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Daily Newsletter, Tuesday, 11/23/2004

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The Option Investor Newsletter                 Tuesday 11-23-2004
Copyright 2004, All rights reserved.                       1 of 3
Redistribution in any form strictly prohibited.


In Section One:

Wrap: Market Misfire
Futures Markets: See Note
Index Trader Wrap: Shifting sentiment with oil
Market Sentiment: Holding Up


Posted online for subscribers at http://www.OptionInvestor.com
************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      11-23-2004           High     Low     Volume   Adv/Dcl
DJIA    10492.60 +  3.20 10514.99 10436.38 1.78 bln 1945/1291
NASDAQ   2084.28 -  0.91  2092.02  2068.98 2.10 bln 1740/1376
S&P 100   561.29 -  0.35   562.55   558.58   Totals 3685/2667
S&P 500  1176.94 -  0.30  1179.52  1171.41 
SOX       429.71 -  3.20   436.38   426.89
RUS 2000  624.53 +  3.01   624.53   616.54
DJ TRANS 3621.08 + 11.80  3626.55  3582.60
VIX        12.67 -  0.30    12.91    12.57
VXO (VIX-O)13.08 -  0.50    13.71    12.81
VXN        18.43 -  0.34    18.97    18.35 
Total Volume 4,187M
Total UpVol  2,260M
Total DnVol  1,855M
Total Adv  4176
Total Dcl  3070
52wk Highs  512
52wk Lows    51
TRIN       1.30
NAZTRIN    0.90
PUT/CALL   0.79
************************************************************

Market Misfire
by Jim Brown

Several times this week the markets tried to rally but
sputtered and failed. The misfires all started off with
a bang but could not produce enough momentum to push the
Dow over 10500 for more than a few minutes. Like a rocket
trying to escape the pull of gravity with only one booster
each spike sputtered at the edge of resistance and fell
back to earth. Unable to make a successful run with a
frontal assault during cash trading hours there was a
sneak attack after today's close that may prove more
successful. 

Dow Chart

 
Nasdaq Chart

 
SPX Chart

 

The economic reports came back to the forefront again
today but it was not Chain Store Sales and National
Activity Indexes that captured traders attention. It
was the economics of oil that tanked the markets once
again. Reportedly fears of shortages and disruptions
in supply were the factors that sent crude back over
$50 for most of the day. The spike back over the $50
level helped to shatter the confidence many analysts
had developed suggesting the oil crisis was over. $50
oil is a red flag and the opening bounce in equities 
to Dow 10514 was immediately sold and we retreated 
back to 10450 where we stayed until oil closed for
the day. 

I don't normally feel that the markets trade intraday
in relation to each other as most reporters claim. 
However, today there was an exact correlation and it
was striking. Compare the charts below for oil and the
Dow. I don't think this correlation will continue at
the same rate but the resurgence of high oil definitely
elicited a knee jerk reaction from equities today. We
have seen in the past that once the shock of $50 has
passed the stock market tends to develop a resistance
to the hourly fluctuations. Hopefully that will begin
soon. On Wednesday we will get the oil inventories for
the week and this bubble could be over as quickly as
it began.  

Comparison Chart Oil/Dow

 
 

Chain store sales spiked for the last week +0.8% and
well over the -0.4% drop from the prior week. This 
should come as no surprise to anyone given the approach
of the busiest shopping day of the year on Friday. I 
drove out of my way to a Super Wal-Mart on Sunday 
with my wife to shop for Thanksgiving dinner which
is normally a big spread around my house. There was
barely an empty space in the parking lot and a shortage
of baskets at the door. It was a mad house with workers
literally running to restock shelves as fast as buyers
cleaned them out. I know a lot of people don't like
Wal-Mart but with a line to get into the parking lot
late on a Sunday night it is evident that there is
no shortage of Wal-Mart shoppers. If you have not 
watched that CNBC special on Wal-Mart I highly 
recommend it just for the business methods they 
discuss. Business majors should be required to view
it. Love them or hate them you still have to respect
their methods and success. It also suggests that next
weeks Chain Store Sales numbers should show huge 
seasonal gains before the season even gets underway.

The Chicago Fed National Activity Index spiked sharply
for October to +0.52 from -0.04 in September and only
+0.17 in August. This number has been highly volatile
over the last six months in what could be seen as 
serious cross currents in the economy. If this is the
start of a new uptrend it definitely should get the
attention of analysts. Production jumped to +0.27
from -0.10 in the prior month. 57 of the internal
components contributed positively to the index while
only seven contributed negatively. The three-month
average at 0.22 has now indicated growth for fourteen
consecutive months. 

The October Existing Home Sales remained flat with 
September at 6.75 million units. Hurricane sales
continue to hold up the sales levels but there have
been declines in many other regions. This decline
could be seasonal, due to higher mortgage rates, held
back by the elections or the prospect of higher energy
prices. It is unknown which factor is the most likely
but the home builders celebrated for the third day
despite the regional numbers. While existing home sales
are not directly related to the home building stocks 
it appears prosperity in one sector suggests continued 
prosperity in the other. One factor helping the 
builders was a drop in existing home inventory to 
only a 4.3 months supply and near a record low. As 
existing homes dwindle those shoppers may be pushed
into the new home market. Stronger job growth should
be a driving force to keep these trends in force. 

Despite the best wishes of most investors the chip
sector just can't get a break and continues to drag
on the broader tech sector. The SOX has struggled 
for two days to recover from the Friday beating but
has not been able to find a bid. Today Intel was cut
by CSFB who lowered their price target to $22 from $25.
Intel had reached a three-month high of $24.81 last
Thursday but has declined to $23.39 at today's close.
According to CSFB, AMD is becoming a growing threat
with the product gap merging and in some cases closed.
The competitive edge is going to AMD where cost is -40%
to -60% less than the Intel product. AMD has gone from
$11 to $22 in the last three months and several analysts
think the underdog could move even higher. The real
problem with the chip sector according to analysts
is the increasing capacity coming online and the
inventory glut now. CSFB said there would be another
30% of capacity added by Intel over the next year
and there is no demand for that capacity. This will
eventually drive prices lower and impact margins with
Intel being the most at risk for price. According to 
Merrill Lynch and the Gartner Group the demand for
PCs in the consumer sector will drop in 2005 to less
than 9% growth compared to 12% in 2004. The SOX fell 
on the Intel downgrade to close at 430 and well off 
the 445 highs from last week. 

After the close today ADI reported earnings that were
inline with estimates at 34 cents but their outlook 
was less than exciting. They warned that the current
quarter could be less than expected. High inventory
levels were again the culprit but there is hope ahead.
Order volatility is stabilizing and the excess inventory
is expected to work its way out of the system by the
end of the first quarter according to ADI. 

On the bright side TECD announced earnings at 64 cents
that blew away estimates of 55 cents and raised their
estimates for Q4 to well over current analyst forecasts.
The stock jumped +2.30 in after hours trading. The 
company distributes high tech products and software
around the world and had revenue of $4.8B for the
quarter. 

Google was the beneficiary of new coverage by Goldman
Sachs at an outperform and a price target of $215.
The stock surged +$10 in after hours as shorts got
their weekly beating. Goldman looked into their crystal
ball and projected 25% earnings growth through 2009
base on global secular growth. That prediction could
be very difficult to match since Google has warned
twice in the last two weeks that earnings will slow.

SIRI continued to move to a higher orbit since the
addition of Mel Karmazan as CEO. The stock has soared
from $4.75 to $6.75 in three days and traded 421 million
shares on Tuesday. This was a new Nasdaq record for 
single share volume. Eventually this high flyer will
come back to earth but it may not be soon. With only
800,000 subscribers and nearly $5 billion in debt the
outcome is probably an acquisition by somebody like
Viacom. Winning the war over XMSR may not occur in 
our lifetime but it won't be due to a lack of trying
by SIRI. 

Despite the listless markets money continues to flow
into funds with $4.5B in inflows for the week ended on
Monday according to TrimTabs.com. They also estimate
that more than $12B has come into the market so far
in November. They are now tracking exchange traded
funds and reported that the new GLD fund had seen
inflows of $1.3B in the last three days. 

I know the question on your mind is not will Google
move higher or SIRI plummet back to earth. Inquiring
minds want to know what happened to the market and
will there be a Thanksgiving rally. I can answer the
rally portion of that question with 100% confidence
and I will do so in the Sunday newsletter. Everybody
knows hindsight is always 20:20. 

The weakness in the markets this week is being attributed
to tax selling by funds. I know it seems earlier than
usual but that is because it is still November. You 
probably thought you forgot to tear that page off the
calendar when I said tax sales. Seriously, I mentioned
last weekend that the January effect had moved into 
December and that tax sales over the last several years
had moved into the early days of December. If market
analysts are right this week those sales have moved 
in front of Thanksgiving this year for one specific
reason. The Microsoft dividend is due out next week
and professional money managers are expecting a surge
in liquidity that will float the markets for up to two
weeks. Nobody wants to be selling then. They want to 
get the sales out of the way early and finish their
new position entry before those funds hit the market.

That positioning has created some serious volatility
over the last three days that has been mostly program
related. With the normal Thanksgiving trend being "buy
Tuesday's close and sell on Monday" the selling should
be behind us. The Dow touched 10600 last Wednesday and
was promptly sold. The Greenspan event last Friday gave
funds another reason to accelerate their dumping and 
the three bounces to 10500 this week were also sell
triggers. During this volatility one thing remained
firm. Support at 10450 emerged and became even stronger
as Tuesday trading began to wind down. The underlying
bid began to aggressively rise and we saw a rally at
the close that took the Dow futures back over 10500. 

The Nasdaq has been struggling as well but did manage 
to post a higher low at 2070 today. With the exception
of that higher low the chart for the last two weeks 
looks like a mirror image of the SOX. However, like 
the Dow there was concentrated buying in the futures
after the close and we should see a pop back over 2090
at the open. 

The SPX also posted a higher low late in the afternoon
with a close at 1177. The S&P futures ran up to 1180.50
after the bell and also suggest a higher open. The most
bullish index was the Russell and that is the one that
telegraphs the action of mutual funds. The Russell 
moved to a four day high just before the close at 
623.50 and appeared ready to retest the 627 all time
high from last week. After the close the Russell futures
soared to 626.50 and also suggest the Russell will open
higher tomorrow. Are you starting to see a common 
scenario developing here?

Russell Chart

 
Wilshire-5000 Chart

 


Personally I believe the artificial pumping of the
futures contracts after the close was an attempt to
send the averages higher at the open and hopefully
trigger some short covering on a low volume day. If
they can get the markets going sharply higher at the
bell then traders may believe the Thanksgiving rally
is breaking out and jump on the train. This could be
a cleverly disguised market manipulation scheme by 
big money to create a rally where none existed to
either benefit from current longs already entered or
to send the market higher over the holiday and give
them a higher exit level on Monday. Personally I still
believe it was the former as the latter leaves them in
cash but at a higher level with stocks artificially 
higher in price. It makes more sense that they have
already dumped the losers and used the dips to start
new positions they now want to send higher. 

Wednesday has a flood of economic reports but none 
are expected to be market movers. Wednesday is a
sentiment day where low volume tends to be bullish
and there are few professional traders left in the
office to try and sell into the rallies. Monday is
the risky day once everyone comes back into the office
to see what changes they still need to make before the
Microsoft billions hits the market. Technically Dec
2nd is the pay date but I would not expect a sudden
flagpole rally on that day. The money has to be
disseminated and received by fund managers before
they can spend it. The following Monday Dec-6th is
the likely date for money flow to begin hitting the
market. However, just because those are the critical
dates it does not mean funds will not be jockeying for
position as early as tomorrow in hopes of getting a
pole position for that liquidity rally.
 
I have to emphasize that all of this is just speculation
and anything is possible. We never know what forces are
at work behind the scenes and how much money is moving
into or out of position or why. What we do know is the
next three weeks could be an exciting time in the market
and hopefully a profitable event. I plan on remaining
long over SPX 1175 and suggest you do the same. This
gives us a red light, green light traffic signal for
the coming week. Decisions are simpler when made in
advance and not in the heat of battle. Mine are made,
are yours?

If you have not seen the end of year renewal special
we announced on Sunday please be sure to check it out
tonight. 

Buy the dips until the trend changes. 

Jim Brown
Editor


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

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


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*****************
INDEX TRADER WRAP
*****************

Shifting sentiment with oil

If I could just figure out for certain which way oil prices were 
headed, I'd have a much more comfortable feel for what to try and 
expect in coming sessions.

Stocks seesawed with oil in Tuesday's trade, where the major 
equity indices and oil finished relatively unchanged ahead of 
tomorrow morning's weekly crude, distillate, and unleaded gas 
inventory report from the EIA.

Oil - Continuous Contract ($WTIC) Chart - $0.25 box

 

After giving a reversing higher point and figure buy signal on 
Friday at $47.50, the conventional $0.25-box chart of $WTIC has 
oil extending gains without so much as a 3-box reversal, and the 
bullish vertical count growing to $60.00.  Ugh!  If oil is headed 
to $60, that can't be good for equity market psychology, and with 
each passing day, traders and investors certainly get the feel 
that equity traders remain focused on what oil is doing at any 
given moment.

Since the point-and-figure-tologist (one who uses point and 
figure charts) would chart X's up to $50.25 for today's trade and 
stop, as that's where the current column of X (demand) builds to.  
However, I also like to look as see where oil settled ($48.94) as 
well as some further selling into tomorrow's session ($48.73) to 
try and get a feel for things toward the close.

I'd have to say that oil traders don't seem to be showing their 
hand, as oil settled almost smack-dab between Friday's buy signal 
and today's high.

Meanwhile, the S&P 500 Index (SPX.X) 1,176.94 -0.02% would have 
finished today's session almost smack-dab in the middle of for 
Friday's opening tick and yesterday morning's low.

But I'm going to go into tomorrow trade with the thought that by 
the close, oil will have settled below today's $48.94 settlement, 
as January Heating Oil (ho05f) $1.4579 matched yesterday's high, 
but did NOT exceed it like we saw in the January Crude Oil 
(cl05f) futures contract.

January Crude Oil futures (cl05f) Chart - 30-min intervals

 

The O/H/L/T in the above chart is Wednesday's (tomorrow's) 
electronic session already underway.  I'm still keeping my 
"yellow" zone of resistance on the January contract, which ties 
to the point and figure chart.  If that observation of "heating 
oil" being a leading indicator for Crude Oil (see this weekend's 
Ask the Analyst) column is the telling DIVERGENCE traders are 
keying off of, then I'll have a bearish bias for oil below WEEKLY 
R1 at this point, but will have to respect that rising 50-pd SMA 
and DAILY Pivot as the near-term support on the above chart.  See 
how the 50-pd SMA seemed to be moving average resistance since 
late October until that "pop" higher from Friday?  

Resistance broken can become support.

Market Snapshot / Internals - 11/23/04 Close

 

Oil jumped higher at around 11:00 AM EST and I still think 
traders can see the impact that type of "pop" higher in oil has 
on things.  The rather robust expansion of new highs at the NYSE 
is most likely attributed to "energy stocks" listed on the big 
board.  Then as oil retreats toward its daily settlement, look at 
internals building to their best levels of the session on the 
advance decline lines.  

U.S. Market Watch - 11/23/04 Close

 

Look at the Market Volatility Index (VIX.X) 12.67 -2.31%!  Early 
this morning, the VIX.X plunged to a new all-time low of 12.57.  
At today's close, most active SPX options were the Dec. 1,175 
puts (SPT-XO) with volume of 8,101 and OI of 54,588.  This 
contract finished at $11.80 with average OHLC of $12.85.  The 
Dec. 1,200 calls (SZP-LT) were the second-most active at 6,530 
contracts with OI of 56,318.  This contract finished at $5.40 
with average OHLC of $5.05.

With the VIX.X falling, I have to think the bulk of trade was put 
seller and call buyer.

I should note that its is NOT the volume in the above mentioned 
put/calls that has my interest.  Its the VIX.X at an all-time low 
that has me trying to figure out just what might be taking place, 
where as the VIX.X falls and the 1,175 puts are most active, why 
would anyone be willing to sell those puts with volatility and 
premiums so low?  

The pivot matrix might provide the answer.

Pivot Matrix -

 

If a trader is selling 1,175 for an average price of $12.85, what 
that trader has to be thinking is that the SPX will not close 
below 1,175 - 12.85 = 1,162.15.  This 1,162.15 calculation would 
be pretty darned close to this WEEK's S1.  Is the MARKET, or a 
TRADER so confident in a lower oil price reaction that they'd be 
selling Dec. 1,175 puts against that level?  Then buying the out-
the-money 1,200 calls in excess of WEEKLY R2?  

They might be.  See today's low in the SPX comes right at/near 
the MONTHLY R2.  Also note tomorrow's SPX DAILY S1 and MONTHLY R2 
correlation.  Let's consider that some important support with 
weekly energy inventories due out tomorrow morning at 10:30 AM 
EST.

Here's a 30-minute interval chart of the SPX with our WEEKLY and 
MONTHLY Pivot retracement overlaid.  

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

 

As I look at the above SPX chart on 30-minute interval, something 
additional hits me.  See that little "double-top" I point to at 
SPX 1,080?  That's this morning's opening tick highs and this 
afternoon's highs.  That looks almost IDENTICAL to the little 
double-top in Heating Oil futures from yesterday's high and 
today's high.  

My thinking here is that EQUITY bulls are simply waiting for the 
reaction to tomorrow's data, but buyers seem more eager than 
sellers.

I also point down to the WEEKLY S2, where earlier this month, we 
can see how the SPX danced along this level before advancing to 
the recent highs of 1,188.

While it is my assumption that today's action in the Dec. 1,175 
puts was the opening up of "naked puts" and selling of 1,175 for 
approximately $12.85 throughout the session, I will want to check 
this first thing tomorrow morning against newly tabulated open 
interest.  It could be an "old bear" selling those puts and 
closing out after seeing 1,188.

Jeff Bailey

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

Holding Up
- J. Brown

Overall investors can feel pretty cheerful.  The markets are 
holding up better than expected.  I was looking for a dip this 
week to give us a good set up into the traditional Christmas 
rally.  Unfortunately, it seems that there are so many investors 
looking to buy the dip that any pull back is going to have to 
fight to become more than a blip on the way up.  At least that's 
what the bull inside of me wants to say.  The bear inside of me 
continues to growl and point at all the stocks and indices that 
remain overbought, extended and due for a real consolidation all 
while the volatility indices trade near multi-year lows.  

There was a lot of talk today about the traditional Thanksgiving 
trade.  What is the Thanksgiving trade?  Historically the markets 
tend to be bullish the day before and the (half) day after the 
Thanksgiving holiday at least they were.  This pattern was very 
consistent for years and years.  The problem now is that it has 
become over publicized and the pattern has broken down over the 
past several years into more of a 50/50 toss up.  Given how over-
extended stocks are I'd still give it a 50/50 toss up but if I 
was forced to bet I might bet on the bulls.  

It's important to note that we'll start to see holiday trading 
volume the rest of this week as most of Wall Street's 
professionals head out early for Thanksgiving here in the states.  
Normally light trading volumes can exaggerate moves, especially 
in low volume stocks.  

Tomorrow brings several economic reports like the weekly initial 
jobless claims, the Durable goods orders for October, the revised 
Michigan sentiment number for November, the new home sales 
figures and the help wanted index.  None are really expected to 
have an impact on trading.  


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

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9585
Current     : 10492

Moving Averages:
(Simple)

 10-dma: 10499
 50-dma: 10168 
200-dma: 10244 



S&P 500 ($SPX)

52-week High: 1188
52-week Low : 1031
Current     : 1176

Moving Averages:
(Simple)

 10-dma: 1176
 50-dma: 1134
200-dma: 1121



Nasdaq-100 ($NDX)

52-week High: 1581
52-week Low : 1301
Current     : 1562

Moving Averages:
(Simple)

 10-dma: 1556
 50-dma: 1471
200-dma: 1440



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

CBOE Market Volatility Index (VIX) = 12.67 -0.30
CBOE Mkt Volatility old VIX  (VXO) = 13.08 -0.50
Nasdaq Volatility Index (VXN)      = 18.43 -0.34 


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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.79        856,931       678,770
Equity Only    0.66        731,115       484,224
OEX            1.08         30,649        33,156
QQQ            1.66         44,470        73,937


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

Bullish Percent Data

           Current   Change   Status
NYSE          73.0    + 0.5   Bear Correction
NASDAQ-100    75.0    + 0     Bull Confirmed
Dow Indust.   66.6    + 3.3   Bull Confirmed
S&P 500       73.0    + 0.2   Bull Confirmed
S&P 100       72.0    + 2     Bull 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: 1.03
10-dma: 1.07
21-dma: 0.96
55-dma: 1.12


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    1708      1673
Decliners    1110      1319

New Highs     233       136
New Lows       11        19

Up Volume    970M     1144M
Down Vol.    778M      876M

Total Vol.  1782M     2048M
M = millions


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

Commitments Of Traders Report: 11/16/04


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

For the first time in weeks the commercials are making a move.  
They upped their short positions days before the recent decline.
Meanwhile small traders remain marginally net bullish.

Commercials   Long      Short      Net     % Of OI
10/26/04      441,263   445,992   ( 4,729)   (0.4%)
11/02/04      446,192   441,676   ( 4,516)   (0.4%)
11/09/04      447,779   449,171   ( 1,392)   (0.1%)
11/16/04      452,149   468,048   (15,899)   (1.7%)

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
10/26/04      138,201   121,275    16,926     6.5%
11/02/04      136,290   132,040     4,250     1.5%
11/09/04      148,415   136,325    12,090     4.2%
11/16/04      166,862   156,751    10,111     3.1%

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 traders also piled on the shorts in the e-minis
to produce the most bearish reading in weeks.  Small traders
also put more money to work but remained strongly net bullish.


Commercials   Long      Short      Net     % Of OI 
10/26/04      276,128   509,552   (233,424)  (29.7%)
11/02/04      307,053   580,081   (273,028)  (30.7%)
11/09/04      337,164   672,903   (335,739)  (33.2%)
11/16/04      371,282   796,279   (424,997)  (36.4%)

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
10/26/04      345,908     64,061   281,847    68.7%
11/02/04      395,029     63,746   331,283    72.2%
11/09/04      392,253     58,999   333,254    73.8%
11/16/04      445,737     70,169   375,568    72.8%

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


NASDAQ-100

Commercials added to both their longs and their shorts but
saw no change in their bullish bias for the NDX.  Small traders
pared back some of their shorts but remained strong net bearish.


Commercials   Long      Short      Net     % of OI 
10/26/04       53,233     31,323    21,910   26.2%
11/02/04       53,002     31,231    21,771   25.0%
11/09/04       54,509     33,016    21,493   24.5%
11/16/04       55,737     33,683    22,054   24.6%

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
10/26/04       10,521    25,388   (14,867)  (42.8%)
11/02/04        8,886    36,621   (27,735)  (61.3%)
11/09/04       10,213    38,251   (28,038)  (57.8%)
11/16/04       10,533    37,660   (27,127)  (56.2%)

Most bearish reading of the year: (28,038) - 11/09/04
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Given the latest data as of 11/16/04 it looks like commercials
were beginning to bet on a pull back.  There was a reduction
in longs and an increase in shorts to create the first bearish
reading in weeks.  Small traders also increased their bearish
bias.

Commercials   Long      Short      Net     % of OI
10/26/04       25,707    24,855      852       1.6%
11/02/04       25,319    24,261    1,058       2.0%
11/09/04       22,863    22,463      400       0.8%
11/16/04       22,004    23,744   (1,740)     (3.8%)
 
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
10/26/04        8,405     6,336    2,069     14.3%
11/02/04        7,952     6,306    1,261      8.8%
11/09/04        6,165     6,483    ( 318)   ( 2.5%)
11/16/04        5,937     6,533    ( 596)   ( 4.7%)

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


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The Option Investor Newsletter                  Tuesday 11-23-2004
Copyright 2004, All rights reserved.                        2 of 3
Redistribution in any form strictly prohibited.


In Section Two:

Dropped Calls: None
Dropped Puts: None
Call Play Updates: COP, DHR, EBAY, EOG, FDX, FLR, IBM, MUR, OSK, PTR, 
                   QCOM, SLB, SUN
New Calls Plays: None
Put Play Updates: FRX
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:
*****

None


PUTS:
*****

None


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

ConocoPhillips - COP - close: 89.70 change: +0.83 stop: 84.99*new*

Ding!  That was the sound of COP hitting round-number, 
psychological resistance at the $90.00 mark.  The oil sector was 
relatively strong as crude oil prices traded above $50.00 a 
barrel for the first time in three weeks.  Crude couldn't hold 
all of its gains but the pull back didn't affect COP.  Shares of 
COP look poised to breakout over the $90 level soon.  Should 
shares dip unexpectedly look for a bounce from the $88 level.  
We're raising our stop loss to $84.99.  Short-term traders may 
consider taking some profits now.  COP is up more than four 
points from our entry price.  

Picked on November 03 at $85.50
Change since picked:     + 4.20
Earnings Date          10/27/04 (confirmed)
Average Daily Volume =      3.0 million 
Chart =



---

Danaher - DHR - close: 58.06 change: +0.12 stop: 55.95 

We're impressed with DHR's relative strength.  The stock is very 
overbought but continues to drift higher with a series of higher 
lows.  Yes, that is a new sell signal on the MACD so we're not 
suggesting new bullish positions.  Short-term traders may want to 
consider taking some money off the table here.  Conservative 
traders may want to just tighten their stops instead.  Our target 
remains the $60.00 region.  

Picked on October 27 at $54.99
Change since picked:    + 3.05
Earnings Date         10/21/04 (confirmed)
Average Daily Volume =     1.3 million 
Chart =


---

eBay Inc. - EBAY - close: 109.53 chg: +0.05 stop: 102.49     

Investors traditionally turn their attention to retailers as 
"Black Friday" approaches, which is the day after Thanksgiving.  
This is historically the opening bell for the holiday shopping 
season.  Yet traders have also learned that online giants like 
AMZN and EBAY also do more than their fair share of holiday 
sales.  Maybe that's why Monday's dip to $106 was bought so 
quickly.  We remain very bullish on EBAY and while we'd like to 
see another dip as a new entry point it may not appear.  Traders 
may be "forced" to buy the breakout over $111.00.  

Picked on November 80 at $103.69 
Change since picked:      + 5.84
Earnings Date           10/20/04 (confirmed)
Average Daily Volume =      10.4 million 
Chart =


---

EOG Resources - EOG - close: 74.05 change: +0.53 stop: 67.99

Exit alert!  We notified our readers in the MarketMonitor this 
morning that it may be time to do some profit taking in EOG.  
Shares traded to $74.72, which is pretty close to our short-term 
target at $75.00.  The stock is up more than 5 1/2 points from 
our entry point and the option values have soared.  It's still 
not too late to take some money off the table.  Yet we remain 
bullish and expect EOG to trade toward $80 by year-end.  Right 
now we'd look for a dip if you were looking for new entries.  A 
pull back to $72 may be a good spot to watch for a bounce.  

Picked on November 14 at $ 68.37
Change since picked:      + 5.68
Earnings Date           10/26/04 (confirmed)
Average Daily Volume =       1.1 million    
Chart =



---

Fedex Corp - FDX - close: 95.43 change: +0.15 stop: 89.99    

Wow!  We remain impressed by the relative strength in FDX and the 
Dow Transports.  Both have been consolidating the past several 
days and both look poised to breakout very soon to new highs.  
Readers can watch FDX for a move over $96 as a new entry point.  
Just keep in mind that our target is the $99-100 region.  In the 
news FDX announced on Monday that its Board had declared a 
quarterly cash dividend of 7 cents per share payable on January 
3rd, 2005 to shareholders on record as of December 13th.  We are
still suggesting short-term traders consider some profit taking.

Picked on October 21 at $89.45 
Change since picked:    + 5.88
Earnings Date         09/22/04 (confirmed)
Average Daily Volume =     1.5 million 
Chart =


---

Fluor Corp - FLR - close: 51.85 change: +3.34 stop: 45.99*new*

Double wow!  We listed FLR last night with the breakout over 
resistance at $48.00 on strong volume.  We thought shares look 
poised to trade higher but we didn't expect a 6.88 percent rally 
today.  Volume was over six times the average on today's gain.  
FLR traded to an intraday high of $53.32.  During that time we 
suggested to our MarketMonitor readers that anyone who entered 
this morning might want to consider exiting for a quick one-day 
pop.  This high-volume rally is very bullish as is the close over 
the $50.00 level.  Watch for a pull back toward $50.00 as a new 
entry point. We are raising our stop loss to $45.99.  Our target 
remains the $55 to $60 range. 

Picked on November 22 at $48.51
Change since picked:     + 3.34
Earnings Date          10/27/04 (confirmed)
Average Daily Volume =      521 thousand   
Chart =


---

Intl Business Mach. - IBM - close: 95.28 chg: +0.17 stop: 89.99 

Hmm... last week's topping action never got very far.  Looks like 
traders are buying the dip to $94.  Yes, the stock remains 
overbought, extended and due for a larger pull back but it's not 
showing up.  We still suggest short-term traders consider doing 
some profit taking here even though the short-term action looks 
poised to push IBM higher tomorrow.  In the news IBM announced 
plans to buy Liberty Insurance Services Corp.  The move puts IBM 
into the life insurance processing and administration services.  

Picked on October 27 at $90.00
Change since picked:    + 5.28
Earnings Date         10/18/04 (confirmed)
Average Daily Volume =     4.7 million 
Chart =


---

Murphy Oil - MUR - close: 84.20 change: +0.60 stop: 78.99*new*

The rally continues for MUR as the oil sector pushes to new all-
time highs.  Today's ramp up in crude oil prices certainly didn't 
hurt the sector.  We were triggered on Monday as MUR broke out 
over resistance at the $82.00 level and hit our entry point at 
$82.25.  We're very encouraged by the rising volume on the 
current rally and technicals remain bullish as MUR builds on its 
recent MACD buy signal.  The next challenge is round-number 
resistance at $85 but we don't expect it to hold MUR back.  If 
shares dip consider a bounce above $82.00 as a new entry point.  
We're raising our stop loss to $78.99.

Picked on November 22 at $ 82.25
Change since picked:      + 1.95
Earnings Date           10/26/04 (confirmed)
Average Daily Volume =       500 thousand   
Chart =



---

Oshkosh Truck - OSK - close: 63.15 change: +1.09 stop: 58.00*new*

Hmm.. the pull back in OSK is being short-circuited by dip 
buying.  Previously the price action and technical oscillators 
all pointed to a pull back.  We've been suggesting readers watch 
for a dip to $60.00 as a new entry point.  We may have to 
consider the possibility that any consolidation will postponed 
until after the holidays.  Currently OSK remains stuck in the 
$62-64 trading range.  If shares breakout over $64 we may have to 
use it as a momentum entry point.  Currently, we're still hoping 
for a pull back!  In the meantime we're raising our stop loss to 
$58.00.

Picked on November 07 at $ 62.16
Change since picked:      + 0.99
Earnings Date           10/28/04 (confirmed)
Average Daily Volume =       205 thousand   
Chart =


---

PetroChina Co - PTR - close: 56.60 change: +0.80 stop: 52.49

Strength in the oil sector helped push PTR to new one-year highs 
as the stock added 1.4 percent on heavy volume.  We remain 
bullish and suggest readers watch for a dip to $56.00 as a new 
entry point.  No change in stop or target.

Picked on November 17 at $55.18
Change since picked:     + 1.42
Earnings Date          00/00/04 (confirmed)
Average Daily Volume =      288 thousand
Chart =



---

Qualcomm - QCOM - close: 40.73 change: -0.26 stop: 37.50

Monday's rebound back over the $40.00 level and its cloud of 
moving averages was very encouraging.  Today's minor dip may be 
nothing more than another entry point.  The MACD remains in its 
buy signal.  No change in our stop loss or our strategy. 

Picked on November 15 at $ 40.51
Change since picked:      + 0.22
Earnings Date           11/03/04 (confirmed)
Average Daily Volume =      13.9 million    
Chart =


---


Schlumberger - SLB - close: 66.10 change: -0.20 stop: 61.00

Hmm... today's action in SLB was a little odd.  The OIX oil index 
and OSX oil services index traded higher as crude broke above the 
$50.00 a barrel mark for the first time in three weeks.  Oil 
services out performed with a 1.16 percent gain.  Yet SLB, an oil 
service stock, turned negative with an afternoon sell-off.  We 
remain bullish, especially through the end of this year, but we 
suspect SLB could slip back toward the $65 region.  Watch the dip 
for a new entry point.  

Picked on November 12 at $ 65.05
Change since picked:      + 1.05
Earnings Date           10/22/04 (confirmed)
Average Daily Volume =       3.9 million    
Chart =


---

Sunoco Inc - SUN - close: 80.78 change: +0.61 stop: 74.89*new*

Up, up and away!  Oil refiner SUN is breaking out to new all-time 
highs.  Yesterday's move over round-number, psychological 
resistance at the $80.00 level was very bullish.  The stock 
appears to be a leader in the sector.  Should shares dip watch 
for a bounce above $78.00 and use it as an entry point.  We are 
raising our stop loss to the simple 40-dma at $74.89. 

Picked on November 18 at $78.25
Change since picked:     + 2.53
Earnings Date          10/21/04 (confirmed)
Average Daily Volume =      1.2 million 
Chart =



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

None


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

Forest Labs - FRX - close: 37.70 change: +0.90 stop: 42.01

If you missed our update in Monday's newsletter we'll repeat what 
happened.  Bank of America downgraded their coverage on FRX to a 
"sell" rating and slashed their price target to $34.00 before the 
opening bell on Monday.  FRX gapped down to $39.07, immediately 
triggering us and shares slipped to an intraday low of $36.10 
before closing at 36.80 on extremely heavy volume.  This was a 
very bearish technical breakdown.  Yet we suspected FRX could 
produce an oversold bounce today, which did occur.  Actually it 
would not surprise us to see FRX fill the gap toward the $40.00 
level, which should now act as resistance.  Readers watching for 
an entry point can look for the failed rally under $40.00.  We 
lowered our stop loss to $42.01 on yesterday's breakdown. 

Picked on November 22 at $39.07
Change since picked:     - 1.37
Earnings Date          10/18/04 (confirmed)
Average Daily Volume =      2.8 million 
Chart =



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

None


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**********

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The Option Investor Newsletter                  Tuesday 11-23-2004
Copyright 2004, All rights reserved.                        3 of 3
Redistribution in any form strictly prohibited.


In Section Three:

Watch List: Drugs to Software and more!
Traders Corner: Elliott Wave principles basics; part 3
Spreads & Straddles: A Mixed Session...
Premium Selling Plays: Naked Puts & Calls


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

___________________________________________________________________

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.
___________________________________________________________________


Taro Pharmaceuticals - TARO - close: 28.51 change: +0.63

WHAT TO WATCH: TARO has a certain appeal if you're worried about 
stocks trading at nosebleed levels.  Sure the drug sector hasn't 
been so strong lately but TARO has produced a consistent rebound 
once it began a few weeks ago.  Currently the $30.00 level is the 
key resistance level to watch.  A breakout over $30.00 would be a 
bullish entry point for a run toward $35 and its exponential 200-
dma or the $40.00 level and its simple 200-dma.  Currently the 
P&F chart shows a triple-top breakout buy signal with a $46 
target.

Chart=


---

NCR Corp - NCR - close: 59.15 change: +1.78

WHAT TO WATCH: After three weeks of consolidating in a very 
narrow range between $56 and $58 shares of NCR is breaking out on 
very strong volume.  This looks very bullish and traders may want 
to consider chasing today's three percent gain. These are new 
all-time highs and so there's nothing to slow NCR down.  The 
bullish P&F chart points to an $83 target.  We would use a short-
term target at $65.

Chart=


---

Texas Industries - TXI - close: 57.96 change: +1.06

WHAT TO WATCH: TXI broke out over resistance at the $55.00 level 
a couple of weeks ago.  Ever since it has consolidated sideways.  
Even though the stock is overbought and due for a pull back 
shares look poised to breakout again.  Watch for the move over 
$58.00.  These are new six and a half year highs for TXI and the 
nearest resistance appears to be the $67 region.  Use a 
relatively tight stop.

Chart=


---

Symantec - SYMC - close: 62.75 change: +0.70

WHAT TO WATCH: We have had SYMC on the watch list or radar screen 
for several days now.  The bullish consolidation under resistance 
at $62.00 has finally broken out.  Today's gain and close at 
$62.75 looks like a bullish entry point.  The challenge is that 
SYMC is due to split 2-for-1 on December 1st, which is next 
Wednesday.  Right now we expect the stock to run higher but some 
stocks can have a post-split depression as momentum traders 
rotate out of the stock.  Others don't see any depression at all 
but keep right on climbing.  You have to decide if you're willing 
to hold over the stock split.

Chart=



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

EXP $75.65 +1.75 - The two-day rally has pushed EXP to another 
new all-time high.  

EGN $57.06 +0.58 - This natural gas stock is breaking out to new 
all-time highs.  It looks like an entry point after the two-week 
consolidation.

PRX $41.18 +2.67 - PRX is breaking out over resistance at the 
$40.00 mark but it still has price resistance near $42.50 
bolstered by its 200-dma's. 


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

Elliott Wave principles basics; part 3
By Leigh Stevens

I recently moved a pile of my books on technical analysis into a 
more remote bookstand away from my home office, as I was rarely 
looking up anything in any of these books.  However, I kept my 2 
Elliott wave books handy – one by Robert Precter and Robert Frost 
called "Elliott Wave Principle" and the other and most useful one 
called the "The Major Works of R.N. Elliott".  

Oh, there are a couple copies of my book (Essential Technical 
Analysis) that I left close by in case I want to refer someone to 
some topic or other – not because I think I am the last word on 
any subject.  

But Elliott has some VERY useful things to say about various 
chart patterns that you see over and over. So, if I could only 
take a couple of market analysis books with me to a desert island 
and I was still remotely studying the markets, well, Elliott 
would be one of them.  He's long gone, but there is not that much 
new under the sun in terms of patterns as similar market patterns 
and cycles keep happening over and over.    

Anyway, I started these musings on wave patterns last month. The 
first article is at –
http://www.OptionInvestor.com/traderscorner/tc_102604_1.asp

I then continued with some Subscriber questions and went a bit 
further with the wave concept in part 2 –
http://www.OptionInvestor.com/traderscorner/tc_111804_1.asp


ONCE MORE WITH FEELING – 
A bull market or a basic up trend often unfolds in 3 advancing 
impulse" waves or moves, with 2 intervening counter- trend 
corrections or downswings - these all together make up what 
Elliott referred to as the 5-wave structure to a bull market 
trend, whether lasting 2-3 days, several weeks, months or years. 
The END or conclusion of one of these component moves or waves is 
where we put a number or letter. A good example, and this one is 
of a long-term up trend, was seen in GE back during the period 
shown below -   


 

I made a blanket statement on my notation on the above chart, 
that the 3 wave is the most powerful and biggest advance.  That 
is, the second "leg" up in a bull market trend.  This is usually, 
but not always the case.  However, it does happen this way a lot, 
for example, on this hourly move in the Dow – 


 

Opps, the beginning of the first advance is cut off slightly  
(wave 1) but didn't rise much further than shown on the left.  

A bull market move, designated by the 5-wave structure or pattern 
is often followed by a down-up-down correction or 3-part 
structure designated by the Letters A, B and C (or as a, b and c) 
and can be seen clearly in a past chart example below which also 
illustrates a couple of other ideas. 

1. The second down leg in a bear trend or bear market usually 
carries farther than the first decline.  And,
2. There is a tendency for the patterns to alternate in distance 
and "regularity"; i.e, the rule of alternation –


  

The Wave "rule of alternation" suggests that the strength of a 
move or the distance carried will alternate; e.g., a stronger and 
longer price swing will follow a relatively lesser advance and 
vice versa.  And, if the first correction is relatively shallow, 
the next one will tend to be deeper.

Bear markets or declining trends subdivide into the 3-part "a-b-
c" structure illustrated in the chart above. The S&P 100 (OEX) 
Index chart is of the hourly closes for about 6-weeks and is a 
pretty typical a-b-c/down-up-down decline.  

The foregoing is Elliott wave in a very small nutshell – studying 
wave patterns, at least when they form the more obvious 
structures of wave up waves and a 3-part decline or bear 
trend/bear market is useful for trading, in giving some hint of 
how the trend may continue to unfold. Having an idea that a 
second advance is the one to go into more heavily and to hang in 
for a bigger move and not to be as quick to jump out, is pretty 
useful guidance.   

Knowing that an overall decline takes the form typically 
of a down-up-down pattern and that the second decline or wave "c" 
is the move that is usually most prolonged and steep is also 
quite valuable. Another chart example is next. By the way, 
usually the rebound (b) in an a-b-c pattern does not commonly 
retrace all of the first decline (a) – 


 

FURTHER BREAKDOWN OF WAVE PATTERNS - 
There is a further subdivision of the larger wave structure and 
its value is in helping you figure out when a particular move may 
in a FINAL stage of completion.

Applying a different kind of alternating rule, impulse waves or 
up moves in bull market trends (waves 1, 3, and 5) in the same 
direction of the trend or up in this case, break down into a 
smaller wave-5 structure. The counter-trend waves 2 and 4 which 
are counter to the trend or are down moves in this case, break 
down into a further a-b-c (down-up-down) pattern or structure.  

Conversely, an a-b-c bearish downtrend has 2 moves in the 
direction of the trend which is down ("a" & "c") and 1 counter-
trend wave "b".  The moves in the SAME direction as the down 
trend (a & c) break down into a "smaller" 1-5 structure, whereas 
the counter-trend upswing “b” breaks down into a smaller a-b-c 
pattern.

Some chart examples help to visualize this – as well, its helpful 
to memorize this simple rule: 

Moves in the SAME direction as the overall trend (up OR down) 
break down into further or "smaller" 5-part patterns AND 

Moves AGAINST the trend (up OR down) break down into a smaller a-b-
c structure.

An advancing trend that has 3 impulse waves up (1,3,5) and 2 
counter-trend downswings making a 5-wave structure, also breaks 
down into smaller 1 to 5 and a-b-c patterns per the example 
shown, a chart and time frame for GE (weekly) seen already only 
without the breakdown into its smaller wave components – 


 
 
As I said, moves in the SAME direction as the up trend above 
break down into smaller 5-wave patterns, whereas the counter-
trend downswings 2 and 4 break down into smaller a-b-c patterns 
(down-up-down price swings).

A declining or bear market trend or an a-b-c (down-up-down)  
breaks down further into smaller 5-wave component moves for the 
"a" and "c" moves that are in the direction of the down trend; 
the "b" wave rebound that is counter to the trend, is broken down 
further into an a-b-c correction, only in this case the direction 
of the price swings are UP-down-UP as shown by going back to the 
OEX hourly chart – 


 

Examples or how I have labeled where one wave begins and ends, 
are for demonstration purposes and in an attempt to provide 
the basic concepts of how a trend is viewed in terms of its 
(Elliott) wave structure.  

I find the wave concepts in patterns useful mostly where the wave 
structure appears pretty clear cut – the success of successfully 
identifying a "classic" wave structure in an unfolding trend is  
whether it provided early recognition of a trend that led to a 
profitable investment or trade.

Write me if this is clear, write me if it's not clear and/or if 
you find some useful example in some trend or other that is past 
or going on currently. And meanwhile ...

Good Trading Success!  


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

A Mixed Session...
By Ray Cummins

Stocks rebounded in late trading Tuesday, closing the day nearly
unchanged amid relatively light trading activity.

The Dow Jones Industrial Average ended up 3 points at 10,492 with
McDonald's (NYSE:MCD) and American International Group (NYSE:AIG)
among the best performing blue-chips.  The NASDAQ Composite Index
finished where it started at 2,084, despite a downgrade of Intel
(NASDAQ:INTC) that weighed on semiconductor stocks.  The S&P 500
index closed at 1,176, with losses in biotech, homebuilding, drug
and materials shares offsetting gains in energy, utility, airline
and managed healthcare issues.  Advancers led decliners 3 to 2 on
the New York Stock Exchange and 6 to 5 on the NASDAQ.  Big Board
volume was 1.2 billion shares and technology traders swapped 1.9
billion shares.  Bond prices drifted in a small range throughout
the session with the 10-year note finishing down 1/32, while its
yield climbed to 4.18%.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 11/21/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of our subscribers, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The editor of this section does not take actual positions in any
published plays and the summary comments are simply a service to
help new traders understand when positions might be opened and
closed.  In most cases, actions taken based on the commentary
would be far too late to be effective, thus it is not intended
as a substitute for personal trade management nor does it in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.


PUT-CREDIT SPREADS

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

VIP   121.49 122.35  DEC 105.0 110.0  0.70  109.30   0.70   Open
WLP   113.90 120.00  DEC 100.0 105.0  0.50  104.50   0.50   Open
CECO   35.00  35.01  DEC  25.0  30.0  0.60   29.40   0.60   Open
PJC    48.95  44.80  DEC  40.0  45.0  0.60   44.40   0.40   Open?
EYET   45.64  44.01  DEC  30.0  35.0  0.45   34.55   0.45   Open
XMSR   36.13  35.01  DEC  30.0  32.5  0.25   32.25   0.25   Open

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

Piper Jaffray Companies (NYSE:PJC) is a candidate for early-exit
after Friday's sharp decline.


CALL-CREDIT SPREADS

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

SEPR   45.44  46.17   DEC  55.0  50.0  1.00   51.00  1.00   Open
TTWO   33.24  32.64   DEC  40.0  37.5  0.30   37.80  0.30   Open
ERTS   46.97  49.15   DEC  55.0  50.0  0.65   50.65  0.65   Open?
GM     39.97  38.90   DEC  45.0  42.5  0.30   42.80  0.30   Open
BSX    34.70  34.02   DEC  40.0  37.5  0.30   37.80  0.30   Open
MXIM   42.50  42.58   DEC  50.0  45.0  0.70   45.70  0.70   Open
BIIB   58.31  55.34   DEC  70.0  65.0  0.50   65.50  0.50   Open
INSP   49.17  44.00   DEC  65.0  60.0  0.40   60.40  0.40   Open

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

Electronic Arts (NASDAQ:ERTS) is now on the "watch" list.


DEBIT STRADDLES

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

NTES    40.00  52.41   NOV   40.0   40.0    5.00   12.00   Closed
NEW     55.15  60.75   NOV   55.0   55.0    4.70    9.10   Closed
SBUX    54.51  55.21   NOV   55.0   55.0    2.50    2.25   Closed
COCO    17.75  16.00   NOV   17.5   17.5    0.85    1.40   Closed
BCSI    19.93  17.53   NOV   20.0   20.0    2.40    2.50   Closed

Speculative positions in Corinthian Colleges (NASDAQ:COCO), New
Century Finance (NYSE:NEW) and Netease.com (NASDAQ:NTES) provided
favorable straddle opportunities during the month of November.

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

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

DRIV - Digital River  $38.31  *** Next Leg Up? ***

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

DRIV - Digital River  $38.31

PLAY (less conservative - bullish/credit spread):

BUY  PUT  DEC-30.00  DQI-XF  OI=987  ASK=$0.15
SELL PUT  DEC-35.00  DQI-XG  OI=641  BID=$0.65
INITIAL NET-CREDIT TARGET=$0.55-$0.60
POTENTIAL PROFIT(max)=12% B/E=$34.45


__________________________________________________________________

NBR - Nabors Industries  $52.72  *** Sector Rally! ***

Nabors Industries (NYSE:NBR) is a land drilling contractor that
conducts oil, gas and geothermal land drilling operations in the
lower 48 United States, Alaska, Canada, South and Central America,
the Middle East and Africa.  It is also a land well servicing and
workover contractor with operations in the U.S. and Canada.  The
company owns hundreds of land workover and well servicing rigs in
the United States and Canada.  Nabor's also provides offshore
platform workover and drilling rigs and owns a number of platform,
jack-up and three barge rigs in the Gulf of Mexico and various
international markets.  These rigs provide well, workover and
drilling services.

NBR - Nabors Industries  $52.72

PLAY (speculative - bullish/credit spread):

BUY  PUT  DEC-47.50  NBR-XW  OI=660   ASK=$0.35
SELL PUT  DEC-50.00  NBR-XJ  OI=1917  BID=$0.70
INITIAL NET-CREDIT TARGET=$0.40-$0.45
POTENTIAL PROFIT(max)=19% B/E=$49.60



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

BEARISH PLAYS - CREDIT SPREADS

All of these positions are favorable candidates for "bear-call"
credit spreads, based on the current price or trading range of
the underlying issue and its recent technical history or trend.
The probability of profit from these positions may be higher
than other plays in the same strategy, due to disparities in
option pricing.  However, current news and market sentiment will
have an effect on these issues, so review each play individually
and make your own decision about its future outcome.

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

LXK - Lexmark Intl.  $84.82  *** In A Trading Range? ***

Lexmark International (NYSE:LXK) is a developer, manufacturer
and supplier of printing solutions, including laser and inkjet
printers, multifunction products and associated supplies and
services for offices and homes.  The company also markets dot
matrix printers for printing single and multi-part forms for
business users and develops, manufactures and markets a broad
line of other office imaging products.

LXK - Lexmark Intl.  $84.82

PLAY (conservative - bearish/credit spread):

BUY  CALL  DEC-95.00  LXK-LS  OI=235  ASK=$0.10
SELL CALL  DEC-90.00  LXK-LR  OI=946  BID=$0.50
INITIAL NET-CREDIT TARGET=$0.45-$0.50
POTENTIAL PROFIT(max)=9% B/E=$90.45


__________________________________________________________________

MBT - Mobile TeleSystems  $135.99  *** Premium-Selling Only! ***

Mobile TeleSystems (NYSE:MBT) is a provider of mobile cellular
communications services in the Russian Federation and Ukraine,
employing technology based primarily on Global System for Mobile
Communications.  In addition to standard voice services, the
company offers its subscribers value-added services, including
voice mail, short message service, general packet radio service,
various other information and entertainment services (including
multimedia messaging service), and data and fax transmission.
It also offers its subscribers the ability to roam automatically
throughout Europe and in much of the rest of the world.

MBT - Mobile TeleSystems  $135.99

PLAY (less conservative - bearish/credit spread):

BUY  CALL  DEC-155.00  MBT-LK  OI=280  ASK=$0.50
SELL CALL  DEC-150.00  MBT-LJ  OI=982  BID=$1.00
INITIAL NET-CREDIT TARGET=$0.55-$0.65
POTENTIAL PROFIT(max)=12% B/E=$150.55



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
STRADDLES AND STRANGLES
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Based on analysis of the historical option pricing and technical
background, these positions meet the fundamental criteria for
favorable volatility-based plays.
_________________________________________________________________

No straddles or strangles today...

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

SEE DISCLAIMER - SECTION 1

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


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

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

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SUMMARY OF CURRENT POSITIONS - AS OF 11/21/04
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The following summary is a reasonable account of the positions
previously offered in this section.  However, no representation
is being made as to the actual performance of a position and in
fact, there are frequently large differences between the summary
results and those of our subscribers, due to the variety of ways
in which each play can be opened, closed, and/or adjusted.  In
addition, the summary might not be completely representative of
the manner in which the average trader would react to changing
conditions in a position and to the options market in general.
The editor of this section does not take actual positions in any
published plays and the summary comments are simply a service to
help new traders understand when positions might be opened and
closed.  In most cases, actions taken based on the commentary
would be far too late to be effective, thus it is not intended
as a substitute for personal trade management nor does it in
any way replace your duty to diligently monitor and manage the
positions in your portfolio.


MONTHLY YIELD FOR UNCOVERED OPTIONS: MAXIMUM & SIMPLE

The Maximum Yield (listed in the summary and with "naked" option
selling plays) is the greatest possible profit available in the
position.  This amount, expressed as a percentage, is based on
the initial margin requirement as determined by the Board of
Governors of the Federal Reserve, the U.S. options markets and
other self-regulatory organizations.  Although increased margin
requirements may be imposed either generally or in individual
cases by various brokerage firms, our calculations use the widely
accepted margin formulas from the Chicago Board Options Exchange.
The "Simple Yield" is based on the cost of the underlying issue
(in the event of assignment), including the premium from the sold
option, thus it reflects the maximum potential loss in the trade.
  
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
 
NAKED PUTS

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

MYGN     DEC    17.50   17.05   18.66    0.45   5.52%   2.64%
VTIV     DEC    17.50   17.05   16.70   (0.35)  0.00%   0.00%
IFLO     DEC    15.00   14.55   18.69    0.45   6.89%   3.09%
SEAC     DEC    17.50   16.95   17.55    0.55   7.02%   3.24%
ADLR     DEC    12.50   12.10   14.01    0.40   6.88%   3.31%
UTHR     DEC    25.00   24.05   35.11    0.95   9.03%   3.95%
RIGL     DEC    20.00   19.70   25.39    0.30   4.02%   1.52%
NFLD     DEC    15.00   14.45   15.75    0.55   8.24%   3.81%
RMBS     DEC    17.50   16.75   20.68    0.75   9.88%   4.48%
AGIX     DEC    20.00   19.60   31.37    0.40   4.83%   2.04%
ATI      DEC    20.00   19.35   20.56    0.65   7.37%   3.36%
MRVL     DEC    25.00   24.60   30.84    0.40   5.17%   1.63%
ELN      DEC    22.50   22.15   27.83    0.35   4.93%   1.58%
TSRA     DEC    25.00   24.35   37.00    0.65   7.97%   2.67%
VTS      DEC    20.00   19.65   22.68    0.35   4.84%   1.78%
ERICY    DEC    30.00   29.60   32.89    0.40   3.44%   1.35%
RMBS     DEC    17.50   16.95   20.68    0.55  10.12%   3.24%
TSRA     DEC    30.00   29.65   37.00    0.35   4.12%   1.18%
NCRX     DEC    25.00   24.25   28.05    0.75   8.18%   3.09%
IFLO     DEC    17.50   17.00   18.69    0.50   7.38%   2.94%
NTGR     DEC    15.00   14.60   15.62    0.40   6.54%   2.74%
ENZ      DEC    17.50   17.05   17.90    0.45   6.32%   2.64%
CECO     DEC    30.00   29.30   35.01    0.70   7.67%   2.39%
CRA      DEC    12.50   12.20   13.32    0.30   6.11%   2.46%
  
Special Tuesday Note: Atherogenics (NASDAQ:AGOX) became a
potential "early-exit" candidate Monday after an analyst
downgraded the stock based on the effectiveness of the
company's experimental drug to treat hardening of the
arteries.


NAKED CALLS

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

MNST     DEC    30.00   30.60   27.36    0.60   4.91%   1.96%
FOSL     DEC    30.00   30.50   27.20    0.50   4.16%   1.64%
SLAB     DEC    35.00   35.55   30.82    0.55   4.84%   1.55%
APPX     DEC    35.00   35.60   29.02    0.60   7.73%   1.69%
DIGE     DEC    25.00   25.30   22.38    0.30   6.05%   1.19%
MDCO     DEC    30.00   30.35   24.85    0.35   5.01%   1.15%
BOBJ     DEC    25.00   25.40   22.92    0.40   5.96%   1.57%
ENZN     DEC    20.00   20.55   14.76    0.55  14.84%   2.68%
TACT     DEC    25.00   25.40   22.83    0.40   8.50%   1.57%

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

TINY   14.30  DEC 12.50  QJT-XV 0.35  684 12.15  25   3.5%  10.0%
AMED   33.58  DEC 30.00  CQW-XF 0.65  735 29.35  25   2.7%   7.5%
ADLR   13.86  DEC 12.50  UAH-XV 0.25  154 12.25  25   2.5%   6.9%
NANO   16.55  DEC 15.00  QNK-XC 0.30   42 14.70  25   2.5%   6.8%
DHB    20.43  DEC 17.50  DHB-XW 0.30  670 17.20  25   2.1%   6.6%
IDCC   20.41  DEC 17.50  DAQ-XW 0.30 1296 17.20  25   2.1%   6.6%
ISRG   34.17  DEC 30.00  AXQ-XF 0.50  761 29.50  25   2.1%   6.1%
HNT    27.23  DEC 25.00  HNT-XE 0.40 2619 24.60  25   2.0%   5.4%

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.
_________________________________________________________________

TINY - Harris & Harris Group  $14.30  *** Entry Point? ***

Harris & Harris Group (NYSE:TINY) is a venture capital investment
company that is operating as a business development company.  The
company's investment objective is to achieve long-term capital
appreciation, rather than current income, from its investments.
The company has invested a substantial portion of its assets in
privately held start-up companies and in the development of new
technologies in various industry segments.  These privately held
businesses generally tend to be thinly capitalized, unproven,
small companies based on risky technologies that lack management
depth and have not attained profitability nor have any history of
operations.

TINY - Harris & Harris Group  $14.30

DEC 12.50 QJT-XV LB=0.35 OI=684 CB=12.15 DE=25 TY=3.5% MY=10.0%


_________________________________________________________________

AMED - Amedisys  $33.58  *** Consolidation Complete? ***

Amedisys (NASDAQ:AMED) is a multi-state provider of home health
and nursing services.  The company operates home care nursing
offices and has corporate offices in the southern and southeastern
United States.  The firm's wholly owned subsidiaries are Amedisys
Arkansas, Cypress Health Services and Amedisys LA Acquisitions.
The services provided in home healthcare include four primary
categories: home health nursing services, infusion therapy,
respiratory therapy and home medical equipment.

AMED - Amedisys  $33.58

DEC 30.00 CQW-XF LB=0.65 OI=735 CB=29.35 DE=25 TY=2.7% MY=7.5%


_________________________________________________________________

ADLR - Adolor  $13.86  *** A Pain-Free Stock! ***

Adolor (NASDAQ:ADLR) is a biopharmaceutical firm specializing in
the discovery, development and commercialization of prescription
pain management products.  Entereg (alvimopan), its lead product
candidate, is being developed to manage postoperative ileus, a
gastrointestinal side effect.  Entereg is being evaluated as an
oral dosage form for patients undergoing certain types of major
abdominal surgery.  It is also being developed to manage opioid
bowel dysfunction, which can negatively impact the quality of
life of patients using opioid analgesic products.  Entereg is
also being evaluated as a treatment for chronic constipation.
The company's next product candidate is a sterile lidocaine
patch in clinical development for treating postoperative
incisional pain.

ADLR - Adolor  $13.86

DEC 12.50 UAH-XV LB=0.25 OI=154 CB=12.25 DE=25 TY=2.5% MY=6.9%


_________________________________________________________________

NANO - Nanometrics  $16.55  *** "Nano" Craze Resurfacing? ***

Nanometrics (NASDAQ:NANO) designs, manufactures, markets and
supports the thin film metrology systems for the semiconductor,
flat panel display and magnetic recording head industries.  The
company's measurement systems use microscope-based, non-contact
spectroscopic reflectometry.  Some of the firm's systems provide
complementary spectroscopic ellipsometry to measure the thickness
and optical characteristics of films on a variety of substrates.
In addition, the firm has both integrated and standalone optical
critical metrology systems to measure critical dimensions of the
patterns on semiconductor wafers.  The company also manufactures
a line of optical overlay registration systems that are used to
determine the alignment accuracy of successive layers of chip
patterns on wafers in the photolithography process.

NANO - Nanometrics  $16.55

DEC 15.00 QNK-XC LB=0.30 OI=42 CB=14.70 DE=25 TY=2.5% MY=6.8%


_________________________________________________________________

DHB - DHB Industries  $20.43  *** New 2004 High! ***

DHB Industries (NYSE:DHB) is a holding company with two major
divisions: DHB Armor Group and DHB Sports Group.  The Armor
Group includes Point Blank Body Armor and Protective Apparel
Corporation of America and they manufacture various types of
body armor.  The Sports Group, which consists of NDL Products,
manufactures and distributes protective athletic apparel and
equipment, including elbow, breast, hip, groin, knee, shin and
ankle supports and braces, as well as a line of therapy products.

DHB - DHB Industries  $20.43

DEC 17.50 DHB-XW LB=0.30 OI=670 CB=17.20 DE=25 TY=2.1% MY=6.6%


_________________________________________________________________

IDCC - InterDigital Comm.  $20.41  *** On The Rebound? ***

InterDigital Communications (NASDAQ:IDCC) designs, develops and
places into operation a range of advanced wireless technologies,
systems and products.  IDCC, through its involvement in the
standards bodies and incubation efforts, monitors emerging
technologies being developed to deliver voice and data in a
wireless environment.  It focuses on its technology and product
development on the air interface technology, referred as wideband
code division multiple access, is comprised of two duplexing
methods, frequency division duplex and time division duplexing.

IDCC - InterDigital Comm.  $20.41

DEC 17.50 DAQ-XW LB=0.30 OI=1296 CB=17.20 DE=25 TY=2.1% MY=6.6%


_________________________________________________________________

ISRG - Intuitive Surgical  $34.17  *** Steady As A Surgeon! ***

Intuitive Surgical (NASDAQ:ISRG) designs, manufactures and sells
the da Vinci Surgical System.  This system consists of a console,
a patient-side cart, a vision system and proprietary "wristed"
instruments.  The da Vinci Surgical System seamlessly translates
the surgeon's natural hand movements on instrument controls at
a console into corresponding micro-movements of instruments
positioned inside the patient through small puncture incisions
or ports.  In addition, the company designs, manufactures and
markets a variety of smart disposable EndoWrist instruments.

ISRG - Intuitive Surgical  $34.17

DEC 30.00 AXQ-XF LB=0.50 OI=761 CB=29.50 DE=25 TY=2.1% MY=6.1%


_________________________________________________________________

HNT - Health Net  $27.23  *** Bottom-Fishing! ***

Health Net (NYSE:HNT) is an integrated managed care organization
that delivers managed healthcare services.  The health plans and
government contracts subsidiaries offer health benefits through
its health maintenance organizations, insured preferred provider
organizations and point-of-service plans through a variety of
programs.  In addition, it owns health and life insurance firms
licensed to sell exclusive provider organization, PPO, POS and
indemnity products, as well as auxiliary non-health products,
such as life and accidental death and disability insurance.

HNT - Health Net  $27.23

DEC 25.00 HNT-XE LB=0.40 OI=2619 CB=24.60 DE=25 TY=2.0% MY=5.4%



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

BEARISH PLAYS - NAKED CALLS

Based on analysis of option pricing and the underlying stock's
technical background, these positions meet our fundamental
criteria for bearish "premium-selling" strategies.  Each issue
has robust option premiums, a well-defined resistance area and
a high probability of remaining below the target strike prices.
As with any recommendations, these positions should be carefully
evaluated for portfolio suitability and reviewed with regard to
your strategic approach and personal trading style.

WARNING: THE RISK IN SELLING UNCOVERED OPTIONS IS SUBSTANTIAL!

The sale of uncovered calls entails considerable financial risk,
far more than the initial margin or collateral required to open
the position.  The maximum financial obligation for the sale of a
naked option is the strike price (of the underlying stock) that
is sold.  Although this obligation is reduced by the premium from
the sale of the option, a writer of options must have the cash or
collateral equivalent of the sold strike price in reserve at all
times.  The simple fact is: stocks often experience large price
swings, exponentially increasing the margin maintenance and very
possibly causing a devastating shortfall in your portfolio.  It
is also important that you consider using trading stops on naked
option positions to help limit losses when a stock price moves in
a volatile manner.  Many professional traders suggest closing the
position when the underlying share value moves beyond the sold
strike, or using a "buy-to-close" stop order at a price that is
no more than twice the original premium received from the sold
option.

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

AGIX - AtheroGenics  $24.09  *** Another Trend Reversal! ***

AtheroGenics (NASDAQ:AGIX) is a research-based pharmaceutical
company.  The company is focused on the discovery, development
and commercialization of novel drugs for the treatment of
chronic inflammatory diseases, including atherosclerosis,
rheumatoid arthritis, organ transplant rejection and asthma.
AtheroGenics has developed a proprietary vascular protectant
technology platform to discover drugs to treat these types of
diseases.  Based on its v-protectant technology platform, the
company has advanced three major drug candidates into clinical
development and is pursuing a number of other programs.

AGIX - AtheroGenics  $24.09

PLAY (sell naked call):

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

SELL CALL  DEC 30    AUB-LF   13200   0.35  30.35   8.2%   1.2%


_________________________________________________________________

CNCT - Connetics  $26.35  *** A Big "Down" Day! ***

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 Luxq 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  $26.35

PLAY (sell naked call):

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

SELL CALL  DEC 30    UXU-LF     445   0.25  30.25   4.3%   0.8%


_________________________________________________________________

JUPM - Jupitermedia  $16.42  *** Profit-Taking Underway! ***

Jupitermedia (NASDAQ:JUPM) is a global provider of original
online information, images, research and events for information
technology, business and creative professionals.  The company
operates four major interrelated and complementary businesses.
JupiterWeb is its online media business.  JupiterImages is its
online images business.  JupiterResearch is the firm's market
research and consulting business.  JupiterEvents is an offline
conference and trade show business.

JUPM - Jupitermedia  $16.42

PLAY (sell naked call):

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

SELL CALL  DEC 20    EUL-LD     248   0.20  20.20   7.0%   1.0%



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

SEE DISCLAIMER - SECTION 1

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

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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.

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