"We Do the Hunting, So You Can Make a Killing"

The Hunting Grounds

Technical: The S&P continued to slid to the lowest levels seen since March, a 6 week losing streak, and the measured

move on the break of 1,300 implies a move to 1,230, which coincides with a re-test of the December 2010 breakout.

The 1,260 level is seen as the nearest support level as the 200 day EMA (200 Day SMA at 1,253), while the March lows at

1,250 are the next critical level, which is it holds, could develop a horizontal trading channel through the Summer.

Major long term uptrend support does not come into play until the 1,200 level, while 1m233 is the 38.2% Fibonacci from

the Summer 2010 low to the recent highs. In the grander scheme, the 1,250 level is a big level, and a break below could

target 1,200. As for short term resistance, the bounces have been weak and few and far between thus far, eying 1,300

as a re-test resistance, and then 1,320 with the 20 and 50 day EMAs sloping down, the trend clearly bearish. A break

above 1,350 is necessary to really regain a bullish momentum move, along with RSI breaking above the 50 level. MACD

is at its lowest level in more than a year, below the level from the March lows, bullish divergence, and RSI and Williams

%R are also indicating an oversold market. The slope on the move down has been sharp, but it does set-up for a

rounded bottom around 1,250 for the markets to regain its footing.

Sentiment/Internals: The most recent AAII Sentiment Survey saw a bearish extreme with bullish sentiment plunging

5.8% to 24.4% and bearish sentiment up 14.2% to 47.7%, the most bearish and least bullish sentiment seen in more than

9 months. The market has started to adjust for slower growth after recent economic data, still concerned with the lack

of job creation, a climbing deficit, and a weak housing markets. The McClellan Summation Index is at its lowest level

since early 2010, and the McClellan Oscillator is sub-200, extreme oversold often leading to recoveries. On Friday only

16.3% of the New High / New Lows were highs, with 51 new highs and 261 new lows. Only 25% of stocks are above the

50 day moving average, while 55.7% remain above the 200 day moving average. Option sentiment is nearing a bearish

extreme on the Option Buyers Sentiment Gauge, while the CBOE Equity Put/Call is also elevated above its historic

moving average, registering above 0.7. Traders did have an eye for protection last week as put activity jumped

throughout the week, while the VIX climbed, now sitting near 19. Equity outflows remain a concern, more than $6.5B in

outflows last week. The S&P is currently trading at a P/E of 13.2, below historic averages for the relative Treasury rates,

and with that implying $96.50 in earnings which seems achievable with $95/$100 the likely range.

Week in Review: It was a rough week for the markets, although one lacking much economic data, as jobless claims

remained elevated, China growth showed signs of slowing, and the UK posted weak economic numbers, while in the US

the Trade Balance was one positive, although a likely one-off due to Japan. Tech stocks were hit the hardest with a

move away from risk, and allocation moving from growth to value as the growth picture for the global economy

deteriorates.

Week Ahead: The coming week will feature a few earnings, Best Buy (BBY), Finisar (FNSR), Kroger (KR), and Research in

Motion (RIMM) set to report, and the focus will be on inflation with PPI/CPI due in the US and also China set to report

the key number. The Philly Fed, Jobless Claims, and Consumer Confidence will come later in the week, and Friday is

Quadruple Witching. Fed Speakers will include Lacker early in the week, and Fisher later in the week. A full list of events

is as follows:

Monday: Fed's Lacker Speaks at 9am; Earnings from CRWS, NTSC, NX, CRWS, NTSC, NX; Analyst Meeting at ECHO; Credit

Suisse Software and Internet Conf. (RLOC)

Tuesday: NFIB Small Business Optimism 7:30am, PPI and Retail Sales 8:30am, Business Inventories 10am; Earnings from

BBY, FDS, OCC, CLC, CPST, EFUT, MCZ, SYUT; Analyst Meetings at CNC, PMTC; Valeant Pharma (VRX) PDUFA; Bakken

Investor Conf. (GEOI), Credit Suisse Software Conf. (DRIV, IL), Deutsche Bank Consumer Conf. (IFF, MJN, EL, ADM, CPO,

SLE), Deutsche Bank Industrials Conf. (DHR, HUN, APD, CYT, JCI, DAN, DD, SON, BWA, GE, RBC, SHW, DOW, ROC, SLGN,

TEX, ITW, ATI, CCK, NOC, MLM), Blair Growth Stock Conf. (GMCR, ILMN, CAKE, APOL, BAX, RVBD, ERTS, IPG, ALXN, ICE,

RMD, CTXS, LTM, FFIV, CAH, RAX, LSTR, FIRE, ISRG)

Wednesday: CPI and Empire Manufacturing 8:30am, Industrial Production 9:15am, Housing Index 10am, and EIA

Petroleum Report 10:30am; Earnings from CWST, FNSR; Analyst Meetings at MWV, NSIT, CIEN, MKSI, TDY; Progressive

(PGR) Monthly Sales Release; Deutsche Bank Consumer Conf. (CL, BG, PG, CLX, URBN), Deutsche Bank Industrials Conf.

(LII, OI, EMN, HII, ANR, WLK, WY, AXL, SWK, CMP, UNP, NEM, WERN, HOV), Blair Growth Stock Conf. (DCI, INTU, WMT,

MASI, CNQR, MMM, WSM, SYK, ARUN, DKS, ARG, RLD, EW, GILD, ZUMZ, CVLT, PX, CAVM, SMG, MDRX)

Thursday: Housing Starts and Jobless Claims 8:30am, Philly Fed 10am, EIA Natural Gas 10:30am, Fed's Fisher Speaks

1:10pm; Earnings from ATU, J.A, KR, PIR, SCHS, WGO, SFD, RIMM; Analyst Meetings at AOL, SCG, MCK, CPNO, HRL, CODI;

BofA Pharma Conf. (AMRN, ENDP, FRX, IRWD, JAZZ, MAPP, MNTA, PRGO, PRX, RDEA, VVUS), Deutsche Bank Consumer

Conf. (PVH, WRC, TIF), Deutsche Bank Industrials Conf. (CLF, HON, RA, GR, PH, DOV, TXT, UTX, ZBRA, IR, PX, TYC, WBC,

BDC), EnerCom London Oil & Gas Conf. (BEXP, GDP, PVA, GOK, END, UNT, CLB, MHR), Blair Growth Conf. (CTCT, ESI,

SSYS, CPHD, NETL, TSCO, VOLC, HOG, SLAB, PLCM, ESRX, MOLX, PPDI), Salesforce (CRM) Cloudforce Boston 12:30pm

Friday: Consumer Sentiment 9:55am, Leading Indicators 10am, Quadruple Witching; Earnings from ODC; Acura (ACUR),

Celgene (CELG) PDUFA, Regeneron (REGN) FDA Meeting; Analyst Meeting at ARIA

Sector Spotlight:

JP Morgan Alerian MLP Index ETN (AMJ) is one of the indexes that made a triple bottom and is starting to

trend higher, near a break of the descending trend line. MLP's are less correlated to the commodity prices,

generating fee related revenues, and many of these pipeline plays will see increased demand for shipments.

This ETN has outperformed against most every other Index and most of the names are high yielders that

should see positive money flow with the market in a state of flux. Large holdings include EPD, KMP, ETP, PAA,

MMP, LINE, OKS, ETE, EEP, and KMR.

Smart Money Tracker

6/10: Hartford Financial (HIG) calls are hot in the last hour of trade for the week with call volume running 2X daily as

4,200 July $26 calls are bought to open around $0.44 on the offer, after 1,500 June $23/$24 call spreads were bought

this morning. Shares bounced off the March bottom and look to close with a bullish hammer reversal, the third insurer

seeing bullish options activity today with Travelers and MetLife earlier. Hartford is a long rumored buyout target,

although a $10.96B market cap, but very cheap at 6X earnings, 0.49X sales, 0.5X book and 3.45X cash flow, almost too

cheap to ignore. Insurers are expected to see $7B in costs from the recent storms in the US, but this looks to be priced

in at this junction. Recent press reports say that Hartford may sell its Mutual Fund Business, with $104B in assets.

Deutsche Bank rated a Buy in May with a $26 target due to capital strength and franchise value.

6/9: Valeant Pharma (VRX) shares nearing a breakout and a pro trade just hit with a 3 way spread, selling 2,700 January

2012 $45 puts at $3.60 and buying 2,700 of the $55/$70 call spreads at $4.75, net $1.15 debit. The $15.9B Drug

Company has traded in the $47.50 to $55 range since announcing its planned deal for Cephalon (CEPH), which it

eventually lost out on with Teva Pharma (TEVA) buying the Company. The consolidation pattern is very bullish and a

move past $55 would likely target a move to $70. Shares trade 15.4X earnings, 3.4X book, and 10.4X sales. Valeant did

decide to buy Sanitas for $443M on May 24th, to expand into Europe with generics. Valeant has an upcoming PDUFA on

June 14th for Potiga, partnered with GlaxoSmithKline (GSK), a drug for epileptic seizures. The drug was rejected in

December even though the FDA Panel had voted 13-0 in favor. Piper raised its target to $62 in May and UBS raised its

target to $63 in April, so the upside potential in there, and it should benefit from currency changes as well. Around

10,000 July $55/$46 collars are sitting in Open Interest. Also, 12,000 January 2012 $60 calls were bought in May as well.

6/8: Nike (NKE), a name we saw increased put action in just over a week ago, with more today running 2X daily as more

than 5,500 trade, mainly the July $82.50 puts bought on the $3.85 offer with 4,749 trading against OI of 3,005. Shares

filled its earnings gap and have now been fading, and below the $80 mark it could see the $75 earnings support level

again, as the $874,000 in put premium bought today is hoping. Nike is not all that attractive on valuation as a large cap

at 17X earnings, 1.9X sales and 29.8X cash flow, also heavily exposed to the weakening European economy and

consumer spending showing signs of slowing in the US. Shares were started Buy at the ISI Group this morning, and also

started Buy at Jefferies on June 3rd with a $100 target. The put action comes as the Company announces it will report

earnings on June 27th, so early bearish plays.

6/7: EOG Resources (EOG) with a longer term bullish trade by a professional, the October $120/$100 bull risk reversal

trades 1,000 contracts at a $1.05 net credit, equivalent of being long 63,000 shares. With the trade being for a net

credit, the trader is willing to be long 100,000 shares at a $98.95 cost basis come October, showing confidence that

downside is limited, while upside looks to have more potential. EOG shares have held up well and failed to breakout of

a consolidation yesterday, but a move past $112 can get shares back towards $120, holding major support at $102.50

recently. The $29.3B Natural Gas producer trades 2.5X book value.

6/6: Dow Chemical (DOW) call volume jumps to 22,000 which is more than 2X daily with shares at a major support level

with the January, February, and March lows and also the 200 day EMA here as selling subsides. Shares are making a

bullish MACD crossover and RSI is trending higher, so a bounce looks likely. The September $38/$42 ratio call spread

has traded 7,000X14,000 at $0.52 to open, looking for a move back to $42 highs for max profits. The $41.4B Co. is in the

hottest industry, chemicals, and trades 9.7X earnings, 0.75X sales and 1.8X book with a 2.85% dividend yield, attractive

on valuation. Argus raised shares to Buy on May 5th with a $49 target, while UBS recommended buying call spreads in

DOW on June 3rd.

Camouflaged Options Action

Approach Resources (AREX) puts jump to 30X daily with 2,700 October $20 puts bought to open in the

$2.20 to $2.35 range with action on June 10th, expecting further weakness as shares break its 200 day EMA.

The $643M Oil & Gas Exploration Co. trades 18.25X earnings, 10X sales and 1.9X book. Global Hunter raised

to Buy with a $32 target on May 6th. In Q1 production jumped 42% and revenues grew 53%, but Wolfcamp

Shale results should be presented in coming months after early testing began in April. If energy prices were to

decline, this High Beta name would likely be hit hard, potentially the idea here with the puts. The Company is

moving from 69% gas in 2010 to 45% in 2011, and 55% Oil and NGLs. Approach Resources is primarily

focused on the Permian Basin in Texas.

The Trade: Long the October $20 Puts at $2.50 or Better

Prowling the Charts

General Dynamics (GD) broke below its 200 day EMA and prior support on increased volume after channeling lower

from a double top with last year's highs. Defense stocks sure to struggle as budget cuts continue to hamper the group.

Shares lack any real support until the $63/$65 range, so this could be the start of a sharper mover lower, momentum

indicators bearish.

The Trade: Long July $70 Puts at $2.35 or Better

The Long Shot

Best Buy (BBY) shares are trading below a major $30 level after failing to hold a weak rally, and the "brick and mortar"

retailer looks likely to fall further, reporting earnings on June 13th, as electronic sales have been very weak according to

recent consumer spending data, and the Company continues to lose sales to Amazon and other online retailers, while

margins suffer as it tries to compete. Although trading at 7.7X earnings, 0.22X sales and 1.7X book, shares are likely a

value trap as business conditions worsen, and there is an 11.8% short float in shares. On June 9th, Deutsche Bank said

the market is pricing in a miss and reiterated a Buy and $37 target, seeing earnings coming in no worse than the low

expectations, while Goldman recommends being on the sidelines, seeing business as bottoming, but Macro headwinds

and weak TV sales channel checks as a negative, keeping a $34 12 month target. Barclay's started shares equal weight,

citing valuation, but recommending avoiding until trends turn more positive, and the Company must deliver on its

International Strategy and Growth Initiatives.

The Trade: Long Best Buy (BBY) July $29 Puts at $1.75 or Better

Taking Cover

Visa (V) shares were punished last week after the Senate rebuffed the delaying the Durbin Amendment for new Debit-

Card rules. The Final Rule could be released by the Fed later this month and go in effect on July 21st. Shares are lower,

but we still do not have clarity on the exact ruling. Visa shares are trading 13.2X earnings, 7.2X sales and 20.6X cash

flow, reiterated a Buy at Argus on June 3rd with a $95 target, and Outperform at RBC with a $92 target. Goldman has

shares Buy-rated and notes it is making a major push for growth into the mobile payments industry. I feel the recent

sell-off is unwarranted and the final ruling could be less onerous than originally expected, allowing for a relief rally.

Shares are holding support on a large ascending triangle and the IV30 is at the 72nd percentile.

The Trade: Long Visa (V) at $74.70 and Sell the July $80/$70 Strangle at $3

Volatility Stalker

The VIX traded in a choppy fashion last week, no real surges in volatility, but remains elevated above the 8 week average

with fears of a double dip recession along with an EU debt crisis keeping volatility elevated. Many stocks are beginning

to trade in the upper 50th percentile of 52 week IV, and with downside in the market likely limited somewhat due to

valuation, the strategy of selling longer term OTM puts in value names you prefer to own (if shares were to continue

lower) is a good one with IV elevated and many stocks 20% or more off recent highs. Considering the "Sell First and Ask

Questions Later" mode of the market, I am sure this strategy will also be able to generate income as we enter Q2

earnings season, where there are sure to be more over-reactions to numbers than we saw in Q1.

Stocks with expensive near term volatility, having the largest IV30 vs HV30 spreads are ENER, ZN, PTIE, PIP, HOGS, RENN,

NEOP, ASTM, ODP, EK, COOL, OMEX, DANG, CLSN, SOMX, and DCTH.

Stocks with cheap volatility, having the largest HV30 vs IV30 include TIN, TLB, SIFY, LNG, SLV, ESI, RMBS, OPEN, COCO,

GLBL, SWKS and ARUN.

Stocks that experienced exploding IV30's the past week include STRL, AEG, ISS, GEL, SMT, LCI, SPRD, RMTI.

As options expiration comes this week, a few calendar spread candidates, where Sigma 1 > Sigma 2, are COOL, MO,

FNSR, RIMM, BBY, TRE, PSA, GE, GLBL, NWL, AMRN and AKS.

Goldman Sachs recommending buying volatility in stocks that exhibit high volatility in Summer months, where it is not

currently priced in, and included AKAM, NVDA, AMZN, CNX, ANF, IGT, URBN, KEY, NTAP, LEN, TER, WAG, MET, YHOO,

and HPQ. These stocks also tend to trade lower and underperform the S&P.

Trade Idea: AK Steel (AKS) shows up on my calendar spread screen with June IV at 50% and July at 43.6%. Steel stocks

outperformed last week in a weak tape and AK Steel is often mentioned in takeover chatter, shares trading only 8.75X

earnings, 0.27X sales and 2.7X book value with a $1.7B market cap, a likely buyout candidate.

The Trade: Long the June/July $16 Calendar Call Spread at $0.32

Scouting LEAPS

AutoDesk (ADSK) are 20% off highs and have been sliding since its last earnings report, although the report was fairly

strong. Shares are trading 18.8X earnings, 4.36X sales and 18.1X cash flow, a fair value for the growth potential with its

3D software. Shares broke its 200 day EMA already and are as oversold as they have been in more than a year, a RSI of

12.75. I can see a continued slide near term to around $36 and will use that level for the suggested option entry price.

RBC started shares Perform with a $46 target on June 9th, UBS raised its target to $52 in May with a Buy rating, BofA

reiterated a Buy and $50 target in April, and PacCrest has an Outperform and $50 target. AutoDesk raised FY12

estimates last quarter, showing confidence, and the Company is undergoing a transition to increasing subscription

revenues, a longer term positive.

The Trade: Long the AutoDesk (ADSK) January $40 Calls at $2.50 or Better (Current Mark $3.30)

Chatter Calling

We saw a few deals this past week as the M&A market has slowed a bit with the market coming down from a state of

euphoria, the International Paper (IP) bid for Temple Inland the biggest deal of the week. Deals included:

� Statoil (STO) Sold Its Gassled Pipeline Stake for $3.2B

� Stryker (SYK) Announced a $162M Deal for Memometal, a French Impant Co.

� International Paper (IP) Offered $3.3B for Temple Inland (TIN), a 44% Premium

� Rakuten, Japan's Largest Online Retailer, Acquired Ikeda in Brazil

� Covidien (COV) Announced It is Seeking a Sale of Its Pharmaceuticals Unit

� WellPoint Announced an Acquisition of CareMore Health Group

� Visa (V) Announced a $110M Deal for Fundamo

� Exxon (XOM) Announced a $1.7B Deal for Phillips, TWP

� Live Nation (LYV) Announced It is In Talks to Go Private

� Qualcomm (QCOM) Announced a Deal for Rapid Bridge Assets

� Ness Tech (NSTC) Received a $307M Deal from CVCI

Takeover chatter was heard in DAN, LEA, OMX, ODP, MU, WDC, TIF, ADBE, TIBX, JDSU, TIE, FTWR, RVBD, X, NUAN, AEO,

COF, ABVT, NDAQ, MCGC, UAM, ELN, BTU, TLB, MOTR and TSLA.

Income Trapper

Priceline.com (PCLN) shares are struggling to regain strength and formed a rounded top below its 20/50 day EMAs,

which are near a bearish crossover. Shares trade 43.3X trailing earnings, 7.4X sales and 26.55X cash flow and Analyst's

have become far too bullish in a $24.5B Company, multiple price targets above $650. The Company is likely to see

continued pressure on market share with the business lacking barriers to entry, and Travel Zoo's venture with Groupon

will allow it to gain on Priceline. Earnings are not likely to come in July expiration, so shares lack a catalyst near term,

and with valuation rich and technical's turning bearish, upside appears limited.

The Trade: Sell the Priceline.com (PCLN) July $510/$520 Call Spread and $450/$440 Put Spread for a $3.70 Credit in the

Iron Condor

Explanations of the Sections

The Hunting Grounds: This section provides an overview of the market and previews the week of trading ahead, as well as reviewing recent

trends and themes in the market. An overview of the technical levels for the S&P, market breadth, upcoming tradable events, and a

spotlight on a sector in the market is given each week. It is vital for any successful options trader to have an opinion of the market overall,

the economy, and an opinion of the individual sectors to find the best opportunities.

Smart Money Tracker: This section highlights the top five (sometimes more) key institutional option trades from the prior week to show

where the "smart money" is betting, and what it means, as well as the bottom line on a trading strategy. Large option trades have proven

time after time to be a leading indicator for explosive moves in the underlying shares, and provide ample opportunities to piggy-back trades

of the best minds on Wall Street. The section will also be an opportunity for non professional option traders to learn the strategies being

used by the "big money", which often gives clues into potential strategies you can emulate in your individual portfolio.

Camouflaged Options Action: This section provides 1 weekly "under the radar" story about a lesser known stock that had unusual options

trading the prior week. I often use what I call "suspicious" options action to find investment ideas for stocks I have never previously

analyzed. I will provide a fundamental and technical analysis as well as an overview of the options action I saw. This section capitalizes on

what can sometimes be insider info trades, as there are often times when a small unusual trade is more than it appears on the surface.

Prowling the Charts: This section provides a weekly option trading idea based on technical analysis, either bearish or bullish, depending on

the overall market trend. The trade will outline a target, a stop, and an analysis of the options strategy. Simple long call/put strategies as

well as more complex spreads such as verticals, condors, butterflies, ratio spreads, and more will be used.

The Long Shot: This section highlights a speculative trading idea based on an upcoming event, whether it be an FDA data, Investment

Conference, Earnings, or other speculative event. It will utilize options to provide the best reward to risk set-ups for the event, and

capitalize on a volatile move in shares.

Taking Cover: This section provides a weekly investing idea based on fundamentals, a position established in options that is tied to equity

for a less risky investor. I will use covered calls, protective puts, covered puts, collars, and more depending on the valuation analysis and

appropriate options strategy.

Volatility Stalker: This section will take a weekly view at market volatility (S&P, Oil, Gold), as well as the top strategies for the current

environment. I will also highlight some volatility movers from the prior week, up and down, as well as a look at stocks with large spreads in

implied and historical volatility to find expensive and cheap options. I may provide some further trading ideas in this section based on

volatility movements in individual securities.

Scouting LEAPS: This section involves trading LEAPS, longer term trades based on fundamental, technical, and rational common sense

reasoning. Some of these will be safer in the money plays while others could look at Black Swan opportunities.

Chatter Calling: This section will focus on mergers & acquisitions, with an overview of recent takeover chatter, analysis of recent deals, and

an outlook for potential takeover candidates in the market.

Income Trapper: This section will capitalize on selling options, using strategies to collect income in high probability trades for solid monthly

returns.

All references to "You Should Buy", “Buy” or "Buy Point" or “I would consider some here” or similar statements should not be construed as

a recommendation or warranty in any fashion but a mere form of expression on the writer’s part. The Information that will be provided in

this website or newsletter is not to be relied upon for your investment/trading decision but is solely your own decision to buy or sell any

securities as a result your own judgment and your own research and/or consultation with your investment advisor. You agree that THIS

PUBLICATION IS FOR EDUCATIONAL PURPOSES ONLY!