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Author: Mike Celeste Editor: Tony Ponzo March Circulation:

Stat Sheet Week Ending March 31st 2007

ChangesWeeklyFebruaryYear to Date
IndexesPointsPercentPointsPercentPointsPercent
Dow-127.0-1.0%+85.0+0.7%-109.0-0.9%
S&P-15.0-1.0%+14.0+1.0%+3.0+0.3%
NAS-34.0-1.4%+6.0+0.2%+7.0+0.3%

Highlight of this past week: GME--came thru big-time.
In this Issue---
SplitMaster Basic System---
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We needed a nice break and we finally caught one--and it was a very good one. GME announced earnings before the open on our sell date, and they were very good. The result was that the stock opened up 5.38 points higher (pre-split), making for a very good day. We are not used to seeing the losses in splits that have occurred this year, so it was a good feeling to get that win.

Big Dipper System---
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Going back to our early philosophy, we feel the Big Dipper is a good way to play splitters if you have to play only one system. True, there are far fewer plays, but by waiting for the price dip and the expected rebound, an investor puts himself in a much safer position. This past week we had 3 Big Dippers close out, all at a profit. They were the first for the year, but it was worth waiting for. Our nemesis stock, GROW, almost made a complete comeback to the BD buy price, but Friday was split day, and it tumbled--maybe on some profit taking, as it went on a run from pre-split prices of 35.02 to 56.78. We still feel there was hedge-fund interference in this fine stock--take a look at its earnings growth.

 Options---
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With the big earnings story that came out on GME, the CALL option certainly benefited, too. The options have flat out not done what was expected of them, no doubt about that---but--we did see GME options take us to a nice 100% gain on the CALLs.

We would like to point out that while things can be better, they can also be worse. We did save a good deal of money by not playing a number of splitters during the falling of the indexes and the rest of the stocks. Along with the stocks and the CALL options, you will notice on Past Results, Options, that we did not play the PUT options, either. Actually, we not only didn't play them on the splitters that we didn't put into the system, we didn't play them on the stocks that were in the system---all except for one, and we paid the price on that one--SIGI--which PUT was even just before sell date, but had a sudden drop to make it a sharp loser by sell date--Naturally, it has since recovered and would now be a 100% winner--but that goes with the territory. We are satisfied that we avoided all those others that would have been losers. Not to repeat too often, but it is important---Not losing is a good thing. Now a word from Tony on the Momentum Strategy

Momentum Strategy - Another Winning Week---
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Again we had another winning week. We only had two plays because the quarter is ending, but they were nice winners. (see Momentum Past Results) Our testing members keep amazing us with their creativeness in making these plays. Some go in and out of the plays two or three times a day and make profits each time. Some testers, such as Bernie, will play a stock in both directions, playing a CALL in the morning then later playing a PUT for example. He knows how to time things and gets in and out fast for quick profits. And he is not the only one that is being creative. So we are very proud of these testing members but have to admitt a little envious at times as well. Whenever we get one of these reports from a tester we say, "why didn't we think of that". But that's OK. We are playing the strategy and doing well ourselves so everyone involved seems to be really enjoying trading these momentum plays.

I want to discuss a situation we had with one of our plays this week. This situation brings about a good lesson. The KMX play made some of our testers wonder what was going on. KMX had a very good announcement with increasing profits and a good outlook for the future. Still, the stock went down and created a PUT play for us. Why did this happen? It is important to read deeper into the news. Yes, they announced well but it was still 3 cents less than the analysts (the street) expected. That was enough to drive the stock down. It doesn't seem like the street should have so much power over a stock but it does. That's just a fact we have to live with and accept. The pre-market price, as shown on many sites, including Yahoo Finance, or your broker's streamer, etc. usually gives the direction a stock is going to go. The price in pre-market for KMX was down almost $2.00--so that is a good indicator of what this stock was going to do. If in pre-market, it was down a little bit, it could open to the upside, but when it is down $2.00, then you can be almost be sure it will open down, no matter what the news was.

But it gets more confusing than that. Sometimes a company will beat the street and still go down and visa versa. Why? Who knows? The point I want to make here is, with this play we do not try to predict the momentum. We just observe then try to follow the direction it is going. It doesn't always work but as you can see from the past results, so far it is working 80% or more of the time.

We had yet, another situation with a play that gave us a lesson too. On Friday, we had listed GPN as a potential play. This one did very well last quarter so we naturally thought it would be good again. Well, it only opened up about .70 and basically had no action for an hour. We knew the conference call was coming up an hour into the market. After about 40 minutes into the day and with the stock going no place, we determined that traders were waiting for the conference call before trading the stock, so we declared it a no play. Good thing too. We were correct. Traders were waiting for the conference and when it came, they heard something they really did not like and the stock tumbled like a lead ball. Earlier we were thinking it was a CALL play and that would have been a mistake. Now, as it turns out, we could have made a fortune by playing a PUT but too much time had gone by and playing at that time of the day is not our strategy. So we just nixed the play. Here again though, we had testers, such as Debbie, who made that PUT play and profited handsomely. Go Debbie!!

The lesson learned here is, if a stock announced in a news release, but has not had their conference call yet, and the stock has no action in it after the open, it is best to nix the play or wait until the conference is over. Now, back to Mike.

Chart Indicator---
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The CI is now in limbo. It is a guessing game as to which way the markets are going to go, according to our fine barometer. We were doing well, but the markets fell apart and the CI came down to being totally neutral by the end of the week. All we can do is wait for direction.

 Stock Split Comments---
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Thank goodness we have finally come to the end of March. Our splitters did not perform well, we acknowledge that, and it gives us the challenge to prove that March was not the defining month for stock splits. We are deep into analyzing what has happened and expect to come up with some new data that will not only stabilize split investing, but return to outstanding profits. We accept the challenge.

 New RSI applications---
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As we stated a while back, we were doing some beta testing to see if there was a way to apply an RSI indicator to our Momentum System, and also to other splitters and general stocks. Sad to report that we had to cross off RSI as a criteria for use with the Momentum System, at least as a buying time tool. It just wasn't consistent. We haven't given up on applying RSI to other situations, but we can see that it will be awhile before we come to a conclusion that the RSI can be used.

The Economy & Commentary---
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The economy is being tested at present. Maybe that is why our Chart Indicator is neutral. There is much good news in the economy, but there are sectors that are going to test the main thing we look at in the economy--the consumer--who drives the economy, no doubt about it. We were hit by the housing sector, what with sub-prime mortgage companies closing and showing their true color (red). Foreclosures are at record highs, and that developed over a short period of time. Major analysis has gone into this, and the consensus seems to be that the economy can weather the housing storm---not that it is good for the economy, by any means, but the "experts" feel we won't see this bringing us to recession.

The politicians are making hay over this---now--but we never heard from them when they allowed lending programs that didn't require any proof of income---none at all--or any way to determine that down the road, the teaser interest rates on mortgages that were allowed were going to have to be raised. When raised, many of the new home-owners found they couldn't pay that much, and boom--foreclosure. OK--let's accept the fact that we can weather the storm on housing. Now we are seeing that other vicious sector--energy--not only raising its head, but appearing like a real fire-blasting dragon. Based solely on emotions, it would appear, we have seen gas prices skyrocket into the heavens. The worry about the Iranian situation with the British soldiers and the combination of that and "maintenance" on refineries has pushed prices way beyond reason. What I wonder the most about regarding this area---What does it take to get the public to DEMAND that something be done to control this sector?
Maybe it is happening so often that people just have given up on anyone in the political arena giving any assistance.

Also, we can't seem to get together and have some kind of boycott---we just don't do anything but mumble as we see our gas tanks getting low. The energy sector really is a form of monopoly, and there are ways that allow our representatives to control monopolies. Take a look at the way we used to do things. AT&T controlled the phone industry and rates were approved by the government agency and we had reasonable rates from that point on. No, that wasn't good enough. One judge--just one--decided that the phone industry should be broken up and rates set by the new companies. Bam, we got hit with big increases. And what has happened over the years since the breakup? Slowly, the new companies merged into each other until we are closer to the old system than a new, highly competitive system. And prices--they are being raised again. This time the phone companies are raising prices for items in packages--text messages, unlimited calling fees, etc.

In the electricity arena, we used to have governmental control over prices because it was an essential product and a near monopoly. Deregulation then became the rule---and we all saw what happened with that. Instead of bringing down prices, electricity rates tripled in many areas (ours) and how did that happen? FRAUD--and it was PROVEN FRAUD. So, did we get relief and refunds when the fraud was proven? Not where we live here in California, that's for certain. Once again, de-regulation, which is supposed to create competition and lower prices did just the opposite. It gave the green light for the consumer to be "raped". Oh, and natural gas saw the same outrageous price increases, too.

In the oil sector, we never did have governmental control over pricing. It seems to us that there is no real competition for going into the refinery business. The last refinery built in California was decades ago. It would seem to us that the oil and gas sectors are just as much a type of monopoly as telephones and electricity----AND--just as much a necessity as they are---yes, just as much. We have to have gas to get to work and our economy would collapse if there was no way to get to work outside of public transportation. Public transportation is poor in California and even expensive, so that is not the answer. Possible aids were long ago cast aside. Disneyland has a monorail, which we have all seen one way or the other. Here in the LA area, the company that built that one for Disney said they could build a monorail right along our freeways, for $180 million dollars for "x" miles of rail. Another system was proposed that was going to cost $540 million for 1/2 the miles that the monorail would have provided. The powers, our "representatives" favored the $540 million project, which was a way to get to the LA Airport. So, we never got the monorail and now it has been just a note in the past. You can tell it was a long time ago by the cost. Just to show that, we just saw that our local freeway is going to get a carpool lane added for 9 miles--the "proposed" cost is going to be $346 Million. Note that it is not a freeway expansion, which would be 4 lanes, at least, but just one single lane, and it is going to cost about $40 million a mile---if it comes in at the estimate, which it usually does not.

Why don't we have price controls on this very obvious necessity? We have had it in other areas, and it worked very well for us until it was undone. And who gets these things undone? It can't be as a result of the lobbyists who have the personal ear of the politicians, for our elected and appointed officials swear that all the campaign donations that come in from the lobbyists have no affect on their voting. Wow, just a minute, my typing got interrupted---a bunch of pigs went flying by my window, followed by a horde of flying wolves chasing them. That makes as much sense as believing that millions in donations have no affect on votes. Sorry people, I just needed to vent. You see, I offered to run for governor of California, with just one item on my platform The one item was to restore electricity rates to their previous, acceptable and affordable levels.

This was 2 elections ago, when the field was wide open, and Arnold got elected. So, I tried to do something, but I was not even able to get enough backing to get on the ballot. They say you can't complain if you never try to do something about a problem--so I tried and now I can complain. We hope that you are able to earn enough to overcome what has been shoved down our throats--and this is not a criticism of any one particular political party. Politicians are the problem and the system we allow them to function in is the problem. This is a generality and I realize there are exceptions--just not enough of them.

In the meantime, we are trying to help overcome these obstacles by providing our team members with a way to increase their income. The Momentum System is our very successful tool at the present, and we hope that more of you will check into it. We have all our results in the Past Result section of our website, free for all to see--every single play is an actual play. Yes, there are losers on the list, and there will be losers in the future, but 80% or more are winners, and that makes up for those occasional losses. It is so satisfying to hear from our players that they are doing so well. Many do better than we do. What they have found out is that if they take our stock picks and follow our general instructions, they get a hang for it and find good entry and exit points. Our research team eliminates so many potential plays, based on earnings announcements, that using our picks seems to do the trick for them. I just can't get over how this works---an example this past week was FUL. The earnings came out, there was a gap opening, and an entry was made. Then, the stock just seemed to dry up in activity. All of a sudden, WHAM, there was a huge increase in volume and the price moved dramatically---then stopped, almost--again. Sure enough, a while later, it took off again and it was so unusual looking, I had to keep going to the news page to see if there was some news released that would account for this activity. There wasn't anything at all to account for it. AND--that's why our research is so valuable. We look for stocks that have a history of moving on earnings release day. If they don't have the history, they are eliminated. Good work, Research Team. FUL was a good play. It has come to the point where at least one of our team members gets in and out of the same stock twice on the same day--and both times profitably. What is also exciting is to hear from some members that they do the opposite of what we do--buy CALLs when we buy PUTs, for instance---and STILL make profits. That is because they have a very good sense of timing and we provide them with stocks that move up and down enough during earnings release day so that there is enough room for a decent profit on the transactions.

Today's Thought---
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The only discipline that lasts is self-discipline......Bum Phillips (NFL football coach)...........And Bum should test himself by playing options in the Momentum System........Mike


Mike

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