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Author: Mike Celeste Editor: Tony Ponzo January Circulation: 6817

Stat Sheet Week Ending January 19th 2008

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-507.0-4.0%-1.0-8.8%
S&P-76.0-5.4%-143.0-9.7%
NAS-100.0-4.1%-312.0-11.8%

In this Issue--- SplitMaster Basic System---
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With the conditions in the market being so negative, we have been rather quiet about making any new plays in the Basic System. We would rather wait until conditions calm down.

 Big Dipper System---
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The Big Dipper has taken a hard hit, there is no getting around that. The positive is that there are only two active picks and these are good stocks and when they do move up, they move up in pretty big chunks. We are not adding any new picks in this system, either, until conditions settle down.

Options---
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Fortunately we have been avoiding options in the splitters and we have saved a whole lot of money by taking this position. As we often say, not losing is good.

Momentum Plays-SPX Options Off To A Great Year--
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We started back in this week on the Momentum Strategy by entering into 5 SPX option plays and it was a terrific week. This year, the market has been hard to gage as far as these plays are concerned but this week gave us 5 plays and all were NICE WINNERS. Further 4 out of the 5 trades were less than 15 minutes long. Yesterday's play took 50 minutes but it was a winner too and that is what counts. The option we entered into yesterday had a market maker that was extremely difficult to work with. We tried to get into a second play and we should have had our order taken, but the market maker was just playing hard ball. Had he taken our order, there is no doubt that we would have gone on to have at least a $1 profit. But even though we did not get that play off, our numbers for the week are fantastic. This week we sit at a 100% win rate and a 57% profit! That's all in one week!! That means, for example, if you started out with a $2,500 account and followed our plays, you would have earned close to $1,300 and now have $3,800 in your account. Momentum Past Plays

Let's talk just a little bit about the Momentum plays based on earnings announcements. Those plays have not really started in yet but looking ahead, they should start in this week. However, we are having so much success with the SPX plays that frankly we are begging to wonder if we should even bother with the earnings plays at this point. We could play an occasional earnings play if we have had a history of winning big with a particular stock and winning each quarter with it. And we will continue testing the overnight play as that could bring bigger dollar profits but other than that, we would put our efforts into the SPX. Members, if you have any thoughts on this, let us know.

Our goal with the SPX is getting more plays each day and eventually increasing the number of contracts. We would like to get two to three plays a day instead of averaging 5 plays a week. But the market has been so wild, it takes time to get a play off thus the number of plays have been reduced. But the market will eventually improve in that respect and we are continually getting better at this play so we are expecting this strategy to be a real champion this year.

Three Indicators---
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For the first time, we have seen the 3 Indicators go to the sidelines, and not be accurate. Having said that and getting the negative out of the way, let us say that our Indicators for the SPX plays have been solidly correct. For the time being, tho, we are not going to count on the 3 Indicators for stock picks. When the markets show less volatility, we will be back using them.

 The Economy, The Markets & Commentary---
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The "experts" may not have figured it out yet, but we are in some pretty negative times when it comes to the markets and the economy. We at SplitMaster have been warning about certain sectors and how they can affect the whole economy, and it sure seems to us that these sectors, mainly the housing, credit, energy and commodity markets, are driving the whole economy in a downward path. We have tried to point out why we feel the way we do, and it seems that our reasoning is basically very correct. You can't issue 100% mortgages with no proof of income without facing serious negative consequences, as we repeatedly state. You can't expect the size of the mortgage market to not affect the other parts of the credit markets. When someone is losing their house to foreclosure, they probably are in credit card trouble, too, and not spending nearly as much as previously, even for food. Energy in the form of electricity, gas heat and gasoline have just massacred the extra discretionary money people have, even tho it be little, indeed. Savings are almost a thing of the past for the average family. Those "experts" infuriated us with their talk about excluding these sectors from monthly calculations--as tho we don't have to have a house, heat and light it, feed our family and drive to work. No, they excluded them--but at the end of the year they had to put the total inflation together and lo and behold !!!---it was the greatest inflation in many, many years. We, the average middle class person knew it a long time ago---but these people couldn't even figure out that it is bad to loan money to someone without asking for proof of income. "They" felt it was totally unexpected, even the ex-Fed chairman. In the old days, I know that any time I went into a bank and tried to borrow money, I had to go thru all kinds of examinations to make sure I could repay the loan. No, it was a repeat of the same story--the rich got richer and the middle class got smaller.

The markets can't seem to find a bottom yet, with the last 16 trading days showing that 13 were down and only 3 were up. In only 13 trading days for this new year, 2008, we see huge losses in stocks, with the Nas being already down 11.8%, with the other major indexes not far behind. If they figure a correction is a drop of 10%, so be it a correction. Many, many other stocks are down 30-40%, so the loss of value toll is way higher than the indexes would show, as bad as they are. We feel that the sun will shine again and the pendulum will swing the other way as it always does, and along with the rubber band stretching again instead of snapping at us. In the meantime, we will dwell on those areas that are productive.

We keep saying a lot of the same things, and some people do listen to us. We talked about some team members that shorted the builders last year--and should have kept the shorts going, actually. Well, now another bit of feedback has come in. Remember our student that I mentored, Jonathan? He is in his 2nd year at U. of Southern California, and has continued to dazzle his teachers and professors. He kept reading what we have been saying about credit and mortgages and he started analyzing the companies in the business. We mentioned that he felt MBI could be going bankrupt (I think it was in a Dec. newsletter). This past week, he took some action. Before that, he tried to short MBI and ABK, but the broker didn't have enough shares to loan for the short. So, Jonathan went out and bought Leap PUT options for Jan. 2009, a year from now.
MBI was around 19 when he started to take action. Friday the stock closed at 8.40 and his puts have mushroomed up in price. Good going, Jonathan---a great piece of analysis. You put those other "experts" to shame.

This is the sort of thing that we try to do--educate our team so that they can make good profits in the markets. We have worked hard to point out where money can be made in both an up and also in a down market. For instance, this week, our 5 SPX plays were all in Puts, as the markets were so decidedly negative. We will also wait for the companies that are going to benefit from a troubled economy--and hopefully we will be able to take advantage of their position and join with them as they show increased profits. This way we hope that whatever is happening in the markets, we have some strategy that is hot at the time.

If you would like to give us a try, just go to our website, SplitMaster.com Further, if you are considering joining the SplitMaster team this year, send an email if you have questions. We would be happy to discuss our strategies with you and what would best fit your trading style and investment level. And to those newsletter members who have never been a strategy member, be aware that we do offer a trial period with a money back guarantee and all of our monthly subsriptions come with two additional free weeks on the initial month. Also, we welcome comments and suggestions--from everyone, not just team members. We all benefit from exchanging ideas.

Today's Thought---
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You will be amazed at how much free time you actually have when you never have to think about or worry about money.....Bob Proctor, Motivator (And that usually happens after you are buried, with no worries of any kind......Mike)


Mike

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