Option Investor

Daily Newsletter, Monday, 11/26/2001

Printer friendly version
PremierInvestor.net Newsletter                 Monday 11-26-2001
                                                  section 1 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:

In section one:

Market Wrap:      Today's recession began in March of 2001
Market Sentiment: Team "Tech" leads the way
Play-of-the-Day:  One Reason Only
Watch List:       DRIV, GOSHA, COLM, PLB

U.S. Market Numbers
MARKET WRAP  (view in courier font for table alignment)
        11-26-2001        High      Low     Volume Advance/Decline
DJIA     9982.80 + 23.10  9992.80  9903.80 1.08 bln   1666/1508	
NASDAQ   1941.20 + 38.00  1941.31  1906.89 1.72 bln   2106/1561
S&P 100   596.24 +  2.97   596.85   590.82   totals   3772/3069
S&P 500  1157.42 +  7.08  1157.88  1146.17           
RUS 2000  461.22 +  2.80   461.44   456.97
DJ TRANS 2525.85 -  9.05  2550.67  2506.57
VIX        25.24 +  0.46    26.20    24.94
Put/Call Ratio      0.45

Market Wrap

Today's recession began in March of 2001

Today's announcement by the National Bureau of Economic Research 
that the U.S. economy is in a recession that began in March of 
this year, appeared to have come a little late for some and fell 
on deaf ears for others.  The NBER is a private academic group 
that officially dates U.S. expansions and contractions and has 
played an important role in monitoring past business cycles that 
helps shape government policy.  Robert Hall, an economics 
professor at Stanford University, heads the NBER business cycles 

Reuters quoted Princeton's Ben Bermarke, one of the members of 
the commitee, as saying, "The bottom should be reached by July at 
the latest, given past behavior of recessions."

Today's news from the NBER may be "too late" for many, but the 
commission is not a forecaster.  They're more like a good 
reporter.  They just report the facts.

What is rather interesting about some of their comments is that 
today's "realization" that the U.S. economy officially ended an 
expansion phase that began in 1991 has officially come to an end.

That's not necessarily "bad news" for stock investors.  10-year 
from now, one might now believe the S&P 500 will be trading 
2,170.  Today's close was 1,157.

I fell out of my chair today when I put the NBER to the test.  
Yes, the test of retracement.  There are a couple of reasons I 
fell out of my chair.

The first reason was some work we had done about a month ago that 
"identified" the 1,082 level as a key "pivot point" or level to 
be monitoring for resistance when the S&P 500 was recovering from 
its September lows of 945.

Now stick with me here and lets take it slow.  If 1991 was the 
beginning of a 10-year expansion, then it makes sense that the 
MARKET new about the beginning and the end of the expansion when 
the S&P 500 (SPX.X) traded a high of 1,552 back in March of 2000.  
If so, then a retracement bracket from the January 1991 levels of 
SPX $324 might gives some type of credence to the committees 

The chart below shows two retracement brackets.  The recent 10-
year's trading on the SPX is shown in blue.  I've also added a 
red retracement bracket that is fitted.  This is too weird and 
way too coincidental, thus I fell out of my chair.

S&P 500 Index Chart - monthly interval 

The longer-term chart of the S&P 500 Index (SPX.X) is quite 
interesting with retracement overlaid on the "10-year expansion" 
that the NBER says came to an end in March of this year.

As we start from the far left of the chart, we might think of the 
first 4 years and 8-months spent in the lower end of our blue 
retracement bracket as rather meaningless.  But during that 4.8 
months, the S&P 500 gained roughly 71% from it's January 1991 
levels.  Once the 80.9% retracement levels was broken to the 
upside, things really got moving as the S&P 500 then gained 41% 
from the $794 level in August 1995 to February 1997.

What I'm now trying to do on a longer-term basis is to create the 
same types of levels of retracement to get my longer-term 
thinking working.  That $940 level sure looks like a level that 
the S&P 500 wanted to turn around from (on 09/21 the SPX traded a 
low of $944.75).  I'm not sure why as the economic data and world 
events taking place in September were horrendous.  Could it 
possibly be that the MARKET knew about a coming expansion and 
nearing the end of an economic recession that began in March of 
this year?  Is it a "coincidence" that the turn higher in 
September came at 50% retracement of the last 10-year's economic 

With my "red" retracement, I'm now going to "roll up" retracement 
and anchor my 0% at $940 (as close as I could get to "blue" 
retracement of $939.48).  I'm also going to be relatively 
conservative in rolling up retracement and "fit" the new "red" 
retracement at 50% with the all time high of the SPX at $1,555.

Why could this be considered "conservative?"  Well, it took 4 
years and 8 months for the SPX to get out of the lower 19.1% end 
of retracement from 1991-1995 (blue retracement) and our red 
retracement shows the SPX just under the 19.1% retracement level, 
currently at $1,175.

If you can, go back and read the October 9th, market wrap on 
PremierInvestor.net and note the "bull's reward" levels we were 
discussing at that time.  The "bull's reward" levels on a close 
above $1,082 were $1,126 and $1,170.  We're above the $1,126 
level and just 13 points away from $1,170.

Near-term, I think bulls have a good shot at the SPX $1,170-
$1,175 range, based on our retracement work.

So.  What takes place at the $1,175 level?  That becomes a point 
where I begin believing (as the MARKET does based on the 
retracement scenario) that we are indeed entering a new economic 
growth phase.

Not convinced?

Lets talk about March of this year as it relates to today's 
comments out of the NBER.  Let's also talk about some peculiar 
relative strength attributes between Government bonds and higher 
risk "junk bonds."

I've said before that the bond market is much smarter than the 
stock market.  It has to be as the underlying instrument (the 
bond) often times carries a relatively low "return" in the YIELD.  
Based on "risk" the YIELD will reflect the amount of risk 
perceived by the market.

It makes sense that in a "troubled" economic environment, a "junk 
bond" or high yield bond fund like the AIM High Yield Fund 
(AMHYX) might under perform a bond fund holding higher grade and 
safer bonds issued like the AIM Intermediate Government Fund 
(AGOVX).  We can test this with relative strength.  

I'm picking some bond mutual funds, as I don't want to 
necessarily try and make a blanket call on "junk bonds" based off 
of just one junk bond.  I'd rather compare a basket of these 
types of bonds to that of a basket of Government bonds.  Apples 
vs. apples so to speak.  However, there are red apples and there 
are yellow apples.  There are government bonds, which are deemed 
"safer" than corporate junk bonds, which are "riskier."

Here's a reprint of an update I wrote on OptionInvestor.com on 
November 16th at 03:00 EST.  It gives subscribers an idea for 
their company 401k-plan, but also an excellent indicator going 
forward to help try and keep a finger on the pulse of the economy 
going forward, that will come from the bond market.

Getting a craving for some "junk" bonds

Every so often, a 401-k or even a retirement account needs a 
little "junk" food.  As it pertains to the fixed income portion 
of your portfolio, that might mean some exposure to the higher 
risk/higher potential return and YIELD of the junk bond market.

Junk bonds got their name partially due to their higher risk as 
the underlying company that offers the debt does not carry the 
highest level of debt rating.  These bonds tend to perform more 
like stocks in a strengthening or strong economic environment.  
At least for awhile, until they become "fair value" and money 
rotates back out.  

There are times to be "in" some junk bonds and there are times to 
be "out."  So why should you be interested in junk bond price 
action even though you are just an options trader?  The bond 
market is perhaps much more complex than the stock market.  The 
decision making process requires an extreme amount of due 
diligence and knowledge of the company and the economic 
environment now and going forward.

One way to really judge things is to compare relative strength 
within the bond market.  Since we cant really get a good feel of 
relative strength by just one bond vs. one bond, I'm going to 
show relative strength of the AIM Intermediate Govt. Fund 
(AGOVX), which holds mostly U.S government securities.  I want to 
compare that fund price strength (based on NAV) against the AIM 
High YIELD Fund (AMHYX), which invests in non-investment grade 
securities with an average credit quality of B.  This was the 
first high yield fund established in the United States.

Relative Strength AGOVX vs. AMHYX

Wow!  As you can see, the Govt. Income Fund (AGOVX) has shown 
incredible strength vs. the High Yield Fund (AMHYX) but perhaps 
that makes sense based upon what we know today about the economy.  
But what about the future?  If this relative strength 
relationship tells us something about the past, then might it not 
tell us about the future?  I sure think so.

What I've done to the above chart is lay out a retracement 
bracket on the RS chart range.  It's kind of interesting that we 
actually get some correlation with RS at the retracement levels 
dating back to the period right around January 2001.

I've also added a "trading" strategy that a fixed income investor 
might have implemented based solely on RS.  This plays very much 
into the hands of trading/investing at levels and playing the 
power of relative strength measurements.  

Going into June 2000, an investor may have had their bond portion 
of the 401-k or retirement account fully invested in the High 
income fund (consult your financial professional to see if this 
would be within your risk profile).  Once the RS moved above the 
19.1% level, the investor may have sold 1/2 of their High Yield 
(AMHYX) fund and moved that money into the perceived safer Govt. 
Income fund (AGOVX).  They didn't want to move it all there as 
they perhaps still weren't sure what was going on in the market 
and liked the higher rate of income they were receiving from the 
high yield fund vs. what was offered from the Govt. Income Fund.  
The High Yield fund had also had a very nice price performance 
gain while they had held it.  Nonetheless, the change in relative 
strength was worth noting and time to take some profits and move 
some money to safety.

Then in October of 2000, relative strength continued to climb as 
the Govt. Income fund (AGOVX) was outperforming the High YIELD 
fund (AMHYX).  An additional 25% of the original bond holding in 
the high YIELD may have been sold and that money rotated to the 
Govt. Income Fund.

In November of 2000, the further strength of the Govt. Income 
fund (AGOVX) was really starting to overtake the performance of 
the High Yield fund (AMHYX) and the remaining amount of capital 
was rotated to the perceived safety.

Only a break of a level of retracement would the investor rotate 
money back to the High Yield fund (AMHYX).

Well... here we are.  The past four sessions, we've seen some 
impressive selling in the Treasury bond fund and I've seen some 
Net Asset Value (NAV) price decline in the AIM Intermed. Govt 
Fund (AGOVX) and some price strength in the AIM High Yield Fund 

Why would "junk bonds" be showing price appreciation?  Is the 
market out of its mind?  Doesn't it know that we're most likely 
in the midst of a recession?

Hmmmm.... but if we think back to June of 2000, everything was 
rosey as I remember.  Why was the market opting to sell junk 
bonds and buy Govt. Treasury bonds?  Was it because the bond 
market knew something the stock market had yet to figure out?  

On the right side of the retracement brackets, I've now put 
together an investment plan going forward, but also a plan that 
we as option traders might use to understand the bond MARKET's 
view on things going forward.

At the bottom of retracement, we were willing to sell 50% High 
Yield (AMHYX) and buy 50% Govt. (AGOVX).  The reason we were 
willing to do this is that we wanted to SELL RISK!  

Now we look to be near the top.  But!  And this is the BIG but.  
I don't want to buy a lot of RISK right now.  Remember, we're in 
what looks to be a recession.  If I load up on junk bonds (AMHYX) 
and the economy doesn't pull out of things, we're going to be 
stuck holding too much risk!  What I want to do is dip my toe in 
the water.  Then if I have success I will add further to the 
exposure of junk bonds.

As stock/option traders, we can learn from the dynamics that take 
place in the bond market.  We can get a better feel for what very 
smart money thinks about the economy going forward.

I think the bond market did a very good job of figuring things 
out back in June of 2000 don't you?  

Monitor both markets

In the past two years, I've talked a lot about the bond market 
and how it can be a stock investor's best friend.  There's 
trillions of dollars in the bond market.  Sometimes it just 
rotates within the bond market, but some money also comes out and 
rotates to stocks.  

As "risky" as a junk bond may seem, a "junk bond" on company 
ABCDEF is actually "safer" than the stock of ABCDEF.  The reason 
being is that the bond is an OBLIGATION to pay a stated rate of 
interest and then return original principle back to the investor.  
While there are no guarantees of either, it is still an 
OBLIGATION, something a stock does not carry.

(End of Nov 16th commentary).

Thinking caps on!

Hmmmm.... March 2001, March 2001.  Hey!  March of 2001 is right 
where the RS chart of the AGOVX vs. AMHYX kicked higher on March 
20th, 2001!  Yep, right at that 61.8% retracement bracket.

Relative strength AGOVX vs. AMHYX current day

Since we started this exercise of monitoring relative strength of 
the AGOVX vs. the AMHYX, the AGOVX has lost just about 1.19% 
(November 15th Net Asset Value close was $9.22).  That can be a 
rather painful drop for an investor committing new money to the 
fund, considering its SEC YIELD of approximately 5.4% (based on 
recent distribution of $0.0415 for 10/31/01).  The higher risk 
and higher YIELDing AMHYX is up just $0.02 since its November 
15th close and recently paid a $0.05 disbursement on 10/31/01, 
roughly a 13% effective YIELD.

In essence, the HIGHER YIELD of the "junk bond" fund has more 
risk, but recent price performance of the funds indicates that 
the MARKET has been willing to take on the risk.  The only reason 
I see this as "feasible" is if the bond market is also perhaps 
beginning to believe that the economy is turning a corner.

We'll continue to monitor this relationship in the bond market 
and also monitor levels as that described above in the S&P 500.

Profit taking vs. economic doom

Everyone, and I mean just about everyone is expecting a pullback 
in the stock market.  You can count me among the "everyone."  

However, I learned a long time ago, that a market rally can be 
stronger and last longer than many expect and it is often times 
best to still have some cash exposed to stocks at this time.

I don't want to chase stocks that look overextended.  Especially 
technology stocks.  But technology isn't the only think there is 
to invest in.

As it relates to the question of "profit taking vs. economic 
doom" the above analysis in the bond market becomes our "ace in 
the hole."  

Scenario going forward is this.  Should we continue to see RS 
favor the High YIELD portion of the bond market, then any 
pullbacks in the broader market averages can be considered 
"profit taking" and not "here we go again for economic doom."

One reason I fee comfortable in thinking this is that in the 
April-June stock rally, the RS chart of the AGOVX vs. AMHYX 
really didn't show any type of RS strength by the higher YIELD 
fund.  At that time, the Relative Strength was still above the 
50-day MA.  RS is now below the 50-day MA.

We'll continue to monitor this relationship going forward.  If 
you're retirement fund is loaded up in Government bond funds, 
you'll want to do the same.  Right now, it sure looks like we're 
starting to see some "shift" in the markets thought of 
risk/reward.  If Government bonds are so safe, then why are they 
being sold?

As they get sold, YIELD moves higher.  As YIELD moves higher, 
they should also become more attractive.  Shouldn't they?  The 
answer is "maybe."  It all depends on other investment 
alternatives available and it is all about risk/reward.  

One last note.  In the above example of "asset allocation" 
between Govt. Treasuries and High YIELD bonds, don't think that 
is just a strategy for individual investors and dollar-cost 
averaging.  If you think for a minute that "BIG money" takes 100% 
of their bond allocation and turns it into stocks or high YIELD 
bonds one day, you might want to rethink things.  

It's a process that is defined by levels, tons of research and 
input from analysts and economists.  But most important, it is a 
process of risk/reward analysis.

Just as we find breaks in levels of retracement on the stocks we 
trade, we'll find breaks in levels in other relationships.  At 
each break, the MARKET takes a new stance, places a bet, then 
follows that bet with a stop.

If at some point, we see the Relative strength reading in the 
bond fund relationship above cross a retracement level lower, it 
wont surprise me in the future if the NBER report eventually 
proclaims that an "economic expansion" began near that date!

Jeff Bailey
Senior Market Technician

Market Sentiment

Team "Tech" leads the way
by Russ Moore

Team "Tech" leads the way. No doubt energized after a few days 
off, tech bulls powered the NASDAQ a step closer to the 2000 mark 
with a gain of +2.0 percent.

The big-cap NDX was up +2.7 percent thanks to a wild run on 
Amazon (+34.4 percent), along with upside performances turned in 
by Cisco, Intel, and Microsoft. The DOW had trouble picking a 
direction for much of the session but did manage to eke out a 
small gain of +0.2 percent.

Volume was on the light side with 1.08 billion shares moving on 
the NYSE and 1.72 billion shares trading on the NASDAQ. Winners 
outpaced losers by a margin of 17/15 on the big board and 21/16 
on the tech index.

The majority of sector action was to the upside with biotechs and 
airlines leading the broader markets while chips, Internet, and 
hardware were the big tech winners. Oil, oil service, utility, 
natural gas, transportation, and chemical sectors were weak.

Trim Tabs reported outflows in all equity funds of 1.3 billion 
dollars for the four days ending November 21, however, U.S 
equities saw inflows of 600 million for the same period.

It’s official; we’ve been in a recession since March of this 
year. The National Bureau of Economic Research, a group of 
academic economists, made the announcement this morning. The 
announcement had zero impact on market direction (what a 

Lot’s of "extended valuation" talk making the rounds (mainly from 
those without horns), and that’s probably going to stop a few 
investors from emptying their pockets just yet. Bullish sentiment 
remains strong however, and a move beyond key overhead resistance 
levels (NASDAQ 200DMA 1967.00 and DOW 200DMA 10,178), could have 
many of the so-called bears rethinking their positions.

Monday 11/26 close: 25.24

Monday 11/26 close: 48.22

30-yr Bonds
Monday 11/26 close: 5.37

Total Put/Call Ratio: .68

Equity Option Put/Call Ratio: .53

Index Option Put/Call Ratio:  2.55


NASDAQ 100 Index (NDX/QQQ)
52-Week High: 103.51
52-Week Low:   28.19
Current close: 40.25

Volume/Open Interest
Maximum calls: 40/151,151
Maximum puts : 37/ 83,324

Moving Averages
 10 DMA 39
 20 DMA 37
 50 DMA 34
200 DMA 41

Fibanocci Retracements
Relative High: 51.95 (05/22/01)
Relative Low:  27.00 (09/21/01)
38% 36.60
50% 39.57
62% 42.59


S&P 100 Index (OEX)
52-Week High:  834.93
52-Week Low:   491.70
Current close: 596.24

Volume/Open Interest
Maximum calls: 600/4,097
Maximum puts : 500/6,499
Moving Averages
 10 DMA  589
 20 DMA  576
 50 DMA  555
200 DMA  608

Fibanocci Retracements
Relative High: 680.03 (05/22/01)
Relative Low:  480.07 (09/21/01)
38% 556.14
50% 579.65
62% 603.55


S&P 500 (SPX)
52-Week High:  1530.01
52-Week Low:    965.80
Current close: 1157.42

Volume / Open Interest
Maximum calls: 1150/34,750
Maximum puts : 1050/42,458

Moving Averages
 10 DMA 1141
 20 DMA 1118
 50 DMA 1080
200 DMA 1182

Fibanocci Retracements
Relative High: 1315.93 (05/22/01)
Relative Low:   944.75 (09/21/01)
38% 1086.75
50% 1130.62
62% 1175.23


52-Week High:  11,518.83
52-Week Low:    8,235.81
Current close:  9,982.75

Volume / Open Interest
Maximum Calls: 98/25,228
Maximum Puts   90/50,491

Moving Averages:
 10 DMA  9,852
 20 DMA  9,617
 50 DMA  9,270
200 DMA 10,178

Fibanocci Retracements
Relative High: 11,350.05 (05/22/01)
Relative Low    8,062.34 (05/21/01)
38%  9,308.92
50%  9,693.99
62% 10,085.60


Biotech Index (BTK)
52-Week High:  811.61
52-Week Low:   383.28
Current close: 618.92

Volume / Open Interest
Maximum Calls: 580/  777
Maximum Puts:  540/1,149

Moving Averages
 10 DMA 588
 20 DMA 574
 50 DMA 514
200 DMA 536

Fibanocci Retracements
Relative High: 811.61 (09/25/00)
Relative Low:  383.28 (03/22/01)
38% 546.22
50% 596.57
62% 646.71


Semiconductor Index (SOX)
52-Week High: 1280.84
52-Week Low:   362.00
Current close: 532.46

Volume / Open Interest
Maximum Calls: 520/ 748
Maximum Puts:  470/1558

Moving Averages
 10 DMA 522
 20 DMA 503
 50 DMA 454
200 DMA 564

Fibanocci Retracements
Relative High: 710.78 (05/22/01)
Relative Low:  343.93 (09/27/01)
38% 484.50
50% 527.18
62% 570.57


Pharmaceutical Index (DRG)
52-Week High:  455.28
52-Week Low:   339.49
Current close: 403.55

Volume / Open Interest
Maximum Calls: 420/406
Maximum Puts:  360/320

Moving Averages
 10 DMA 395
 20 DMA 393
 50 DMA 390
200 DMA 392

Fibanocci Retracements
Relative High: 448.43 (12/29/00)
Relative Low:  339.49 (03/22/01)
38% 382.22
50% 395.69
62% 409.03


CBOT Commitment Of Traders Report: Monday, 11/26. 
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the 
Chicago Board Of Trade. 

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 are not. 
Extreme divergence between each signals a possible market turn in 
favor of the commercial trader’s direction.   

S&P 500
Commercials   Long      Short      Net     %Change 
11/06/01     376,807   416,063   (39,256)    8.2%
11/13/01     381,539   421,284   (39,745)    1.2%
11/20/01     369,784   415,822   (46,038)   13.6%

Most bearish reading of the year: (111,956) - 3/6/01
Most bullish reading of the year: (41,144)  - 5/1/01

Small Traders   Long      Short      Net      %Change
11/06/01       132,106    81,208    50,898    (2.7%)
11/13/01       136,047    87,645    48,402    (4.9%)
11/20/01       140,507    86,861    53,646     9.8%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

Commercials   Long      Short      Net     %Change 
11/06/01      39,410    47,890    (8,480)  (37.0%)
11/13/01      38,751    49,257   (10,506)   23.9%
11/20/01      38,042    46,446    (8,404)  (20.0%)

Most bearish reading of the year: (15,521) - 3/13/01
Most bullish reading of the year:  (1,825) - 1/02/01

Small Traders  Long      Short      Net      %Change
11/06/01       11,406     8,143    3,263     (47.7%)
11/13/01       11,568     6,505    5,063      55.1%
11/20/01       12,933     8,230    4,703      (7.1%)

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01

Commercials   Long      Short      Net     %Change 
11/06/01      25,977    11,951   14,026      5.4%
11/13/01      24,145    10,204   13,941     (0.6%)
11/20/01      25,033    11,525   13,508     (3.1%)

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year:  8,925  - 5/22/01

Small Traders  Long      Short      Net      %Change
11/06/01       3,569    12,281    (8,712)     25.2%
11/13/01       4,094    12,121    (8,027)     (7.8%)
11/20/01       3,609    10,565    (6,956)    (13.3%)
Most bearish reading of the year:  (7,572) - 5/08/01
Most bullish reading of the year:   1,909  - 1/16/01

                    Small Specs               Commercials
S&P 500         (Current)  (Previous)     (Current) (Previous)
Open Interest
Net Value        +53,646     +48,402        -46,038     -39,745

Total Open
Interest %       (+23.59%)  (+21.64%)      (-5.86%)   (-4.95%)
                 net-long   net-long       net-short  net-short

                     Small Specs             Commercials
DJIA futures     (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value          -6,956     -8,027          +13,508    13,941
Total Open
interest %       (-49.07%)    (-49.50%)      (+36.94%)  (+40.59)
                 net-short   net-short     net-long    net-long

                     Small Spec              Commercials
NASDAQ 100      (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value         +4,703      +5,063         -8,404    -10,506

Total Open
Interest %        (+22.22%)   (+28.01%)     (-9.95%) (-11.94%)
                 net-long   net-long      net-short net-short

What COT Data Tells Us
Indices:.Commercial players finally moved off of their four-week 
holding period as they added to their net-short positions. The 
increase was limited to less than a percentage point; 
nonetheless, it does show that the Commercials have not yet moved 
in to a full-blown accumulation phase (bullish) and would appear 
to be playing a cautious hand.

Gold: November has not been kind to the XAU (gold and silver 
index), however, Commercial players have reduced their net-short 
contracts to near flat and that could signal a bounce in gold is 
around the corner.

10/23 25,191 contracts net-short
10/30 33,199 contracts net-short
11/06 35,435 contracts net-short
11/13 23,637 contracts net-short
11/20  2,489 contracts net-short

Data compiled as of Tuesday 11/20 by the CFTC.

Play-of-the-Day (Bullish)
 ! note, SBAC was also the POD last Monday.

SBA Communications - SBAC - close: 11.70 change: +0.50 stop: 10.45

Company Description
SBA is a leading independent owner and operator of wireless 
communications infrastructure in the United States. SBA generates 
revenue from two primary businesses -- site leasing and site 
development services. The primary focus of the Company is the 
leasing of antenna space on its multi-tenant towers to a variety 
of wireless service providers under long-term lease contracts. 
Since it was founded in 1989, SBA has participated in the 
development of over 15,000 antenna sites in the United States.
(source: company press release)

- ORIGINAL WRITE UP, Nov. 16th, 2001 -

Why We Like It:
We like SBAC because the stock looks to have plenty of upside 
potential despite the strong gains it has already made from its 
October lows.  We placed this new long play in the high risk/high 
reward section because of the big move it has already produced 
this week.  The first thing traders should notice when the look 
at a chart of SBAC is the long steady down trend from its late 
April highs.  The stock has painfully evaporated from the $34 
level down to a low on Nov. 7th of $5.91.  During this time the 
selling would ease for a couple of weeks as the stock rebounded 
only to get squashed again.  This price history is yet another 
reason to place it in the high-risk category.  Of course the 
disciplined use of stop losses can prevent most of this pain.   
The stock recently announced its 3Q earnings on November 13th and 
the results were good.  The three months ending on Sept. 30th, 
2001 produced total revenues of $63 million, which is almost 39% 
higher than the previous year.  The company's chairman commented 
on their strong revenues despite a challenging business 
environment.  These positive results helped spur the strong gains 
in the stock this last week.  On a technical level we are 
encouraged that shares have broken through price resistance of 
$10.  The dip to $9.65 late Thursday and early Friday could have 
been bears trying to pressure the stock at a psychological 
resistance level like $10 but the bulls powered it higher.  
Another technical plus was the close at $10.66, which is above 
the Sept. 7th low of 10.48, which could have represented 
additional resistance at 10.50.

So how should traders approach this stock that has already 
rebounded more than 70% from its October lows?  We feel that 
Friday's close at 10.66 is a confirmation of the breakout over 
the $10 level from Wednesday.  The challenges that bulls will 
face is the 50-dma at 11.37 and a retracement level at 11.50.  We 
would encourage readers who have the ability to apply a 
retracement tool to the chart to do so.  We like to view the 
Fibonacci levels of 23.6%, 38.2% and 61.8%.  However, most tools 
also add the 50% level and many will highlight the ends at 0% and 
100%.  In addition to these, if you can, add the 19.1% and the 
80.1% (a couple of Mr. Bailey's favorites).  Now apply the tool 
to SBAC from the late April highs near 34.25 to the October low 
near 5.90.  It is uncanny how accurate the stock trades between 
these levels of support and resistance.  Add these technical 
levels to the common round number price support (psychological 
numbers for investors) and you have a very clear picture of what 
portfolio managers and market makers are trading.  You should see 
the 80.1% retracement very close to the 50-dma.  This could be a 
very tough hurdle for the stock.  However, one short-term signal 
some traders like to use is the 5-dma vs. the 15-dma.  SBAC just 
produced a bullish crossover with the 5 crossing over the 15.  
Additionally, the MACD is turning positive and also has plenty of 

We decided to consult the point-and-figure chart for SBAC and it 
shows the stock on a fresh buy signal.  The new p-n-f bullish 
price target is $20.  This coincides with the descending bearish 
resistance line.  We're not quite that greedy but we're still 
going to aim for a move to $13.90 as our ultimate exit point.  
Shares might stall at $12 but if SBAC breaks out above the 11.50 
level there could be a short squeeze big enough to fuel the move 
higher.  We're going to initiate the play with a stop just under 
Friday's low at 9.64.  We're willing to risk 9.5% to hopefully 
make 30%.  If you like the pattern developing in the stock but 
you're not fond of our entry point consider waiting for shares to 
close above the 11.50 level - just use a tighter stop once you 
enter.  It's very possible that shares will pull back to the $10 
area which would make a good entry point but wait for the bounce 
up to begin.

- POD UPDATE, Nov. 26th, 2001 -

The bullishness in the tech sectors helped SBAC trade up another 
4.4% to close below overhead resistance at $12.00 (really 11.85).  
We are raising our stop to 10.45 after SBAC's successful bounce 
at 10.25 last Wednesday.  We are selecting SBAC as the Play-of-
the-day tomorrow for one reason.  If SBAC can trade above $12.00 
there could be a short squeeze or short covering combined with 
new bulls taking positions on the breakout.  We would not 
look to enter a new position until the stock confirms the move 
higher (over $12.00).  The newsletter is currently up almost
10% on the play.

Picked on November 16th at $10.66 
Gain since picked:          +1.04
Earnings Date               11/13 (confirmed)

Watch List

The PremierInvestor.net watch list is not designed to be read
as full fledged stock picks.  Rather we would prefer to offer
it as an extra tool in today's investor toolbox.  Think of it
as a radar screen with your own radar operator pointing out
interesting developments, technical patterns or potential plays
that you may or may not have seen on your own.  Due to time
constraints we do glance at the news but rarely do we have 
time to fully read pertinent news stories, due background 
research and other necessary screens that investors should do
before making a decision.  A common exercise is to read the
entry, glance at the sector and other stocks in that industry
and then compare what's happening in the stock to what's 
happening in the broader market indices.  We hope you enjoy
the Watch List and that it proves to be a useful tool for your
own trading success.


Digital River - DRIV - close: 17.11 change: +1.53

WHAT TO WATCH:  This is one Internet stock that is really out-pacing
its peers.  DRIV has been on fire from late August where it was
trading for less than $5.  Now shares have added another 9.8% to
close over $17.  This is one we certainly don't feel like chasing
despite its strong volume supporting the climb.  It is definitely
a stock to watch for pull backs or breakdowns.


Oshkosh B'Gosh Inc - GOSHA - close: 39.93 change: +0.68

WHAT TO WATCH:  This youth apparel company has been in a non-stop
climb from $25.00 in early October to its current position just
under round number price resistance at $40.  GOSHA has surpassed
the previous 52-week high set back in June and this appears to be
an all-time high for the stock price.  The stock doesn't trade a lot
of volume and bears have got to be thinking "when does the six 
week up trend begin to pull back?"  How you choose to trade GOSHA
depends on your beliefs about retail clothing, this holiday shopping
season and whether or not you feel like shorting something that is
up 60% in the last six weeks.  Believe it or not, the candlestick
formation produced by Monday's trading looks like a "hanging man".
This could be a bearish signal that might preclude a new bearish
trend or pull back.  However, we do need to see confirmation first
which alluded the bears when they saw a smaller hanging man on 
Halloween.  Considering the trend we would wait for shares to close
under its 10-dma and we'd still be very cautious.  FYI, we found
GOSHA on the Trading Ideas page for today on Premier.


Columbia Sportswear Company - COLM - close: 32.06 change: -2.29

WHAT TO WATCH:  Here's another apparel company that also enjoyed
a strong move up from October through November but now appears to
be ready to change directions.  The last several sessions have
shown the bulls to be finding fruitlessly with overhead resistance
at $35.  The 200-dma is hanging just beyond at $36.50.  The
breakdown today came on twice the average volume and we could see
shares pull back to $27.50.


American Italian Pasta - PLB - close: 38.00 change: -2.00

WHAT TO WATCH:  One might think that with the onset of cool 
weather the amount of pasta Americans eat would go up.  Whether
this is true or not, shares of PLB are doing the opposite.  The
stock just broke down below its 200-dma on twice its average
volume.  Today's close is below the September lows and if 
the stock follows through on the technical breakdown we could
see shares fall to $35 before finding support.  Longer-term
shares are looking unhealthy as well.  Confirm stock direction.

To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support

This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:


For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.


Copyright  2001  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

PremierInvestor.net Newsletter                  Monday 11-26-2001
                                                   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:

In section two:

Net Bulls
  Bullish Stop Adjustments:  CBR, NOK
  Bearish Stop Adjustments:  WWCA

Stock Bottom/Active Trader
  Bearish Stop Adjustments:  PB      

High Risk/High Reward
  Bullish Stop Adjustments:  SBAC, TMPW
  Closed Bearish Plays:      EBAY, INTC

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)

Net Bulls (NB) section

NB Stop Adjustments

Bullish Plays

CBR - close: 7.53 change: +0.38 stop: 6.98 *new*

With the Nasdaq enjoying a strong rally lead by the chip and 
Internet sector the software sector added its own 3.5% gain.  Our 
new bullish play in CBR added over 5%.  We're still aiming for 
$8.50 but don't let that stop you from taking profits along the 
way.  The close over the $7.50 level is encouraging for tomorrow.  
We are raising our stop to 6.98.  


NOK - close: 25.24 change: +1.06 stop: 23.25 *new*

The positive markets helped NOK make another gain.  Bulls should 
feel positive by the close over the $25.00 level.  We're going to 
raise our stop to just under the 15-dma (currently 23.39).  Don't 
forget that our target for NOK is $27.50.  Traders should also 
remember that NOK has its annual analyst meeting tomorrow.  

Bearish Plays

WWCA - close: 25.16 change: -0.69 stop: 26.01 *new*

Our bearish play on Western Wireless is finally starting to move 
our direction again.  After slowly consolidating sideways it 
looks like the bears have finally taken control.  The stock has 
hit a new 52-week low and fell below the recent lows in November.  
Looking at an intraday chart shows the stock really sliding near 
the close.  The fact that it closed on its low for the day is not 
a good sign for the bulls tomorrow.  We are lowering our stop to 
$26.01.  If WWCA trades to $20 intraday we'll close the play at 

Stock Bottom / Active Trader (AT) section

AT Stop Adjustments

Bearish Plays

PB - close: 14.48 change: -0.47 stop: 15.11 *new*

We didn't see any news articles on PB today so it looks like the 
stock is merely following through on its breakdown of support 
last week.  Shares started sliding lower and then began to pick 
up speed and eventually traded to $14.00 before bouncing back by 
the close.  Volume of 633K is 200% above normal.  We are lowering 
our stop to $15.11.

High Risk / High Reward (HR) section

HR Stop Adjustments

Bullish Plays

SBAC - close: 11.70 change: +0.50 stop: 10.45 *new*

The bullishness in the tech sectors helped SBAC trade up another 
4.4% to close below overhead resistance at $12.00 (really 11.85).  
We are raising our stop to 10.45 after SBAC's successful bounce 
at 10.25 last Wednesday.  


TMPW - close: 44.00 change: +3.49 stop: 39.95 *new*

The excitement in the online retail (Internet) sector carried 
over into the rest of the Internet stocks and TMPW added over 8% 
in Monday's trading.  With shares closing at $44.00, traders who 
originally targeted this level for profit taking should do so.  
The newsletter is up over 10% in the play but we're not ready to 
call it quits yet.  TMPW could encounter resistance at 44.50 or 
its 200-dma at 45.70.  Readers may want to adjust their strategy 
accordingly.  We are raising our stop from $37.69 to $39.95.  
Remember, if TMPW trades to $49.00 we'll close the play.

HR Closed Plays

   Closed Bearish Plays

eBay Inc - EBAY - close: 65.16 change: +3.61 stop: 61.60

A number of positive comments about the current holiday shopping 
season and how it may affect retailers, specifically online 
retailers like Amazon.com sent the whole sector running higher 
today.  AMZN closed up over 34% today and in its wake buyers 
pushed EBAY up over 5%.  The opening price for EBAY was $62.36.  
This is above our stop on the play and thus we'll take a slightly 
larger loss on this high risk/high reward bearish stock pick.

Picked on November 20th at $59.11 
Gain since picked:          -3.25
Earnings Date               10/18 (confirmed)


Intel Corp - INTC - close: 31.87 change: +0.81 stop: 31.31 

Positive comments from brokers in addition to Taiwan 
Semiconductor's (NYSE:TSM) comments on higher sales and profit 
expectations for 2001 due to a "substantial increase in customer 
orders" had the SOX index on fire today.  The SOX ended the day 
up 4%, which helped shares of INTC gap up at the open and close 
with a 2.6% gain.  As of Friday's close we were already close to 
being stopped out at 31.31.  Now we will have to take today's 
open at 31.43 as the closing price.  This brings the play to a 
65-cent loss or just over 2%.  Traders should note that INTC 
remains under strong resistance between $32.00 and $32.50.  A 
close above this level would be very bullish for the stock.  
Something that might help Intel achieve more buying interest was 
news today of their new transistor design.  Intel proclaimed that 
their new TeraHertz transistor will be able to run 1 trillion 
cycles per second.  Intel says that their new design allows them 
to overcome two current problems facing the chip industry of 
power consumption (electron leakage in the chip itself) and heat, 
which can actually melt the silicon if not addressed properly.  

Picked on November 15th at $30.78 
Gain since picked:          -0.65
Earnings Date               10/16 (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 

SI      Siemens Aktkien            60.80     +0.87
BLX     Banco Latino Americano     33.00     +1.30
GOSHA   Oshkosh B'gosh Inc         39.93     +0.68

Breakout to Upside (Stocks $5 to $20) 
Ticker  Company Name               Close     Change 

YHOO    Yahoo Inc                  18.07     +2.34
AMZN    Amazon.com Inc             12.21     +3.13
JDEC    J.D.Edwards & Co           14.06     +1.57
ONIS    Oni Systems Corp           10.11     +1.38
MUSE    Micromuse Inc              16.57     +2.07
LGND    Ligand Pharmaceuticals     16.00     +1.25

Breakout to Upside (Stocks over $20) 
Ticker  Company Name               Close     Change 

PHG     Koninklijke Philips        29.25     +1.07
CVS     Cvs Corp                   26.90     +1.56
A       Agilent Technologies Inc   26.25     +1.15
CVC     Cablevision Systems        40.30     +1.79
AAPL    Apple Computer Inc         21.37     +1.53
SNPS    Synopsys Inc               58.25     +4.15

Breakout to Downside (Stocks over $20) 
Ticker  Company Name               Close     Change 

CHIR    Chiron Corp                44.08     -1.27
SHPGY   Shire Pharma Group         35.20     -1.66
TPP     Teppco Partners            31.20     -1.27
COLM    Columbia Sportswear Co     32.06     -2.29
PLB     American Italian Pasta     38.00     -2.00

Recently Overbought With Bearish Signals (Stocks over $20)

GNTX    Gentex Corp                25.75     -0.66
WPL     Wp Stewart & Co            24.25     -0.18
CAPX    Capital Crossing Bank      20.98     -1.55

To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support

This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:


For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.


Copyright  2001  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.


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

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

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

Option Investor Inc
PO Box 630350
Littleton, CO 80163

E-Mail Format Newsletter Archives