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| Author: Mike Celeste | | Editor: Tony Ponzo | | October Circulation: 7596 |
Stat Sheet Week Ending October 28th 2006
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| Changes | Weekly | Year to Date |
| Indexes | Points | Percent | Points | Percent |
| Dow | +88.0 | +0.7% | +1.0 | +12.8% |
| S&P | +8.0 | +0.6% | +129.0 | +10.3% |
| NAS | +10.0 | +0.4% | +147.0 | +6.7% |
| Splitmaster Strategies |
| Basic | ............... | +13.7% |
| Big Dipper | .............. | +19.8% |
| Option Calls | .............. | +123.0% |
| Option Puts | .............. | +65.0% |
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Highlight of this past week:--- Big Dipper---closes out October with a good gain.
In this Issue--- SplitMaster Basic System---
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While there is nothing current in the Basic System, we are looking forward to November. A few companies have announced splits recently and they will show up in our system in November. Read more about this in the Splits Comment section below.
Big Dipper System---
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With only 2 trading days left in October, we have closed out the month for the Big Dipper and we saw 2 plays completed and both were winners.
Options and Spread Test---
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Since there have not been many split plays the option action has been down as well. So we have been concentrating on the spread play. Most of you know from last week's newsletter that we temporarily stopped the testing to make some changes. We were not satisfied with the results mostly due to problems in dwindling time premiums. When we first started the beta test on the spreads, the results were very good with a lot of winning plays. But then the plays became inconsistent. Time premiums in the options just would not hold up to what historical norms would suggest they should. So back to the drawing board to find a way around this problem. We needed to find a way to ride the momentum instead of fighting the momentum. I am not going to explain the detail of what we have changed in the play at this point but I will say that we have had some excellent results in our testing of the changes. I will also say that we have made the play easier to work with as it is no longer a spread so less commissions to deal with. And it is no longer an overnight play but rather, all in the same day. In fact, some of the plays are only one hour long. So we will let the testers know more of what we are doing in the coming weeks but we still have a couple of issues to iron out. More next week.
Chart Indicator---
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The CI remains pretty strongly in positive territory. Team members--don't forget to check the Big Dipper page to see the spread daily.
Stock Split Comments---
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Finally !! This past week there were 5 new split announcements. Of the 5 there were 2 that met our criteria, and they were both 3-2 ratios, so they will be posted on the Big Dipper potential list, starting in November. None of the 5 were 2-1. The earnings season is well upon us and we think this is the start of the split announcements because there are plenty of companies that are coming out with good earnings and many of them are near 52 week highs, which is when most companies announce splits. Look for many more to come.
S+P 500 Options---
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We just mention this to say that we haven't forgotten about this potential play. We check on it periodically, and at present it is not showing enough premium and time-value to be worthwhile.
The Pattern Play Watch List ---
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Don't forget to take a look at the first month's results of the retailer stock prices that we show on the Pattern Play page. They now show the prices at the beginning of October and by the close Tuesday we will have the results for October. We then will carry them into November, so watch and see how the stocks do. You will note that all 6 of the retailers shown on this page are profitable at this point, and that includes a strong down day on Friday when they all declined.
The Economy---
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The economy seems to be slowing down, but it seems emotion is edging out earnings for control of the market. The Dow made new highs for the first 4 days of the week and the momentum is leaning toward the upside. There have been some real wild rides on stocks whose earnings have come out. There were some that moved 12-18 points in the day following the earnings release. That has definitely caught our attention and again, it relates to the work that Tony and Pat are deeply involved with.
Update on real estate (because we think it is closely related to the stock market)---
From AP
"The median price of a single-family home fell to $219,800 last month, a drop of 2.5 percent from the price in September 2005. That was the biggest year-over-year price decline in records going back nearly four decades. Home prices had also fallen in August and it marked the first back-to-back declines in 16 years."
Another AP article talked about new home prices. They fell 9.7% last month the largest amount in 35 years. True, they did sell more new homes, but they had to drop the price or give large incentives to move the inventory.
Again, we want to point out that when they are talking about 35 year records and 4 decades, this isn't a "soft landing" that the "experts" predicted and most now agree is not the best way to describe the current real estate market. On a monthly basis this exceeds the other price declines of the early 1990's. We keep mentioning this sector because we feel that too many people were being misled into believing better things were going to happen. Our experience in real estate goes back 50 years and we have seen it happen a number of times. The mathematics of it all is what is so useful in determining what is upcoming. Also, we point it out for the benefit of anyone that is either considering buying or selling a home in this time frame. Lastly, we discuss it to point out that we think that during this time that we have been predicting a fall in the RE market, we believe that investment money could be switched into stocks. The rotation of sectors keeps on happening, and this is the current rotation we feel we are observing. Another sector is rotating, too, and that is the gasoline market. Prices have fallen and we hope to see more price reduction--while inventory went down this past week, it is still far above last year's level in both oil and gasoline.
Today's Thought---
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On Sir Winston Churchill's 80th birthday, while he was being photographed, the photographer commented that he hoped to be able to photograph the great statesman at age 100. " I don't see why not, young man," Churchill replied. "You look reasonably fit to me."
Mike
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