SplitMaster.com:: Newsletter
Home :: Strategies :: Membership :: Past Results
Author: Mike Celeste Editor: Tony Ponzo May Circulation:

Stat Sheet Week Ending May 5th 2007

ChangesWeeklyAprilYear to Date
IndexesPointsPercentPointsPercentPointsPercent
Dow+144.0+1.1%+709.0+5.7%+802.0+6.4%
S&P+12.0+0.8%+61.0+4.3%+88.0+6.2%
NAS+15.0+0.6%+103.0+4.3%+157.0+6.5%

Highlight of this past week:--MA repeats as excellent winner in Momentum System.
In this Issue--- SplitMaster Basic System---
*****************************
As we have been saying lately, with the markets acting like they have been, stock splits should be forthcoming. This past week there were 9 new split announcements. Team members can see that we held up on buying one and there are 3 more scheduled to enter the system on Tuesday. We are facing the prospect of buying POT, too, so get ready for fast action. OK, so that was a little humor that Pat brought up. It's not "that" kind of pot, but POT the stock. With these numbers, we have to be aware that this might be a time to configure allotments of investment money to spread out over the large number of plays. That would mean putting a bit less into each play. During the year we do periodically see these spurts where it is quickly feast where it used to be famine in the number of splitters. Make sure you read the section on "Split comments."

 Big Dipper System---
************************
The list of potential Big Dippers keeps growing and will only get bigger for the rest of the month. This is another area that needs planning IF the stocks dip down to hit the target buy prices. There are now 7 on the list and that is going to double in the near term, with some dropping off at different dates along the line if they do not hit the dipper price. Another plan to conserve capital could be to wait on Basic plays and see if the dippers come in and use that system. Of course, if they don't hit the dipper price, no action--but it is a possible plan. Everyone's investment program is based on how much they target for each stock, so try to work out a plan ahead of time.

 Options---
***************
With so many new stocks hitting the buy list for this month, the options are another choice--and another item to allocate your funds. Most of the splitters have options. Considerations are compounded with splitters because we have to determine which month and strike price to go for. We post an option, but investors might want to go to a different strike price because of the costs of each strike price option. Lots to think about. We see this frequently from team members that are in the Momentum Day Trader plays, which is an option using system. Some get CALLS and some get PUTS and at different strike prices. That is an individual decision and many are doing well at it. By the way, we certainly appreciate the feedback we get from team members as they use the systems. It helps us very much.

 Momentum Day Trader Plays - This Week---
****************************************************
We had 9 potential plays listed for the Momentum Strategy this last week. However, the SplitMaster team only executed 2 of those plays. Four of the plays we decided not to go into because we did not like the action, but we tried to get into the other three but missed them. Either the limit prices we placed were not aggressive enough or we were just too slow with placing the orders. All three of those plays would have been nice winners too. So that is one draw back to this play - the action is sometimes fast making it hard to execute a play at the price you want. Exit points are usually easier to execute. We continue testing better methods to improve the play. I will talk more about that below. I do have to say that often, team members consistently execute plays we miss with excellent results.

The two plays we did execute, gave us a nice net win for the week. Momentum Past Results We had CELG which produced a small .25 loss, but MA produced a very nice $1 win and that could have easily been $2 if we were more aggressive. This is the second quarter in a row that we have profited on this stock. It is a very big mover making it easier to get in and out with a profit. In fact, a trader could easily play this stock two or three times during the day after its announcement, with good results.

We continue to test our signals with this play. We are slightly tweaking the criteria here and there to see if we can not only improve the play but find a way to execute the in and out points in a more relaxed fashion. This play will never be completely relaxed but we just want to make things easier in any way we can. We have had some good results in the behind the scene testing and will continue this testing this week. Hopefully we will be at a place soon that we can use the modified criteria for actual plays. Of course much of our signal criteria is transparent to the members but we will certainly keep you informed.

Chart Indicator---
***************************
Last week we warned that the Nas spread on the Chart Indicator was at a dangerously high level, which would indicate being overbought. The very next day Nas dropped 32 points, which is an equivalent to the Dow dropping 160 points (the ratio is about 5-1). The Nas did recover and closed the week with another gain, but there was an opportunity to use that indicator and do some trading, for those that are more inclined to quick trades. We think that as time goes along, all of us will get to rely more and more on this area of planning. At the close of this week, the rubber band got even tighter, after the recovery from Monday's steep drop. The Nas is again in dangerous territory--so be cautious out there. The rubber band will break and snap back, but we don't know exactly where that breaking point is--just be careful out there. Things overall however, look pretty good with the market. There have certainly been many companies beating expectations this quarter which is a good sign. And there are other various factors that are good for the market. So hopefully, when the DOW and Nas have a pull back, it will be a gentle and controlled one (profit taking). If that happens then it will be considered a healthy pull back which is good for the market and will create buying opportunity. In the mean time we will have to be vigilant and move with caution. We don't think anyone should stop trading as no one knows how much longer this market will continue up. It may go for a long time, but the use of stop losses or trailing stop losses at this time, may be a good idea.

 Stock Split Comments---
**********************************
We are firm believers in studying history. That is what our programs are based on, after all. We study the past and when patterns are seen, they can be valuable tools in setting up investment programs. Well, last year there was a nice run going up and we came to May 11 and BAM !!!, the bottom dropped out. At that time there were many splitters on the list and also many Big Dipper possibilities. I think it was the first time that we had a large BD list and every single one of the stocks dropped to hit the target buy price. That severe market reaction lasted into July and you chart followers can go back and see what we mean. The Nas did not recover to the May 11 level until some time in October. Since our plays are for about a month, it was not a fun time. Fortunately we were able to pull back on some plays and then the number of splitters dried up. That was an extremely unusual time for splitters and we hope it was an aberration. Next week comes the anniversary of the May 11 drop and at the very least we want to be ready and aware. We look at it this way because of the recent similarities of strong market action and a much longer list of split announcements, and we don't want to be caught off guard. On the other hand, we already had a substantial pull back or correction this year. You'll remember that on Feb. 27th we saw the market drop over 500 points, (at its lowest point). So was that our major correction for the year? No one knows of course but we do feel, that with such a long and hard up move in the past weeks, there will be at least, a profit taking week in the near future.

The Economy & Commentary---
**************************************
We are wondering just what is going out there in the stock market world, especially as it relates to the economy. Emotion seems to be in control at this point and no matter what the economic news is, the indexes are making net gain after net gain. Every week we talk about the Dow streak of up days. Every week it seems to get ever higher. The Dow has now been up 23 of the last 26 trading days. The economic news has not been all encouraging. Earnings are coming in better than expected with the majority of companies as mentioned above, but there are other sectors that are at least sending warning signs. Employment isn't as strong as it was; housing and mortgages aren't showing any signs of recovery yet; oil has been in good supply, with inventories up, but gasoline refining has been lowered and RECORD gas prices are eating away at the consumers' spending supply. The reporting site for oil shows that oil prices are $5.35 LOWER than at this point last year, as of 4/27. Food prices are also rising, with competition between eating and producing for energy pushing corn prices higher, for example. It drives me crazy to read some of these government reports on prices when they say the rise was 'x' amount, but if you exclude food and energy it was only 'this' amount. It's as tho they are telling us that eating and getting to work doesn't really count. To us we see a good deal of signs of inflation--BUT--the markets are running on emotion, and who are we to turn down profits to be made in the stock market. When we look back thru history we see more than enough times when the emotion of fear drove down prices, no matter how good the economic news was. Let's take it while it is available--but at the same time--be cautious and don't run wild getting out of balance in the amount you commit to the market. It's similar to those people that saw house prices going up so fast that they borrowed money to jump in and buy spec houses, trying to flip them even before escrow closed on the buy side. There was a report that in the Las Vegas area, at the height, there was a planned opening of another new section of homes. People were camped out, waiting for the day when you could buy. This is hard to believe--the story said that when the sales door opened prices were raised about $5,000 each time a buyer purchased one of the homes. I don't know how many homes were made available, but the price went up $15,000 after 3 houses were sold. Incredible--but the dam burst there, and those speculators are now being foreclosed on, as the resale prices have dropped below any equity they have and they can't keep up with the mortgage payment, as their intention was never to hold the house for any real length of time.

To balance that story out with some positive news in housing, we saw another report. The Kiplinger letter last week stated that the housing slump is not affecting luxury homes in Southern California because they did not rise like other homes did during the boom and they are not subject to the sub-prime bust because people buying higher dollar homes do not need to borrow sub-prime money. They actually sited cases of really big homes selling for more in the last few weeks with one selling for a million dollars more than its asking price. So while our homes are not all million dollar homes, I think the higher level priced homes qualify for a definite positive point in the overall outlook on housing. Just an interesting point. Housing is spoken of in general, but there are always some sections of the country that are contrary to the general outlook.

Caution is the word of this week, but we do want to be able to take advantage of the higher markets at the same time--Again--be careful out there.

 Today's Thought---
************************
Life will bring you pain all by itself. Your responsibility is to create joy..........Milton Erickson, MD


Mike

Published by Splitmaster.com, LLC.
P.O. Box 960 San Dimas CA 91773
Copyright © 2006 All Rights Reserved.
Privacy Policy

To unsubscribe from our newsletter or edit you delivery address go to our Newsletter Page. To edit membership information login to the Splitmaster.com members page. For inquiries regarding this or any other Splitmaster.com Information Delivery System publication contact us at staff@splitmaster.com.