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Author: Mike Celeste Editor: Tony Ponzo November Circulation: 7224

Stat Sheet Week Ending November 17th 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+134.0+1.0%+714.0+5.7%
S&P+5.0+0.3%+41.0+2.9%
NAS+9.0+0.3%+222.0+9.2%

Highlight of this past week: CAM closes out in 1 day with a $6.80 point profit.

Notice--There will not be a newsletter next week as we will be spending Thanksgiving with our family. We hope you are able to do the same and that you have a very happy and memorable holiday.

In this Issue--- SplitMaster Basic System---
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The 3 major indexes have had a pretty rough November, while our careful selection of splitters that have closed out have shown a nice monthly profit, up to this point. As our Weekly Highlight shows, we closed out CAM in 1 day this week, with a nice profit of $6.80 and have seen it drop below our sell price. ARD was our other gain that has been closed out in November. "D" is our next close out and it is currently sitting there at a small profit. We continue to believe that splitters do better than the indexes, even in times when the market is in turmoil. We lose, too, but we're again aiming at the total picture of being profitable when looking from the beginning of the year to the end of the year.

 Big Dipper System---
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We are still waiting for a Big Dipper to hit our lower target price. Remember, the Big Dipper is like cost averaging a trade. In other words, if you buy a stock at say $52 on the Basic System, then it drops to say $45 and you buy it again for the Big Dipper system, you now have an average cost of $48.50 making it easier to get a profit when it moves back up. Some members only play the Big Dipper so they would only buy when and if the stock drops in price to the Big Dipper lower target price. A couple of the active plays went fairly near the Big Dipper buy price, but nothing hit, thus far. In a way it shows the power of the splitters, but we would love to get one that touches the buy price and jumps right back up. Maybe we should just count our blessings--especially since Thanksgiving is next week.

Options---
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This time it came down to decisions, decisions, decisions. Two of our written puts went below the strike price, so we had to decide whether to take the stock when it was put to us on Friday, expiration day, or to buy back the puts and take our lumps. For record purposes, we bought back and the lumps are definitely there. For real time, I made the decision to accept the stock and hold it for a while. First of all, it seemed a good price, chartwise, and secondly, we stick by our theory that splitters are from companies that are doing well. Sometimes there is a downgrade that is temporary and sometimes a sector gets hit, etc. We will see which decision turns out to be best.

 Momentum Plays -- Back on track---
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With the market being so volatile - up one minute then down the next - over the last couple of weeks we have been having a hard time with the Momentum plays including the SPX options. It's not so much that we were losing as we could not seem to get into a play. So we took a couple of days just to make trades on our own to see if we could get our rhythm going again. By Thursday, we had made a number of very successful trades so we decided to start posting our plays again to the members on Friday. We hare pleased to say that Friday went very well with two winning trades - one earnings play and one SPX option play. Momentum Past Plays

We are expecting another volatile week coming up but we look forward to making as many plays as we can. Remember, this coming week is a short one due to the long Thanksgiving weekend.

Three Indicators---
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This past week saw our 3 Indicators all showing oversold conditions in the market--on the same day. We had Nas down 4 days in a row, the "W" indicator was at 0, and that is the lowest you can go when it shows oversold, and our Spread Indicator was at -135 where a number higher than -100 is oversold. That is such a strong suggestion that the market is due for a good up move. The next day the Dow was up 320 points, with Nas up 90 points (equal to 450 Dow points). It seems to us that when all 3 Indicators are in either an oversold or overbought positions on the same day, we should jump into options that are also showing favorable price positions. OK, we didn't do it ourselves, as we have been too conditioned to going for short term (minutes) profits of 30-50 cents, as in the SPX play. However, you might think about taking a position for almost a full day. See more details in the SPX section below.

 New SPX System---
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Carrying on from the 3 Indicators comments just above, we just wanted to point out that we saw an SPX strike price that we tried to get into at a point around 90 cents to $1.10. Because all 3 indicators were showing oversold on the same day, we could have kept that option and watched it go to over $5 by the end of the day. WOWEE !!! Now that's what we would like to be in. Slap our hands for not widening our scope of the total picture here. Because it has been tough lately to get a buy executed we didn't take advantage of this unique line-up of the indicators. However, even tho it has been harder to get into plays, they are still profitable when we do make a play. One day this week we tested the system with a wider scope outlook and made 2 profitable plays (actual plays), one in 16 minutes and the other in less than 2 minutes--in and out. Because the SPX system is relatively new, we are always analyzing it for either additional strategies within the system or for trying different timing. Each expiration month seems to bring different opportunities and while that is good, it is also difficult to see consistency in criteria. The net result, tho, continues to be phenomenal in our opinion. We can accept an occasional loss when we are seeing wins well over 90% of the time.

Feedback---
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We were extremely happy to hear from a fellow team member, Fidel, who was able to take advantage of commentary and market action in one of our "favorite" sectors, housing. Here is what he reported---

"Mike,
I bought puts on all the home builders in July and sold them in early august with a huge profit....(Glad to see that he was able to take advantage of a pretty obvious situation, but go ahead, ask me if I got some puts after writing so much about this sector--of course I didn't, fool that I am).........
I love your commentary on the market. I agree 100%. But, you also need to ADD that everybody also bought an extra house to sell to somebody else,,,,that somebody else .... is not here anymore!" (Excellent point, Fidel, and something I overlooked--mike)....................

Then, there is this from Bernie--simple and to the point--

"Great job guys. another great week. thank you very much!
Bernie"


 The Economy, The Markets & Commentary---
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While the stock market continues to take a hit in November, it is no surprise to see that volatility, as measured by the Volatility Index (VIX, or $VIX on some charts) made a huge move up, hitting levels not seen since the yearly high was set back in that August crash. The only two times this year that it has been over 30. That shows that there is great uncertainty in the markets and no general consensus. We see the Dow down 224 points on 11/9 and then up 320 points on 11/13. Both times our indicators had shown that the markets appeared to be overbought and then oversold, but it definitely is not for the faint hearted. The economy is being battered back and forth; one day with good news and the next day the credit situation comes back into the picture to haunt us. Also, we should point out that during these days of triple digit moves in the Dow, we see numerous times of rallying and declines, opposite of what the market ends up at when it closes. That pendulum is swinging mighty fast on those days. It seems to get to the point where there is so much nervousness that there is a great deal of overreaction. We see interpretation and impressions and rumors holding sway, when actual facts should be carrying the day--and the results are these huge swings in the market. Oil prices near $100/barrel have yet to play out thru the economy. Here in California we are seeing daily price increases, with no end it sight at this juncture.

There was a very interesting speech this week from the Fed Chairman, Mr. Bernanke--as reported in The Kansas City Star on 11/14. This is the section that grabbed our attention---
"As part of the Fed's effort to provide more economic information, policymakers will make forecasts of both overall inflation - which affects and is closely watched by consumers - as well as "core" inflation, which excludes food and energy prices, Bernanke said. Adding a projection on overall inflation, which covers a wide variety of goods and services, is especially important to consumers as they make financial decisions, prepare household budgets and plan for the future. Ultimately, households and businesses care about the overall, or headline, rate of inflation," Bernanke said.

As long time readers of this newsletter know, we have been harping for years about the reporting of inflation. There seems to be too much attention paid to the core readings, and neglecting the effects of energy, food and housing on consumers. They seem to be telling us that we don't really care about driving, eating and where we live, so they excluded them. We like Bernanke and what he has done in the short time he has held this position.

 Today's Thought---
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If there is so much concern about the negative global effect on polar bears, how come they allow a hunting season on them---and for some groups why is there an open season all year, with no limit on how many they can kill? As we say, just a thought.

Mike

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