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Author: Mike Celeste Editor: Tony Ponzo December Circulation:

Stat Sheet Week Ending December 1st 2007

ChangesWeeklyNovemberYear to Date
IndexesPointsPercentPointsPercentPointsPercent
Dow+391.0+3.0%-558.0-4.0%+909.0+7.3%
S&P+40.0+2.8%-68.0-4.4%+63.0+246.0%
NAS+64.0+2.5%-198.0-6.9%+246.0+10.2%

Highlight of this past week: DE (Click on Last Mo Detail) plows its way to an early 15 point win, so we harvest it early.
In this Issue--- SplitMaster Basic System---
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I think we can sum up the recent activity in the Basic System by saying it is satisfying---not spectacular, but still satisfying. We took an early out on DE after it went up 15.33 points from our buy date, being in for just under 2 weeks. In October we had another big winner in CRS, closing it out in 1 week with a profit of 14.79. At present, with the splitters still active, we show a net profit as of the close of Friday's market.

Big Dipper System---
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Hey, we finally saw a splitter dip down to our target buy price. LKXQ was the stock and we closed it out in 1 week with a nice 10% gain. In addition, we are keeping our eye on it, hoping to buy it back if it drops again. The Big Dipper leaves us with mixed emotions. On one hand we want the splitters to go up right away, but on the other, we feel that if a stock does take a dip that we can profit from that, too. Under the most ideal conditions the stock will drop to our target buy price and then recover enough to go higher than the original buy price in the Basic program, resulting in a profit in both, on the same stock. With this one we never did have it in the Basic, as it didn't quite qualify--and it worked out well.

 Options---
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Our options on the splitters have been very quiet lately, with only 1 on the active list. Unfortunately, it is currently showing a loss, but our concentration on the options in both the Momentum play and the SPX play have continued to show profits and a an 85% win rate. We are working hard on our data analysis to get more options going in the splitters.

A quick note about writing puts. If you remember, we told our team members that when we came to Oct. option expiration day we had DKS showing a price below the put strike price. We mentioned that we had a choice of buying it back at a loss, or having it put to us and we take possession of the stock. For my personal account, I decided to take the stock and the next week the stock rebounded and it gave me a nice profit, plus the dollars received when the put was written. This time it worked out. But, it is not to say that this is a consistent strategy, but on a stock-by-stock analysis.

 Momentum Plays---
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We wound up having a pretty good November in the Momentum Strategy even though it seems like we had a hard time. First, except for this week, the market was so bad that it put everyone on edge. Then, the SPX options started trading with thinner bid/ ask spreads as we have been reporting, making it hard to get a decent profit. More on that below. There were some big swings though and if one could go into an SPX option and be on the right side of that swing, of course there were great profits to be made. Predicting the direction is hard in this market, obviously. Much of the day it trades in a short range - up a little then down a little.

All in All though, November turned out to be a pretty good month. There were less plays than usually but we still had 9 trades and seven were profitable. So for the last two months, we are still looking at an 85% win rate and 190% profit. As explained before, we get the profit number but adding up all the costs for the two months then dividing it by the number of plays to get the average investment. We do this because, we are only in the investment for 30 minutes or so (or less) and those same funds can be used over and over. Then we add up the total profits and divide the cost into the profits to get 190%. Momentum Past Plays

So the Momentum play continues to be a real winner!!

Three Indicators---
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We wonder if it is getting tiresome to see the Indicators continue to time-after-time be accurate short-term predictors for the market. We certainly don't want to take them for granted, as they have been a wonderful tool for us. Lately the markets were pretty severely oversold, and the Indicators led us to some very profitable transactions--this week's results being a good example.

 New SPX System---
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Since the October expiration of options, the market maker in the SPX options has us gnashing our teeth and not liking that person very much. Of course, Bernie reports he has still been getting in and out of these plays with profit. We may be a bit more conservative, but the problem has been with us for 2 weeks. The bid/ask spread on the SPX options has been too small for us. The reason this affects us is that we enter orders higher than the bid price and enter sell orders at less than the ask price. With a tight spread there isn't much room to work and still be able to show a decent profit. We did a couple of test plays and while they were profitable, it was only for 10 cent gains, not enough to hang your hat on.

On a positive note, our 3 Indicators led us to a handsome profit on Friday. We told team members that I was making a personal play because 2 of the 3 indicators was showing overbought after the open on Friday. For this type of play, our analysis was to go for a higher profit than normal and keep it most of the day, if necessary. Because our belief in the Indicators is so strong, I didn't have any fear about going into a put on the SPX. After the open on Friday, the Nas was into its 4th straight up day and the W Indicator was at 99 out of a possible 100, both indicators showing the markets to be overbought. So, an in and out play for the same day showed a 38% profit--not bad for a 1 day play.

It was especially gratifying to hear from some other team members who also followed and bought that put--and made a nice profit. Bernie, naturally, did us one better. He went into the after market and bought the put back again and at the close he was already showing a gain, again.

 Feedback---
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Here are some comments from others on the Team--

" Hey Tony, I did the spx play that you said mike did, I got in at 2.70, and
just sold for 3.70, I had the same thought of the market, so I went ahead
and did the play
Thanks
Derek" (Derek got the high of the day--I got 10 cents less)

From Jeff-- "Unbelievable day for DE. I thought I would
outsmart you guys(nice try) by placing a trailing stop. I kept it tight at
1/2 pt. Guess what, I was stopped out at 162.17. That's ok, I am still a
happy camper. Keep up the good work"

Thanks for the comments, guys--we appreciate them--Staff

SPECIAL NOTE---
We thought you might be interested in the activities of some of our newsletter followers--outside of the markets. Here are two "celebrity"
people we like a lot.

Dale Salwak has written many books and is a great magician, besides. Here is the description of his new book currently available on Amazon.

"Part epistolary memoir, part handbook, Teaching Life reflects on more than three decades of teaching literature and touching the lives of students. Both a reflection on a life in literature and a primer on teaching as a vocation, this soul-stirring work also provides behind-the-scenes stories of many of the authors who have influenced Dale Salwak’s career.

Written in response to the sudden death of one of his students, who died tragically in an automobile accident on her way to Salwak’s office to talk over her career plans, Teaching Life is an effort to impart lessons to the next generation of teachers: “It was the suddenness of her death, I think, along with the utter loss of so much potential, which struck me forcibly, and I found myself wondering if anything I had said in class had made a difference in her too-short life or, for that matter, in the lives of any of my students.”

By turns analytical, reflective, and exhortatory, Teaching Life unselfconsciously captures the fascination, enlightenment, and sheer joy that literary studies can offer professors and students. It also implicitly speaks to society's prevailing—and disturbing—prejudice against the profession." (End of description)

Going to the area of entertainment, we are happy to say that one of our long time family friends is now a "star" on TV. She grew up across the street from us and I can personally attest to the fact that she is even better looking in person than on TV. She is the "new" gal on "Orange County Housewives", seen on the cable channel, BRAVO. Her name is TAMRA. If you have cable, take a look---she has done very well for herself, but like all the other wives, shows there are problems in every household.

The Economy, The Markets & Commentary---
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What the heck is going on here? (My favorite expression, it seems)---We had a good closing week to Nov., but overall it still showed a big loss for the month. You can see that in the Stats shown at the top. Talk about volatility--WOW ! The first 19 trading days of Nov. there were 13 days that averaged over a 200 point change in the Dow from one day to the next. Our 3 Indicators showed which way to expect the market to go, and we see that volatility can be great opportunities for some of our strategies. We think that the reason for all this volatility is the uncertainty on the part of the "experts" that control most of the volume in the trading (institutions). It appears to us that about every other day they reverse opinions on how much affect certain factors will have on stocks--mostly in the credit sector. However, we think they are breaking their analysis down into 2 different areas. One is factual---there are a number of stocks that are negatively affected by the market and the economy seems to be struggling toward the end of the year. Gasoline price are taking their toll on other sectors and it doesn't look like they will go down any time soon. Everything sold has to be transported from one place to another, and that takes energy. Prices have been going up because of this and it seems it has met the point where consumers are pulling back on spending, etc. Keep in mind, tho, that what is bad for one group is good for another. People are still spending, even tho they have less for other things besides not only gas, but electricity and heating. Saving doesn't seem to be a high priority to most of us. OK, who is benefiting? For one, and a big one, Wal Mart showed very nice earnings in their latest quarter. People want price value, so Wal Mart is well positioned.

The other area that the "experts" work in is Anticipation. Rallies in the markets seem to center around anticipation, expectation and plain old hope--that the economy will solve the major problems; especially the credit crunch that is affecting so many more than they thought. When this thought prevails, we see the markets rally. The next day fear might return and the actual present situation in credit comes back to haunt them, and we see these big market declines.

Our belief that stock splits come from companies that are doing well seems to be holding up quite well. While the markets did not do well for the month of November, stock splits did show nice profit. With 11 months behind us for this year, it appears that unless there is a major, major catastrophe to hit the market in December, our split results for the year will continue our record of splits showing a profit every single year since 1975, when we began our studies. I believe you can go back even further if you check data, as I always remember stocks splits doing well for me in the 50+ years I have been in the markets. Naturally, we don't win them all, and sometimes we take a good hit besides, but from the beginning of the year, the splits show profits. That solidifies our belief that some companies do well even in bad economies, and those are the companies that split their stock. You might have noticed, on the other hand that the S+P made a closing low last Monday that was below the price at the end of 2006.

The stock market is supposed to read the conditions about 6 months ahead of time. Right now we are still positive for 2007, but sliding. What does that mean for 2008, or 6 months from now? We admit we can't predict that far ahead, but we do have an Indicator that usually runs at least a month before going in the opposite direction, positive to negative or the reverse. Right now we are showing a slightly positive indicator, after having been in the oversold, negative position.for most of November. In other words the shorter 1 month term could go either way, but we would not be unhappy to see a nice Christmas rally.

Today's Thought---
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When you are making a success of something, it's not work. It's a way of life. You enjoy yourself because you are making your contribution to the world...............Andy Granatelli, Racing icon.

Mike

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