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| Author: Mike Celeste | | Editor: Tony Ponzo | | November Circulation: 7362 |
Stat Sheet Week Ending November 18th 2006
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| Changes | Weekly | Year to Date |
| Indexes | Points | Percent | Points | Percent |
| Dow | +235.0 | +1.9% | +1.0 | +15.2% |
| S&P | +20.0 | +1.4% | +153.0 | +12.3% |
| NAS | +56.0 | +2.3% | +241.0 | +10.9% |
| Splitmaster Strategies |
| Basic | ............... | +15.1% |
| Big Dipper | .............. | +28.8% |
| Option Calls | .............. | +70.0% |
| Option Puts | .............. | +154.0% |
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Highlight of this past week: ---New hit on Big Dipper and Basic Strategy stock pick moves up almost 3 points.
In this Issue--- SplitMaster Basic System---
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Just when our Basic play makes a nice upward move--WHAM ! BAM !--the infamous downgrade hits and the stock takes a hit, but it might have been just a one day move, as it recovered pretty nicely the next day. In fact it almost moved up $3 on Friday alone. So this stock recovers from a down grade in one day showing the strength of stock splits. The stock has a nice earnings expectation, too, so we like it a lot.
Big Dipper System---
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The stock mentioned in the Basic system took that hit and dropped down to the Big Dipper target buy price and the next day showed almost a 3 point gain as we said above. The "expert" that downgraded the stock probably did us a favor. He not only downgraded the stock, but the whole sector--in spite of very positive news about that sector's expectations for 2007. Cramer on CNBC was talking about something similar on Friday's show. He talked about stocks that get negative comments even tho the company nor the sector reports anything like that. It definitely dropped those stock prices, but then he gave the current prices and showed what a great buying opportunity it was when the negative comments ruled the marketplace.
It's not an easy thing to do, buying in the face of a dropping price, but those of us that have been around long enough know that our Big Dipper system is based on that exact theory. Buy when splitters take a dip, as the computer has shown year in and year out, it has been a profitable move.
Options---
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Every once in awhile we like to remind team players that our daily email that includes options, when they are up for buys or sells, is more a guideline than a definitive process. We used to just post them as a buy, etc., without specific prices, but those that use auto trade brokers require more specifics. Those that make their own decisions can continue to do just that---we post the option we like and you can do the rest. For instance, when the Big Dipper stock hit the target buy price this past week, the options should have been bought, also. The stock hit the buy price near the end of the day and we put out the email for the next day on the options. The stock opened up and the options were appropriately priced. Because stocks hitting the lower Big Dipper price can often bounce back quickly, we suggest team members have some kind of alert system on their computer that will sound an alarm when a Big Dipper is hit. That way, you can take action even before we send out an email. This kind of alarm can be found on financial sites such as Yahoo Finance or from your brokers site tools. Of course this can be a two way street. Sometimes it will work to your advantage to act fast and sometimes it is better to wait awhile before you execute a trade on the Big Dipper. This continues to be part of the educational process that we hope we give to our readers and team players. Use the options suggestions as a guideline to your option decisions. We will also point out that entering option positions at market price at the open could result in the market maker taking advantage and boosting prices in his favor. We, ourselves, normally put limit orders in on options. Here again though, sometimes one method works best one time while other times, the other method works best. The best thing to do is pick the method you are most comfortable with and stick to it.
Beta Test---
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The Beta test continues to prove to be a winner. It does take a lot of concentration to execute the plays but this week again, proved to be a winner with three out of four plays this week being clear winners. Plus, the one loss we had was very small and two of the wins were fairly substantial. So we continue to test with optimism. At this point, we will start calling the play the Announcement Momentum Strategy as it is no longer a spread play but a one option play per pick. We feel this one option play is much easier to deal with than the spread. We are now starting to ask a few of our more active and experienced option members to participate in the testing so we can get some concrete feed back. If that goes well, we will open the test up to all of our previous testers. More to come.
Chart Indicator---
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The CI has continued to stay in positive territory for 3 months straight, which is a very long run. It is the longest positive run this year. Of course, in balance, we were coming off a 3 month straight negative run prior to this. We have to go back to--guess when???--to see anything similar to this positive run. That would be back to the 4th quarter--yes, our famous 4th quarter theory--of 2005. There was a very short negative dip near the end of December, 2005, but otherwise it ran positive to early Feb. 2006. We had a spread between the Neg/Pos break line and our chart of 86 points, which is dangerous territory. That was on Wed., and by Friday, the spread had moved to 66, which is still on the high side, but trending lower. Team members are reminded that this spread is posted daily at the top of the Big Dipper page, along with other statistics.
Stock Split Comments---
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The supply of new split announcements has leveled off into a rather steady flow--not too many, but not shut out, either. We continue to expect more announcements as the markets are in either new high territory or recovery high territory.
The Economy---
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This 4th quarter is shaping up to be all we expected it to be--but that is speaking of the stock market in general. By the end of this past week we observed the Dow to have a string of 6 straight up days, the Nas had a string of 5 straight up days (only Fri. was down a small 3.20). The financial news commentators are increasing their comments about how strong the market is, even tho the economy is showing mixed results. New home prices were said to have dropped 10% at this point and numbers of sales are at multi-year lows. Yet some of the "experts" continue to talk about a bottom being met, and price drops are not severe. Yes, resale homes in CA did show a slight increase in price in October, but still under the highs--and the inventory is very large. It's sort of like a tug of war--one side will quickly advance, then there is a stalemate pause where the strengths are about equal, and the final pull will exhaust one side and they give in. We seem to be at that pause point in the housing market, where buyers are not reducing prices further (resale market--the new home builders have already capitulated) and the buyers are holding out for better prices. We're betting that the buying side is going to win out with lower prices coming. In the meantime the inventory would be even higher, except for the fact that a number of sellers have taken their houses off the market listings.
Comment--There was an IPO on Friday that more than doubled its initial offering price of $59--closing at $132.99. I understand that Cramer strongly suggested buying this one quickly after trading started. He certainly was right on this one--he may miss on some, but he was right on about this one. Anyway, the stock was Nymex, the New York Mercantile Exchange. What caught my attention was a quote from its Chairman, Richard Schaeffer. That quote was "We've got to run this place efficiently so we can warrant the high price that people paid for us." My immediate thought upon reading that comment was, does that mean that if the stock hadn't run up so much that the company wouldn't have to be run efficiently? He probably didn't mean that, but he could have said that they should continue to run it efficiently, if he thought they had--otherwise it appears that there could be lots of room from efficiency improvement. Just a thought.
Today's Thought---
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Agatha Christie, queen of the mystery novel, was married to a noted archaeologist. When asked what it was like being married to an archaeologist, she replied that that was the best kind of husband a woman could have. "The older she gets, the more interested he is in her," she quipped.
Mike
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