Jocelynn Drake Focuses on Microsoft, General Motors, General Electric, Bear Stearns, Guidant.

Business Editors

CINCINNATI--(BUSINESS WIRE)--Sept. 18, 2003

Options activity has been brisk as speculators jockey for position ahead of September expiration, according to Jocelynn Drake. Read about Microsoft (NASDAQ:MSFT), General Motors (NYSE:GM), General Electric (NYSE:GE), Bear Stearns (NYSE:BSC), and Guidant (NYSE:GDT).

Investors are in a buying mood this afternoon as they grab up shares amid speculation as to who will fill Dick Grasso spot as the head of the NYSE. The latest round of economic information also proved to be mild, wooing traders back into bullish positions. The index of leading economic indicators rose 0.4 percent in August, meeting the Street forecast. This marked the fourth consecutive month of gains. In addition, weekly initial jobless claims tumbled by 29,000, inching back below the 400,000 mark to 399,000. The four-week moving average ticked up by 2,000 to 410,750 and now sits at its highest level since mid-July.

Blue chips are surfing higher this afternoon on a wave of news. Microsoft (NASDAQ:MSFT) announced plans to expand its board by two people. Currently, Helmut Panke, the chairman of the management board for BMW, and Charles Noski, former vice chairman of AT&T, have been nominated for the positions. General Motors (NYSE:GM) has reached a deal with the United Auto Workers. The group completed agreements with Ford Motor and DaimlerChrysler earlier this week. Finally, General Electric (NYSE:GE) stated that it is ending its stock option compensation for CEO Jeff Immelt and will tie his pay more closely to the company's performance.

In sector action, brokerage firms are trending higher after Bear Stearns (NYSE:BSC) reported net income of $305.6 million, or $2.30 per share. Analysts had been expecting a profit of only $1.65 per share. Revenue for the quarter rose 29 percent to $1.49 billion compared to the Street estimate of $1.33 billion. Chips have limped back into the green after a rough start to the morning. One brokerage house said that the sector is in for a 15-percent correction.

At 1:30 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 9629.3) is up 0.88 percent and the S&P 500 Index (SPX - 1036.72) is higher by 1.05 percent. The Nasdaq Composite (COMP - 1901.0) is up 0.96 percent. At 1:31 p.m. in the options pits, 1,550,860 calls and 824,315 puts traded for a composite put/call ratio across all five exchanges of 0.53. The CBOE put/call ratio for equity options weighed in at 0.48.

With September options set to expire after the close of the market on Friday, a great deal of the activity we are seeing is the closing of front-month positions and rolling them out to back-month options. Guidant's (NYSE:GDT) option volume at its September 50 and October 50 calls may be an example of this. The September 50 strike has seen more than 6,400 contracts cross the tape on open interest of 14,245 contracts. The October 50 strike has also seen 6,200 contracts change hands on open interest on only 4,934. We shall have to wait until tomorrow's translation to see how these positions work themselves out.

Sentiment toward the shares remains relatively mixed. The stock's Schaeffer's put/call open interest ratio of 0.63 is higher than 97 percent of those taken over the past year. On the other hand, short interest plunged 19 percent over the most recent reporting period to 3.9 million shares and is only 1.57 times its average daily trading volume. This sharply reduces the chances of a covering rally boosting the equity. Wall Street remains skeptical of the company, with 15 of the 24 analysts rating it a "hold" and one rating it a "sell."

Technically speaking, GDT has plunged through support at its rising 20-day moving average and appears to be pulling back to support at its 10-week trendline. Additional support is moving closer in the form of its 20-week moving average. The stock has enjoyed the support of these intermediate-term trendlines since January. However, the shares must still contend with resistance in the 50 area. This region capped the equity's rally from November 2001 to February 2002. Fifty is also roughly double its October bottom at 24.75.

Technically speaking, the stock pulled back to the area of a 50-percent retracement (at 47.38) of its rally from its November low to its June high. After rebounding off this level, the shares have moved back above previous support at their 10-week moving average. STJ is also consolidating into support at its rising 10-month trendline.

Click the following link to see the Weekly Chart of GDT since October 2000 with 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=8486 .

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About Schaeffer's Investment Research (www.SchaeffersResearch.com)

Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .