‘Drift Up’ Phase

Activity is sedate to say the
least. Futures are higher across the board as we begin to enter the
post-earnings "drift-up" phase. December new home sales are out at
9:00 AM CST, with 922k expected vs. 934k in November.

The calendar is loaded the rest of the week with Durable
Goods and Consumer Confidence tomorrow and State of the Union tomorrow night.
Wednesday morning brings Q4 advance GDP (-1.2% expected), and Wednesday
afternoon is the FOMC rate announcement.

Thursday morning we have personal income and spending,
initial jobless claims, Q4 ECI, and the Chicago Purchasing Managers Index.
Friday brings the January payroll numbers, University of Michigan sentiment
numbers, January manufacturing ISM (formerly NAPM), and December construction
spending. Phew!

After all of that we should have a clue. Until then, look
for a range-bound upward drift with low volume and low volatility.

Updates

We are teeing up some bullish positions in the oil service
sector.

Current Recommendations

(
AZO |
Quote |
Chart |
News |
PowerRating) (Autozone) — We are working to sell 25% of our
March 55/65 put spread (long from $2.125, 100%) at $4.25. The stock turned and
ran away from us, so we wait.

Rolls/Adjustments

None.

Recap of open trades

Long-term

Reverse Collars

(
TLAB |
Quote |
Chart |
News |
PowerRating) — March 17.5/15 reverse collar (long the
March 17.5 calls, short the March 15 puts) at $1.50 credit average (50%).
Currently trading at a $.60 credit.

(
AMD |
Quote |
Chart |
News |
PowerRating) — April 25/15 reverse collar (long the April 25
calls, short the April 15 puts) at $.05 credit (100%). Currently trading at
$1.40 credit.

Buy-writes

None — volatility too low!

Proxy buy-writes

(
BA |
Quote |
Chart |
News |
PowerRating) Jan. ’03 35/May 45 call calendar @ $4.75.
Currently trading at $7.15.

BA Jan. ’03 40/May 45 call calendar @ $2.75. Currently
trading at $4.45.

Complex Strategies

(
GILD |
Quote |
Chart |
News |
PowerRating) — Long the GILD Feb. 70 straddle at $8.00
(50%). Currently trading at $7.00.

Short-term

Call Positions

None.

Call Spread Positions

(
DYN |
Quote |
Chart |
News |
PowerRating) — Long the March 30/40 1:2 call ratio spread @
$1.50. Currently trading at $.50.

TLAB — Long the March 17.5/22.5 call spread at $.80
credit average (50%). Currently trading at $.40. Note: This spread is a
result of a reverse collar roll.

Put Positions

None.

Put Spread Positions

(
AZO |
Quote |
Chart |
News |
PowerRating) — Long the March 55/65 put spread @ 2.125
(100%). Currently trading at $3.00.

STOPS

TLAB: Stop @ 11.95 close only.