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Author: Mike Celeste Editor: Tony Ponzo March Circulation:

Stat Sheet Week Ending March 3rd 2007

ChangesWeeklyFebruaryYear to Date
IndexesPointsPercentPointsPercentPointsPercent
Dow-533.0-4.2%-353.0-2.8%-349.0-2.8%
S&P-64.0-4.4%-31.0-2.2%-31.0-2.2%
NAS-147.0-5.8%-48.0-1.9%-47.0-1.9%
Splitmaster Strategies
Basic......................0.0%+3.3%
Big Dipper......................0.0%0.0%
Option Calls......................0.0%+32.0%
Option Puts......................0.0%0.0%

Highlight of this past week: Past Momentum Plays--have another winning week, despite the markets' crash.

In this Issue--- SplitMaster Basic System---
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No getting around it, we took our beating along with everyone else this past week. See Commentary below.

 Big Dipper System---
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With the market collapse this past week, we saw 2 new entries onto our Big Dipper list. By the end of the week, it was nice to see that they were down less than 1 point, after all the turmoil.

 Options---
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Outside of the Momentum plays, we definitely had a weak week, and it was pretty frustrating. We had a big winner going in the ALB CALLs, but they were taken down with all the rest of the stock market. As CNBC said, everything was hit, not a few sectors--everything.

 Chart Indicator---
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There was a reversal from Positive to Negative on Tuesday, 2/27--and it wasn't surprising, seeing that the Dow dropped 416 points. However, and very importantly, the CI did its job--See Commentary below

 The Economy & Commentary---
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Boy, my Dad's teachings keep coming back to me, over and over---and how true they are. He always said that there is more reaction to expectations than to reality--in many areas. They would include the stock market, real estate and other sectors, even personal life. (People often worry about matters like health, marriage, children--before anything goes wrong--If I get sick, what happens? Is my marriage going to work out? Are my children going to succeed? Etc., etc.). We see drastic stock market volatility when fears of expectations gain momentum. Many people are wondering if this past week's results are a Deja Vu of what is coming, remembering back to last May thru July??? Yes, we are in that group--and how can you not be? There is no valid reason for such a severe market downturn that we experienced this week other than we have been in an up trend for quite a while. But then the fundamentals are still very good. MAYBE the Chinese economy is going to slow down--no real evidence, but the fear took hold and spread around the world. So much of the US economy is affected by Chinese imports that it COULD have a major impact. BUT, the facts don't show that. Last year we saw emotion take hold and take down the stocks, also. They later recovered somewhat, but the shorter term swing trades paid the price, as they were closed out during the negative time-frame. We had a good year in 2006, economically. 2007 hasn't shown us anything to give us major concerns, outside of the housing market--and commercial real estate has remained strong. One of the worst comments I saw about the 413 drop in the Dow was the sub-headline in the paper that said "It was expected". Baloney, I say. If that were expected, there would have been a sell-off well before that--logic says that would be so. It was just the week before that we were at either all time highs or 52 week highs. Think of that--in one week we went from all time highs to severe negatives. In fact, the major indexes are all at a loss for the year 2007 at this point. That's how quick emotion can turn things around. If it wasn't so painful, it would be fascinating. Of course, expectations can turn out to be true (drastic expectations seldom do get that bad) and we will have to wait for time to show us what is accurate. Then, too, the prior week during high times, the expectations were for a good year in 2007. The "experts" kept telling us that--and the investors obviously bought into it--driving up prices.

Our Chart Indicator once again proved itself big time. It went negative on Tuesday, 2/27. What did that mean to SplitMaster? It meant that we were correct to delay some new split buys, and the CI confirmed that we should continue to delay new plays. One of our old sayings is "It is good NOT to lose. We can tell you that every one of those delayed splitters dropped in price from what they normally would have been. We are analyzing them to see if and when they can be added back into the system. In the meantime, we count our blessings for not having losses in them. We can say that the Chart Indicator's present reading is showing an oversold position. That means that the gap in our criteria points has reached the oversold point. Word from "the street" going into Friday was that many investors didn't want to carry a position over the weekend. The international news (China) could worsen, or expectations could worsen. So, what happened on Friday--the last 20-30 minutes saw a sharp drop in the indexes. We will continue to put a lot of faith into our Chart Indicator, and it helps with other stock investments besides splitters, too. Again Dad's words come back---Sell by the 10th day of Jan. and come back later in the spring. We saw highs by the 10th day and prices sure are lower now. As the other old saying goes, "The older I get, the smarter my father is (was)." We can also relate to another long-time favorite--March, in like a lion, out like a lamb. We have seen the lion come in and roar, now we hope that the lamb shows up for a calm period.

Saving the best for last---Some comments about the Momentum System, what we are calling Momentum 2, and the RSI potential. These are my comments about the Momentum System. Not thinking about the results of the general market, I want to say that it is almost spiritual to watch the stock and option movements on the stocks that our research team comes up with. Since it is based on earnings releases, we see pretty drastic openings, and then usually some milling around and then (the beauty part) the price movement starts going in the direction the team called for. There are times when a person can get into the option at a much more favorable price than the very early opening stage, too. It sort of reminds me of peace doves when they are released. There is an initial burst from the cage, the doves circle around getting their bearings, and then they unite and fly in the proper direction. I know, it sounds goofy, but when you put in a lot of time on this stuff, it sometimes gets to you.
As much as we are disheartened by the recent stock market volatility and its affect on our splitters, we are deeply satisfied with the results of the Momentum plays, This past week we had 4 plays--2 winners, 1 smaller loser and 1 breakeven---but for a nice net win (in dollars) for the week. And we missed getting in on some very nice winners because we put our orders in a little too late. But some of the team members did get in and profited nicely. For example, just on Friday we saw the options on FLR be available at a range of $2.55 and an opportunity to exit at $5.50. INT had the option available at $2.70 (and I just stared at it and did nothing more, for my own investing) and watched it go to a high of at least $4.70. You know, these are a heck-of-a-large percentage move. And, again, it is satisfying to read the emails of team subscribers that are playing the strategy.

Re Momentum 2--Last week we mentioned 2 stocks as possibilities to watch for a down move, starting on Monday, 2/26. They were ROP and RRGB. Let's go over the results. ROP had a high of 56.83 on Monday, a close of 55.14 and a low of 52.56 on the 2nd day after. RRGB had a high of 42.32 on Monday, a close of 41.05 and a low of 38.28 on the 2nd day after. Can you see the potential in the options, too? Keep in mind, this play is in addition to the regular Momentum Play. At the very early stages of testing, and after several adjustments to the criteria, we see results of 12 wins and 2 losses. These picks are only from the list of the Momentum 1 daily (mostly daily) list of potentials. This play is longer than the Momentum 1 daily play--going from 1-4 and on rare occasions no longer than 7 days.

Re RSI--We had tried two early actual plays, RDEN and FDP, using the RSI criteria. We closed both out at net gains--not much, but gains. In the meantime, we have tried to apply the RSI to the Momentum plays, with the goal of determining entry and exit points. So far it is encouraging and we continue to try to "read" the indicator. Some that we sent to interested team members were NUCO, ZRAN, UTEK, TRMP,STMP and MMM. They were all picked to go down, based on the RSI. All went down over 1 point, even tho on teen-price stocks, we set a goal of 50 cents. Now, for the future (see Today's Thought)--Since the markets dropped, we thought we would take a look at a couple of stocks that might go up next week, based on the research. Take a look at ANSS, SHS and ZOLL (our splitter). More info to come.

 Today's Thought---
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The nicest thing about the future is that it always starts tomorrow.........


Mike

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