Market

Wednesday, the market posted its first decent rally in weeks. Wells Fargo, Northern Trust and Charles Schwab posted good numbers and that helped to rally an oversold financial sector. Oil also retreated and that helped to take the sting out of very high PPI/CPI numbers. Comments from Ben Bernanke reassured traders that financial stability, not inflation, was the Fed's priority. The market was able to hold its gains and rally into the bell. Thursday morning, a lower than expected jobless claims number, a 9.1% jump in housing starts, lower energy prices and solid earnings from J.P. Morgan pushed the market higher. The market held most of the gains and it posted back-to-back rallies. After the close, MSFT, MER and GOOG are trading lower after reporting earnings. The S&P Futures are down 10 points after hours and we are likely to see a lower open. If the market can recover over the next few days and close above SPY 126, the shorts will get squeezed and we will get a nice bounce. We may have seen a minor capitulation low this week. The VIX spiked on the IndyMac failure and concerns over Freddie Mac/Fannie Mae. In the chart you can see how these VIX spikes have represented short-term lows. Next week, the economic numbers shape up like this: LEI, Beige Book, Durable Goods, Michigan Sentiment and New Home Sales. Weak economic conditions are priced in and earnings/guidance (not economic releases) will drive the market. The major earnings releases next week include Bank of America, Merck, Apple, QLogic, SanDisk, Steel Dynamics,, AK Steel, Caterpillar, DuPont, UPS, UnitedHealth, Broadcom, Norfolk Southern, Yahoo, AT&T, Boeing, General Dynamics, McDonald's, Peabody Energy, Whirlpool, Allstate, Amazon, QUALCOMM, 3M, Wynn Resorts, Black & Decker and Arch Coal. By the end of the week, we will know how the overall earnings season is shaping up. Most importantly, we will be able to gauge guidance for the third quarter. At this juncture, playing a bounce makes the most sense. I don’t want to get caught short if we do get a snap back rally. This week we will buy calls on two strong healthcare stocks only if a bounce materializes. NEXT WEEK I WILL PASSIVELY MONITOR THE MARKET AND THERE WILL NOT BE A WEEKLY REPORT. I WILL MONITOR POSITIONS AND SEND UPDATES AS NEEDED.

Bullish	BAX
Stock	Baxter International, Inc. operates as a healthcare company worldwide. It offers medical devices, pharmaceuticals, and biotechnology products for the treatment of hemophilia, immune disorders, cancer, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions.
Rationale	Today, shares rose to an all-time high after the company reported earnings that beat Wall Street expectations, due to higher sales of biotech drugs and vaccines. The company said profits increased 26 percent to $544 million in the quarter ended June 30, helped by double-digit growth of its biotech and drug-delivery units. Based on its performance, Baxter raised its expectations for 2008 adjusted earnings to between $3.28 and $3.32 per share, up from prior estimates of $3.18 to $3.24 per share. The company said its second-quarter sales grew 13 percent to $3.2 billion. However, more than half of that increase was due to favorable currency exchange rates. The stock trades at a forward P/E of 18.
Strategy	Abbott Laboratories and Johnson & Johnson also reported earnings this week that benefited from the falling dollar. The decline in U.S. currency has made U.S. manufacturers' products cheaper abroad, boosting demand. Strong sales of biotech drugs and vaccines drove second-quarter profit up 26 percent for drugs and medical device maker Baxter International Inc., beating Wall Street estimates. I don't like the market, but I feel that it has been resilient at this level. I need to stick with stocks that arein an uptrend and biotech has been hot. Even if we are on the wrong side of the market, this stock will hold up well.
Entry	Buy 5 BAX Nov 65 calls (BAXKM) @ $6.70 - Day. Filled 7/18/08
Target	Sell 5 BAX Nov 65 calls @ $6.40 - Day. Filled 8/1/08
Stop	Once a position is established, sell 5 BAX Aug 65 calls contingent on the SPY closing below 125 - GTC.
Tracking	7/18/08 - Bought 5 BAX Nov 65 calls (BAXKM) @ $6.30.The options traded between $6.20 and $6.40. 8/1/08 - Sold 5 BAX Nov 65 calls @ $6.40. The stock continued to grind higher and we were able to get out. I did not like what I was seeing in the market and the stock was flatlining. It was best to go to the sidelines and wait for a better entry point. We made $30 (5 x $.10 less commissions 2 x $10).

Bullish	AMED
Stock	Amedisys, Inc. provides home health and hospice services in the United States. Its home health services include skilled nursing and home health aide services; physical, occupational, and speech therapy; and medically oriented social work to eligible individuals who require ongoing care. The company also offers clinically focused programs for chronic conditions and various diseases, such as diabetes, coronary artery disease, congestive heart failure, complex wound care, chronic obstructive pulmonary disease, geriatric surgical recovery, behavioral health, and stroke recovery, as well as various rehabilitative programs.
Rationale	In April, the company posted record financial performance for the quarter with net service revenue and net income increasing 38.7% and 24.1%, respectively, over the first quarter of 2007. Net service revenue for the first quarter of 2008 increased 38.7% to $213.1 million compared to $153.6 million in 2007. Net income increased 24.1% to $16.5 million compared to $13.3 million in 2007. Diluted earnings per share increased 21.6% to $0.62 compared to $0.51 per diluted share in 2007. The weighted average number of diluted shares outstanding increased to approximately 26.6 million compared to 26.0 million in 2007. “We are very pleased with our first quarter operations,” stated Bill Borne, Chief Executive Officer of Amedisys. “In addition to an excellent quarter financially where we reported record revenue and strong EPS, we completed the acquisition of TLC, which we believe will be an outstanding investment for the company. With the integration of this milestone acquisition well underway, we will continue to focus on the execution of our long-term strategy of growing the business both internally and externally, and delivering high quality, cost-effective care to the patients entrusted to our service.” The stock trades at a forward P/E of 18
Strategy	Today, the company raised its expectation for profit and revenue for 2008. Per share profit is now expected to be between $3 and $3.10, up from a range of $2.70 to $2.80. The new estimates include the effect of recent acquisitions. The company now expects 2008 net service revenue to be in a range of $1.1 billion to $1.15 billion, up from an estimate between $1.05 billion and $1.1 billion issued April 30. Analysts polled by Thomson Financial expect earnings per share of $2.75 and revenue of $1.09 billion for the full year. This was a substantial guidance increase. The company is recession proof, has great cash flow and it will thrive as baby boomers age. Stocks that have been in a long, tight range have big breakouts. This stock has weathered the market decline and now it might be enjopying a flight to safety. I love the breakout on big volume.
Entry	Buy 5 AMED Sept 55 calls (CQWIK) @ $9.00 - GTC. Filled 7/17/08
Target	Sell 5 AMED Sept 55 calls @ $9.10 - Day. Filled 8/1/08
Stop	None
Tracking	7/17/08 - Bought 5 AMED Sept 55 calls (CQWIK) @ $9.00. 8/1/08 - Sold 5 AMED Sept 55 calls (CQWIK) @ $9.10. the stock stalled and I did not like the market conditions. It was best to get out and look for a better entry point. We made $30 (5 x $.10 less commissions 2 x $10).