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

Stat Sheet Week Ending June 30th 2007

ChangesWeeklyMay1st QuarterYear to Date
IndexesPointsPercentPointsPercentPointsPercentPointsPercent
Dow+49.0+0.4%-219.0-1.6%+1.0+8.5%+946.0+7.6%
S&P0.00.0%-28.0-1.9%+83.0+5.8%+85.0+6.0%
NAS+14.0+0.5%-2.00.0%+181.0+7.5%+188.0+7.8%

Highlight of this past week--Momentum Plays--Another winning week.

In this Issue--- SplitMaster Basic System---
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While it didn't seem like such an exciting month, we did end up with SplitMaster again showing a profit, which means we have had only one losing month this year. We say only one, but we didn't like to see even one month at a loss, and we were also looking forward to better returns in our Basic System. However, with our new software, we feel we are on the right track and there will be more in and out trading in each stock, if we get the signals--"If we get the signals" being the key part of the plan. We don't want to rush in and out of situations just to have more plays. We want to see the reason why we go in or out.

 New Software---
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We are seeing some great early benefits to the new software. We exited 2 plays using it and both turned out to be excellent moves. PVA was scheduled to sell on 6/28, but we sold on 6/14 for a pre-split price of 82.54, while the 6/28 price would have been 79.96. BWLD was even more dramatic. Sell date was 6/26 and the price on that date was 80.50. We got the signal to sell on 6/21 and that price was 89.28--a whopping difference of almost 9 points---and that is even tho the stock dropped 4 points on the open of our sell date due to a downgrade by an "analyst". One of the rare occasions when we and the "experts" agreed. We continue to learn what this software is capable of and we have high expectations for many different applications to both stocks and options.

 Big Dipper System---
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We will try to mitigate the damage done in our Big Dipper stock, SPAR. The stock has taken a real beating and we can't find any news on it, so we continue to wonder why. The Growth Rate % is larger than the Price/Earnings ratio, and that is always a welcome sign, so we wonder and ask why. If any of our readers know, please drop us a line. The Motley Fool had this stock in their top 5 growth stock list on June 6. The closing price on the stock that date was 36.89, and picked to go higher, remember. By the end of this week, 6/29, the pre-split price was down to 25.53. That's a 31% drop in 23 days--goodness gracious ! Thankfully, the split was a 3-2 ratio and we don't include them in our Basic System, so we didn't have that loss to face. In the meantime, we will monitor it closely and use that new software to try to determine a new buy signal, in case anyone wants to average down in cost from the original Big Dipper entry price. We will keep team members posted. There are no options in this stock, so that will not be a consideration.

 Options---
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There hasn't been much action in the options category lately, as we didn't get our suggested option price on some of the splitters, but that has definitely worked in our favor. We did close out on PUT at a nice 29% profit, but we had to be persistent. As mentioned above, we got out early on BWLD, but left the PUT play open. The stock dropped rapidly after that, which increased the PUT price, of course. However, we had set an entry level that we thought was very safe and the stock was not near the PUT price. The market maker kept the option at too high a price, in our opinion, and since we had to buy it back and we had the July PUT with a lot of expiration time left, and currently at a decent price, we held on until we got our price--and it did just that.

 Momentum Day Trading Plays- This week---
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Even though this week sees the earnings announcements really slow down we still managed to have 5 potential plays and executed three. One play, NKE, never gave a good signal so we did not go into it and we missed a CALL play on MON which would have been a very good play. We put our order in a little too late, just missing the play. But MON did produce a nice PUT play, a short time later and MLHR also gave us a nice PUT play as well. We did have a small loss on APOL yesterday. That darn stock just stayed flat all day after its initial gap up. Then we notice it started to trend up so we got out with a small loss and good thing as it did continue to drift up against us. But all in all, we had a nice net profit for the week once again. Momentum Plays It would be nice to have more plays but this is to be expect this time of the quarter and next week will be mostly quiet, especially with the 4th of July holiday on Wednesday.

Let's discuss the cost averaging strategy that we have been talking about and what the effects can be. We are still holding on to KMX. It has not been much of a mover after the announcement date. However, it has drifted up against us. Yesterday though, we received a signal that it was in a down position and it finally did move down. So we bought some more of the 27.50 PUTs, .55 cheaper than our original buy. The results is, our average cost has been lowered to about 2.10. That option was actually trading between 2.10 bid and 2.20 ask yesterday so we are very close to getting out at a profit. Before, we would have had to wait until the option hit 2.40 to get out even. So with any down move on the stock Monday, we should be out. Do you see the advantage? Again though, I have to stress this strategy can be stressful and it is not for everyone. So if you are thinking of ever utilizing this strategy, make sure you understand what you are doing and make sure you are comfortable with it.

Chart Indicator---
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Right now the CI is at a dead even level, not positive or negative, but neutral. It has come down from positive, and gave us warnings that turned out to be extremely accurate. We'd also like to mention that we had a bounce back signal, also, and it came this past week. On Tuesday we saw Nas drop for the 3rd straight day. That is usually an indication the market is going to reverse positions, and Wed. we saw Nas go up 31.19 points, or the equivalent of 155 Dow points. Another indicator we use, (we call it the W signal) dropped to a level under 10, which is a buy signal to us. That happened on the same day, so we had definite confirmations. Just a point of info for the other direction---On 6/18 and 6/19, when the Nas struggled to movements of 0.11 and .16, the W signal was 94--and anything over 90 is a sell signal. On 6/20 Nas dropped 26.80 and the Dow dropped 146, followed up by a Nas loss on 6/22 of 38 points and a loss of 186 points on the Dow. We think our signals are continuing to prove their value.

 Stock Split Comments---
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I actually get thirsty when thinking of the new split announcements. It has been another dry spell, and the old song "How dry I am" keeps running thru my head. However, I do remind myself that this is the summer season and splits are much fewer in number at this time of year. We expect to make up for this by using the new software to guide us in and out of plays 2 or 3 times during a run.

The Economy & Commentary---
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It's that time of year when we pause to take a look back and see what happened during the first six months of the year, and also the 2nd quarter, along with the past month. During June we saw 8 days with triple digit or close to triple digit Dow moves. That's 8 days out of 22 trading days, or more than 1/3 of the time there were triple digit moves. Friends, that is volatility. Out of the 8 triple digit moves, 5 were to the downside and 3 were to the upside. For the month there were losses in the major indexes, but the strong gains of earlier months made it seem like it was a winner. You can see the figures above on our table showing week, month, quarter and yearly results to date. Last year we were hit in the indexes from May into July. This year May was a very good month. Now we will see what July brings. Summer is the annual time when vacations are mostly taken, and trading volume drops. We remain wary of July and will not hesitate to delay entry points or exit points if our signal so indicates.

The general economy is finding out what we have been telling you for a long, long time. Housing affects the market, no doubt about it. Rising interest rates are also a considerable factor at this time. One hedge fund working in sub-prime mortgages folded up, and more are in trouble or are going to be in trouble before this is over. However, keep in mind that one areas bad news is good news for another area. There definitely will be opportunities to jump into situations that are either ripe for PUTS or shorting of the stock and also for CALLs and going long on special situations. We did well with our PUT plays during June, even after seeing that by being conservative, we left plenty on the table. We're looking for consistency at this point, so we remain conservative. The extreme volatility of the markets shows us that there is still a lot of uncertainty out there. One day there is optimism and then another report comes out that leans towards pessimism and it is enough to drive a long term investor crazy. Which way do you go? We think we go with the swing of that ol' pendulum and go with the direction for much shorter terms.

Today's Thought---
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Be grateful for every day spent with loved ones--don't miss the chance...........Mike

Mike

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