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Author: Mike Celeste Editor: Tony Ponzo January Circulation:

Stat Sheet Week Ending January 6th 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-65.0-0.4%-65.0-0.4%
S&P-8.0-0.6%-8.0-0.6%
NAS+19.0+0.8%+19.0+0.8%
Splitmaster Strategies
Basic...............0.0%
Big Dipper..............0.0%
Option Calls..............0.0%
Option Puts..............0.0%

In this Issue---
SplitMaster Basic System---
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The two plays closest to ending their run are both showing a profit at this point--not a whole lot, but showing a profit. One is closing next Thursday and the other is closing on 1/17, Wednesday.

 Big Dipper System---
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We had a new play hit this past week, with no news to account for the dip. The reason could be that the stock has had a big up move in the past 2 months, so there might be some profit taking going on. It is a fast mover, both up and down---it will be interesting to see how it ends up.

 Chart Indicator---
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Our CI is still walking the fence, going back and forth, over and under the break-even line. This has been expected, due to the uncertainty in the markets,

The Economy---
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As we pointed out last week, there is a great deal of uncertainty in the market. Fear of inflation, fear of slowdown or recession, fear from housing, fear from retailing---and the good news is trying to combat it--but it is pretty much of a standstill at this point. The beginning of the month is supposed to be good, historically. It seems we are getting premature moves and that started back in May, when the sharp declines started. The summer months are when that is supposed to happen, but it came early. Maybe Jan. is doing the same thing. We warned about expecting some type of correction after the 10th day of Jan., and this week has been a roller-coaster already. It was a short week, with New Year's Day and President Ford's funeral keeping the markets shut for 2 days. Wed. started out with a big bang, and then the Fed opened its mouth about the growing concern of the housing sector being worse than expected (but that was a foregone conclusion to us, as you have read here for a long time). The Dow was up 117 points on Wed., and then the Fed news came out. It ended up 11 points, so it dropped over 100 points from that early start. Nas was similar. For all intents, it was a downer day. Thursday was a rebound that held on Nas, while the Dow was up only 6 compared to the Nas +30 (equal to 150 Dow points, remember). As this is being written on Friday, we are again in a decline mode. Back and forth--making it very difficult to come to any sort of longer term investment conclusions (longer term being more than a day, at this point). While the optimists look at the housing sector as having hit bottom, the Fed seems to have doubts, and comments from some of the large builders don't seem to be real confident of the months ahead. We continue to believe there is going to be more grief ahead. Mortgage finance companies in the sub-prime area are even folding up, due to the heavy losses incurred and that results in their funding from other sources coming to an end. The people that are on adjustable mortgages that are coming due for upward revisions to their interest rates see a large number of them being in trouble. That means that they will either lose their house or sell at lower prices. Again, we want to point out the correlation of housing to the stock market. With the Fed just saying they were more concerned with housing and what that did to the market on Wednesday, you can see the immediate connection. The latest report on pending sales showed another decline, when an upward number was expected. Fed watchers have gone from looking for no rate increase as being good, to now looking in disappointment that the chances for a rate decrease are diminishing. They aren't satisfied anymore with the rate staying the same. Today, wages and labor increases took its toll on the market. Anyone that's been around for a while knows that hiring and wage increases always come after companies get slim and trim. Labor has waited its turn and would like some jobs and wage increases--which aren't that much, besides. Actually, more jobs and higher wages is good for the economy--more spending is usually the result. Same old story--at some point these factors are looked on favorably, and at another point they are looked on unfavorably. Right now, these particular items and sectors are unfavorable.

Housing is taking its turn in the barrel, but soon, the "experts" will move onto another sector and push it one way or the other. Retail sales reports were another downer, but then the huge increase in gift cards is noted to be a potential boon for this sector. Uncertainty--it takes its toll. At some point we will have the facts about what happened and the uncertainty will be gone---for those items. They will then move on to others--pushing them up and/or down. And folks, that is the way of the market--the future carries more weight than the present or the past. However, when the future sees that pendulum that we talk about going to extremes in expectations or uncertainties, that's when you see the volatile markets. How is it going to end up? Stay tuned...............

 Today's Thought---
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The Gift of a Compliment: A simple and sincere "You look great in red," "You did a super job," or "That was a wonderful meal" can make someone's day.

Mike

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