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| Author: Mike Celeste | | Editor: Tony Ponzo | | September Circulation: 8204 |
Stat Sheet Week Ending September 16th 2006
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| Changes | Weekly | Year to Date |
| Indexes | Points | Percent | Points | Percent |
| Dow | +169.0 | +1.5% | +843.0 | +7.9% |
| S&P | +20.0 | +1.5% | +71.0 | +5.7% |
| NAS | +70.0 | +3.2% | +31.0 | +1.4% |
| Splitmaster Strategies |
| Basic | ............... | +13.7% |
| Big Dipper | .............. | +19.8% |
| Option Calls | .............. | +123.0% |
| Option Puts | .............. | +65.0% |
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It is late, but here is this week's newsletter.
Highlight of this past week:----PCU ---hits the Big Dipper and moves ahead.
In this Issue---
SplitMaster Basic System---
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Sometimes we feel that someone upstairs is rooting against a bull market in the third quarter. Last Tuesday was sell date for CHAP. Going into Monday there was a nice profit in the stock. At Monday's open the stock was about the same as the close on Friday. By the end of Monday, the stock was down almost 6 pre-split points, wiping out the gain. On Tues. the stock opened and was closed out with pennies of profit. Later on Tuesday the stock moved back up where it would have been a decent profit, but it was too late for us. Do you see what we mean by someone upstairs if rooting against the third quarter? Please, let us be done with the 3rd quarter.
Big Dipper System---
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After being so quiet for a while, we had PCU take a dip to our Big Dipper buy price, and we saw it recover fairly quickly. This leads us to think about watching for a new potential play in this system. The stock quickly rose almost 2 1/2 points and then settled back to below the buy price and then recover again. It seems that several of the BD's have done this, so we were wondering if it might be worth it to get out if there is an initial bounce over 2 points over the BD buy price. Then we would wait a while and try to buy it back at the suggested buy price. Nothing official here, but something you might want to take a look at and this would be only when the market is still unsure of itself.
Options---
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We want to give auto traders a special reminder. Sometimes our limit prices set in the email trade signal does not get every member executed. If you auto-trade you should check with your broker or online with your account at least two or three times a week to see if your order was executed. If the price was hit but your order was not executed, you need to make a decision as to what to do. Contact your broker and give instructions.
You will notice that CHAP did not have an option play. While we moan and groan about the profit evaporating in the hours before being closed out, we did see that the CALL would have been at a loss on sell date
even tho the stock managed a very small profit. That would be due to the loss of time value in the CALL.
Our newest option possibility did not hit our entry price and we had set it at true value. When looking at the option calculator we saw that the option was overpriced, so we didn't go for it. The same applied to PCU when it hit the Big Dipper. We have heard from some that they were able to pick up CALLs at a decent price, so that is working out, too. Remember that our suggested prices are just guidelines and if you are able to keep your eyes on the options during trading hours, it can work to your benefit.
Spread Strategy update---
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We keep mentioning that as the quarter comes to an end, the picks for this strategy become less and less. Well, that was really true this week. We had a few candidates but for one reason or another they did not project well so we had no plays. The good news is, our projections and decision not post any picks was the right thing to do. There was one that would have had a small profit but not worth the time and investment. So we feel good that we are able to project quite well as we continue to test.
We will keep checking as we could still have plays over the next few weeks and we will keep working with the beta testers. Next earning season will be here in less than 30 days and we will then have a lot on our plate to work with.
Chart Indicator---
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The CI is currently well above the break even line of positive/negative---BUT---we are starting to get a little concerned. We post the CI numbers on the Big Dipper page for the team members and you can easily see where it is compared to the break-even line. At this point we are 73 points above the Nas line, from the Nas low on Friday. The last time there was this much of a spread was Jan. 11, when it was 69 and in the next 7 trading days there was a solid decline. We don't have a solid theory on the overbought call, which this might be, but we have been right-on with the oversold call. You might remember that back in June we notified you that the Nas was 113 points below the break-even line and was probably well into oversold territory. There was a good rally of about 125 Nas points from that point. Adding to that we see that Nas has been up 6 consecutive days. The last time we saw that many days being up was when there were 7 straight up days, ending on that Jan. 11, 2006 date. The record since we have been tracking this is 7 straight up days, so we are getting a bit nervous about this. Keep our eye on it. We are not suggesting at this time that to expect a major downturn in the market. We are only saying that we may be due for a couple of down days.
Stock Split Comments---
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With the markets making solid moves lately, we see that the Dow is fairly near its all time high and Nas has finally worked its way this past week to be above the Dec. 31, 2005 close. There haven't been many split announcements, as we know, but we do want to point out that the markets are responding to good earnings, which we prefer. As your know we believe that companies that have good earnings are those that also consider stock splits. That is a firm belief---and to paraphrase from that famous movie, "Field of Dreams"--If we build good earnings, splits will come. The 4th quarter has always been good for the markets, and we are eager to see it come into play.
The Economy---
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We have often mentioned that what is bad for some is good for others. Recently we saw an article in the LA Times that just reinforced that. "TCW Group Inc. plans to start an investment fund of as much as $1.5 billion to buy distressed mortgage-backed securities as the real estate slump deepens, said Jeffrey Gundlach, the Los Angeles firm's investment chief." (TCW is a French company). You know we have been predicting a decline in real estate prices, contrary to the popular opinion from the "experts" that there would be a soft landing, with prices leveling off and not declining. You don't see many of them saying that now, tho. So, this group is positioning itself to take advantage of these declines. It reminds me of the 1980's when the Savings and Loan industry took advantage of the loosening of rules so that insiders could borrow, and those insiders were often in the construction industry. Generous loans were made to them and when prices fell the SL's were left holding the bag and the government had to bail them out to the tune of something like 500 BILLION dollars. After being bailed out, these people were not thru taking advantage of the situation. The government sold off the SL's that they had taken over and the sell prices were pennies on the dollar of what the government had paid. The big boys stepped in and bought them on the cheap. Bad for some (taxpayers) and good for others (the rich get richer). We now move to the mortgage industry and see that history will probably repeat itself---watch for the foreclosures to make large increases, which no doubt will affect the economy, too.
Another area that might be affecting the economy is pensions. There was a major change in the pension rules and pensions seem to be a thing of the past for new employees. I can't seem to decide whether it is going to be good or bad, as the former pension money is going to still be invested, but it seems the worker is going to fund it. Traditional plans are held by only 33% of workers today, compared to 84% in 1980. I can't get a grasp on it, but haven't gone into it since it doesn't apply to me personally---but it is going to be a major factor for many millions. Workers don't seem to know much, either and it could possibly result in retirees not having enough to live on (as tho they did now).
Today's Thought---
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In view of the new movie about Robert Kennedy---
Only those who dare to fail greatly can ever achieve greatly...........Robert F. Kennedy
Mike
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