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Author: Mike Celeste Editor: Tony Ponzo June Circulation: 7269

Stat Sheet Week Ending June 9th 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-244.0-1.8%+961.0+7.7%
S&P-28.0-1.8%+90.0+6.3%
NAS-40.0-1.5%+159.0+6.6%

Highlight of this past week: ANSS makes a nice 28% profit in the option.
In this Issue---
SplitMaster Basic System---
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After that rush of split announcements, we see that they have pretty much dried up, outside of some 3-2 announcements. We have had 3 that met our criteria, since the first of June. The way the market has been behaving, we can understand why. That's ok, as we have plenty on the table already and want to concentrate on getting them closed with a profit.

 Big Dipper System---
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The recent strength of the markets was evidenced this past week when we saw some heavy selling, and yet we didn't hit any Dipper target buy prices. It would be nice if we could predict the daily bottom of these declines, but we can't, so we go with what we have.

Options---
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The options programs have been doing well, especially in the Momentum program. HOWEVER, we continue to stress that option plays are not for everyone. You need a thorough understanding of how options work and how they are priced, obtained and sold, etc. A good number of our team members do have that knowledge and are doing very, very well. I have to say that Bernie is the king of the "day trading" members--and often is successful at being more aggressive at making some of these trades than we are. We are concentrating on developing a very consistent winning pattern and in doing that we lean to the conservative side in looking for our profit goals. A lot of work has gone into day trading, and it is paying off. I think Tony pointed out to the day traders that we have been running at an 83% win rate. This is definitely not to say that we think we know everything about it, but that leaves 17%that drives us to try to develop a better stop-loss strategy, and that is especially tough in options, as market makers see those orders and drop down and snap them up at times. But, we do feel that we have taken steps based on study and logic. There are defining reasons why we do what we do. We are constantly trying to improve not only our results, but the methods we use to get the word to our team members. Recently we put in new programs that get the word out much quicker than before--and I'm talking about where 30 seconds is a long length of time. Our most experienced members don't even need all that we provide. They just need the stocks that we pick. They pick their own entry points, option strike prices, and exit points. It has been very satisfying to get all the feedback that we have been getting, as that lets us know that we are going in the right direction. Team member, Kurt, even came back from vacation and went right into the action mode. I believe he said he did 4 buys and 3 sales (getting more options on one stock when it went against him for a short time), and all worked out for him. Debbie tells us she missed a move, but went in the opposite direction when she thought the timing was right--and secured another win. And so it goes--for those that have the confidence in their knowledge and how to work our system with that knowledge. Others can build up that knowledge by paper-trading first, and making sure they understand the world of "day trading". I'm telling you, I wish we could have a video of our "war room" during the early part of the trading day, when most of our own trading is being done. Strong emotions are not lacking is one way to put it, and it really has been a form of entertainment for me, too. Of course, when you are winning, it's a lot easier to call it entertaining. Tony P. is the main developer of the Momentum plays, and covers it very well in his explanations. However, I want to continue to stress that our signals that are sent in only seconds, are still guidelines---as proven by all the reports we get of profitable trades that, while they are about the same stocks, might be different than our trades--in time, direction and pricing decisions. We like to make our entry, have our goal set, and immediately place a sell order for our goal price. As the market moves, we might change that order, but it has often caught our sell price and moved the other way--sometimes just temporarily, and sometimes not. We have seen, more often than not, much better prices than what we exit at, but we remain comfortable in our decision. We very much like the idea of putting in a sell order right after the buy execution is given to us. Those team members that have made themselves available to this program are encouraged to try variations, as those mentioned above have done, and find that which gives you as much comfort level as possible. Also let us know how you are doing and if you don't mind, we'll talk about your successes in our newsletter and other email correspondence. It seems like the feedback goes in waves. Sometimes a lot of people report to us (keeping us very busy) and other times a few. But we are thinking about putting up a trader of the week in our newsletter so if you have a good week send us your results. This could be a lot of fun and we would like to see a lot of different traders of the week over time.

A quick comment about one of the splitter options that is coming up for sale next week. It had about a 100% profit into it--but the market decline took it away. Many of you may be happy with those 100% profits and if you are, we see no problem with you making your own decision to get out early and take the profit. You don't always have to wait for the posted sell date to get out. We hope some of you made that choice and if you did, great going.

Momentum Plays- A Great WEEK!---
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We had an outstanding week in a couple of ways this week. First, our new criteria has allowed us to spot more opportunities so we made more plays than usual - 9 to be exact. Momentum Past Results And I think in the weeks to come, we will do even more. Then, out of those 9 plays only 1 lost and it was a small loss to boot. So that is an 89% win rate for the week surpassing our goal of 80%. True, this figure is for one week only but we are pleased and look forward to doing it again in the weeks ahead. Also, some of these plays were internal SplitMaster team plays but they were real picks and real wins.

The plays represent a $1,160 profit for the week on about an average of 5 contracts each. So extrapolating this out like we did last week, you can see that if you have an average of 10 contracts, you would have made $2,320. And 20 contracts would bring $4,640 for the week and so on. Now playing that many contracts is not for everyone and I have to say that you should never, never play more contracts than you are comfortable with and never trade more money than you can afford to lose. Of course the plan is to win but, there is an old saying that states, "never invest with scared money". I think that says it all.

But do some of our members trade those bigger number of contracts? Yes. Some trade as many as 100 contracts for a trade. But, I must stress that these are the members that are very experienced, very confident in what they do and can afford to do it. But it is fun to think about how much they are winning and it can certainly be a goal to someday build up to.

I want to bring up one more aspect of these trades this week. For some time we have been teaching that one way to exit the play is to put a set target price for the out. Now, the target out price can be different for each member. Some may be happy with .20, some with .50 and so on. You may think .20 or .30 is not a lot of profit but remember, as you gain confidence, you can always increase the number of contracts and if these smaller targets are giving you wins more consistently, your profits can turn into a very nice week or month. The idea is, once a trader is in on the buy side, they immediately put in the sell for the target price. This is a wonderful strategy as often, a stock will move up fast, hit the target price and turn around. Case in point, we had a play on FWLT yesterday and it did exactly that - hit the .30 then turned down and rather fast. Because we are playing this more conservatively, our target price for now is usually .30. Once we are in, we wait just a little bit to see if the stock is going to really run meaning we could wind up with a bigger profit. Sometimes they run up so fast, by the time we put in the sell order we already have .50 profit or more. Those are great plays but do not come that often. Once we are in a play if the stock meanders a bit we put in our sell order for our target price. We may raise this target price as we gain more success but for now this is what we do. BUT KEEP THIS IN MIND. You do not have to follow everything we do. Get your own style and target outs. And new or less experienced members should always take the more conservative side no matter what we are doing. In time you can gradually increase your aggressiveness.

One last thing. In case a play just goes against you, have a maximum loss strategy too and be prepared to move on it. Yes, you could get out at your maximum target loss only to see the stock turn back. But it could also keep going against you and become a huge loss. So it is better to take a smaller loss and move on to the next play rather than being overly loyal. Have your rules and take the emotion out of the play. Some people employ stop losses to accomplish this and if this makes you comfortable, use them. They are a good tool. We do not use stop losses at this time but we have a .50 target and are prepared to move fast. Again, develop your own strategies on these issues and stick to them. Over time, you will see that these rules make you a much better trader.

Chart Indicator---
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In the last newsletter we gave a cautionary warning about the level of the Chart Indicator--it being very high, or in an overbought condition. Did the market get hit over the head in the 3 day middle period of this week? I hope to tell you it did, just as we warned. We cautioned about taking profits in advance and hope very much that a number of you did just that. You still don't need convincing about the power of our CI, do you? If so, we can tell you we aren't going to give up on you. We will be hammering you over the head with this indicator, we have so much belief in the good it can do. All we can do is try to educate--and be educated ourselves. We think it is all worthwhile. Team members, remember--every day we post the CI numbers at the top of the Big Dipper page. If you are not a member yet, it could be more than worth our lowest subscription fee just to get that service. (To tell you the truth, we have talked about charging a small fee just for that one service--for those that don't want to get into our more sophisticated trades--but we haven't done it--yet.)

 Stock Split Comments---
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As mentioned above, in the CI section, we had a severe sell-off in a 3 day period this week. As usual, the "experts" come up with all sorts of reasons for the decline, but most of those reasons are not new or not too logical. At SplitMaster we give forewarnings about possible cautions that should be taken. This did not surprise us at all--maybe the depth was deeper than we thought it could be for a 3 day period, but we have been expecting it--and granted, we didn't know when that pendulum would swing the other way, but we definitely put out cautionary notices.

 The Economy & Commentary---
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Interest rates, among other factors, was a leading concern of the markets this past week. The concern went from worrying about whether the Fed would cut rates, to a developing concern about whether rates might even be raised, due to inflation and other factors. We have been saying that reports about little or no inflation didn't sit well with us. We see lots of areas of inflation. One confusing reason is that earnings have been coming in at such a good rate. Usually raising prices can hurt earnings, at least for a while. How can that be explained? One way prices are raised and we consumers don't notice is by charging the same price, but giving smaller amounts of product. I see that frequently, when shopping. That is a sort of hidden inflation--and it is inflation. Another way earnings are built up is by cutting back on costs--either labor costs, using fewer workers and getting the same or higher production, or lower costs of material. Both of those can be obtained by going to other countries--outsourcing labor, or lower prices for material from other countries. It seems that everything I pick up says made in China, for instance. I'm old enough to remember that "Made in Japan" meant is was made at a low cost. Then it was made in Taiwan, followed by made in................pick a country. Calling a company often results in difficulty in understanding the representative, as it could well be that you are talking to someone half-way around the world. Those are ways that increase company earnings, but could still be a form of inflation to others.

Also, there is the possibility that the markets could have gotten ahead of themselves. That's why we place so much attention on our Chart Indicator, which has been right on the money in showing overbought conditions. I really like mathematics and have been saying for a long time that mathematically you can't have house prices increasing at rates that are unsustainable. We think we have been accurate in predicting the housing downturn. Now the housing "experts" have lowered their expectations for 2007 at least 3 times this year, and we aren't even finished with the first 6 months. It is very difficult for us ordinary folk to know what to believe and not believe in these types of reports. All I can say is--follow someone or some type of report for awhile and see if it is pretty consistently accurate. If it is, stay with it. The stock market mathematically seemed to get to an area where it just didn't want to go up any more. Will it recover? If so, how long will it take? We remain confident that higher days are ahead, but right now we don't have an indicator that is in any position to tell us when. We can get a good look when the markets are oversold, but that takes time to develop. Right now we don't want to see a decline like last year, when the nosedive went from May into July. That's another reason we like our Momentum plays--they go with momentum and you can have winning trades playing both up and down moves. We have been searching for this for a long time, and we think we are on the right path. Keep watching our free page on the site, www.SplitMaster.com, Past Results, Past Momentum plays. As with all our strategies, we post EVERY play, win or lose. Put us to the test and see if we have a grasp on the economy and how it affects the stock markets.

 Today's Thought---
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Your purpose explains what you are doing with your life. Your vision explains how you are living your purpose.
Your goals enable you to realize your vision........Bob Proctor, Self-help author


Mike

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