limited to a $.45 ($450) rollout.  We rolled 
to the November. $34 calls and $37 puts for a total of $.70 ($700). 
Our new total credit is now $12,900. 

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 conservative cash flow generating strategy.  

ZERO-PLUS Strategy.  OEX – 554.88
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.  We own 3 OEX December 2006 540 calls @ $81 (x 300 = 
$24,300).  Our cash position as of August expiration was $8,390.  
In September we added another $975 for a total of $9,365.  In 
October we added $650 for a new total of $10,015.

Zero-Plus Position For November
November bull put spread 500/490 for credit of $.70 x 5 = $350.  
November bear call spread 555/565 for credit of $.60 x 5 = $300.  
If all goes well, we'll be able to add another $650 to our cash 
position.
__________________________________________________________

SPX "Sure Thing" Strategy - 1160.16
Formerly called the "Credit Spread Boogie."  We sold 3 SPX 1120 
October puts and bought 3 SPX 1095 October puts for a net credit of 
about $6.50 ($1,950).  The initial maintenance was $7,500.

When the SPX traded in the low 1100s, it was time for an 
adjustment.  We closed out the original bull put spread for $13.20 
($3,960).  We then opened a seven-contract position of an 1115/1140 
bear call spread, taking in $6.35 ($4,445).  We took in some extra 
premium.  Our new profit potential is $2,435 -- if SPX closes below 
1115.  

We've been getting whipsawed.  Our most recent position was a 
November 14-contract 1120/1095 bull put spread at $7.00 ($9,800).  
The maintenance is getting pricey at $35,000.  That's why this 
strategy is not for everyone.  Our potential profit is still 
$2,435.  We had to close the 1120/1095 bull put spread and we 
initiated a new 1115/1140 bear call spread.  We picked up another 
$350 in premium to $2,785, but our maintenance is now $70,000.

Once more with feeling.  I know this is getting out of hand, but we 
have to play out the hand.  We closed out our 1115/1140 bear call 
spread and now have 60 contracts of a November 1125/1100 bull put 
spread.  We've taken in a total of $2990 in premium and our 
maintenance is now $150,000.  I hope this is the last of it.  
____________________________________________________________

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, Your 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.


************************Advertisement*************************
 
Trade Smarter Using the latest Insider Trades
 
Is the CEO selling off? Has a key insider loaded up on shares 
before a big price jump? 
 
Find out now. Get your free download of Real Time insider trades:
 
http://www.realtimeinsider.com/default.asp?aid=637
 
**************************************************************


**********
DISCLAIMER
**********

Please read our disclaimer at:
http://www.OptionInvestor.com/page/oin/aboutus/disclaimer.html


**************************************************************
ADVERTISING INFORMATION

For more information on advertising in OptionInvestor Newsletter,
or any Premier Investor Network newsletter please contact:

Contact Support




DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

To ensure you continue to receive email from Option Investor please add "support@optioninvestor.com"

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives