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Daily Newsletter, Thursday, 10/10/2002

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PremierInvestor.net Newsletter                 Thursday 10-10-2002
                                                    section 1 of 2
Copyright ) 2002, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================

In section one:

Market Wrap:      Key Reversal Day?
Play-of-the-Day:  Eyeing A Breakout
Market Sentiment: Pop Goes the Market


************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
        10-10-02        High      Low     Volume Advance/Decline
DJIA     7553.95 +247.68  7560.93  7197.49 2341 mln   1804/ 963
NASDAQ   1163.37 + 49.26  1165.83  1108.49 1833 mln   1998/1249
S&P 100   405.91 + 13.22   407.10   387.80   totals   3802/2212
S&P 500   803.92 + 27.16   806.51   768.63
RUS 2000  336.18 +  9.14   324.90   336.18
DJ TRANS 2096.77 + 83.75  2111.72  2008.31
VIX        46.29 -  3.03    50.48    46.17
VIXN       62.82 -  1.20    64.38    60.18
Put/Call Ratio      0.97
*************************************************************

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

Key Reversal Day?

Traders woke to a full basket of news to be digested before
planning their trades.  Much of that news at first appeared to be
positive.  Television networks trumpeted the announcement that
Iraq had invited the U.S. to inspect weapons sites.  They did,
but they accompanied that invitation with a taunt.  Futures at
first reacted positively, but a close reading of news articles
left little reason to believe that weapons inspectors would soon
be packing their bags.

After Bush's Monday speech, the White House released satellite
photographs of two former weapons sites, showing evidence that
Iraq was rebuilding them.  The Defense Intelligence Agency later
released information about two more.  The so-called invitation to
visit those sites came accompanied by a challenge from Iraq's
Minister of Military Industrialization, Abdel Tawab Mullah
Huweish.  Claiming that he's in charge of weapons programs, he
denied developing weapons of mass destruction, but threatened,
"If the Americans commit a new stupidity, we will teach them a
lesson that they will not forget."  The White House announced
that Iraq didn't make those decisions.  The U.N. did.  Suddenly,
the headline news didn't sound quite so positive, a conclusion
reinforced by later news that U.S. and U.K. planes had fired on
Iraqi planes in the no-flight zone, a common occurrence these
days.  To add to negative sentiment, newscasts later referred to
an FBI alert that terrorists may have planned other U.S. attacks.
Also, the French tanker that exploded in Yemen contained
fragments of another ship, seeming to confirm one eyewitness
report that a fishing vessel had drawn up to the tanker before
the explosion.  This lends credence to the theory that the
explosion was a deliberate act of terrorism.  Later in the day,
the House passed a resolution authorizing an attack on Iraq, if
needed.  The Senate will begin deliberations this evening.

More positive were YHOO's earnings and Aetna's pre-announcement.
Futures steadied.  Initial jobless claims were released.  Those
claims fell 40,000, to 384,000 versus the expected 405,000, and
continuing claims fell, too.  These numbers buoyed the markets,
even though that surprise jobless claims number perhaps wasn't so
great a surprise.  Before the announcement, a Bloomberg
television commentator mentioned that the first week of a quarter
often surprised to the positive side.

Bloomberg also mentioned that Q3 earnings growth expectations for
U.S. companies had been lowered significantly to 5.5%, and that
this lowered expectation would dampen enthusiasm for stocks.
Also tempering the enthusiasm were the Merrill Lynch downgrade of
GE, the news that the ECB and Bank of England had maintained
their benchmark rates, and the news that the Nikkei had closed
below 8500 for the first time since June 1983.  Although the
Nikkei closed down 99.72 points, at 8439.62, it had briefly moved
below 8200 and bounced from that area.  Little did traders know
that our markets would stage a similar rebound.

Early on, it looked as if the big C-day (capitulation) had
finally arrived.  Sellers drove the SPX below July lows of
775.68, to 768.63.  The DJ Industrials dipped below 7200, and the
COMPX came dangerously close to 1100, at 1108.49.  The long-
dreaded break of those S&P 500 July lows instead triggered a wave
of buying that kept adv/dec lines positive all day.  Perhaps
coincident with a Fed announcement of a net infusion of $4.5
billion; a strong dip in gold; an announcement of share buy-backs
by several companies, and a sell-the-rumor, buy-the-fact reaction
to weak retail earnings, markets bounced.  Hard.  The DJ
Industrials climbed more than 100 points in twenty minutes, and
zoomed up 250 points within an hour. At its highest level, the
Industrials were 363.50 points higher than the lowest, although
the Industrials closed a bit off that high.

Was this buying yet-another bear market rally or the start of a
new trend?  Recently beaten-down sectors proved to be some of the
biggest gainers. Usually that hints at short covering, and the
markets were certainly long overdue for a short-covering rally.
Those previously beaten-down sectors included the banks,
brokerages, semis, utilities, and telecom equipment companies.
Even retailers gained, despite rather dismal outlooks for most.
Gaming stocks, which had been doing well, were among the biggest
losers.

By the end of the day, some traders were talking about a key
reversal day.  What is that?  A key reversal day comes at the end
of a long trend, such as our current down trend.  Markets move
quickly to new lows (or highs, if it's a reversal of a move up),
but then reverse from there.  Technicians say big price ranges
characterize key reversal days.  Prices may move as much during
the first two to four hours as they do during several days' worth
of trading.  Today's action met that test, although big price
swings aren't so uncommon lately, and not uncommon at all in a
bear market rally.  An explosion of volume also usually
accompanies a key reversal day.  Volume was higher today than in
recent days, with NYSE volume at 2.05 billion shares and the
Nasdaq 1.83 billion shares.  Although this was moderately heavy
volume, I'm not sure I'd qualify it as an explosion of volume, so
today's action might not have met that part of the test of a key
reversal day.

Let's see if the charts can clarify today's market action.
Tonight, I'm going to use the OEX candlestick chart as a proxy
for all the major indices, since their charts look similar.  One
reason for using the OEX chart rather than the SPX chart is that
the OEX has not yet tested its July lows, unlike the other
indices.  On the chart, I've indicated another big-range day on
October 1.  That October 1 candle seemed to be forming the third
candle in a morning-star pattern, another reversal pattern, yet
the next day saw the sell-off continue.  Like the October 1
candle, today's candle kept the OEX firmly within the descending
channel that has been forming since mid-August.  As bullish as
today's action seemed, it hasn't yet proven that the overall
trend has changed.  While the RSI and stochastics appear to be
showing bullish divergence (lower prices on the OEX while RSI and
stochastics reach equal or higher lows), the RSI also appeared to
be showing bullish divergence at the time of the October 1
bullish candle.  In my opinion, the jury is still out on a trend
reversal.  I'll watch for a rollover or a (sustained) breakout
when OEX hits that upper trend line again before I change my mind
about the overall trend.

OEX Daily Chart with RSI and Stochastics:




Tomorrow may tell the tale.  Potentially market-moving events
include GE earnings, expected before the bell.  In late
September, GE affirmed that it expected to meet third-quarter
earnings projections of $.40 per share.  However, the company
soon revealed that the proceeds of the sale of Global eXchange
Service unit helped the company to meet those projections.
Within days, several brokers cut their outlooks for GE.  Merrill
Lynch cited concerns over the finance and short-cycle plastics
units, and they projected their outlook concerns into 2004, when
turbine sales are expected to fall. On Wednesday, Scott Davis at
Morgan Stanley joined the band and lowered 2003 earnings
projections to $1.70 a share from $1.79.  Like the Merrill Lynch
broker, he mentioned short-cycle businesses, and noted problems
in power and aerospace businesses and losses in GE Capital's
portfolio. His use of the term "perfect storm" with relationship
to this bellwether stock didn't bode well for the future outlook.
Today, Merrill Lynch's analysis led them to downgrade GE to
neutral from buy.  Even with today's slight bounce, this stock
has lost 5.40 points since late September alone.

Tomorrow morning also sees the release of important economic
numbers:  PPI and retail sales (September numbers, released at
8:30 ET) and preliminary Michigan sentiment (October number,
released at 9:45 ET).  Forecasts are for PPI of 0.1% (previous
0.0%), core PPI of 0.1% (previous -0.1%), retail sales of -1.0%
(previous 0.8%), retail sales ex-auto of 0.4% (previous 0.4%),
and preliminary Michigan sentiment of 85.5 (previous 86.1).
Since the PMA lockout of the dockworkers occurred on Sunday,
September 29, those September retail sales figures will not
reflect the majority of the damage inflicted by the lockout, but
that doesn't mean the numbers will be rosy.

Evidence of weakness mounted this week.  In Monday's Market Wrap,
Steven Price reminded us that that retailing giants repeatedly
missed same-store sales numbers throughout the summer.  Also on
Monday, the August Consumer Credit report showed $4.2 billion in
credit, rather than the expected $11 billion, perhaps another
indication of a slowdown in consumer spending.  Tuesday, Redbook
reported that its chain store sales index fell 0.7% in September.
Wednesday, retailer American Eagle warned for Q3 and Q4.
Although AEOS mentioned the problems caused by the West Coast
lockout, they also blamed the weak retail environment.  This
morning, CIBC downgraded the company.  Also this morning, Talbots
reduced its outlook for Q3 and Q4, citing a customer research
study that indicated "a significant increase in customer concern
regarding the turbulent economy and volatile stock market."
Federated Stores lowered their outlook.  BJ's Wholesale and Men's
Wearhouse both guided below consensus.  Wal-Mart met same-store
sales figures, but those figures had been previously lowered.
Costco topped earnings, but revenues were shy.  Dillard's
September same-store sales were down 5%, and Ann Taylor reported
weak September sales.  Gap's and Brown's Shoe Stores same-store
sales were down.  Kohl's same-store sales fell and they warned
that earnings would be lower than expectation.  Eddie Bauer same-
store sales were down significantly.  J.C. Penney's reported a
3.1% decrease in comparable-store sales.  I list these numerous
results to emphasize how troubled this sector remains.  I could
list more.

The question remains whether this grim outlook has already been
priced into the market.  The daily RTH (Retail HOLding Company
Depository Receipts) chart shows the damage done by the lockout,
but it also points out the difficulties the retailers were
experiencing even before the end of September.  The double top
predicted a minimum downside target of 70 in this index, a target
that has now been exceeded.  However, the chart also indicates a
gap that occurred in the middle of the movement down from the
second of the double tops.  Such gaps are often called measuring
gaps, because the movement that occurs after these gaps is often
roughly equal to the movement before the gap.  If that's true in
the case of the RTH, this holder may have reached the target
indicated by that measuring gap.

RTH Daily Chart with RSI and (5)(3)(3) Stochastics:




Continued warnings of lower same-store sales from retailers offer
a gloomy prospect, but this week's earnings have already
presented most of the gloomy picture.  I wouldn't be surprised to
see some rebound with upward resistance tested, but the retailers
are going to have a hard time breaking through that overhead
resistance.  As Jim commented last week, the temporary resolution
of the PMA lockout of the dockworkers doesn't undo the damage.
First, the judge hasn't yet approved the use of Taft-Hartley.
Second, even Taft-Hartley is a temporary resolution.  Also, the
backlog of containers still needs to be unloaded, and perishables
may already be spoiled.  The CEO of Mega-Toys was on television
today, and commented that he didn't see a single container on the
road when he drove into work this morning.  The lockout occurred
because of a slowdown, and nothing ensures that dockworkers won't
stage another slowdown.

Beyond these concerns lies another.  We haven't yet had an all-
out capitulation day.  Why do our markets need a capitulation
day?  Because Art Cashin says so.  Well, it's not just Art
Cashin.  On Bloomberg television this morning, one fund manager
confirmed that he wasn't buying equities until the VIX moved
strongly over 50.  While I tend to trust my own studies and
instincts, I've learned to pay attention to people who've
survived several market turns.  There's a more prosaic reason,
too:  until seasoned participants believe that all weak hands
have been flushed out of the system, they will continue selling
into rallies.  While we may see a rally for a day or two, and I
recognize that one of these rallies will be THE rally that
changes the trend, I'm still waiting for the markets to convince
me that they've begun a new trend.

Linda Piazza
lpiazza@OptionInvestor.com


===============
Play-of-the-Day   (New BULLISH tech play)
===============

Verizon Communications - VZ - cls: 32.95 chg: +0.80 stop: 31.24

Company Description:
Verizon Communications is one of the world's leading providers of
communications services. Verizon companies are the largest
providers of wireline and wireless communications in the United
States, with 135.1 million access line equivalents and 30.3
million Verizon Wireless customers. Verizon is also the largest
directory publisher in the world. (source: company press release)

Why We Like It:
It's no secret that telecom and wireless stocks have taken a
severe beating.  The IXTCX combined telecom index and YLS.X
wireless index (which have both been trending lower for two
years) are trading near all-time lows.  Things are looking pretty
bleak, but the group is not without its stronger performers.
Just take a look at QCOM, which has proven to be incredibly
resilient.  The stock has bounced around in the $25-$30 range
since June, seemingly oblivious of the plummeting NASDAQ.  Shares
of VZ have shown similar strength in recent months.  That's
especially impressive, considering the difficulties that have
plagued Baby Bells such as BLS and SBC.  Verizon has aimed to
protect itself from local market competition by introducing new
sources of revenue such as long-distance service in New Jersey
and New York.  This strategy appears to be working.  The company
announced on October 1st that it was maintaining its earnings
estimates for 2002, and shares have been trading with a bullish
bias ever since.

VZ is now threatening to slice through resistance in the $33.50-
$34.00 region.  Rather than waiting for shares to actually move
above that area, we're initiating this paper trade at current
levels.  The stock's recent tendency to outperform the NASDAQ and
double-top buy signal on the point-and-figure chart are
indications that a breakout will occur in the near future.  If
our expectations prove to be incorrect, we've limited our
downside risk with a relatively tight stop at $31.24, one cent
under today's low.  More aggressive traders could use a stop just
below the 50-dma at $30.73.  In terms of upside potential, we're
looking for a rally to the $38-$39 region, under the 200-dma.
This is also the location of the descending trendline formed by
the pattern of lower highs on the daily chart.  We'll set an
official exit price if/when shares approach our objective.

Picked on October 10th at $32.95
Results since picked:      +0.00
Earnings Date           10/29/02 (confirmed)





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

Pop Goes the Market

by Steven Price

Guess that SPX intraday low was pretty significant.  Wednesday's
sell-off looked ominous, with the Dow, S&P 500 and OEX all
breaking down through significant support levels.  The one
nagging indicator that gave an inkling of bullish sentiment was
the fact that the SPX had stopped dead at its July 24 intraday
low of 775.  This morning, the sell-off continued, with the Dow
reaching its downside-measuring objective, based on the head and
shoulders formation it had formed over the last couple of months.
That measuring objective was around 7180-7190 and this morning's
bounce came right at 7197. And what a bounce.  The Dow rallied
336 points from its bottom, to burst back above the 7500 mark,
which had served as previous support. So now all must be well;
children (or possibly investment bankers) will be singing in the
streets, rays of sunshine will fall upon our shoulders and maybe
we'll even get a little manna from heaven.  NOT!  We may in fact
be forming the bottom for a continued rally, but until we break
above 8000 in the Dow and 1223 in the Nasdaq Composite, there
will still be a series of lower highs and lower lows. Of course,
we can still play a bounce for a few hundred points to the long
side, but I wouldn't be thinking triple digits for Yahoo just
yet.   In fact the NYSE saw 569 new lows, to only 18 new highs.
The Nasdaq saw 413 new lows, with only 15 new highs. While it's
awfully hard to achieve a new high after an 1800-point Dow sell-
off, these numbers do demonstrate just how far we have to go.

With bullish percentages falling into the low double and single
digits, the risk has definitely been mounting for bears, as this
can be seen as a sign of market compression. The NDX fell to 12%,
the Dow to 8%, the SPX to 18% and the OEX to 17%.  This reading
is a measure of the number of stocks in an index currently giving
point and figure buy signals, and anything under 30% is
considered oversold condition.  The fact that we just broke the
775 mark in the SPX, trading down to 768, and came within 3
points of the OEX intraday low of 384, tells me we may have
simply seen a round of short covering by bears who were aiming at
those levels since late August.  After giving up almost 1800
points since the end of August, a bounce seems in order.  After
all, even shorts need to take their profits at some point.

The news after yesterday's bell that Yahoo beat forecasts could
have been the catalyst for a rally; however, we didn't get that
rally until after a morning sell-off.  Economic data this morning
showed a decrease in initial jobless claims, but a 4-week moving
average that remained over 400,000.  We also got a slew of retail
data, including earnings warnings from Kohl's (KSS) and Federated
(FD), the parent of Macy's and Bloomingdale's.  A number of other
retailers also saw a decline in same store sales and those that
saw increases, like Wal-Mart, still did so on lowered
expectations.  The message seems to be that consumers are cutting
back on discretionary spending and that is not good news heading
into the holiday shopping season.   GE also received another
downgrade this morning, but rode the tide higher by the end of
the day.  A look at the weekly chart of the Dow shows that we are
in the seventh straight down week, until today.  This afternoon's
rally actually puts the average up 5 points for the week.

President Bush announced that the House of Representatives had
passed a resolution by a margin of 296-133 that authorizes him to
use military action against Iraq.  The Senate is expected to
approve the measure tonight.  While Bush has said on several
occasions that he would be open to weapons inspectors being
allowed to do the job of disarming Saddam, this certainly opens
the door for what many expect to be a military exercise at some
point.

Treasury Secretary Paul O'Neill said that it is possible the
administration will implement another stimulus package that would
allow further tax cuts for investors. While republicans are
focusing on cuts, democrats are pushing to extend unemployment
benefits that will expire just after Christmas.   It is unlikely
anything will happen before the elections and passage of the
bills will likely depend on the results.

Crude Oil Futures fell below $29 a barrel to $28.97, as
expectations are that next week's petroleum inventory numbers
will show an increase in reserves after six weeks of declines.

If there had been good news for the economy (the drop in jobless
claims was positive, but not enough to signal a bottom in the
stock market), the rally could have been attributed to something
concrete.  However, it appears that shorts simply took some
profits and covered their open positions after we broke the July
24 SPX intraday low.   Tomorrow's retail sales and preliminary
Consumer Sentiment numbers should give us a look at just how
willing consumers may be to spend in the next few months.  We
have already seen what the retail numbers will most likely bring,
but a positive surprise in the confidence number could keep the
rally going.  The last time a Friday ended higher than it opened
was a month ago.  Even if the rally does continue, I'll look for
a higher high before putting on my horns.


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

Market Averages

DJIA ($INDU)

52-week High: 10679
52-week Low :  7286
Current     :  7533

Moving Averages:
(Simple)

 10-dma: 7597
 50-dma: 8299
200-dma: 9432

S&P 500 ($SPX)

52-week High: 1176
52-week Low :  775
Current     :  803

Moving Averages:
(Simple)

 10-dma:  810
 50-dma:  877
200-dma: 1024

Nasdaq-100 ($NDX)

52-week High: 1734
52-week Low :  795
Current     :  849

Moving Averages:
(Simple)

 10-dma:  833
 50-dma:  912
200-dma: 1216

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


The S&P Retail Index (RLX.X): The retailers were all doom and
gloom this morning, as earnings warnings came from Kohl's and
Federated.  There were a slew of negative same-store sales
reports, indicating that consumers are spending less heading into
the holiday season, rather than more. The challenge appears to be
finding someone to buy all those goods that will finally be
unloaded on the west coast.  Surprisingly, however, the Retail
Index bounced once again from the 250 level, reaching an intraday
low just under 245 and finishing at 258.  It appears to be short-
covering, and the previous intraday of 249 did fall. Tomorrow's
preliminary Consumer Sentiment number should give us an
indication of just how willing the consumer will be to pony up
for gifts in a couple of months. As we head into the holiday
season, we will keep an eye on November's weekly sales data.  If
we still see more declines, we'll put on our shorts and get out
of the way.

52-week High: 366
52-week Low : 253
Current     : 265

Moving Averages:
(Simple)

10-dma  : 264
50-dma  : 283
200-dma: 325


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


Market Volatility

It is interesting that on the day when the VIX finally broke
through the 50 level, after failing there for three straight
days, we got a rally of over 300 points from the low of the day.
I was looking for a VIX in the high 50s before we got a continued
rally, so we may still have some downside.  However, if this is
the start of the big one, at least the pattern of hitting 50
first will remain in tact. The index actually dropped 3 points on
the day, to finish at 46.48, however, it topped out this morning
at 50.48 intraday.   Friday should once again bring in weekend
premium sellers, so watch for a VIX drop toward the end of the
day, unless today's rally turns out to be short covering and we
head lower tomorrow.


CBOE Market Volatility Index (VIX) = 46.29 -3.19
Nasdaq-100 Volatility Index  (VXN) = 62.82 +0.44

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

          Put/Call Ratio  Call Volume   Put Volume

Total          0.97        710,404       692,244
Equity Only    0.67        505,627       339,484
OEX            1.07         52,003        55,826
QQQ            1.07         55,118        58,902

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

Bullish Percent Data

           Current   Change   Status
NYSE          25      - 2     Bull Correction
NASDAQ-100    15      + 0     Bear Confirmed
Dow Indust.   10      + 0     Bull Correction
S&P 500       18      - 2     Bear Confirmed
S&P 100       17      - 3     Bear Confirmed

Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart.  Readings above 70 are considered overbought, and readings
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend

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

5-Day Arms Index   1.08
10-Day Arms Index  1.37
21-Day Arms Index  1.47
55-Day Arms Index  1.36

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

        Advancers     Decliners
NYSE       1804           963
NASDAQ     1998          1249

        New Highs      New Lows
NYSE         18             331
NASDAQ       11             337

        Volume (in millions)
NYSE     2,341
NASDAQ   1,833


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

Commitments Of Traders Report: 10/01/02

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

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

S&P 500

There has not been much change in the positions of Commercials,
who reduced both longs and shorts by about 2,000 contracts each.
Small traders are also relatively unchanged, with reductions of
about 1,000 contracts to both the long and short sides.


Commercials   Long      Short      Net     % Of OI
09/10/02      426,230   470,537   (44,307)   (5.0%)
09/17/02      476,224   503,268   (27,044)   (2.7%)
09/24/02      425,276   442,661   (17,385)   (2.0%)
10/01/02      423,661   440,133   (16,472)   (1.9%)

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year: ( 16,472) - 10/01/02

Small Traders Long      Short      Net     % of OI
09/10/02      166,696    85,259    81,437     32.3%
09/17/02      182,243   116,377    64,866     21.7%
09/24/02      124,232    73,506    50,726     25.7%
10/01/02      123,371    74,704    48,667     24.5%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year: 114,510 - 3/26/02

NASDAQ-100

Commercials reduced both longs and shorts, but by a relatively
small percentage, giving up 600 long contracts and 1,700 shorts.
Small Traders also made few changes to their overall positions,
getting slightly longer overall, by about 600 contracts.


Commercials   Long      Short      Net     % of OI
09/10/02       53,309     58,745    (5,436) ( 4.9%)
09/17/02       72,522     75,815    (3,293) ( 2.2%)
09/24/02       46,637     54,613    (7,976) ( 7.9%)
10/01/02       46,000     52,976    (6,976) ( 7.0%)

Most bearish reading of the year: (15,521) -  3/13/02
Most bullish reading of the year:   9,068  - 06/11/02

Small Traders  Long     Short      Net     % of OI
09/10/02       14,024    10,494     3,530    14.4%
09/17/02       15,288    14,142     1,146     3.9%
09/24/02       11,163     9,421     1,742     8.5%
10/01/02       11,896     9,575     2,321    10.8%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:   8,460  -  3/13/02

DOW JONES INDUSTRIAL

Commercials left long positions unchanged, while reducing shorts
by 10%.  Small traders reduced longs by 1,000 contracts, while
adding the same amount to the short side.


Commercials   Long      Short      Net     % of OI
09/10/02       22,946    14,936    8,010      21.1%
09/17/02       26,863    21,187    5,676      11.8%
09/24/02       18,951    10,074    8,877      30.6%
10/01/02       18,969     8,903   10,066      36.1%

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
09/10/02        7,568    10,129    (2,561)   (14.5%)
09/17/02       13,393    11,637     1,756      7.0%
09/24/02        7,939     9,453    (1,514)   ( 8.7%)
10/01/02        6,809    10,503    (3,694)   (21.3%)

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   1,909  -  1/16/01

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




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DISCLAIMER
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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:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
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Copyright ) 2002  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter                 Thursday 10-10-2002
                                                    section 2 of 2
Copyright  2002, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================

In section two:

Net Bulls
  New Bullish Plays:     VZ

Stock Bottom / Active Trader
  Bullish Play Updates:  HLYW, ITMN
  Bearish Play Updates:  NEU, RYL
  Closed Bearish Plays:  KMB

High Risk/Reward
  New Bullish Plays:     ORCL

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) Tech Stock section
==================================================================

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

  -----------------
  New Bullish Plays
  ----------------- 

Verizon Communications - VZ - cls: 32.95 chg: +0.80 stop: 31.24

Company Description:
Verizon Communications is one of the world's leading providers of 
communications services. Verizon companies are the largest 
providers of wireline and wireless communications in the United 
States, with 135.1 million access line equivalents and 30.3 
million Verizon Wireless customers. Verizon is also the largest 
directory publisher in the world. (source: company press release)

Why We Like It:
It's no secret that telecom and wireless stocks have taken a 
severe beating.  The IXTCX combined telecom index and YLS.X 
wireless index (which have both been trending lower for two 
years) are trading near all-time lows.  Things are looking pretty 
bleak, but the group is not without its stronger performers.  
Just take a look at QCOM, which has proven to be incredibly 
resilient.  The stock has bounced around in the $25-$30 range 
since June, seemingly oblivious of the plummeting NASDAQ.  Shares 
of VZ have shown similar strength in recent months.  That's 
especially impressive, considering the difficulties that have 
plagued Baby Bells such as BLS and SBC.  Verizon has aimed to 
protect itself from local market competition by introducing new 
sources of revenue such as long-distance service in New Jersey 
and New York.  This strategy appears to be working.  The company 
announced on October 1st that it was maintaining its earnings 
estimates for 2002, and shares have been trading with a bullish 
bias ever since. 

VZ is now threatening to slice through resistance in the $33.50-
$34.00 region.  Rather than waiting for shares to actually move 
above that area, we're initiating this paper trade at current 
levels.  The stock's recent tendency to outperform the NASDAQ and 
double-top buy signal on the point-and-figure chart are 
indications that a breakout will occur in the near future.  If 
our expectations prove to be incorrect, we've limited our 
downside risk with a relatively tight stop at $31.24, one cent 
under today's low.  More aggressive traders could use a stop just 
below the 50-dma at $30.73.  In terms of upside potential, we're 
looking for a rally to the $38-$39 region, under the 200-dma.  
This is also the location of the descending trendline formed by 
the pattern of lower highs on the daily chart.  We'll set an 
official exit price if/when shares approach our objective. 

Picked on October 10th at $32.95
Results since picked:      +0.00
Earnings Date           10/29/02 (confirmed)
 





==================================================================
Stock Bottom / Active Trader (AT) section
==================================================================

===============
AT Play Updates
===============

  --------------------
  Bullish Play Updates
  --------------------

Hollywood Ent. - HLYW - cls: 19.65 chg: +2.16 stop: 18.04 *new*

Wow...Talk about immediate results!  In our play description last 
night we talked about the positive business outlook for HLYW.  
This point was really hammered home today when the company raised 
its guidance for both the fourth quarter and fiscal 2003.  
Hollywood Entertainment said it expected same-store sales growth 
of about 10% for Q4, compared to previous estimates of only 4%.  
Growth expectations have been raised from 2%-3% to 12%-14%.  The 
company also boosted its earnings growth guidance from 15% to 20% 
for 2003.  Sounds like business is really humming along!  Wall 
Street applauded this news with a 12.3% gain.  Shares gapped 
higher this morning, so our long play was activated at the 
opening trade of $18.06.  In light of today's huge move, we would 
not be surprised to see an orderly pullback.  Our stop loss (one 
cent under today's low, two cents under break-even) will take us 
out of this play if the profit-taking turns into a full-fledged 
reversal.  Traders looking to protect a small gain could use a 
stop just below intraday support at $18.82.  Also note that we've 
set an official profit-target at $20.74, slightly below April/May 
resistance.   Shorter-term traders should be looking to take 
profits near the $20.00 level.

Picked on October 9th at $18.06
Results since picked:     +1.59
Earnings Date          10/22/02 (unconfirmed)
 



--- 

InterMune Inc - ITMN - cls: 32.19 chg: +1.00 stop: 29.98 *new*

So far, so good.  ITMN held firm on Wednesday, despite bearish 
action in both the NASDAQ and Dow Jones.  The stock responded 
nicely to today's broader market rally and continued to distance 
itself from the 200-dma at $30.05.  In a positive development, 
shares outperformed the DRG.X pharmaceutical index and added 
3.2%.  Uptrending action in the MACD and daily stochastic 
oscillators bodes well for a rally to the next area of 
psychological resistance at $35.00.  Our official exit target is 
set just below this level, at $34.94.  Our stop has also been 
raised to $29.98, slightly below the 200-dma.  Short-term traders 
looking for new entries can watch for a move above Monday's high 
at $32.75.

Picked on October 8th at $31.39
Results since picked:     +0.80
Earnings Date          10/23/02 (unconfirmed)
 



  --------------------
  Bearish Play Updates
  --------------------

Neuberger Berman - NEU - cls: 24.99 chg +1.89 stop: 25.51 *new*

The beleaguered financial sector rebounded sharply today, thanks 
to a broad-based rally in the equity market.  The worries that 
have been plaguing the group haven't suddenly disappeared, but 
nothing goes down in a straight line.  The XBD.X broker/dealer 
index looks like it's trying to find a bottom, having bounced 
from the 320 level four times in the last four sessions.  This 
line in the sand is critical.  A failure of support could send 
the index spiraling down to the 300 region.  Unfortunately the 
rising oscillators indicate that the XBD may continue to rise.  
NEU shot higher by 8.1% on Thursday but couldn't muster a close 
above psychological resistance at $25.00.  This gives us some 
hope for a reversal, but (much like the XBD) the bullish daily 
stochastics and MACD are hinting towards more upside.  In light 
of the strengthening technical picture, we've moved our stop down 
to $25.51.  Although this doesn't give us much more wiggle room, 
it should limit potential losses to a manageable 6.2%.

Picked on October 5th at $24.01
Results since picked:     -0.98
Earnings Date          10/22/02 (confirmed)




---

Ryland Group Inc - RYL - close: 33.86 change: +2.27 stop: 35.60

After getting hammered on Wednesday, the DJUSHB home construction 
index bounced back with a 5.7% gain.  Better-than-expected 
jobless data from the Labor Department seemed to spook the bears 
into short-covering.  RYL briefly dipped to the $31.00 level this 
morning, but quickly moved back into positive territory.  Shares 
finished with a 7.1% gain after uptrending for most of the 
session.  A solid victory for the bulls...But will it last?  The 
recent pattern has been for the market to sell off on Friday, 
because nervous investors are unwilling to take positions ahead 
of the weekend.  If this is the case tomorrow we could see RYL 
rollover from current levels and gravitate towards our profit-
target at $30.06.  Short-term traders could target new entries on 
a move below intraday support at $33.00.  Should the stock 
continue to rebound, we'll be watching for the $35.00 level to 
act as resistance.  Our stop remains set at $35.60, but those 
seeking to eliminate risk could use a break-even stop at $34.65. 

Picked on October 4th at 34.65
Results since picked:    +0.79
Earnings Date         10/22/02 (confirmed)





===============
AT Closed Plays
===============

  --------------------
  Closed Bearish Plays
  --------------------

Kimberly Clark - KMB - cls: 54.00 chg: +0.78 stop: 53.51

With the Dow Jones and FPP.X forest/paper product index both 
looking due for a bounce, we elected to challenge this play with 
a very tight stop.  That level was eclipsed when KMB gapped 
slightly higher on Thursday morning and opened at $53.85.  Our 
paper trade was closed for a gain of $3.00, or 5.2%.  Shares 
wound up underperforming the Dow, but bulls will be encouraged by 
the fact that shares bounced just 27 cents above the July lows.  
As could be expected after a sharp sell-off, the oscillators are 
showing signs of reversing from oversold levels.  KMB may have 
more downside remaining, but for now it appears as if the bears 
are on the defensive.

Picked on September 20th at 56.85
Results since picked:       +3.00
Earnings Date            10/22/02 (unconfirmed)






==================================================================
HIGH RISK/HIGH REWARD (HR) section
==================================================================

============
HR New Plays
============

  -----------------
  New Bullish Plays
  ----------------- 

Oracle Corp. - ORCL - close: 8.51 change: +0.44 stop: *text*

Company Description:
Oracle is the world's largest enterprise software company. 
(source: company press release)


Why We Like It:
A lot of Wall Street observers have been made to look pretty 
foolish by attempting to call bottoms, and we're not about to 
make the same mistake.  Does the NASDAQ have more downside 
remaining?  Probably.  Is the climate for IT spending beginning 
to improve?  Not that we can tell.  As a matter of fact, Oracle's 
CEO commented last week that the European tech sector is starting 
to face the same difficulties that have become all-too-familiar 
to U.S. investors.  He did mention that a domestic turnaround 
might be forthcoming in 2003, but long-term institutional 
investors will probably want to see some concrete evidence of an 
IT upturn before they vote with their cash.  Against this 
backdrop of fundamental uncertainty, we're adding ORCL as a 
bullish play.  What's up? 

Simply put, the short-term technical picture is looking strong.  
ORCL has spent the past three weeks trading in a sideways 
consolidation pattern.  Shares moved higher by 5.4% today and 
came within just 15 cents of setting a new relative high.  If 
today's tech rally has legs, a breakout could quickly send shares 
to the $10-$11 region.  Rising action in the MACD and daily 
stochastics (5,3,3) bodes well for the bulls.  The overall IT 
spending environment may not be improving anytime soon, but we 
think ORCL will nonetheless trade higher over the next 1-2 weeks.  
By waiting to enter this play until ORCL trades above $8.72, 
we'll ensure that any possible levels of near-term resistance 
have been cleared.  The 50-dma at $9.27 could throw a wrench in 
our plans, so we'll be watching closely to see how the stock 
behaves near that level.  This play will be initiated with a stop 
at $7.99, slightly under today's low.  We'll probably move our 
stop higher if shares close above $9.00.

Click here for an annotated chart of ORCL:



Picked on October xxth at $xx.xx <- see text 
Results since picked:      +0.00
Earnings Date           12/17/02 (unconfirmed)
 




==================
  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            34.40     +2.94
BRL     Barr Labs                  60.12     +1.28

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

YHOO    Yahoo! Inc                 12.27     +2.29
PSFT    PeopleSoft Inc             15.15     +1.04
HCBK    Hudson City Bancorp        17.39     +1.48
CHS     Chico's FAS Inc            17.45     +1.45
HLYW    Hollywood Entertainment    19.65     +2.16
APPX    American Pharmaceutical    17.87     +1.323.34

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

LLY     Eli Lilly                  60.90     +1.10
AMGN    Amgen Inc                  48.24     +2.62
UNH     Unitedhealth Group         92.18     +1.20
RY      Royal Bank of Canada       32.90     +1.42
COST    Costco Corp                32.20     +1.75
HDI     Harley-Davidson            48.46     +1.91
FDC     First Data Corp            29.86     +3.26

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

BBBY    Bed Bath & Beyond          30.16     -1.08
HET     Harrah's Entertainment     43.08     -1.62
WEN     Wendy's International      31.96     -2.04
CEC     CEC Entertainment          29.00     -1.61
WGOV    Woodward Governor          43.80     -1.48
SURW    Sure West Comm.            21.45     -3.72

----------------------------------------- 
Recently Overbought With Bearish Signals (Stocks over $20)
------------------------------------------- 
Ticker  Company Name               Close     Change 

                             




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

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:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

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

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Newsletter, or any Premier Investor Network newsletter please
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Copyright  2002  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

DISCLAIMER

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

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

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