SplitMaster.com:: Newsletter
Home :: Strategies :: Membership :: Past Results
Author: Mike Celeste Editor: Tony Ponzo June Circulation: 7269

Stat Sheet Week Ending June 23rd 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-279.0-2.0%+897.0+7.2%
S&P-30.0-2.0%+85.0+6.0%
NAS-38.0-1.4%+174.0+7.2%

Highlight of this past week:--BWLD--makes a quick jump, so we take the early profit.

In this Issue--- SplitMaster Basic System---
*****************************
Step by step we are applying new criteria, based on our new software. Our signals stopped us from completely losing the profit from a very nice ride on BWLD. Although we had a bit of bad luck just before we sold, the net results was, our new software signaled for us to get out and it was right on. BWLD was at a loss, and it slowly was coming back to within about 1.50 of our buy price. Then, WHAMO, the stock jumped from pre-split 84 to over 94, with no specific news that we could find. Our software indicated that the run was short lived and was then at a point where it looked like it was going to go negative. So we sent a notice that we were selling at the open the next day, because of that quick profit of about 9 points. Although it turned out very well as those of you who had it know, we did have one Boo-Hiss !!! For once it appears we agreed with the “expert analyst”---there was a downgrade before the market opened. If that downgrade would have come out after the open this story would have even been better. But it came out before and as a result, the stock dropped 4 points at the open (pre-split), but it was still left a decent profit from our buy price. The real nice thing about this whole situation was that the stock continued to drop, and our new criteria saved us a substantial amount (remember, we would still have been in the stock until next week). The stock dropped an additional 4.6 points (again, pre-split) and at the close on Friday we were right back at even. So, even tho we caught a tough break with the downgrade, our new program worked, and that seems to be telling us that we are on the right path.

 Big Dipper System---
************************
The Big Dipper picked up 2 new plays this past week, and they were based on prices before we had our new criteria in force. We feel we could have done quite a bit better on the buy price if we had it in effect earlier. Both stocks dropped below the buy price and we are not using the new criteria to see if we can pick up some more at even better prices. The latest one does not have options, so we won’t be able to use leverage on that one. The goal is to get better prices for the time frame we need. So far, it looks like this is definitely possible.

Options---
****************
With the new expiration month showing so much time left, option prices have a high time value, which of course makes them more expensive. That makes decision time even more difficult. Time value will hold to the delta value for the most part, so it is just a cost of doing business. It is nice when expiration date approaches and there is a whole lot more intrinsic value, so the option moves closely with the stock—both ways.

 Momentum Plays for Day Traders- This week---
*****************************************
Not much to discuss here as we had a very light week with only two plays. One play had a small .20 loss and one is still active. We do not usually hold a play over, but this PUT play is at a point in which it has a lot of intrinsic value, its not down that much and it appears like it is due for a down movement, which is what we are looking for in this stock. Plus, we have four weeks until expiration so we are holding for now.

This is the time of quarter when the plays thin out so the lack of plays is expected. In fact, for Friday, other than a few over the counter stocks which we never consider, there were no earnings announcements. Next week we will probably get a couple of plays but then we go into the quiet period the first week of July. The announcements pretty much dry up until about the 15th of July in which they will be back in abundance. Of course, if we can find any stocks that have a lot of activity or large trading ranges, we may go into those. This is what we have been calling the high ATR stocks. ATR stand for Average Trading Range. But lately these stock have been hard to work with too so we'll just have to watch and keep members posted.

Chart Indicator---
*******************
This is almost getting repetitive. Our Chart Indicator tells us we are in overbought or oversold positions, we relay that to you in the newsletter (team members get to see it daily on the Big Dipper page), and BINGO, it seems as though every single time it comes thru as indicated. This week we saw it happen again, with 2 triple digit down days on the Dow coming after we warned in the last newsletter. We don’t get much feedback about this indicator, but let me tell you, it has proven itself time and time again. With the Dow being so strong this year, we haven’t seen the oversold sign, but it will come, there is no doubt about watching that pendulum swing back the other way, as we talk about from time to time. In the meantime, we hope more people start acting on it.

 The Economy & Commentary---
**************************************
Fear seems to again be taking control of the market. The volatility continues, with wide swings going from one direction to another. The previous week saw the Nas end a streak of double digit gains for the last 3 days of the week. Remember that the Nas results are multiplied by 5 to get approximate comparisons to the Dow. Then, this week, it was very interesting to watch Nas. We warned of the overbought conditions and Nas changed only -.11 and +.16 on Monday and Tuesday---that’s virtually unchanged each day. After all those double digit days, this seemed to us to be a topping and the rest of the week saw a drop of a net of about 38 Nas points, or equal to a drop of 190 points. The Dow did even worse, dropping a net of about 275 points in the last 3 days of the week. Our Chart Indicator has hit right on the button, as we have stated. Inflation and hedge fund problems over sub-prime mortgage bonds were given as the culprits this time. According to an article in the Los Angeles Times, a number of hedge funds are heavily leveraged in this area—too heavily, according to the report. They are backed by large financial institutions, who are betting that the sector will improve quickly. The reporters feel that the problems could grow instead of decline. This is another indication of how one sector, the housing sector, can affect another sector, the financial sector, which then affects the stock market and all investors, in general. Bonds in these areas are not backed by hedge funds (the leverage factor, as you recall), but by banks, asset managers, pension funds and insurance companies that serve mainstream America. The analysis goes on to say that home prices have been falling in many areas and monthly payments jump over the next year on almost $1 trillion in adjustable-rate mortgages---so the problem escalates, if that is correct. We have been saying for a long time that the housing market was in trouble and would be in trouble, based on mathematics and history, which does repeat itself.

The market “experts” have been saying that the economy is too strong for one sector to take it down. We hope they are correct—but that old bugaboo, FEAR, is rearing its ugly head. We feel it is a combination of fear and overbought conditions that are in control at this point. We also noticed that many stocks have been taking some big hits in just one day, or a short time---including splitters. Those stocks that have been acting like that have been those stocks that had long up moves and were at historic highs. UP does not last forever, and neither does DOWN. This time it looks like the UP movers are starting to get hit, so be careful about new investments, and look for not just support levels, but strong support levels. Here at SplitMaster we feel that our new tools will allow us to take advantage of down moves by buying PUTS at opportune times, and then switching to CALLS when our signals indicate such a move upward might be imminent. The economy always makes opportunities in some areas and in both directions, up or down. We want to be there to take advantage of extreme fear and extreme optimism. Our confidence level remains firm based on these points.

Today's Thought---
*****************
If you can find a path with no obstacles, it probably doesn’t lead anywhere.

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.