Backing Off…

Currently, DJI futures are 82.0 lower, S&P 500 futures are 8.30 lower, and
Nasdaq 100 futures are 16.50 lower. In Europe, the FTSE 100 is up 54.70 points,
or 1.44%, the DAX is down 31.73 points, or 1.11%, and the CAC 40 is up 41.99
points, or 1.48%. Germany is in sad, sad shape. In Asia, the Nikkei continues to
slide, showing a 112.93 point, or 1.23%, loss, and the Hang Seng picked up 37.14
points, or 0.37%. Currently, interest rate futures are mixed, the dollar is
unchanged, and crude oil and gold futures are both slightly higher.

This market has failed in the follow-through department time and time
again. Today will be crucial. This thing could easily roll over and die.
Therefore, I would stay on the sidelines and wait for more proof. If that was an
intermediate bottom, there will be plenty of time to play. The meat of earnings
season is just around the corner, and there is no need to stick your neck out
yet.

As I mentioned yesterday, we have noticed time and time again how important
turning points in the market coincide with political events. Monday’s
resignation by Sen. Torricelli may not seem like much at first look, but a shift
in the Senate back to the Republicans will be seen as a bullish event by many
market participants. With this in mind, we are tightening stops on our
outstanding short positions. See “Stops” below.

Volatility

As one would expect, volatility was crushed yesterday. The VIX fell
4.44 to 40.13, the VXN dropped 1.11 to 57.24, and the QQV slipped 3.00 to 48.98.
I think it would be wise to avoid buying options for the time being, as we may
be on the verge of a volatility collapse.

Update: (10/01/02)

(
KSS |
Quote |
Chart |
News |
PowerRating) — We sold half of our January 60/70 put spreads at $6.00
this morning.

New Recommendations

None.

Working Orders (Old Recommendations)

(
BP |
Quote |
Chart |
News |
PowerRating) — Buy the October/January 40 put calendar spread (buy the
January 40 puts, sell the October 40 puts) at $1.20 (25%).

(
CCU |
Quote |
Chart |
News |
PowerRating) — Bid $1.50 for another 25% of the January 40 calls.

(
IBM |
Quote |
Chart |
News |
PowerRating) — Sell half of the January 50/60 put spread at $4.00.

(
KSS |
Quote |
Chart |
News |
PowerRating) — Sell half of the January 60/70 put spread at $6.00. Filled!

(
S |
Quote |
Chart |
News |
PowerRating) — Sell half of the January 35/45 put spread at $6.00.

Buy-writes

(
HAL |
Quote |
Chart |
News |
PowerRating) — Long the January 15 buy-write at $12.05 (100%).

Proxy buy-writes

(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the January 15 calls at $3.20 — left over from proxy
buy-write (50%). Left for dead.

Complex Strategies

(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the January 50/60 put spread at an average price of $2.50
(75%).

(
IBM |
Quote |
Chart |
News |
PowerRating) — Long the January 50/60 put spread at $2.00 (50%).

(
KSS |
Quote |
Chart |
News |
PowerRating) — Long the January 60/70 put spread at $3.00 (12.5%).

(
S |
Quote |
Chart |
News |
PowerRating) — Long the January 35/45 put spread at $3.00 (25%).

Call Spread Positions

None.

Spread Positions

(
IBM |
Quote |
Chart |
News |
PowerRating) — $65.00, close only.

(
KSS |
Quote |
Chart |
News |
PowerRating) — $67.75 close only.