Option Investor

Daily Newsletter, Tuesday, 07/08/2003

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PremierInvestor.net Newsletter                 Tuesday 07-08-2003
                                                   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:      Better Than Monday
Watch List:       BEAS, VRSN, AMAT, NTAP and more!
Market Sentiment: Surprising strength, puzzling options

MARKET WRAP  (view in courier font for table alignment)
      07-08-2003           High     Low     Volume Advance/Decline
DJIA     9223.09 +  6.30  9236.39  9162.94 1.91 bln   1807/1412
NASDAQ   1746.46 + 25.80  1747.44  1713.76 2.02 bln   2106/1144
S&P 100   506.34 +  0.84   507.06   502.52   Totals   3913/2556
S&P 500  1007.84 +  3.42  1008.92   998.73
W5000    9687.14 + 47.10  9697.35  9592.61
RUS 2000  473.97 +  8.26   474.13   465.13
DJ TRANS 2565.12 +107.00  2569.67  2466.08
VIX        21.40 -  0.65    22.31    21.11
VXN        33.49 -  0.02    34.79    32.91
Total Volume 4,170M
Total UpVol  2,807M
Total DnVol  1,282M
52wk Highs  975
52wk Lows    22
TRIN       1.01
PUT/CALL   0.63

Market Wrap

Better Than Monday

No, we did not put more points on the board but we did exceed
Monday's volume by a fair amount. Is this a good thing for a day
where the Dow barely broke even? That $64 billion question will
be answered on Wednesday when the market will have to meet a much
higher standard just to break even.

Dow Chart - Daily

Nasdaq Chart - Daily

Economically the day was a pass with no material economic reports
and profit taking from Monday a much bigger concern. The leading
report Tuesday morning was Weekly Retail Sales which rose +0.7%
to a new high for this cycle. The sales were boosted by the July
4th promotions but traders could have cared less. This is not a
real market mover under normal circumstances and today was no
different. This weekly snapshot will take a backseat to the real
monthly numbers on Thursday. We will get to see if the high
inventories have burned off from the heavy discounting and what
stores are looking at for the balance of the summer. With consumers
getting a chunk of extra cash on their paychecks from the recent
tax cut, retailers will be slashing prices and running big ads to
get their share.

Those same consumers ran up their debt over the month of May with
a bounce in consumer credit to $7.3 billion from the consensus
estimates of $5.2 billion. However April was revised down to $7.8B
from the previously reported $10.7B. The biggest jump was in auto
debt which was prompted by continuing big incentives from the
major manufacturers. These gains were despite a refinance index
that is 400% higher than it was this time last year. Some
consumers are paying off debt at a record pace while others are
going deeper in debt due to unemployment.

The most positive report for the day was the Richmond Fed Survey
which came in positive, only +1 but we can't complain. This was
the first gain in five months and the first time the shipments
index has been positive since January. Unfortunately new orders
were flat and backlogs were severely negative at -15. The ISM
showed a minor contraction in June and this survey is only showing
a very minor improvement in the Richmond Fed region. The good news
is that we are not seeing an increase in the contraction but signs,
however slight, of continued improvement. Traders are unsure if
the minor improvements will be enough to maintain earnings through
the 3Q until the second half recovery begins.

The big story was the multiple merger/takeovers announced today.
The biggest impact to the market averages came from the Yellow
Roadway acquisition. The +$16 bounce in ROAD sent the Dow
Transportation index soaring +107 points and probably had a lot
to do with the positive mood on the Dow. While the indexes are
not directly related they are intertwined on a sentiment basis.
The Dow normally has trouble when the Transports fail to move in
the same direction. Traders seeing the large numbers on the TRAN
today could have gotten that warm fuzzy feeling about the market
in general. If so they did not get it until after 3:PM.

You wonder how many earnings warnings were ignored due to the
three takeovers and the positive press they received? If EMC thinks
LGTO is a bargain then are all techs a bargain? While I doubt it
that was the sentiment running rampant on Tuesday. The Nasdaq
roared to another +25 point gain and a high near 1750. Yes, 1750.
It is amazing that just a couple weeks ago we were agonizing over
a 1685 top and the potential for a drop below 1600 as a critical
event. Just yesterday FILE, SGP, WEN, RITA, SMG, SYBN and BMC
Software warned on earnings and this morning they were joined by
BMS and SCHL but the warning pace slowed dramatically as we move
into the earning cycle. The first Dow component announced tonight
and Alcoa beat the street by +3 cents. This is not likely to cause
a runaway market on Wednesday but traders hope it could become
contagious. The hopes are for better than average comparisons due
to the very weak Q2 in 2002. With over 55% of the S&P already
warning for the 2Q it is clear the load will have to be carried
by a very few stocks.

Earnings for the rest of the week include DNA and YHOO Wednesday,
Thursday. Friday we will get the big gun, GE, and traders are not
afraid they will miss but afraid they will say something negative
in their guidance. Economic reports are still slim until Friday
when we get the PPI. Next week we will get a strong pickup in both
earnings and economic reports and the market will have plenty to
mull over.

Microsoft made news at the bell by announcing they would no longer
give employee stock options as incentives. They are going to
establish a plan to award actual stock which will vest over a set
period of time. While the incentive to employees is approximately
the same the impact to MSFT books is substantial. The stock grants
will be expensed on MSFT financials in a dramatic departure from
the current practices of major companies. MSFT said the new plan
would take effect in September and be shown on the June-2004 end
of year financials. They said they would also expense the value
of previously granted stock options and restate past results to
show the impact of those changes. They also said employees with
options priced over the current stock price could now sell those
options to JP Morgan which effectively ends the current option
program for everyone. By taking this step MSFT is waging war on
the other major tech companies who have refused to expense options
in the past. Many of these companies would have never reported a
profit if the cost of their options had been included.

It has been rumored that Cisco earnings would be reduced by more
than half if their options were expensed. All the big techs will
be under fire including CSCO, DELL, INTC, AMZN, EBAY, YHOO and
ORCL if their earnings suddenly take a 50% dive. With the
standards board already coming up with an expensing rule this is
a preemptive step by MSFT to blunt the damage. MSFT said expensing
options in the 1Q would have cost $656 million and reduced earnings
from 25 cents to 20 cents. MSFT has an advantage because they are
so profitable. All the other companies have earnings that are a
fraction the size of MSFT but the options expenses are still very
high. This will be very interesting to see how it plays out. Did
PE values just double or will stock prices adjust? I think
investors will rationally consider the earnings in light of the
expensing but those PE numbers are going to be a constant
eyesore for years to come.

There were several news events impacting sentiment today. The
July-7th survey of newsletter writers showed that the number
bearish was at a 12 year low. The ratio of bulls to bears had
improved only slightly from the week before where conditions were
at the worst level seen since October 1987 and the week before
the crash. This is despite the PE on the S&P hitting 32 in recent
weeks. That is the same level it was in March of 2000 when the
bubble began to burst. Merrill Lynch said today that this was
the weakest recovery period on record. Makes you wonder what the
earnings are going to look like next week. Despite all the negative
news bond yields continue to rise. On June 16th the yield on the
ten year note was 3.08%. Today it traded at 3.75% despite a 25
basis point Fed cut in the middle. The Fed wanted to keep rates
down and bragged constantly about all the tools at their disposal
to do this. Did they lose the toolbox? The almost panic reversal
in bonds has puzzled many traders. Despite the gains on Monday
the bond money has not been finding its way into equities. Some
yes, but only a fraction of the money being raised. Where is it
going and why? Traders are now worried that the sell off will take
a life of its own and the Fed will not be able to slow the rate
increase. While the short-term inflow of some bond cash is positive
for the markets the long term impact of rising rates will be very
detrimental. We have had the equivalent of three 25-point rate
hikes in the last two weeks and the market is still climbing. Or
is it?

The volume on Monday was anemic considering the magnitude of the
market bounce. In reality the bounce was mostly short covering
produced by a giant bounce in the Asian markets and no terrorist
attack over the weekend. Retirement cash inflows supposedly made
up the rest. If you look at the chart below you can see the Dow
peaked at 10:25 in the morning at 9261 and has been down trending
ever since. Volume today was strong but that volume came on a flat
day for the Dow. Actually the Dow did not turn positive until 3:30
this afternoon. That means the high volume was on a down day. The
Nasdaq was the exception. Despite tech earnings warnings and the
impending potential for negative earnings surprises techs just
continue to gain. The Nasdaq is up nearly +150 points since July
1st. Does anybody think that is excessive? Volume on the Nasdaq
was over 2B shares. Today was a market full of divergences that
ended well. Tomorrow is the key to the week.

Dow Chart - 10 min

We begin to see real earnings accelerate and a slight pickup in
economic reports. These are real potential problems for stocks.
We are also likely to see the recent highs on the Dow and S&P
retested and that retest will be at the end of a multiple month
advance. It will also come at the same time as the typical July
peak. Nobody knows if the retest will fail or be successful but
the danger is real. In trading all the stars are aligned for a
major event. Not necessarily a crash but a consolidation period
of several weeks once the excitement of the current rally runs
its course. The S&P is up +27% from the March lows of 789. +27%
in a little over three months. That kind of gain is similar to
the gains in the S&P in 1998 which was not a recession year.
You can see what happened in 1998. The upward spike into the
July earnings is very similar.

SPX Chart - Daily

We are rapidly careening into the July earnings event and the
outcome is very uncertain. Even if earnings are good will they
be good enough to satisfy the huge gains since March? Will the
2Q retirement cash flow indefinitely? Will the bond market slow
the current crash or will the rapid escalation of interest rates
produce stock market uncertainty? Will the Fed appear any day
now and wave their magic wand to knock rates back into the
cellar. Do they know which wand to use since the last one had
the reverse effect. Somebody call Harry Potter because there is
a good chance we are going to need some real magic soon. Either
way be sure you have the right spell in place as we approach the
end of the week to protect yourself against any unplanned

Enter Very Passively, Exit Very Aggressively!

Jim Brown


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


BEA Systems - BEAS - close: 12.26 change: +1.01

WHAT TO WATCH: There was no news to attribute today's nearly 9%
gain to, other than the stock playing catch-up with the rest of
the Technology sector.  BEAS has been trading in a fairly narrow
range for months now, and today's close above $12 (its first
since January) looks like the beginning of a breakout.  There
could be some mild resistance enroute to the $14 level and then
the stock looks like it could take a run at major resistance near


VeriSign, Inc. - VRSN - close: 15.84 change: +0.96

WHAT TO WATCH: Throughout its rally from March-June, we kept
waiting for VRSN to give us a decent pullback for entry, to no
avail.  Over the past few weeks though, the stock pulled back
nicely to consolidate and rebound from above the 50-dma.
Tuesday's session saw a strong 6.45% gain and it looks like a
breakout is just around the corner.  On a break above the June
highs, look for a rally to extend up to the $18 area as an
initial target.


Applied Materials - AMAT - close: 17.80 change: +0.17

WHAT TO WATCH: The Semiconductor index (SOX.X) is once again
leading the NASDAQ higher and ended on Tuesday just below the
critical $400 resistance level.  A breakout from that level could
generate some powerful short-covering.  AMAT is right at a
critical resistance level as well and a breakout over $18 could
see a strong rally up to the $20 as earnings season gets


Network Appliance - NTAP - close: 18.69 change: +0.49

WHAT TO WATCH: Like the Energizer Bunny, NTAP just keeps on
running.  We had some fun with the stock on its way to the $18
level and after a healthy looking pullback near the 50-dma, the
stock is once again showing strong buying interest.  A breakout
over $19 (just above Tuesday's intraday high) looks like it could
usher in a another strong wave up towards the $21-22 area, which
served as strong resistance in March of last year.


On the RADAR Screen

COH $56.16 - While it is too extended to play right now, COH's
impressive breakout today demands consideration.  Look for
Tuesday's euphoric 6% gain to relax somewhat in the days ahead
and target bullish entries on a rebound from the $53 area.

KSS $54.89 - This retailer has had a habit of underperforming
both the Retail index and the overall market in recent months and
after the current round of short-covering has run its course,
we're looking for that pattern to reassert itself.  KSS is coming
up on stiff resistance at the descending trendline from the
December and April highs, along with the 200-dma.  Wait for the
reversal to commence and then ride the stock back down to the $50

MSTR $42.00 - MSTR is definitely back from the dead, as the stock
has been on a tear for the past several months.  We had a bit of
fun with the bullish trend a while back, but clearly punched out
way to soon, as the stock then pushed above $42.50.  Since that
first foray into that area in early June, MSTR has been turned
back on two other occasions.  From the looks of today's strong
10.43% ramp on news of a lucrative deal with the US Postal
Service, the stock looks like a definite breakout candidate.
Trigger entries on a breakout over $42.75 and look for a strong
subsequent rally as the shorts run for cover.

Market Sentiment

Surprising strength, puzzling options
Jonathan Levinson
Today's session felt like the usual post flagpole rally
rangebound drift, where the buyers run out of either courage or
money, and the bears, emboldened by a return to relative
normalcy, begin to press.
Except that the Nasdaq drifted higher throughout the day,
punctuating its move with an end of day ramp, while the SPX and
Dow were relatively weaker, the Dow held back by GE in
particular, which closed lower by 1.61%.  It was nevertheless a
green day for all the indices following yesterday's impressive
The put to call ratio stuck to the middle of its neutral range
for most of the session, while the volatility indices were
positive until the last half hour for the NDX and COMPX.  The VIX
was negative throughout.  This action is puzzling, as the
stronger indices should have shown negative volatility, while the
weaker should have been higher.  Instead, we saw the reverse.
The only explanation I can propose is that the moves higher on
the NDX and COMPX were accompanied by relatively higher levels of
option buying, and the moves higher in the SPX and INDU were less
so.  Is it because some of the Nasdaq bullish speculation was
being executed with long option plays at an institutional level? 
Or were institutions buying in their short contracts, willing to
pay extra for them?  We'll find out in tomorrow's session.


Market Averages


52-week High:  9353
52-week Low :  7197
Current     :  9223

Moving Averages:

 10-dma: 9087
 50-dma: 8866
200-dma: 8400

S&P 500 ($SPX)

52-week High: 1015
52-week Low :  768
Current     : 1007

Moving Averages:

 10-dma:  983
 50-dma:  958
200-dma:  894

Nasdaq-100 ($NDX)

52-week High: 1299
52-week Low :  795
Current     : 1299

Moving Averages:

 10-dma: 1227
 50-dma: 1183
200-dma: 1051


More of the same.  The VIX remains in its horizontal range of
investor complacency.  The VXN has actually continued its bounce
from the 30 level but may be setting a lower high.

CBOE Market Volatility Index (VIX) = 21.37 -0.68
Nasdaq-100 Volatility Index  (VXN) = 33.49 -0.02


          Put/Call Ratio  Call Volume   Put Volume

Total          0.63        655,944       414,796
Equity Only    0.48        561,053       268,383
OEX            1.18         15,133        17,860
QQQ            2.35         14,588        34,349


Bullish Percent Data

           Current   Change   Status
NYSE          72.6    + 1     Bull Confirmed
NASDAQ-100    79.0    + 3     Bull Correction
Dow Indust.   86.6    + 3     Bull Confirmed
S&P 500       78.8    + 1     Bull Confirmed
S&P 100       83.0    + 2     Bull Confirmed

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

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


 5-Day Arms Index  1.02
10-Day Arms Index  0.98
21-Day Arms Index  1.07
55-Day Arms Index  1.10

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


Market Internals

            -NYSE-   -NASDAQ-
Advancers    1672      2004
Decliners    1164      1056

New Highs     334       438
New Lows       10         11

Up Volume   1086M     1555M
Down Vol.    751M      426M

Total Vol.  1873M     1996M

M = millions



Commitments Of Traders Report: 07/01/03

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 doesn't appear to be much change in the commercial or
small traders positioning since the previous week's big move.
Big money remains net short while retail traders remain
heavily net long.

Commercials   Long      Short      Net     % Of OI
06/10/03      456,967   455,024     1,943     0.2%
06/17/03      519,887   501,401    18,486     1.8%
06/24/03      405,382   447,526   (42,144)   (4.9%)
07/01/03      415,976   453,005   (37,029)   (4.3%)

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   18,486  -  6/17/03

Small Traders Long      Short      Net     % of OI
06/10/03      199,356   185,403    13,953     3.6%
06/17/03      202,040   184,028    18,012     4.6%
06/24/03      159,405    85,182    74,223    30.3%
07/01/03      150,232    75,937    74,295    32.8%

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02

E-MINI S&P 500

Sometimes it is amazing how the relationship between commercial
traders and small traders continue to play out.  Traditionally,
institutional traders (commercials) are historically on the right
side of the trend week in and week out.  Despite this success
the small trader is generally on the opposite side.  This time
big money is showing their most bullish reading in quite some
time while the small traders is the complete opposite and
marking their most bearish reading in many a month.

Commercials   Long      Short      Net     % Of OI
06/10/03      270,359   543,221   (272,862)  (33.5%)
06/17/03      306,279   661,114   (354,835)  (36.6%)
06/24/03      150,208   201,724    (51,516)  (14.6%)
07/01/03      175,893   216,993    (41,100)  (10.5%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  (41,100)  - 07/01/03

Small Traders Long      Short      Net     % of OI
06/10/03      498,999    49,689   449,310    81.9%
06/17/03      466,837    70,609   396,228    73.7%
06/24/03       84,081    44,347    39,734    30.9%
07/01/03       57,639    67,449     9,810     7.8%

Most bearish reading of the year:   9,810   - 07/01/03
Most bullish reading of the year: 449,310   - 06/10/03


It looks like the commercials have been caught off guard.
They are growing increasingly bearish on the NDX, which is
hitting new 52-week highs.  Either institutions are expecting
a reversal soon or this has been a painful bout of denial
as tech stocks continue to rally higher.

Commercials   Long      Short      Net     % of OI
06/10/03       42,877     45,793    (2,916)  (3.3%)
06/17/03       60,964     65,561    (4,597)  (3.6%)
06/24/03       28,780     47,425   (18,645) (24.4%)
07/01/03       28,662     48,265   (19,603) (25.5%)

Most bearish reading of the year: (19,603)  - 07/01/03
Most bullish reading of the year:   9,068   - 06/11/02

Small Traders  Long     Short      Net     % of OI
06/10/03       14,759     7,761     6,998    31.1%
06/17/03       29,400    23,232     6,168    11.7%
06/24/03       24,519     7,064    17,455    55.3%
07/01/03       26,777     8,498    18,279    51.8%

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


The action in the INDU futures remains somewhat dull after
watching the big moves in the e-minis above.  As expected
small traders are fading the commercials who are net long.

Commercials   Long      Short      Net     % of OI
06/10/03       17,368    15,263    2,105       6.5%
06/17/03       20,625    18,593    2,032       5.1%
06/24/03       19,373    11,565    7,808      25.2%
07/01/03       20,504    11,871    8,633      26.7%

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
06/10/03        7,968     8,316    (  348)   ( 2.1%)
06/17/03        9,092     9,398    (  306)   ( 1.6%)
06/24/03        5,950     7,442    (1,492)   (11.1%)
07/01/03        5,799     6,822    (1,023)   ( 8.1%)

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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Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter                 Tuesday 07-08-2003
                                                   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

Play of the Day:  Not So Slow

Closed Plays:     DHI, HGSI

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)

Play-of-the-Day  (bullish)

Borders Group, Inc. - BGP - close: 18.60 change: +0.07 stop: 17.25

Company Description:
Borders Group, Inc. operates book, music and movie superstores,
including mall-based bookstores, through its subsidiaries,
Borders, Inc., Walden Book Company, Borders U.K. Limited and
Borders Australia Pty Limited, among others.  As of January 26,
2003, the company operated 434 superstores under the Borders name,
including 17 in the United Kingdom, nine in Australia, two in
Puerto Rico and one each in Singapore and New Zealand.  The
company also operated 778 mall-based and other bookstores
primarily under the Waldenbooks name in the United States and 37
bookstores under the Books etc. name in the United Kingdom.

Why we like it:
What should have been a rather bullish holiday-shortened session
got bushwhacked by some anomalous action in the futures pits,
sending the broad markets on a wild, if brief ride lower and then
back higher just over an hour into the day.  While it may have
caused consternation for some, it did us the favor of providing a
decent entry point on our BGP play.  The stock dipped just below
$17.60 before the buyers re-emerged and the stock spent the rest
of the day steadily working higher, ending with only a loss of a
nickel and still very close to that $18 resistance level.  We've
been expecting a pullback from the upper Bollinger band (currently
$17.98) and the fact that the pullback delivered on Thursday was
so shallow is encouraging.  Traders that took advantage of that
brief entry point are looking good here, with the possibility of a
breakout next week above $18 providing more aggressive entry
opportunities.  Conservative traders will still want to focus on
intraday dips near the $17.50 area as a lower-risk entry.

Why This is our Play of the Day
Our initial expectations had been for BGP to gradually work higher
over the next few weeks, eventually reaching the $19.75-20.00
level.  The stock has clearly exceeded our expectations so far, as
it is already up more than 6% from where we initiated coverage
just over a week ago.  Even a consolidation day in the overall
market couldn't keep the bulls from fractionally extending BGP's
gains to the $18.60 level on Tuesday.  While momentum traders may
be able to do well with new entries above the $18.75 level, we
aren't advocating such a strategy here due to the fact that BGP is
above its upper Bollinger band.  If taking a momentum entry, make
sure there is strong follow-through on the volume side.  It looks
like a mild pullback is in order, and we want to take advantage of
that as an entry point.  Look for support in the $17.35-17.45 area
to be strong, as that is the site of both former resistance, as
well as the rising 20-dma at $17.32.  Note that our stop remains
at $17.25, as a drop below that level would raise concerns as to
the sustainability of the current bullish trend.

Annotated Chart of BGP:

Picked on June 29th at   $17.54
Change since picked       +1.06
Earnings Date           08/19/03 (unconfirmed)
Average Daily Volume =    478 K

Active Trader / Non-Tech Stocks


  Closed Bearish

D.R. Horton - DHI - close: 30.40 change: +0.71 stop: 30.25

Things were looking a bit dicey in our bearish play on the
Housing sector via DHI at the close on Monday, as the broad
market strength had propelled the $DJUSHB index back above its
20-dma.  DHI had followed along with a solid bounce back over the
$29.50 level, but still held below our stop.  That all came to a
screeching halt this morning though, as DHI gapped up, plowed
through our stop in the first 90 minutes of the day and never
looked back, ending right at its intraday high.  The play worked
marginally for a few days, but the relentless bullish action in
both the broad market and the $DJUSHB was just too much to keep
even this sector weakling underwater for long.  We had the right
idea, but after being stopped out today, we apparently overstayed
our welcome on this one.

Picked on June 25th at   $28.90
Change since picked       +1.50
Earnings Date          07/17/03 (confirmed)
Average Daily Volume = 1.42 mln

High Risk/High Reward


  Closed Bearish

Human Genome Sciences - HGSI - cls: 13.88 chng: +0.74 stop: 13.55

It was a hard-fought battle, but the bulls finally won out on our
HGSI play.  The stock gave every indication of wanting to break
down below support, including an intraday dip below $12 last
week.  But in the end, the strength in the Biotechnology index
was too much and the stock crept back over the 10-dma and $13
level on Monday.  This bearish play's fate was sealed this
morning when USB Piper Jaffray initiated coverage with an
Outperform rating and the bears ran for cover, helping the stock
to post a 5.6% gain on the day.  That was enough to push through
our stop and force us to drop the play tonight.  HGSI's relative
weakness served us well right up to the bitter end, proving the
hazards of playing the downside (even on a weak stock) in a
bullish market.

Picked on June 18th at    $13.43
Change since picked        +0.37
Earnings Date           07/24/03 (unconfirmed)
Average Daily Volume =  3.07 mln

  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

UTX     United Technologies        73.94     +1.40
GM      General Motors             36.58     +0.68
STT     State Street               42.31     +1.07
STI     Suntrust Banks Inc         61.55     +0.76
GD      General Dynamics           75.40     +1.63
S       Sears Roebuck & Co         34.90     +1.15
LTR     Loews Corp                 49.06     +0.55
HRB     H&R Block                  45.20     +0.91
MGA     Magna Intl Inc             72.55     +3.61
CMX     Caremark Rx                26.89     +0.99
PBG     Pepsi Bottling Group       22.25     +1.52
LEN     Lennar                     76.49     +1.39
NYB     New York Community         31.88     +0.99

Breakout to Upside (Stocks $5 to $20)

ACN     Accenture Ltd              19.39     +1.38
BEAS    Bea System Inc             12.26     +1.01
AW      Allied Waste Industries    11.48     +1.13
IM      Ingram Micro               12.86     +1.21
DCN     Dana Corp                  16.20     +4.18
DCLK    Doubleclick                11.98     +1.02
ACF     AmeriCredit                10.06     +1.26
WWCA    Western Wireless           13.68     +1.28
ASKJ    Ask Jeeves Inc             17.85     +1.45
NTE     Nam Tai Electronics        18.50     +3.58

Breakout to Upside (Stocks over $20)

CHA     China Telecom              25.10     +1.49
SDS     Sungard Data System        27.65     +1.49
MCO     Moody's Corp               56.49     +1.50
PIXR    Pixar                      66.32     +2.92
LEA     Lear Corp                  48.85     +1.42
GYI     Getty Images Inc           43.35     +1.74
APH     Amphenol Corp              51.90     +3.61
ORLY    O'reilly Automotive        36.51     +2.14
CHS     Chico's FAS Inc            24.95     +2.85
PSUN    Pacific Sunwear            28.28     +1.88
CCMP    Cabot Microelectronics     57.11     +1.47
AXL     American Axle & Mfg        26.87     +1.69

Breakout to Downside (Stocks over $20)

DEO     Diageo Plc (ADS)           42.32     -1.27
NAB     National Australia Bank   109.72     -4.86
ECA     Encana Corp                36.35     -1.17
PPP     Pogo Producing             40.30     -1.38
BMS     Bemis Co                   45.91     -2.66
FR      First Industrial Realty    30.30     -1.58
SCHL    Scholastic                 26.99     -1.35
EVG     Evergreen Resources        50.10     -1.53

Recently Overbought With Bearish Signals (Stocks over $20)

FBC     Flagstar Bancorp           24.43     -1.12

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