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Author: Mike Celeste Editor: Tony Ponzo October Circulation:

Stat Sheet Week Ending October 27th 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+287.0+2.1%+1.0+10.8%
S&P+34.0+2.3%+117.0+8.3%
NAS+79.0+2.9%+389.0+16.0%

Highlight of this past week: Momentum Past Results--- had 6 winning plays this past week.

In this Issue--- SplitMaster Basic System---
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The splitters are picking up, both in price and in number of announcements. We kept expecting more announcements as the markets have been so high (except for last week), but they were slow in coming. At least they have started to announce, again. We look forward to better times when the numbers increase--but not too many, as we can run out of investment capital.

Big Dipper System---
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The cupboard is pretty bare right now in this strategy, but that is sort of expected when the markets are doing well. We get our share of downgrades, and while they seem to come at the wrong time, sometimes they are a big help. Splitters usually recover the downgrade from these "experts" and we feel that they are buying opportunities. The closest one we have right now is about 3.5 points from the BD buy price.

 Options---
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The more splitters we have, the more potential option plays we have, also. We missed a couple--but--one has dropped below our original suggested buy price, so we will be listing a buy price on it again, soon.

In the meantime, we are concentrating on writing more Put options for income. We realize that few of you do this, but we think it is an opportunity. Then, too, if the stock is Put to you on expiration (only occasionally), it is at a price that we feel is a very good buying opportunity.

 Momentum Plays - Profits Continue even though---
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The profits continue to come in on this strategy even though we did finally have two losses. Momentum Past Results Oddly enough they came back to back and were our last two plays of the week. Those are the first two losses in nearly two months and while we don't want to see any losses we realize that the losses are going to come every now and then. Our goal with this strategy is to maintain a 80% to 85% win rate and with double digit gains in dollars. For the last two months, our win rate is 92%. The dollar gain is about 207%. I know some of you will take out the calculator to see how we arrive at those numbers so here is how we made this calculation. The win rate is simply that over the last two months we have had 23 plays and 21 wins. Simply divide the 21 by 23 and you have the 92% win rate. The dollars percent of gain is figured by adding up the total cost of the trades for the two months and the total profits. Then, since the investment only lasts for the 30 minutes or so that we are in a play, allowing an investor to reuse the same investment money over and over, we simply divide the number of plays into the total investment for the two months to come up with an average trade amount of $2,688.48. Divide that into the profit amount of $5,560 and you can see that it comes out to approximately 207%. Not bad for a little bit of work three to five days a week in the morning - probably less than an hour a day counting waiting time. Another way to look at this is if you had a trading account with about $2,750 two months ago, and followed the trades exactly, you would now have doubled your account.

Let's take this a step further. The above calculations are based on an average of about 8 contracts on each trade. Not everyone is willing to trade those numbers but many of our members do and some trade much more. The trades we post are based on what we trade in the SplitMaster account and often we here at SplitMaster are trading a much higher number of contracts in our personal accounts. Now the percentage will be the same but look what happens to the dollars if you double, for example, the number of contracts. $5,560 profit becomes $11,120. Triple it and it becomes $16,680 and so on.

Now we are not suggesting to our members that they start trading more contracts. In fact, never invest more than you can afford to lose. We are simply saying that the opportunity is there and for those more experienced members who can easily afford it, this might be something to consider if don't already.

We do not really advertise this Momentum play to the public. We keep it for our members and newsletter subsribers. We are not really looking to make this particular strategy have a huge membership base as we do not want the volume on the options we play to be overwhelmed. But for those existing members who have not played this stategy yet and may be interested and for you newsletter members who are interested, we welcome your questions and membership.

Three Indicators---
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The Chart Indicator is back to positive, after spending 3 of the last 4 days below the line, but not long enough to drag the CI itself down below the break-even line.

We do have 2 of the 3 Indicators showing that the market is overbought again, so we are anticipating some sort of reaction. The kicker in all of this, and a major reason for the big jump in the markets this past week, is that the "experts" are anticipating another cut in the interest rates, compliments of the Fed. Therefore, we are wary of a down market signal. Wednesday the Fed will give their decision, and if they don't cut the rates, watch out. We would think there would be a major downward move.

 New SPX System---
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Yes, there is a first time for everything. We knew we would have a loss someday in the SPX play, but it was really a close call. It seems that only one team member wasn't able to cancel their buy order, per our instructions and they took a little loss, just 20 cents. It happens every once in a while that our change of order happens just as the target price is hit. However, we have seen it happen that way, and it works to the benefit of the team members that are in---the price stabilizes and then goes in the right direction and the result is a nice profit.

For those that like this system (and what is not to like when you are making excellent profits?), be sure to realize that if you are conducting the play by yourself, you need to be right at the computer. For those that can't stay online and watching, there is another acceptable option. We are associated with auto-trading brokers that set up your account to your own individual specs, and the order goes directly to them for immediate action. That way you can particpate in all the other things that occupy our daily lives.

Check with us if you are interested in this auto-trading program, or if you have any questions.

 The Economy, the Markets & Commentary---
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We don't know about you, but we are having a difficult time trying to figure out where we stand with the economy at present. There is so much conflicting information coming out from "economists" and our usual "experts" that we have to just see how the economy is affecting our own personal lives. We mentioned that the Fed meets next week to decide our financial future, as it applies to interest rates. The markets definitely feel that another cut is coming, with the only question being how big a cut. This past week you could see that the markets really did not want to go down. On both Wednesday and Thursday we saw them recover at the end of the day and on Wed. the recovery was over 200 points. You can't ignore that. On the other hand, anticipation is not always rewarded. If the Fed does not make any cut, we would anticipate some pretty good selling pressure. On Friday, good earnings from Microsoft and satisfaction with the report from Countrywide spurred the markets upward all day, closing near their highs. Could this be a trap? We don't know, but we are certainly keeping a close watch on the financial news. The market often hears what it wants to hear. Take Countrywide for example. They came out with earnings that were quite a bit worse than expected, but because the news also said that the worst was over, and the next quarter, etc., would show profits, the stock rose 32%. Man alive, that is something. Yes, there probably was short covering in there, but still--32% up in one day and they report a loss worse than expected.

I don't know about you, but much of the talk about the mortgage disaster is suspect to me. What I mean by that is there are a lot of financial institutions that have been involved in this sector saying that they are putting charges in the 3rd quarter results and the worst is behind them.

Two things about that----1. Cramer on CNBC has often said that we shouldn't believe those kinds of reports. He feels that usually there are follow-up reports with more negative news. On that point, I agree, as I have made an effort to track that on stocks of interest to me. 2. Merrill Lynch now reports that while they said the negatives were in the 3rd quarter, they now will have to report more bad debt changes in the 4th quarter. It is also a rumor, per CNBC, that the CEO is probably on his way out the door.

Our analysis of this sector has long been that these financial companies don't really know the true value of the loans. If you don't know, and you set your own value, what direction do you think they will put those values? We feel that they put them on the high side, even tho it may be a loss.Then, later, they can say that matters became worse and they have to make more charges. We should be very wary about these statements until the true picture is really out in the open--and that may be a while.

There is one financial columnist that I really respect, and he is Tom Petruno of the Los Angeles Times. He wrote a column in the Saturday issue of the Times and I think it is very worthwhile reading. The reason I like him is that he doesn't take too strong a position on one side, but rather gives facts about both sides of the situation. If you would like to read this, go to --
Inflation Fears---The title of the article is "Inflation fears not registering". I believe he gives us plenty to think about.

On the economic front we continue to see negatives about the home credit situation, as we have said. In addition we saw oil prices go over $90/barrel this week; consequently FedEx is boosting its rates, and airlines raised domestic fares to offset soaring fuel costs. It was reported to be the 6th increase in fares since Labor Day, less than 2 months ago. Gold, the inflation hedge, made a new high since Jan. 1980 (over 27 years ago), followed by more increases in other metals, energy commodities and agriculture futures. "They" continue to tell us that there isn't really much inflation--take it for what you will. Consumer sentiment fell to the lowest level in more than a year. ON THE OTHER HAND, we get glowing earnings from a number of companies, including Microsoft. What do we make of all this? Lots of confusion as far as we are concerned.

Today's Thought---
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Many of the things you can count, don't count. Many of the things you can't count, really count.
..............Albert Einstein, genius.



Mike

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