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Author: Mike Celeste Editor: Tony Ponzo January Circulation: 7323

Stat Sheet Week Ending January 20th 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+10.00.0%+103.0+0.8%
S&P0.00.0%+13.0+0.1%
NAS-52.0-2.1%+36.0+1.5%
Splitmaster Strategies
Basic...............+3.3%
Big Dipper..............0.0%
Option Calls..............+32.0%
Option Puts..............0.0%

Highlight of this past week: RG CALLS close out with a profit of 105%--or higher.

In this Issue---
SPECIAL NOTE TO MEMBERS: Notice that in the Basic System under active plays, we have put back GROW as an ongoing play. The split date and sell dates are only temporary dates out in the future. We will replace those dates with the real ones as soon as we get the information. We made this posting at the suggestion of member Alan S.

SplitMaster Basic System---
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While the supply of plays is lower than normal at this time of year, it is always good to see that the plays you do have show a net gain for the month. Since we don't have any other plays closing out in January, we can see that we have a net monthly gain of 3.3%. SIAL, which was ahead for quite a while lost a little, and RG was a big winner, so putting the results together, we see the net gain. We know that there are going to be winners and losers--we don't lie and say we win on all of them, like some other services do, but we aim for the net results to be positive.

Big Dipper System---
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We never stop seeing new things, even in this world of stock splits. A while back we had a first-time occurrence when WLT cancelled a stock split and broke up the company into two pieces. Since they cancelled the split, we closed out the position with little change. Some of the team members held on and made decent profits on the play. This past week we saw another first-time happening. GROW announced that they didn't have enough votes from stockholders for a quorum on their stock split announcement. The stock has originally been up 9 points the 2nd day after buy date and some members took their profits right away--good going. The company said they would bring up another vote. OK, we didn't know what to expect, it being a first for us. Tony called the company to get details and was told it would be voted on again, but they didn't know the exact date for the split. The news release stated they would reconvene the meeting on Jan. 31, 2007. We waited to see what would happen after the announcement and the stock stayed in the same range, actually up a bit, for 4 straight days.. We then sent a special alert to all team members, giving them all the details we had, and stating they could make a decision as to how they wanted to handle their personal account. Because the split should still be forthcoming, we left it in the system, we said, until we have more details. Fortunately, most decided to close out of the stock (there are no options in this one--thank goodness). Unfortunately, the negativity in the stock happened two days after we sent the alert. This situation, as most of you recognize, is very highly unusual. If there is negativity coming after news, it is usually immediate. We still don't know why there was a delayed reaction, if that really is the reason (can't think of anything else)--The news of the split delay came out on a Tues., while the market was open, so there was plenty of time for everyone to absorb the news, and held steady for those next 4 days.. The stock opened normally on the 2nd day after our alert (6 days after the release), but then started a steep decline. No other news has come out, and that's why we are so puzzled. We shall keep our members up to date as soon as we learn anything more.

 Options---
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While our first option trade (SIAL) closed at the loss after being profitable most of the time, the next trade, RG, closed out with a nice 105% profit. The net result showed a 32% net gain on the two transactions. Again, as in the Basic system, we have no other option plays to close in January, so that is the monthly total, and we are pleased to see it. We look forward to more plays from splitters that have options.

Momentum Play - This week---
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We had plenty of potential plays this week but nothing seemed to pan out. We executed only one play and it turned out to be a break even play. That's a lot of work for break even but, we have to deal with everything that comes at us and have confidence that in the end, the net results will be positive. Last quarter showed some very nice net results so we'll see what is ahead for this quarter.

Some of our members played these stocks with their own twist and I am happy to say profited from this action. Member Harvey, decided to go into LRCX even though we nixed this potential play. He wound up with a profit in less than an hour. We did go into another play, FUL. That was the stock that was a break even. We had a couple of members that held over night however and wound up with a slight profit. So great going to those members.

 Chart Indicator---
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The CI is heading down, but the close on Friday was right on the Positive/Negative break-even line, so technically we are still Positive. We are always pleased to see our criteria confirmed by the results of the CI, as it continues to be a very valuable tool--not only for splits, but also for other investments in the markets. Keep a close eye on this--members only--on the Big Dipper site page, at the top.

 Stock Split Comments---
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We had mentioned before that we were going to try to come up with a better method of reporting our results. While it continues to be a very difficult matter to be perfectly accurate, we thought we would make a slight change. This would cover the time when there are either not enough splits, or too many splits--compared to more normal times. At present we are in a period of fewer split announcements--altho we expect an increase any time, we can't predict exactly when they will happen. Therefore, we are going to try this for 2007. For slow times we will allot no more than 1/5 of our investment capital in a play. Before, if there was just 1 play in the month, the calculation would be to invest all of our capital in 1 stock--and that is not reality. When the splits are above normal in number, we will cut back on the amount for each play. There is no precise way to do this, and we have found faults with all other methods, suggested or from our research. We will be adding a column to reflect this, coming up soon. If you are an option player, this would also apply. We hope this will show a better picture of the power of stock splits. Last year, 2006, was absolutely bonkers when it came to the number of stock splits and when they were announced--it was either way too many or way too few. That was another first for us. In normal years we think our method of reporting results was better than any other. As usual, the market is never "usual", completely. There are certain criteria that remain pretty well within certain boundaries, but 2006 was mind-blowing---so, we make adjustments. Let's see what happens.

 The Economy---
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Sometimes we are still surprised at how often history repeats itself. Last week we went over possible expectations for January, and why--Let's take a look at what we said -- "The major indexes have started out the year doing very well---as expected. We are now at the danger point for several reasons. Our old theory of selling at the 10th day of Jan. is just about here (markets were closed until 1/3). The Nas is up for the 5th straight day, indicating a pullback. Last year the Nas was up for the first 7 days, to 1/11, and then pulled back--as expected." So what did we see happen this week? Nas took a dive, giving up a good portion of the gains it had sustained, having been up those 5 straight days. With the week shortened because of the M.L. King birthday holiday, we saw 3 straight down days, with the worst one-day decline in quite a while. Friday saw a minor uptick, but the week lost 2.1% in the Nas (see our stats above). Once again, January did its thing. We pointed this out so our readers might be able to take advantage. We had RG scheduled to close out on Wed., but because of the Jan. factors, we said that we would not be opposed to getting out one day earlier. We saw that some did--and it worked out well for them. The CALL option was able to be sold that one day early for $2 more (pre-split price) than the next day. The play still showed a 105% gain, but the day before selling resulted in the CALL showing a 250% gain. That's what the January Effect can do. We don't think it has anything in particular to do with the economy, but more to do with the mindset of investors coming off the Christmas period attitude. Most people are feeling good during this time--and we even have a term for this period--the Christmas rally. We think it extends into the new year--new expectations being mostly positive. Then the gift-giving bills start to come in and we come down to earth. That pendulum that we often talk about starts swinging the other way, as it always does--at some point. There is never a time of ever-increasing feelings about the market going in the same direction--up or down. The financial media starts talking about what they expect for the year ahead, and if it has been a good year before, there is always caution expressed by the "experts". Caution--not saying one way or the other, just caution--things won't be quite as good, but there are still good situations to be found, just less of them. Whatever the reasons, we seem to see similar results repeated. In 2006 we saw the markets go up for the first 7 days, then drop for the next 3 straight days and not recover the highs until sometime in March. Then, after a nice run-up into May, the markets took a real dive and didn't recover January's number (Nas) until into October. January is a powerful month and should not be ignored. Then, too, we know from history that the best 6 months in the market are the cold months. This year the economy has a lot going for it. The political factor can not be overlooked. The presidential race seems to heat up earlier and earlier and each party wants to put its best foot forward leading up to the election. Matters that hurt get done in the early part of the presidential 4 years. The reasoning is that people will forget tax increases, rising costs, etc., if they occur early. Then, they will remember the good things that happen closer to election time. We don't see any reason to change that outlook this upcoming time between now and the next election.

The investment houses seem to be directing their research "experts" into changing sectors that look appealing. There has been quite a bit of influence attempted to get the tech sector to be one of the hot areas for 2007, but so far, very mixed results. It seems good earnings are coming in from IBM and Apple, for instance, but the stock traders are saying they are not good enough. Both stocks did well in 2006, so maybe it is profit taking. Sometimes it just seems that you just can't do enough to please some people.

The two big sectors that we keep our eye on, Energy and Real Estate, continue to be fascinating to watch. They both are such a large part of the economy and in such a state of flux that we can't seem to let them go out of our radar. We will have more to say about them soon (naturally, I just can't let go), as the words being bandied about by the "experts" and the media just doesn't seem to want to challenge them, Really, simple logic says that a lot of that mumble-jumbo coming out just can't be--not if you apply it both ways. By that I mean, for just a quick example, the reasoning given by the oil industry for prices remaining high doesn't hold water. The reasons should be applied whether oil prices are going up or down, when you say how gasoline is priced. No, their statements don't hold water--in both Energy and also Real Estate. More on these another time.

 Today's Thought---
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Many noted successful personalities attribute lot of there success to rising early in the morning and getting ahead start on their day's tasks. One noted personality who did not agree with this was Mark Twain. He would often stay in bed until late in the morning and would often do his work writing from bed. Once when a reporter came to interview him at his home his wife Livy asked him, " Don't you think it will be a little embarrassing for him to find you in bed?" "Why, if you think so Livy" he replied, "we could have the other bed made up for him."



Mike

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