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Daily Newsletter, Thursday, 02/20/2003

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PremierInvestor.net Newsletter                 Thursday 02-20-2003
                                                    section 1 of 2
Copyright ) 2003, 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:      Economy Stupid or Stupid Economy?
Play-of-the-Day:  1-800 Breakdown
Market Sentiment: It's the Economy


************************************************************
MARKET WRAP  (view in courier font for table alignment)
************************************************************
      02-20-2003           High     Low     Volume   Adv/Dcl
DJIA     7914.96 - 85.60  8027.35  7893.74 1.39 bln 1478/1723
NASDAQ   1331.23 -  3.10  1344.29  1329.09 1.29 bln 1635/1598
S&P 100   424.29 -  4.51   430.63   423.70   Totals 3113/3321
S&P 500   837.10 -  8.03   849.37   836.56
W5000    7931.61 - 64.10  8032.12  7928.01
RUS 2000  359.74 -  0.54   360.94   359.07
DJ TRANS 2084.91 - 20.50  2114.07  2082.63
VIX        35.67 +  0.45    36.77    35.38
VXN        48.56 +  0.93    49.18    47.68
Total Volume 2,834B
Total UpVol  1,098B
Total DnVol  1,660M
52wk Highs  115
52wk Lows   193
TRIN       1.68
PUT/CALL   0.86
*************************************************************

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

Economy Stupid or Stupid Economy?

Economists were run over by the economic bus this morning
but the markets barely reacted. The markets shook off the
bad news as just more evidence that the stupid economy is
still wandering aimlessly in the soft patch. President Bush
took to the stage today to warn that the economy could get
worse if his stimulus package was not passed soon. Based
on the volume nobody believed him.

Dow Chart - 10 min


Nasdaq Chart - 10 min


There was a flood of economic reports today and none of
them were positive. The Trade Deficit hit a record low in
December at -$44.2 billion and over 10% deeper than the
prior month. This shows that world markets are still in
decline and will probably remain weak through the first
quarter. It appears that weak global demand is slowing
manufacturing around the world. Global sentiment is falling
and with it global markets. The deficit is going to be a
drag on the 1Q-GDP and more analysts are now worried that
it could be negative.

The Jobless Claims rebounded over 400,000 and layoffs
appear to be growing again. Continuing claims rose to 3.44
million from 3.29 million. This number is nearing the 2001
high of 3.5 million. Without job growth any recovery is
still months away. Any initial recovery will be seen in
signs of increased productivity as manufacturers produce
more with existing workers until physical limits are
reached. As demand picks up we will see slowing jobless
claims before we see an increase in jobs. To date this has
not happened. The four-week moving average also rose to
395,000 and very close to the critical 400K level.

The MBA mortgage application index was flat for the week
due to a decline in refinancing applications being offset
by a slight rise in new purchase activity. Refis represented
72.5% of applications and will be the hardest hit by any
rate increase. The current 30yr mortgage is 5.69% and with
the PPI exploding today that number is at risk.

The Philly Fed Survey surprised analysts considerably at
2.3 compared to estimates of 10 to 12 and inline with
Dec/Jan numbers of 11.2. The numbers showed weakening
demand and slowing shipments. Shipments fell to 0.0 from
21.3 in January. This is very bearish. Inventories are
continuing to fall and prices paid rose sharply from 11.6
to 16.2. Prices paid are rising, prices received are
falling and demand is evaporating. Does not paint a very
pretty picture.

The Conference Board Leading Indicators came in a -0.1%
after being revised intraday. This dip ended a three-month
string of gains with November the highest at 0.5%. The
decline is increasing and only four of the ten components
made any improvement in the last six months. This shows
there is no recovery expected any time soon.

The biggest economic problem for the day was the PPI
report which came in at +1.6% compared to estimates of
+0.4%. The majority of the gain came from increases in
energy/oil prices but even without food/energy, the "core"
rate still rose more than twice the estimates at +0.9%.
This shows that producer prices rose on all levels and
there is suddenly real fear that the inflation monster
is returning. Like a preview of a Godzilla movie with
the monster quietly swimming under the ocean toward some
distant shore, the ripples on the surface are growing
while unsuspected civilians go about their lives. When
he arrives at the shore and suddenly stands up to his
full height it is too late for action and something is
going up in flames. That something for us is prices and
interest rates. Neither of which will help the economy.
The Fed is busy shoveling money into the system by the
truckload to prop up the economy and ward off deflation
but with inflation suddenly appearing they will have to
rethink their plan. Yesterday there was a 24% chance of
another rate cut at the FOMC meeting on March 18th but
with numbers like these those odds may shrink significantly.
Most feel that this number is a statistical error which
will be corrected next month. Others feel that it is
indicating rising demand pushing up prices. I fail to
see that demand in any other report. The PPI number was
the largest jump in 13 years.

About the only good news today came from Merrill Lynch
which upgraded the chip sector based on oversold conditions
and low inventory levels. They raised the sector from
negative to slightly positive. They feel that without
another significant drop in demand the sector is reasonably
valued. The research note suggested there could be a
+10% increase in demand in 2003 but they were not basing
the recommendation on that possibility. They said the
very low inventory levels could prompt a reasonable bounce
if there was any demand increase. The SOX has rebounded
from 260 to near 300 in the last four days and has been
instrumental in holding up the Nasdaq.

GE CEO Jeffery Immelt, was interviewed and said the US
economy was still very challenging but if the consumer
keeps spending we should not slip back into recession.
That is a very big "IF" based on currently falling
consumer sentiment and rising unemployment. In a rare
break with consensus many of the CEOs at the summit in
Florida said that even IF the war was avoided the economy
would still be in trouble.

The FNM CEO offered a competing view that most companies
were not holding up on spending. Hello, Franklin Raines,
anybody home? After the close FNM reaffirmed that it
would earn "about" what it earned in the 4Q or $1.66.
According to First Call the consensus was for $1.74.
Since FNM does not issue specific guidance it cannot
be seen as a warning but it was clearly an indication
that they were not going to meet the consensus numbers.
FNM also said they saw the housing market slowing by
2-3% this year. The stock was down in after hours.

BEAS announced earnings after the close that beat the
street but then gave guidance that was seen as negative.
Revenue estimates for the 1Q were less than expected and
they declined to give estimates for the full year and
used the Iraq ate my earnings outlook excuse. BEAS was
down slightly in after hours.

With earnings about over for the 4Q the outlook for the
year has dropped significantly with S&P full year earnings
now expected to grow only in the 8-9% range depending
on who is adding up the numbers. 40% of the S&P companies
have warned for the 1Q with only 23% giving positive
guidance. These percentages are based on already seriously
revised earnings estimates. The earnings hurdle is so low
it is painted on the asphalt instead of rising above it
and they are still cutting estimates. With the geopolitical
concerns not likely to ease for at least another month I
think it is safe to say the 1Q is already a loser.

After a substantial short covering rally which ended on
Tuesday afternoon the Dow has resumed its previous down
trend. There was a sharp spike at the close on Wednesday
but that evaporated just as quickly at the open on Thursday.
The Dow drop came to a halt at 7900 on Thursday and it
resisted every effort to push it lower. The final tally
was a -86 point close but considering the overwhelming
negativity of the economic reports it could have been
much worse.

The Nasdaq is the star of the show and is being held up
by the semiconductor sector. The Nasdaq held onto 1330
support all day and is still positive for the week. With
the SOX near strong resistance at 300 the odds of continued
support are slim.

With the Dow having completely retraced its gap up on
Tuesday and poised to break 7800 again there is real fear
that last weeks low of 7629 could be broken. The problem
is not a flood of sellers but lack of buyers. The volume
is nearing record low levels for the year and barely over
one billion each for the NYSE/Nasdaq. The Etrade CEO said
in an interview that even small investors are moving to
the sidelines and trading activity is slowing to a crawl.
If there was any concentrated selling event we could be
in serious trouble. We are drifting down due to lack of
interest rather than the results of massive dumping.
Mutual fund cash is nearing record levels and
institutional traders have simply stopped trading.

The geopolitical concerns along with economic concerns
have made trading about as profitable as a moonlight
walk through a minefield. They don't know if the next
new alert will be the one that sets off the panic drop.
They are afraid to be in the market and afraid to not be
in the market. This is why there is no selling. They are
maintaining current hedged positions but are not committing
any new funds to the market. Huge blocks of puts are
trading on the indexes and I-shares as new money is being
put to work as insurance instead of investment. In a
nutshell traders are adopting a bunker mentality and
while they are not selling they are not buying either.

The positive side of the equation is the lack of selling.
Bears appear to be as reluctant to short as bulls are
to buy. After the huge +450 point Dow romp from last
weeks lows the bears are afraid to go short again in
volume. They are nibbling but on a diet. With a Saddam
retirement announcement a 450 point gain could be just
the opening gap. The risk reward in this environment is
just not conducive to big positions.

One reader who has been trying to short several stocks
this week related that there was no stock available to
short in the semi sector or in the Dow diamonds (DIA).
I researched the diamonds and there was only three days
of volume short as of Jan-31. That means a heck of a
lot more people have shorted them since OR they have
taken the shares out of circulation to prevent them
from being shorted and putting pressure on the market.
The reader tried to short them in accounts at Brown,
InteractiveBrokers and CyberTrader with zero results.
I would lean more to the "removed from inventory" thesis
instead of all available shares shorted. The idea would
be to not voluntarily give your last box of bullets to
somebody that wanted to shoot back at you.

Friday is a tossup again. With the Dow five points above
last Friday's close anything is possible. We could see
buyers appear who missed last weeks rally. We could see
sellers appear confident that the bulls could not hold
the line and looking for 7500 next week. Tomorrow we
have the CPI or Consumer Price Index. With the lack of
attention the PPI got today the CPI should also be
ignored if negative. Either way there is likely to be
an afternoon bounce as everyone still trading goes flat
for the weekend.

Enter Very Passively, Exit Very Aggressively!

Jim Brown
Editor


===============
Play-of-the-Day   (New BEARISH high-risk/high-reward play)
===============

1-800 Contacts - CTAC - close: 19.10 change: -1.56 stop: 21.01

Company Description:
1-800 CONTACTS offers consumers an attractive alternative for
obtaining replacement contact lenses in terms of convenience,
price and speed of delivery. Through its toll-free telephone
number and its Internet web site, www.contacts.com, the Company
sells all of the most popular brands of contact lenses. (source:
company press release)

Why We Like It:
One look at the daily chart for CTAC is enough to make
shareholders of the contact lens retailer recoil in horror.  On
December 3rd the stock gapped sharply higher on news that 1-800
Contacts had struck a deal with Johnson & Johnson to become an
authorized retailer of JNJ's Vistakon line of contacts.  Wall
Street viewed this development as a huge coup for CTAC.  The
stock gapped up to $21.00 (after finishing the previous session
at $14.50) and quickly rallied to the $28.00 level.  Shares
traded strong over the following month, maintaining the huge
gains while moving higher in a shallow uptrend.  However, this
bullishness evaporated on January 9th after the company's COO and
CFO announced he was resigning to "explore a range of other
career possibilities and personal interests."  While there was no
indication that the resignation was somehow related to management
problems at 1-800 Contacts, it nonetheless provided a great
excuse for the bulls to take profits.  The subsequent selling was
fast and furious.  Roughly three weeks later the stock had fallen
back to the top of the gap near $20.00.  Shares initially
rebounded from this level but within days had resumed their march
lower.  The downward momentum picked up considerably on Wednesday
after the company announced a net loss for the fourth quarter.

That brings us to today's trading, when CTAC abandoned the $20.00
support level on very strong volume of 213K shares.  Traders who
shorted the breakdown were rewarded with a rapid sell-off that
took the stock down to the $19.00 region by the closing bell.
Now that CTAC is beginning to fill in the sizable December 3rd
gap, we think chances of a continued decline are very good.  The
weekly chart shows possible support at $18.00, which provided
resistance in October of 2001.  You'll recall that previous
resistance often becomes support, and vice-versa.  We believe the
bulls will have a tough time defending this level if CTAC
continues to decline on high volume.  More substantial support
lies at $16.00, which thwarted rallies in April and June of last
year.  Our profit-target is set just above that level at $16.06.
We have entered this play at current levels, with a 10% stop at
$21.01.  Those with a more conservative strategy could use a stop
slightly above $20.00.  We've classified CTAC as a "high-
risk/high-reward" play because the stock tends to trade on
relatively light average volume of 42,000 shares.  Lighter volume
stocks sometimes see added volatility because it's easier for the
institutional players to throw their weight around.

Annotated daily chart - CTAC:



Picked on February 20th at $19.10
Results since picked:       +0.00
Earnings Date            02/18/03 (confirmed)





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

It's the Economy
by Steven Price

It appears that without any major developments in the geo-
political arena, traders were left to focus only on the economic
data released this morning. That data showed an economy that is
far from improving.  In fact, it is hard to find a silver lining
in any of the data and the markets certainly reacted that way for
the most part.

The initial jobless claims for last week came in at 402,000,
breaking the barrier of 400,00 that economists use to judge
whether the employment picture is getting worse.  It was the
third straight rise in claims and came in above the consensus for
390,000.  During the holiday season, this number is subject to
wide fluctuations, but as we get further away from that time of
the year, the trend is definitely moving in favor of a worsening
picture. It was the highest level in seven weeks and pushed the
four-week moving average to 394,750, which is the highest level
in six weeks for that average.

The U.S. trade deficit grew by a record $44.2 billion in
December.  That resulted in a record $435.2 billion for the year
and registered an increase of $76.9 billion from 2001.  The
previous record was $378.7 billion, set in 2000.  The higher
deficit is partially a reflection of the U.S. economy showing
less weakness than that of the rest of the world.  While U.S.
policymakers can give themselves a weak pat on the back, a
worsening world economy does not mean good things to anyone.
December exports fell by 2.5%, while imports rose 1.7%. For the
full year, exports fell $35.6 billion, which was the second
largest year-over-year decline.

For those unemployed souls looking for the unemployment picture
to reverse the recent trend, a survey released by the Business
Council unfortunately does not bode well.  It CEO survey said
that only 9% of those responding said they were planning on
increasing hiring above last year's levels.  46% said they
planned no change in hiring practices (disappointing in and of
itself). The worst part of the survey came in the form of the 45%
that said they planned on reducing their hiring pace of 2002.

The Conference Board's Leading Economic Index fell 0.1% in
January, contrary to an inaccurate release that showed it
unchanged.  It was revised and re-released after including
revisions to its vendor performance category.    Not sure how it
was left out, since there are only ten indicators, but I suppose
if a Bear Stearns clerk can accidentally purchase almost a
billion dollars of stock (as happened last year), anything is
possible.  The indicators showed a 4:6 increase/decrease ratio.
The positive contributors to the index, from largest to smallest,
were average weekly initial claims for unemployment insurance
real money supply, manufacturers’ new orders for consumer goods
and materials, and interest rate spread. With the recent
increases in initial claims, the most positive indicator appears
in danger.  The negative contributors, from the largest to
smallest, were index of consumer expectations, building permits,
average weekly manufacturing hours, manufacturers’ new orders for
non-defense capital goods and stock prices.  The coincident index
turned up and for the six-month period through January has risen
0.2%.  The Conference Board interprets the results to point to a
more robust pace of economic activity in the coming months.

The Philly Fed survey came in far below expectations, with a
reading of 2.3, versus a consensus of 11.7, which would have been
a slight gain.  The shipments index fell to zero from 21.3 and
new orders dropped from 17.3 to 14.1.  Employment increased, from
the previous reading of negative 6.1, but still stayed negative
at -0.9.

The producer price index reflected the worst wholesale inflation
in 13 years. It was mostly due to an increase in energy costs,
which jumped 4.8%.  Prices also jumped elsewhere, as the core
inflation rate rose 0.9%.  Most of the core rate increase, which
excludes food and energy, came from a 3.5% increase in new car
prices.   That rise was partially due to the end of special
promotions.

With the rollover from Tuesday's high of Dow 8075 we have now
given up 170 points from the high after a 400+ point rally from
last Thursday's low of 7628.  With each move lower, the sinking
bullish percent's indication that we were just seeing an oversold
bounce appears more accurate. We took out 7900 on an intraday
basis, but rallied back above that level after the bond market
closed.  We have seen a late day rally following the close of the
bond market the last two days, which suggests bears lose a little
confidence when they are not getting confirmation.  The late day
rally did run out of steam, failing just below the daily S1 level
of 7942 noted in the Index Trader Wrap, for those traders
following the daily pivots.   The drop has also led us to another
point and figure reversal down and taken us back to the previous
triple bottom breakdown level of Dow 7900.  We got a similar
reversal in the OEX, but have yet to get one in the SPX, which
stopped just shy of the required 835 trade, bouncing at 836.56.

Bulls can make an argument that a 170-point pullback after a 400-
point gain is just a dip buying opportunity.  However, the bears
can suggest that a 400-point rally after a 1200-point drop is
more convincing as a short entry opportunity.  As long as the
bullish percents are still dropping and each bounce falls short
of a new buy signal, I am going to side with the bears.
-----------------------------------------------------------------

Market Averages

DJIA ($INDU)

52-week High: 10673
52-week Low :  7197
Current     :  7914

Moving Averages:
(Simple)

 10-dma: 7887
 50-dma: 8341
200-dma: 8674

S&P 500 ($SPX)

52-week High: 1176
52-week Low :  768
Current     :  837

Moving Averages:
(Simple)

 10-dma:  834
 50-dma:  880
200-dma:  917

Nasdaq-100 ($NDX)

52-week High: 1734
52-week Low :  795
Current     : 1001

Moving Averages:
(Simple)

 10-dma:  978
 50-dma: 1015
200-dma: 1018
-----------------------------------------------------------------

The Semiconductor Index (SOX.X):  The SOX continues to give
warning signs for bears.  I mentioned that it began to form
support before the major indices last week, foreshadowing a
possible bounce.  It hovered at 260 before it bounced along with
the broader markets and has now held its gains in spite of a
rollover in the Dow and Nasdaq. The sector has received upgrades
the past two days, as well. Morgan Stanley raised its rating on
the chip stocks on Wednesday from in-line to attractive (and no,
not after a few beers).  It said the reward to risk parameters
had become more attractive over the past few months and expects
the group to outperform the overall market in the next 12-18
months. On Thursday, Merrill Lynch shifted its stance on the
semis to slightly positive.  While that does not sound like an
overwhelming vote of support, it said it believes that valuation
is reasonable, if not highly attractive.  It also said that low
inventory levels and low capital spending would increase the
industry's sensitivity to an increase in demand.  The SOX closed
above its last bounce high of 292.07, but still has stiff
resistance just above at 300.  While the comments are positive -
sort of - I'd wait for a move over 300 before initiating long
plays in the sector.

52-week High: 641
52-week Low : 209
Current:      292

Moving Averages:
(Simple)

 21-dma: 277
 50-dma: 298
 200-dma: 335
-----------------------------------------------------------------

The VIX behaved as expected, with an increase on today's
pullback, but it didn't show a very big fear factor.  The gain of
0.45 was mild, as it held above support at 35%, but didn't
really jump. The premium calculation moved to March-April
options at the beginning of the week, so expiration is not
really a factor in the reluctance.  If we do get rolling
downhill, however, there is plenty of room until it hits
resistance at 40% again.  If it drops below 35% and the markets
head higher, then we may be getting a clue that what we've seen
the past two days were just a pullback on the way up in
equities, as opposed to an oversold bounce on the way down.

CBOE Market Volatility Index (VIX) = 35.67 +0.45
Nasdaq-100 Volatility Index  (VXN) = 48.56 +0.93
-----------------------------------------------------------------

          Put/Call Ratio  Call Volume   Put Volume

Total          0.86        367,753       291,620
Equity Only    0.86        592,988       509,333
OEX            1.05         33,666        35,426
QQQ            1.52         22,072        33,620
-----------------------------------------------------------------

Bullish Percent Data

           Current   Change   Status
NYSE          40.3    + 0     Bull Correction
NASDAQ-100    34.0    + 1     Bear Confirmed
Dow Indust.   16.7    + 0     Bear Confirmed
S&P 500       34.8    - 0     Bull Correction
S&P 100       29.0    + 0     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  1.09
10-Day Arms Index  1.24
21-Day Arms Index  1.33
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       1286          1536
NASDAQ     1541          1519

        New Highs      New Lows
NYSE        36               61
NASDAQ      69               72

        Volume (in millions)
NYSE       1,392
NASDAQ     1,297
-----------------------------------------------------------------

Commitments Of Traders Report: 02/11/02

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

Commercials slightly decreased long positions, while increasing
shorts by a more significant amount.  The net result was an
increase of 8700 on the short side. Small traders increased longs
by 10,000 and shorts by 2,000.

Commercials   Long      Short      Net     % Of OI
01/21/03      415,028   456,885   (41,857)   (4.8%)
01/28/03      422,232   468,586   (46,354)   (5.2%)
02/04/03      414,543   465,678   (51,135)   (5.8%)
02/11/03      412,333   472,156   (59,823)   (6.8%)

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
01/23/03      148,227    95,356    52,871     21.7%
01/28/03      142,734    85,567    57,167     25.0%
02/04/03      151,174    93,439    57,735     23.5%
02/11/03      161,126    95,618    65,508     25.5%

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 longs by 1,500 and increased shorts by
3,000, for a 6% increase in overall short position. Small
traders increased the long side by 4,000 contracts,
while leaving shorts close to unchanged.

Commercials   Long      Short      Net     % of OI
01/23/03       37,174     49,789   (12,615) (14.5%)
01/28/03       37,955     49,321   (11,366) (13.0%)
02/04/03       40,934     50,992   (10,058) (10.9%)
02/11/03       39,412     53,818   (14,406) (15.5%)

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
01/23/03       25,852     6,764    19,088    58.5%
01/28/03       25,814     7,576    18,238    54.6%
02/04/03       25,573     8,648    16,925    49.5%
02/11/03       29,667     8,915    20,752    53.8%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:  19,088  - 01/21/02

DOW JONES INDUSTRIAL

Commercials increased long positions by 2,000 contracts and
shorts by 600.  Small traders took a similar approach with an
increase of 800 to the long side and a small decrease to shorts.

Commercials   Long      Short      Net     % of OI
01/23/03       16,901    11,031    5,870      21.0%
01/28/03       16,013    11,574    4,439      16.1%
02/04/03       17,596    11,232    6,364      22.1%
02/11/03       19,826    11,800    8,026      25.4%

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
01/23/03        5,120     8,282    (3,162)   (23.6%)
01/28/03        4,838     7,836    (2,998)   (23.7%)
02/04/03        4,583     9,424    (4,841)   (34.6%)
02/11/03        5,390     9,300    (3,910)   (26.6%)

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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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 ) 2003 PremierInvestor.net. and
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Do not duplicate or redistribute in any form
PremierInvestor.net Newsletter                 Thursday 02-20-2003
                                                    section 2 of 2
Copyright ) 2003, 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
  Bullish Play Updates:  SLAB

Stock Bottom / Active Trader
  Bearish Play Updates:  APD, GWW, JWN

High Risk/Reward
  New Bearish Plays:     CTAC
  Bullish Play Updates:  AMGN, CYTC, TECD
  Bearish Play Updates:  AW, IDPH

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 Play Updates
===============

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

Silicon Labs - SLAB - cls: 26.65 chg: +1.31 stop: 23.99 *new*

Positive comments from Morgan Stanley's semiconductor analyst and
an upgrade of several stocks within the chip sector did not lead
to any gains for the SOX.X on Wednesday.  Shares of SLAB mirrored
the flat action in the index and traded an Inside Day.  This
morning saw another brokerage upgrade in the semiconductor group
- this time from Merrill Lynch, who said that its outlook for the
industry had turned to "slightly positive" from "negative."
These comments set the stage for an early-session rally in both
the SOX.X and SLAB.  The stock performed especially well,
breaking out of the Inside Day formation before topping out
slightly below $27.00.  (Your charting service may show an
intraday high of $28.49.  This was a bad tick - the high for the
session was actually $26.95.)  Our long play was activated at
$25.74.  With no company-specific news to explain today's
powerful 5.1% rally, it looks like shareholders were simply the
beneficiaries of a strong short squeeze.  The bears just weren't
able to justify holding on short positions as SLAB broke to new
highs.  This move came on the strongest volume in over two weeks,
which is exactly what we like to see when these types of
breakouts occur.  Given this technical strength, we think chances
are good that SLAB will eventually be able to move up to the
December highs near $30.00.  Traders who are still looking to get
long can watch for a move above $27.00.  Our stop is currently
located at $23.99.  Those with a more conservative risk
management strategy could use a stop slightly below $25.00.

Picked on February 20th at $25.74
Results since picked:       +0.91
Earnings Date            01/22/03 (confirmed)






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

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

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

Air Products - APD - close: 38.50 change: -0.47 stop: 42.01

Bears are exerting their control now that the markets are pulling
back from their recent rally.  The last three sessions of
declines for APD have been on strong volume, which is a good sign
for the bears considering the very light volume for the overall
markets.  More conservative traders can begin to adjust their
stops.  Reducing exposure with tighter stops is one possible
protection from any upside surprises.  Now that shares of APD
have made a convincing break down through support the decline
could begin to pick up speed.  Yet, just as the markets tend to
do just the opposite of what the crowd things it will do, don't
be surprised if APD bounces.  A failed rally at $39.00 or $39.50
(or even $40) might be another opportunity to go short if you're
still looking for an entry point.  Stocks tend to move in cycles.
Three days down can be followed by one or two days up.  Five to
seven days down can be followed by two to three days up.  We'd be
looking for APD to produce another bounce soon as traders adjust
their positions.  Next significant support is near $35.00.  As
the stock approaches this support level we'll begin to outline
exit strategies.  We recommend that you already have an exit
price in mind.

Picked on January 29th at $39.84
Results since picked:      +1.34
Earnings Date:          01/22/02 (confirmed)




---

Grainger - GWW - close: 46.53 change: -0.13 stop: 47.56

Wednesday, GWW announced that it had been named the "most
admired" company in its industry by its peers.  Kudos are great
for the management and the company's employees but they aren't
going to save a wholesale/retail/catalog like GWW from a soft
economy.  Not that we're playing GWW for the soft retail sales,
but the sector continues to look weak.  The Premier Investor
Newsletter is currently NOT recommending new bearish positions in
GWW until shares trade back below the $45 level.  If support at
$46 holds, the bears may have to relinquish the fight until
shares hit the 200-dma still overhead.

Picked on February 7th at $45.59
Results since picked:      -0.94
Earnings Date           01/29/03 (confirmed)




---

Nordstrom Inc - JWN - cls: 17.17 chg: -0.08 stop: 18.01

Surprise, surprise, the retail sector is not performing as well
as expected but what is surprising was Nordstrom's numbers.  The
company came out after the bell today with its Q4 results.  The
street had been expecting 42 cents a share.  JWN turned in net
income of 44 cents.  This is an 18% jump over net income a year
ago.  The results were fueled by stronger sales at Nordstrom Rack
stores, their discount outlets (assuming anything sold by
Nordstrom could be purchased at a discount).  Overall sales rose
by more than 7% over last year's Q4.  Shares of JWN are trading
16-17 cents higher in after hours markets.  Traders should notice
that JWN has been working on a pattern of higher lows over the
last couple of weeks.  Is this a sign of a possible bullish
reversal or just a bear flag in the overall prevailing bearish
pattern?  Obviously, the only way to know is to wait and watch.
Should the stock break lower than the short-term trend of higher
lows then bears will probably strengthen their grip on the stock.
Otherwise, keep an eye on the $17.75 level, which has been
resistance twice in the last couple of weeks.  We will maintain
our stop at $18.01.  New positions might be considered should the
stock offer a failed rally near resistance, but we would
encourage a tight stop.

Picked on January 27th at $17.98
Results since picked:      +0.81
Earnings Date           02/20/02 (confirmed)






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

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

  -----------------
  New Bearish Plays
  -----------------

1-800 Contacts - CTAC - close: 19.10 change: -1.56 stop: 21.01

Company Description:
1-800 CONTACTS offers consumers an attractive alternative for
obtaining replacement contact lenses in terms of convenience,
price and speed of delivery. Through its toll-free telephone
number and its Internet web site, www.contacts.com, the Company
sells all of the most popular brands of contact lenses. (source:
company press release)

Why We Like It:
One look at the daily chart for CTAC is enough to make
shareholders of the contact lens retailer recoil in horror.  On
December 3rd the stock gapped sharply higher on news that 1-800
Contacts had struck a deal with Johnson & Johnson to become an
authorized retailer of JNJ's Vistakon line of contacts.  Wall
Street viewed this development as a huge coup for CTAC.  The
stock gapped up to $21.00 (after finishing the previous session
at $14.50) and quickly rallied to the $28.00 level.  Shares
traded strong over the following month, maintaining the huge
gains while moving higher in a shallow uptrend.  However, this
bullishness evaporated on January 9th after the company's COO and
CFO announced he was resigning to "explore a range of other
career possibilities and personal interests."  While there was no
indication that the resignation was somehow related to management
problems at 1-800 Contacts, it nonetheless provided a great
excuse for the bulls to take profits.  The subsequent selling was
fast and furious.  Roughly three weeks later the stock had fallen
back to the top of the gap near $20.00.  Shares initially
rebounded from this level but within days had resumed their march
lower.  The downward momentum picked up considerably on Wednesday
after the company announced a net loss for the fourth quarter.

That brings us to today's trading, when CTAC abandoned the $20.00
support level on very strong volume of 213K shares.  Traders who
shorted the breakdown were rewarded with a rapid sell-off that
took the stock down to the $19.00 region by the closing bell.
Now that CTAC is beginning to fill in the sizable December 3rd
gap, we think chances of a continued decline are very good.  The
weekly chart shows possible support at $18.00, which provided
resistance in October of 2001.  You'll recall that previous
resistance often becomes support, and vice-versa.  We believe the
bulls will have a tough time defending this level if CTAC
continues to decline on high volume.  More substantial support
lies at $16.00, which thwarted rallies in April and June of last
year.  Our profit-target is set just above that level at $16.06.
We have entered this play at current levels, with a 10% stop at
$21.01.  Those with a more conservative strategy could use a stop
slightly above $20.00.  We've classified CTAC as a "high-
risk/high-reward" play because the stock tends to trade on
relatively light average volume of 42,000 shares.  Lighter volume
stocks sometimes see added volatility because it's easier for the
institutional players to throw their weight around.

Annotated daily chart - CTAC:



Picked on February 20th at $19.10
Results since picked:       +0.00
Earnings Date            02/18/03 (confirmed)




===============
HR Play Updates
===============

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

Amgen Inc. - AMGN - close: 53.99 change: +0.01 stop: 50.49

Inching ever closer to that breakout over resistance, AMGN bucked
the bearish trend in the Biotechnology sector again on Thursday.
The BTK index has fallen back from the 327-330 resistance level
over the past 2 days, coming to rest today right at that
important 320 level. In contrast, AMGN has continued to work
higher, posting another intraday high over the $54 level.  The
way the stock is bucking the trend of its sector hints that a
breakout is indeed just around the corner.  Traders looking for a
new entry into the play will want to wait for a decisive move
over resistance, and a viable trigger would be a trade over
$54.25.  Should we get another intraday pullback before that
move, we can target a rebound from the $52.50-53.00 area, which
once again provided intraday support this morning.  Until AMGN
completes that breakout, we're maintaining our stop at $50.49

Picked on February 14th at $52.51
Results since picked:       +1.48
Earnings Date            04/24/03 (unconfirmed)




---

Cytyc Corp. - CYTC - close: 13.09 change: +0.27 stop: 12.12 *new*

Most impressive!  CYTC broke out to new highs today after
spending the previous two sessions trying in vain to move above
whole-number resistance at $13.00.  The first signs of trouble
for the bears appeared during the second hour of trading, when
shares spiked up to $13.06.  Shares then gravitated back to the
$13.00 area for several hours before enthusiastic buying during
the final 15 minutes pushed the stock to an intraday high of
$13.13.  Cytyc finished the session with a 2.1% gain.  Meanwhile,
the major indexes floundered as the Dow Jones gave back 1% and
the NASDAQ traded mostly flat.  Apparently someone forget to tell
CYTC what the rest of the market was doing!  This relative
strength might have partially stemmed Wednesday night's comments
from Cytyc CEO Patrick Sullivan, who outlined the possibilities
for revenue growth in 2003 and 2004.  If the stock's recent price
action is any indication, investors are growing more optimistic
about the company's fundamental outlook.  CYTC is already trading
at multi-month highs and today's breakout above $13.00 has raised
the possibility that shares could soon reach our profit-target at
$13.94.  The Premier Investor newsletter currently has a gain of
8.0% in this hypothetical trade.  Conservative or short-term
traders might want to take some profits off the table if CYTC
moves back below $13.00.  Others could protect a 5.0% gain with a
stop at $12.72.  Our stop has been raised to break-even at
$12.12.  Aggressive traders looking for new entries can watch for
a pullback to $13.00.

Picked on February 11th at $12.12
Results since picked:       +0.97
Earnings Date            01/28/03 (confirmed)




---

Tech Data Corp. - TECD - close: 22.08 change: +0.20 stop: 20.49

Try as they might, the bears just can't seem to make any headway
with TECD.  Over the past week the stock has found eager buyers
during intraday pullbacks.  Shares responded well to the recent
broader market rally, and they've continued to move higher over
the past two sessions while the NASDAQ lost its upward momentum.
On Thursday TECD popped above what had been short-term resistance
at $22.00.  Shares finished solidly in the green after setting a
new relative high of $22.21.  A move above this level on Friday
might provide another bullish entry point.  Should the stock pull
back, we'll be looking for buyers to move in at the $21.90-$22.00
region, near the short-term ascending trend of higher lows.  For
the time being we'll keep our stop set at $20.49.  More
conservative traders can use a stop slightly below $21.50 or
$21.00.

Picked on February 18th at $21.75
Results since picked:       +0.33
Earnings Date            03/17/03 (unconfirmed)




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

Allied Waste - AW - close: 8.40 change: -0.35 stop: 9.28

Not a bad start for this short play.  Last night AW was looking
quite weak after breaking below critical support on strong
volume.  The bears continued to claw away at the stock on
Thursday morning.  Shares succumbed to heavy selling shortly
after intraday support near $8.60 was broken.  Our paper trade
was activated at $8.54.  The stock proceeded to move quickly
lower before basing out above $8.30 for the remainder of the
session.  Shares finished with a 4.0% loss, easily
underperforming the Dow Jones.  It looks like the worsening
technical picture is really scaring off any potential buyers.  On
Friday we'll be looking for a move below $8.30 to open the door
for a test of whole-number support at $8.00.  Traders seeking new
entries could watch for a breakdown to new lows or a failed rally
at the $8.60-$8.70 region.  Our initial stop-loss for this play
is $9.28.  Traders who are a bit more conservative could use a
stop just above the 200-dma at $9.04.

Picked on February 20th at $8.54
Results since picked:      +0.14
Earnings Date           02/13/03 (confirmed)




---

IDEC Pharma. - IDPH - cls: 29.50 chg: -0.87 stop: 32.06 *new*

A negative news development for Biogen, one of the leading
Biotech companies, pressured the entire sector on Thursday.  BGEN
was whacked for a loss of more than 8% after European regulators
rejected the company's application to market its psoriasis
treatment.  This setback prompted a slew of negative brokerage
comments, including a downgrade from AG Edwards and a reduced
earnings outlook at Deutsche Bank.  With the broader tech sector
showing no signs of strength, the biotech index never really had
a chance.  The BTK.X posted a 1.25% loss and distanced itself
from the top of its descending regression channel.  IDPH fared
considerably worse, giving back 2.8% and closing below
support/resistance at $30.00.  The daily chart shows that IDPH
has rolled over from its multi-week downtrend.  This has created
what appears to be the beginning of a bearish reversal in the
stochastics (5,3,3).  Factor in today's relative weakness, and it
looks like the bulls are clearly on the defensive.  Traders
seeking new entries can watch for a move under today's low
($29.15) - but remember that shares may find some support at the
relative low of $28.38.  Also note that we've bumped our stop-
loss down to $32.06.  Those who are more risk-averse could use a
stop slightly above $31.00.

Picked on February 13th at $29.99
Results since picked:       +0.49
Earnings Date            01/30/03 (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

MLM     Martin Marietta Material   28.85     +0.65
TSA     Sports Authority            6.14     +0.63
TALK    Talk America Holdings       5.67     +1.20

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

JCP     J.C. Penney               19.77     +1.34
MRVL    Marvell Technology        19.82     +1.52
RMBS    Rambus Inc                15.07     +1.19

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

ACL     Alcon Inc                  38.38     +1.94
BVF     Biovail Corp               35.01     +1.34
CYMI    Cymer Inc                  34.83     +2.11
LF      Leapfrog Enterprises       21.15     +1.37
COO     Cooper Companies           27.30     +1.45
AAII    AAI Pharma.                21.13     +2.44
ERES    Eresearch Tech             23.04     +1.70

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

SBC     SBC Communications         21.30     -1.73
KFT     Kraft Foods                30.00     -1.48
BLS     BellSouth Corp             20.60     -1.54
VZ      Verizon Communications     34.76     -1.84
BA      Boeing                     29.17     -1.01
GIS     General Mills              43.75     -1.34
AHC     Amerada Hess               43.06     -1.24
PTSI    Pam Transportation         24.31     -1.27
GOLD    Randgold                   26.38     -1.12

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

CEPH    Cephalon Inc               49.00     -2.70




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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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Newsletter, or any Premier Investor Network newsletter please
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Copyright ) 2003  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.

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