Higher Open — Is This A Sustainable Bounce?

One of the characteristics of this market has been for theses bounces from
"oversold" conditions to evaporate almost instantly. Therefore, it
will be safer to be a spectator at this point and watch the market closely to
see if it can prove itself. If this does prove to be the beginning of an
intermediate-term low, we will have plenty of trading opportunities along the
way.

The first order of business will be to identify intraday resistance targets
likely to be challenged. When (if) the market trades up to these levels, there
may be some interesting daytrading opportunities. Naturally, I will be
approaching these from the short side since the trend is down.
Like my partner Dan Knytych, whose commentary appears in the weekly
"Intrinsic Value" newsletter, I like to use Market Profile
to identify rotational zones where the market is likely to crest. Looking at our
favorite indices and daytrading vehicles, the DJI (cash), S&Ps (cash), QQQs
and Russell 2000 (cash) levels, I like the following levels for intraday trades:

(Note: Futures, ETFs, etc., all trade with various amounts of premium. These
reference prices are cash levels. We also use options, but we hesitate to buy
puts until volatility comes down. How you approach daytrading — if at all — is
up to you.):

DJI                                              
9625, 9758

SPX                                             1018-1020,
1029 -1030

QQQ                                           
28.20, 28.65 -28.75, 29.20

Russell                                        
464, 473.5 -475, 481

Volatility

Friday was incredible. The VIX went nuts, hitting 36.01 intraday before
collapsing to close at 29.93. Even though that was still up on the day, the sell-off
in volatility sure looked like a sea change. Volatility sellers are beginning to
lick their chops at these levels, and we will likely be adding to our buy-writes
soon as well. The VIX closed up 1.20 at 29.93, the VXN closed up 1.37 to close
at 55.67, and the QQV closed up .13 to 46.92. Intraday highs were as follows:
Vix, 36.01, VXN, 57.58, QQV, 50.80!

Trade Updates (6/14/02)

(
MMM |
Quote |
Chart |
News |
PowerRating) — We bought another 50% of the October 110/120 put spread at $2.80.
We now have a 100% position.

New Actions (New Recommendations)

None.

Working Orders (Old Recommendations)

(
CHIR |
Quote |
Chart |
News |
PowerRating) — Sell all CHIR July 50 calls at $1.00 to close.

(
MER |
Quote |
Chart |
News |
PowerRating) — Sell the July 37.5 puts at $3.00.

Rolls/Adjustments

(
DYN |
Quote |
Chart |
News |
PowerRating) — Holders of the DYN January 15 call/June 20 call proxy
buy-write (long the January 15 calls, short the June 20 calls at $3.20),
buy the June 15 calls (to open) and sell the September 17.5 calls (to open)
for $1.00 credit (to you).

Buy-writes

Proxy buy-writes

(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the January 15/June 20 proxy buy-write at $3.20 (50%).

(
GM |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30 (10%). Sold at $7.80, 6/13 and
6/14/02.

(
JNJ |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30 (75%). Sold half at $6.00,
6/14/02.

(
CHIR |
Quote |
Chart |
News |
PowerRating) — Long the July 50 calls at $3.30 (50%).

Call Spread Positions

None.

Put Positions

(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August 65 puts at $1.25 (100%).

(
MER |
Quote |
Chart |
News |
PowerRating) (2) — Long the July 37.5 puts at $1.40 (25%).

Spread Positions

(
DJX |
Quote |
Chart |
News |
PowerRating) — Long the July 90/96 put spread at $2.00 (25%).

(
MER |
Quote |
Chart |
News |
PowerRating) — Long the June/July 40 put calendar at $.50 (50%).