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Daily Newsletter, Wednesday, 08/29/2001

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PremierInvestor.net Newsletter                Wednesday 08-29-2001
                                                  section 1 of 2
Copyright  2001, All rights reserved.
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In section one:

Market Wrap: What's Mr. Buffett doing? 
Market Sentiment: GDP Ekes Out a Gain
Play-of-the-Day: Minnesota Mining - MMM (Bearish)
Watch List: The Short List

-----------------------------------------------------------------
U.S. Market Numbers
-----------------------------------------------------------------
MARKET WRAP  (view in courier font for table alignment)
-----------------------------------------------------------------
       8-29-2001          High      Low     Volume Advance/Decline
DJIA    10090.90 -131.13 10267.70 10075.61    966 K   1427/1690	
NASDAQ   1843.17 - 21.81  1879.76  1833.65 1.44 bln   1525/2060
S&P 100   586.34 -  7.79   597.34   585.63   Totals   2952/3750
S&P 500  1148.56 - 12.95  1166.97  1147.38             
RUS 2000  473.34 -  0.86   475.51   471.25 
DJ TRANS 2827.87 -  3.26  2840.86  2803.82 
VIX        25.73 +  1.71    26.30    24.16 
Put/Call Ratio      0.66
-----------------------------------------------------------------

===========
Market Wrap
===========

What's Mr. Buffett doing? by Jeff Bailey

The "Sage of Omaha" as he is affectionately known (I'll call him 
Mr. Buffett) has been in the news of late.  Recently it was 
disclosed that he was a bull on shares of Office Depot (NYSE:ODP) 
and today's news that he had sold his stake in First Industrial 
(NYSE:FR) got the markets attention.  When Mr. Buffett talks, the 
street seems to listen.  

Mr. Buffett probably knows more about fundamentals and current 
trends than most fundamental analysts combined.  No, he's not a 
"one man shop," but over time he's had an uncanny knack for 
uncovering longer-term value.

Back on July 20th at 12:00 EST in OptionInvestor.com's intra-day 
commentary, I discussed the point/figure chart of Office Depot 
(NYSE:ODP) as that stock had gapped higher on BIG volume the 
previous trading session.  To me, that gap higher on BIG volume 
looked to be what I call "the break away gap."  This type of 
activity is a "sudden realization" by the market that things are 
changing for a stock.  Over the course of time, this gap is 
followed by another gap called the "run away gap" where the stock 
hits a new gear and earnings or some other type of catalyst comes 
into the stock.  The final stage is the "exhaustion gap." this 
gap is usually the last bit of euphoric news that hits the stock.  
Those that have watched the stock over time and seen its price 
double or triple finally get on board and the top is soon 
created.

While this "break away" gap was noted on July 20th, I found it 
interesting that on August 14th, news was released that Mr. 
Buffett had added the shares to his holdings.

Office Depot Chart - last 11 months



One would hardly put Mr. Buffet in the classification of "day 
trader want to be."  Far from it.  Did you know that Office Depot 
is the No. 1 U.S. office supply chain store?  Staples 
(NASDAQ:SPLS) is ranked No. 2 (I didn't, I thought it was the 
other way around).  Did you know that Office Depot just posted 
its 6th quarterly loss in a row on August 14th?  That doesn't 
make much sense considering the stock has nearly doubled so far 
this year does it?  Could it be that the MARKET knows something, 
or perhaps Mr. Buffet knows something about the future that has 
yet to be disclosed?  

The point here is this.  Look for this pattern in other stocks 
you're considering from the bullish side.  Look at some longer-
term time frames, not just 60-minute interval charts.  It's an 
amazing yet simple pattern that can turn you onto a stock that 
can be a big winner.  The "flatter" the 200-day ma is, the more 
easily it seems that it is pierced or broken to the upside.  
Stocks that have "tested" the 200-day MA two or three times in 
past sessions or weeks that are building higher lows are chart 
patterns that often times move more boldly through the 200-day ma 
when its broken.  Stocks that merely "drift" above their 200-day 
ma's with little volume, often times are susceptible to failure 
or pullback at a minimum.

Keep an eye on bond YIELDS and this stock

I'd be crazy to go into tomorrow's trading with just a bullish 
candidate, so here's a stock that could get creamed on further 
declines for the broader market.  Of course, a group of 
individual stocks and their movement in unison eventually decide 
the broader market action.  With that said, it makes too much 
sense to identify stocks where their breakdown could actually 
lead the markets lower.  Introducing Minnesota Mining and 
Manufacturing (NYSE:MMM).  

Minnesota Mining and Manufacturing Chart - $2 and $1 box



Shares of MMM look like they are balancing on the I-beam of 
destruction.  With a bearish vertical count of $94, there's some 
downside potential for the stock.  Note the "first test" of 
bullish support back in April (just after red 4 at $98).  There's 
an old saying in the point/figure world.  "The first test of 
bullish support is often times most painful for the bears."  The 
stock bounced off bullish support like a bullet hitting a slab of 
iron and the stock rocketed higher from $98 to $126.  Now we see 
the bullish support trend (blue +) being violated on the second 
test.  Hmmmm, that's DIVERGENCE from past action isn't it?  
Perhaps MMM is just recently experiencing a change of trend that 
now looks to be the bearish resistance trend (red +).  While last 
Friday's rally to $111.82 seemed impressive to some, it wasn't 
enough to have the above chart reversing 3-boxes.  In essence, 
there has been no meaningful price movement in the stock since 
August 22nd, when the stock traded $107.05.  Tomorrow could 
change all of that.

The main reason I like MMM as a bearish trade candidate is this.  
In April (red 4) shares of MMM reached a low and tested its 
bullish support right after bond YIELDS had hit their lows at the 
time.  What happened?  Bond YIELDS rocketed higher as sellers 
came into bonds.  One could argue a bunch of money flowed from 
bonds toward MMM and helped that stock surge from $98 to $126!  
Now what's been happening?  In May (red 5) shares of MMM reached 
their peak at the $126 level.  Where are bond YIELDS now in 
relation to this type of correlation?  The 5-year YIELD ($FVX.X) 
is right back at its April lows, but the 30-year YIELD ($TYX.X) 
still has a ways to go before it reaches its March 22nd low YIELD 
of 5.217% (today's 30-year YIELD close was 5.362%).

Tomorrow, I think a trader that is looking to add a short/put 
position to his/her account has the advantage of being able to 
correlate the bond market action with a trade in MMM.  Should the 
5-year YIELD continue lower and seriously violate the March lows, 
and the 30-year YIELD break the 5.35% and eventually fall to the 
March lows of 5.217%, then I'm thinking that MMM is going to 
follow these bond YIELS around like a lost dog.

If however, bond YIELDS were to rise at some point, the trader 
that is short/put could then be alert to potential strength in 
the shares and lower his/her stop for the trade, with the thought 
that a higher YIELD could see shares of MMM gaining strength.  I 
think this is the best way for traders to monitor a trade.  Try 
to find a "different" security like the Treasury bond that really 
mimics the price action of a stock you're trading.

Tomorrow could be a CRITICAL test for the bulls

Today's closing YIELD on the 5-year bond ($FVX.X) was below the 
March 22nd low YIELD.  Tomorrow will be a HUGE test for bulls.  
If all the talk about a strengthening economy just around the 
corner is TRUE, then I would sure think that those that believe 
in that scenario would sell some 5-year Treasury bonds, who's 
price is now at a yearly HIGH!  If this doesn't happen, then I 
still believe that stocks have downside.  Especially those stocks 
that lack sponsorship to begin with (i.e. networking, software, 
internet).

Tomorrow I will once again be watching bond YIELD.  This 
morning's higher stock futures got shoved right down the throats 
of the bulls.  Looking back, bond YIELDS were in the red from 
their opening of trading and perhaps gave hint that the futures 
market action was not going to hold at all.  Tomorrow morning 
I'll make a more concerted effort to mention where bond YIELDS 
are.


================
Market Sentiment
================

GDP Ekes Out a Gain by Jeffrey Canavan

Revised gross domestic product was expected to be flat or 
possibly negative for the second quarter, but managed to grow 
0.2%.  While the economy grew more than expected, it was still 
the worst performance in eight years.  

Short sellers took advantage of the situation, and pushed the Dow 
and S&P 500 through recent support levels.  The weakness in 
equities spurred buying in bonds, which pushed the yield on the 
5-Year Note beneath the March 2001 low of 4.382%.

Semiconductors were today's worst performing sector after 
Advanced Micro Devices (AMD) reported they see an operating loss 
and lower revenues for Q3.  Sales of flash memory products are 
expected to fall 30%, which will cause to total revenue to fall 
15%, which will lead to an operating loss for the quarter.  
Lehman Brothers is also expecting Cypress Semiconductor (CY) to 
lower guidance after experience a weak August.

The Software Index came under pressure after shares of video game 
publisher Take Two Interactive Software (TTWO) reported lower 
third quarter profits.  Computer Associates stock also fell 2%, 
even though Charles Wang and the rest of CA's board fended off a 
challenge from Texas billionaire Sam Wyly.

The Internet Index (INX.X) fell to a three year low on the 
weakness of Yahoo (YHOO) and Amazon (AMZN).  eBay had been down 
$1.48 earlier in the session, but managed to rally to an 8 cent 
loss.

Biotechnology was one of the few sectors that finished the day in 
positive territory, managing a 0.55% gain on the strength of 
CORR, PDLI, VRTX, and GENZ.

Oil, forest product, and insurance stocks also finished the day 
in positive territory.  

Technology could be in for another rough day tomorrow after Sun 
Microsystems warned they are struggling to break even in the 
first quarter due to declining order rates.  Corning also 
announced that 2001 fiber optic growth is well below forecast, 
and will be cutting 1,000 jobs.

*************************Sector Watch****************************

            Support                Close              Resistance
DJIA       |10,000  |      |10091 |      |      |      |  10,450|
NASD       | 1,710  |      |      | 1843 |      |      |   2,000|
S&P 500    | 1,133  |      | 1149 |      |      |      |   1,200|
Rus 2000   |   465  |      |      |  473 |      |      |     481|
Semis      |   535  |      |  570 |      |      |      |     660|
Biotech    |   473  |      |      |      |  542 |      |     575|
Internet   |   121  |      |      |      |  118 |      |     125|
Networking |   300  |      |      |  294 |      |      |     330|
Software   |   158  |  161 |      |      |      |      |     175|
Banking    |   650  |      |  639 |      |      |      |     685|
Retail     |   858  |      |  847 |      |      |      |     880|
Drugs      |   380  |      |  388 |      |      |      |     410|

Support Alerts: Dow, S&P 500, Internet, Banks, Retail
Resistance Alerts: Resistance levels have been lowered.
            ____________________________________________________
           |   Long    |   Short   |   Strength    | Relative   |
           |   Term    |   Term    |     of        | Strength   |
           |   Trend   |   Trend   |    Trend      | vs S&P 500 |
DJIA       |  Bearish  |  Bearish  |     Weak      |  Neutral   |
NASD       |  Bearish  |  Bearish  | Strengthening |  Negative  |
S&P 500    |  Bearish  |  Bearish  | Strengthening |    --      |
Rus 2000   |  Bearish  |  Bearish  |     Weak      |  Rising    |
Semis      |  Bearish  |  Bearish  |     Weak      |  Neutral   |
Biotech    |  Bearish  |  Neutral  |     Weak      |  Positive  |
Internet   |  Bearish  |  Bearish  |    Strong     |  Negative  |
Networking |  Bearish  |  Bearish  | Strengthening |  Negative  |
Software   |  Bearish  |  Bearish  |    Strong     |  Negative  |
Banking    |  Neutral  |  Bearish  |   Weakening   |  Negative  |
Retail     |  Bearish  |  Bearish  |     Weak      |  Negative  |
Drugs      |  Neutral  |  Bearish  |     Weak      |  Positive  |

            _____________________________________
           | Short-Term  |          | Point and |
           | Overbought/ | Momentum |   Figure  |
           | Oversold    |          |   Signal  |
DJIA       | Neutral     |  Falling |   Sell     |
NASD       | Neutral     |  Falling |   Sell    |
S&P 500    | Neutral     |  Falling |   Sell    |
Rus 2000   | Neutral     |  Flat    |   Sell    |
Semis      | Overbought  |  Falling |   Buy     |
Biotech    | Overbought  |  Rising  |   Buy     |
Internet   | Neutral     |  Rising  |   Sell    |
Networking | Overbought  |  Falling |   Sell    |
Software   | Neutral     |  Falling |   Sell    |
Banking    | Oversold    |  Falling |   Sell    |
Retail     | Neutral     |  Falling |   Sell    |
Drugs      | AP OS       |  Falling |   Buy     |
             AP OB = Approaching Overbought
             AP OS = Approaching Oversold

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


=========================
Play-of-the-Day (Bearish)
=========================

Too sweet to pass up  - our newest Bearish play and Play of the Day 
are the same.

Minnesota Mining - MMM Close:$106.75 Change:-2.55 Stop:$111.00

Company Description:
Minnesota Mining & Manufacturing (3M) researches, manufactures and 
markets a wide range of products related to its technology in 
coating and bonding for coated abrasives.  In general this consists 
of applying one material to another, such as abrasive granules to 
paper or cloth (coated abrasives), adhesives to a backing 
(pressure-sensitive tapes), ceramic coating to granular mineral 
(roofing granules), glass beads to plastic backing (reflective 
sheeting) and low-tack adhesives to paper (repositionable notes). 

3M has six operating segments that include industrial (advanced 
adhesives, tapes, and abrasives), transportation, graphics and 
safety (reflective materials, respirators, and optical films), 
health care (drugs, dental, and skin products), consumer and office 
(tape), electro and communications (insulating products), and 
specialty material (gases and plastics) markets.

Fundamentals: 
The consensus analysts' estimate is for the firm to earn $4.56 per 
share this year on sales of $17.1 billion and $5.23 on $18.4 in 
2002.  Last year, earnings came in at $4.68 per share on sales of 
$16.7 billion.  The shares have a forward 2001 P/E of 23, which is 
in line with the industry average of 24.  The MMM PEG 
(Price/Earnings Growth) at 2.02 is higher than the 1.60 industry 
average suggesting the shares are slightly overvalued.  The company 
indicated an annual $2.40 per share dividend.

Why We Like It:  
MMM is one of the best-managed companies around and a long-time 
favorite for value investors. Right now that management is taking a 
$400 million hit to restructure the company to enable it to better 
adapt to changing market conditions.  Despite the changes, as one 
of the largest corporate bellwethers, MMM cannot escape the 
weakening global economy.  This has the shares under selling 
pressure.  They've dropped from a 52-week high of $127.00 on May 
17th to Wednesday's $106.75 close.  Since mid-July the shares have 
been in a trading range of roughly $112 and $107.  Tech freaks 
should note the upper figure represents a 50-percent retracement 
from the May high further reinforcing the strength of it as a level 
of resistance.  

On Wednesday the shares produced a downside breakout with a close 
of $106.75 on rising volume.  This break may be small, but the 
repercussions are great.  It represents a triple bottom breakout 
and a reversal of a long-term bullish trend that has been cooking 
since October 2000.  According to a study by Professor Earl Davis 
of Purdue, Triple Bottoms are profitable 93.5-percent of the time 
with average gain of 23-percent within 2.4 months.  This makes them 
one of the most reliable of chart formations.  In the short term 
this sets up a likely move to resistance at $105 or $100 on its way 
to our longer term $94 bearish objective.  If you would like to get 
a look at the point & figure chart on MMM, our master strategist 
Jeff Bailey has included it in today's Market Wrap.  Long-term 
investors who can stand the heat will no see a bullish reversal 
until $118.  Shorter-term traders want to have a stop on either 
side of the $111.87 200-day moving average depending on their 
tolerance of risk.  We are going to peg our initial stop at 
$111.00. .  

Picked on August 29th at $106.75
Earnings Date              10/22 (Not Confirmed)





==========
Watch List
==========

Trading Note!  

Tonight's Watch List was written with a focus on potential short
plays.  The market outlook is very negative and there is no reason
to go long right now.  Yes, it's very likely that we may get a 
relief rally before the weekend but most are only going to see it
as a bounce before the next leg down.  Historically, Labor Day 
week tends to be positive.  If this is proven the case again or
we do see a relief bounce look carefully at these stocks and their
sector-mates for potential failed rallies.  These could offer 
exceptional opportunities to short them before we begin the earnings
warnings season in the next two-weeks.  On another note, we tend
to avoid shorting stocks that are less than $30 unless the 
temptation to profit is just too great but then we do so carefully.
Those who are not willing to take the risk of shorting stocks 
could consider using Put options to capture the downside momentum
in equities.  This allows you to capitalize on a falling stock price
with limited risk if the trend reverses.  For more info on options
check out our option primer here:
http://www.PremierInvestor.net/education/optionsprimer/
and the CBOE's page on the Characteristics and Risks of Standardized
Options here: http://www.cboe.com/Resources/Intro.asp

Good Luck.

==================================================================


Microsoft - MSFT - close: 60.25 change: -0.49

WHAT TO WATCH:  Ah, we're going to start out with the biggest of
the big software companies.  The Software sector has been in a
terrible downtrend for sometime now and the GSO index has been 
bouncing off of support at the 160 level for the last seven
sessions.  Today the GSO closed at 161 and could fall of the cliff
any day now.  The group as a whole could see some support at 
April's lows of 155 but we wouldn't be surprised if the sector
fell further.  Looking back at MSFT, the stock fell through its
200-dma back on Aug. 17th and put in a new relative low at $59.
The last few sessions have seen the stock attempt a rally but 
the bulls couldn't make it through new resistance at $63 and its
200-dma (near 62.30).  If the market rallies, look for a potential
short play if MSFT rolls over at this resistance.  If the stock
continues to fall consider a short play when shares close under
$59.  Our first downside target would be $55 but given enough
time and enough downward pressure from the NASDAQ we could 
eventually see $50 again.  




---

PeopleSoft Inc - PSFT - close: 34.20 change: -1.55

WHAT TO WATCH:  Building on the software weakness we highlight 
PSFT.  The stock is has seen some extreme falls in the past but
we're looking for something at little more predictable.  The
stock shows a similar pattern to MSFT's the last couple of weeks
and right now it's offering us a very clear trigger signal to
go short.  $34 has been the new level of support since the 21st
of August and a close under this level would tell us to consider
PSFT for a new short.  Honestly, aggressive traders can probably
look at PSFT as a short now but do so only with a tight stop.
Our first downside target would be $30, the intraday low on July
20th.  As you can see from the chart, if given enough time and
pressure, shares of PSFT could fall much lower.




---

QLogic Corp. - QLGC - close: 29.96 change: -1.75

WHAT TO WATCH:  Another stock in the software sector that looks
weak right now is QLGC.  The downward trend has been steeper in
QLGC than in PSFT or MSFT.  Today's trading produced a breakdown
under what should have been strong support at the $30 level.  If
this technical pattern fits your style of trading, consider it a
short now.  However, we recommend you confirm the downward move
as a relief rally could spur shares back up towards its 10-dma
which is currently near 33.65.  We doubt the stock would make it
that high but without knowing how violent any future bounce could
be you need to know where upside resistance is.  A failed rally
at this level could be a good entry point to go short but so would
another day with a close under $30.  Our first downside target 
would be $25 and given enough time shares could see $20 again.




---

VeriSign Inc - VRSN - close: 38.69 change: -5.95

WHAT TO WATCH:  Ouch!  We're really not trying to pick on the
software group but so many of these stock are just dying we
might as well make a profit on them.  Before we begin, the 
13% loss today could easily provoke an oversold rebound tomorrow.
If this occurs we would expect a potential bounce to $41-$42.
If the market is weak again a bounce may only reach $40.  If
this occurs, consider a failed rally at these levels as potential
entries to go short (with an appropriate stop overhead).  Checking
the news shows that investors are concerned over the future of
VRSN's .biz and .info business that is expected to launch soon.
Considering the terrible loss today on high volume the selling
might just continue anew tomorrow morning.  Aggressive traders
should jump in as they see fit.  The stock's first level of 
significant support should be $35 with stronger support near
$30.  These levels would represent our near-term and intermediate
downside targets.




---

Providian Fincl. - PVN - close: 38.75 change: -1.15

WHAT TO WATCH:  Enough with the software stocks, let's look at
a couple of banks.  Providian, a well known credit card company,
has just been dying the last several weeks.  More recently, 
the company has been beaten up over a policy change in how
it accounts for bad loans.  On Monday, CSFB cut their price
target and their earnings estimates for the company which didn't
help either.  Volume has been growing as the stock's price kept
falling and Wednesday's trading produced a huge sell signal.
The $40 level has been support for months (about 16 months).
The stock has found buyers at the $40 multiple times and today's 
close is likely to produce even more selling.  We would consider
this stock a short now with a tight stop north of the $40 mark.
If you're looking for a better entry, consider a failed rally
if the stock bounces back to $40 and rolls over.




---

Bank of America - BAC - close: 60.05 change: -1.81

WHAT TO WATCH:  Making it four down days in a row, BAC is really
suffering under investors concerns that the Fed's easing cycle
may be coming to an end.  The negative implications of the most 
recent report on existing home sales didn't inspire any confidence
either.  Is BAC oversold on a short-term basis?  Yes.  But the
stock has been in a wide uptrend since December of 2000 when shares
were trading for less than $40.  Wednesday's close left the stock
right at price support of $60 which is also near the bottom edge
of its ascending channel.  Trader's willing to play the downside
have a couple of options.  We would suggest you look for a close
under $60 as a potential trigger event.  Or if you suspect the
stock might bounce soon then look for shares to roll over between
$61.50 and $62.50.  Our first downside target would be $55 but 
expect shares to stall at $57.50 before getting there.  





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Do not duplicate or redistribute in any form.


PremierInvestor.net Newsletter               Wednesday 08-29-2001
                                                   section 2 of 2
Copyright  2001, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================
To view this email newsletter in HTML format with imbedded
charts and graphs, click here:
http://www.PremierInvestor.net/htmlemail/082901_2.asp
=================================================================

In section two:

Education:
  Traders Corner: Ursus Arctos Part 1

Split Trader
  Split Announcements: none
  New Plays: none
  Play Updates: none
  Closed Plays: AmeriSource - AAS

Net Bulls
  New Plays and Play of Day: Minnesota Mining - MMM (Bearish) 
  Bullish Play Updates: none
  Bearish Play Updates: none
  Closed Plays: none

Stock Bottom / Active Trader
  New Plays: none
  Bullish Play Updates: none
  Bearish Play Updates: none
  Closed Plays: none

Trading Ideas
  Value Plays With Bullish Signals
  Breakout to Upside (Stocks $5 to $20)
  Breakout to Upside (Stocks over $20)      
  Breakout to Downside (Stocks over $20)      
  Recently Overbought With Bearish Signals (Stocks over $20) 


===================
Traders Corner
===================

Ursus Arctos Part 1 By Eric Utley

This if the first installment of a series that will explore the
idea of shorting stocks/buying puts; that is, playing the role
of bear.

The Nasdaq Composite (COMPX) has shed about 64 percent since
hitting its peak back in March of 2000.  Yet, even after
witnessing the awesome trend of the current bear market, many
traders I speak with remain reluctant to assume the role of
bear.  When in all reality, if a trader had been willing to make
bearish bets they would've experienced one of the easiest times
to make money in the history of the market.  The period between
September of 2000 up through April of this year was especially
"easy" because of the consistency of trend and the velocity with
which the market dropped.  But because of several psychological
barriers and popular delusions, most retail traders missed out.
So it's my goal with this piece to expose some of the notions
that prevent traders from betting on stock prices declining.

When we step back, the idea of betting on stock prices declining,
or any other asset for that matter, is a bit odd.  Think about,
is there any other transaction in life that bets on an asset
losing its value?  Buying a home is diametrically opposed to that
notion.  Unfortunately, a vehicle depreciates the instant that
it's driven off the lot, but car buyers certainly don't benefit
from that.  Perhaps a car dealer is the closest thing to a
stock market bear in the real world, because she/he sells
vehicles on the offer and buys them back on the bid.  But that
situation is more synonymous with a market maker, who buys at
wholesale and sells at retail, capturing the spread.

Truth be told, I can't think of a real world situation in which
a participant speculates on an asset losing its value.  What's
more, the mechanics of selling a stock short are even more
arcane than merely speculating on its demise.  For instance, in
order for a trader to short a stock, that stock must be borrowed
from another market participant, who's usually a broker.  After
all, one can't sell something they don't own, unless they borrow
it.  The act of borrowing something and selling it is rather
unique, and difficult for amateur traders to relate with.  Here
again, I can't think of a real world situation that justly
represents the act of borrowing and subsequently selling a stock
short.  Buying puts is a bit more detached from the borrowing
of the underlying, and for that reason puts are often easier
to relate to - options are merely a leveraged, directional bet,
assuming one is a net buyer of contracts.

In my estimation, I think some traders avoid selling stocks
short because it feels unnatural.  There's no other transaction
in the real world that compares, so individuals don't have any
reference, nor a comfort with the transaction.  It's easy to
relate to buying and holding a stock, and expecting that stock
to increase in value over time.  Isn't that what buying a home
is all about?  But the buy and hold mentality is another barrier
that prevents traders from selling stocks short.  

Some of the most famous market participants are from the buy
and hold school, including Lynch, Buffett, and Grahm.  In fact,
the buy and hold mentality is perpetually pounded into the
brains of market participants through the various media outlets,
including business TV, magazines, and newsletters.  Only recently
has the media begun to address the idea of shorting stocks, but
still on a very, very limited basis.  And I can guarantee that
market participants won't hear a peep about bearish bets once the
next bull market comes around.  It's the omnipresent and overtly
bullish nature of the media that has led many market participants
to believe that the modis operandi is buying a stock and holding it.
But it's difficult to lay too much blame on the media.  After all,
advancing stocks are synonymous with a bull market, and a bull
market is synonymous with healthy economic times.  And who can't
relate with that?

It's true that the buy and hold strategy works, over time.  But
it's not the de facto market operation, which many market
participants have been led to believe.  Perhaps another reason
for the perpetuation of the buy and hold mentality is the
tendency of markets to advance over time.  The last time I looked
at Ibbottson's data, the market had averaged a roughly 10 percent
annual return for the past century.  Moreover, the following chart
of the Dow Jones Industrial Average ($INDU), which spans a mere
decade, argues a strong case against shorting stocks.




I think that the buy and hold strategy makes sense at the "right"
times, under the "right" economic conditions.  But make no
mistake about it, buying and holding a stock is an investment
strategy and not a trading strategy.  While that notion may seem
rudimentary, I've discovered that some traders have difficulty
separating the two worlds.  My point, however, is that the buy
and hold strategy is not the only option that market participants
are left with.  Remember, two sides make a market and the buy
side is only half.

Before I leave the notion of buying a stock and holding it,
consider for a moment the mire that is currently known as
Japan.  The following chart displays the past decade of a
broad-based Japanese average.




Because the chart only goes back ten years it doesn't reveal
that the Japanese markets are at 17 year lows!  That's right,
17 years!  I won't draw any conclusions from what's going on
in Japan currently, nor its similarities or differences to
the United States.  But I think the above chart makes for
some provoking thought as it relates to the buy and hold
mentality.

A mentality that I've encountered often is the notion that
betting on a stock's demise is un-American by its very nature.
"Who wants to see a business fail," responded an individual
I spoke with recently when asked why he didn't trade the
downside.  "Shorting stocks isn't capitalism," he added.  The
idea that betting on a decline of a stock's price is
inappropriate is one of the most ignorant arguments I've ever had
to disprove.  Participants are in the market place to allocate
capital to the most efficient places at any given time.  If a
business model isn't efficient (Read: CLECs), then the proprietor
of that model will not be allocated capital.  Instead, market
participants will allocate capital to the most efficient place,
thereby investing in the business model that has the potential to
add the most economic value.  Shorting stocks of companies that
shouldn't exist to begin with is capitalism at its best.  It's
Darwin, baby, survival of the fittest!

There are other perceived barriers, both psychological and social,
that prevent market participants from playing the role of bear.
But it's my hope that I've touched upon a few of the bigger
issues.  The most important point that I'd like to impress upon
readers is that there should be a disconnect from emotion and
operations in the market.  The starting point in any market
operation should be the realization that a market, sector, and/or
stock just is.  After making that discovery, trading should
become easier, whether it be to the upside or downside.


=================================================================
Split Trader (ST) section
==================================================================


===============
ST Closed Plays
===============

  ----------------------------
  Closed Split Candidate Plays
  ----------------------------

AmeriSource - AAS at $64.00 stop

==================================================================
Net Bulls (NB) section
==================================================================

============
NB New Plays
============

  ---------------
  New Short Play
  ---------------

Minnesota Mining - MMM Close:$106.75 Change:-2.55 Stop:$111.00

Our newest Bearish play and Play of the Day are the same.

Company Description:
Minnesota Mining & Manufacturing (3M) researches, manufactures and 
markets a wide range of products related to its technology in 
coating and bonding for coated abrasives.  In general this consists 
of applying one material to another, such as abrasive granules to 
paper or cloth (coated abrasives), adhesives to a backing 
(pressure-sensitive tapes), ceramic coating to granular mineral 
(roofing granules), glass beads to plastic backing (reflective 
sheeting) and low-tack adhesives to paper (repositionable notes). 

3M has six operating segments that include industrial (advanced 
adhesives, tapes, and abrasives), transportation, graphics and 
safety (reflective materials, respirators, and optical films), 
health care (drugs, dental, and skin products), consumer and office 
(tape), electro and communications (insulating products), and 
specialty material (gases and plastics) markets.

Fundamentals: 
The consensus analysts' estimate is for the firm to earn $4.56 per 
share this year on sales of $17.1 billion and $5.23 on $18.4 in 
2002.  Last year, earnings came in at $4.68 per share on sales of 
$16.7 billion.  The shares have a forward 2001 P/E of 23, which is 
in line with the industry average of 24.  The MMM PEG 
(Price/Earnings Growth) at 2.02 is higher than the 1.60 industry 
average suggesting the shares are slightly overvalued.  The company 
indicated an annual $2.40 per share dividend.

Why We Like It:  
MMM is one of the best-managed companies around and a long-time 
favorite for value investors. Right now that management is taking a 
$400 million hit to restructure the company to enable it to better 
adapt to changing market conditions.  Despite the changes, as one 
of the largest corporate bellwethers, MMM cannot escape the 
weakening global economy.  This has the shares under selling 
pressure.  They've dropped from a 52-week high of $127.00 on May 
17th to Wednesday's $106.75 close.  Since mid-July the shares have 
been in a trading range of roughly $112 and $107.  Tech freaks 
should note the upper figure represents a 50-percent retracement 
from the May high further reinforcing the strength of it as a level 
of resistance.  

On Wednesday the shares produced a downside breakout with a close 
of $106.75 on rising volume.  This break may be small, but the 
repercussions are great.  It represents a triple bottom breakout 
and a reversal of a long-term bullish trend that has been cooking 
since October 2000.  According to a study by Professor Earl Davis 
of Purdue, Triple Bottoms are profitable 93.5-percent of the time 
with average gain of 23-percent within 2.4 months.  This makes them 
one of the most reliable of chart formations.  In the short term 
this sets up a likely move to resistance at $105 or $100 on its way 
to our longer term $94 bearish objective.  If you would like to get 
a look at the point & figure chart on MMM, our master strategist 
Jeff Bailey has included it in today's Market Wrap.  Long-term 
investors who can stand the heat will no see a bullish reversal 
until $118.  Shorter-term traders want to have a stop on either 
side of the $111.87 200-day moving average depending on their 
tolerance of risk.  We are going to peg our initial stop at 
$111.00. .  

Picked on August 29th at $106.75
Earnings Date              10/22 (Not Confirmed)





==================
  Trading Ideas 
==================

This section contains stocks that meet criteria which may make 
them of interest to long and short side traders.  These are not 
recommendations, nor have they been reviewed by PremierInvestor 
editors for investment potential.  However, each of them has 
technical and fundamental characteristics that make them worthy 
of further review by traders and investors looking for fresh ideas. 
New stocks will appear daily following the market close.  

  ---------------------------------
  Value Plays With Bullish Signals
  ---------------------------------

Ticker    Company Name              Close  Change
TSCO      Tractor Supply Co         23.47  +1.02
VLO       Valero Energy Corp        40.85  +2.24
TSO       Tesoro Petroleum          13.15  +1.20
SCVL      Shoe Carnival             13.35  +1.44
  ---------------------------------------
   Breakout to Upside (Stocks $5 to $20)
  ---------------------------------------

Ticker    Company Name              Close  Change
FTO       Frontier Oil              17.03  +1.52
TSO       Tesoro Petroleum          13.15  +1.20
BMRN      Biomarin Pharmaceuticals  12.49  +1.49
ALOY      Alloy Online              17.35  +1.10

  ---------------------------------------
   Breakout to Upside (Stocks over $20)
  ---------------------------------------

Ticker    Company Name              Close  Change
BZH       Beazer Homes              65.20  +4.14
KBH       Kb Home                   31.14  +1.74
SEAC      Seachange Internat Inc    24.19  +3.89
PRGN      Peregrine System          26.47  +2.70
KNSY      Kensey Nash Corp          20.90  +1.10
HRB       H&R Block                 38.90  +1.16

  -----------------------------------------
   Breakout to Downside (Stocks over $20)
 -------------------------------------------

Ticker    Company Name              Close  Change
VRSN      Verisign Inc              38.58  -5.95
CY        Cypress Semiconductor     22.01  -1.33
EME       Emcor Group               38.28  -1.70
SFY       Swift Energy              25.10  -1.05
DPMI      Dupont Photomasks         34.10  -1.45

  ------------------------------------------------------------
   Recently Overbought With Bearish Signals (Stocks over $20)
  -------------------------------------------------------------

Ticker    Company Name              Close  Change
RMD       Resmed Inc                57.20  -2.10
MYL       Mylan Laboratories        34.45  -0.47
JH        John H Harland Co         24.02  -0.08
UN        Unilever N.V.             60.25  -1.15
SKT       Tanger Factory Outlet     21.86  -0.06

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