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

Stat Sheet Week Ending January 26th 2008

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+108.0+0.9%-1.0-8.0%
S&P+6.0+0.5%-137.0-9.3%
NAS-14.0-0.6%-326.0-12.3%

Highlight of this past week: Momentum Plays win 3 out of 3, extending streak.

In this Issue---
SplitMaster Basic System---
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The rally this week helped on a comeback, but we still have plenty of room to go.

 Big Dipper System---
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That rally made things look a bit better, but we need a lot more oomph to the market. The good thing is that the stocks are good stocks. We will probably extend the sell date on some or all of the plays. We'll keep members posted.

 Momentum Plays-The Winning Steak Continues--
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We only had three plays this week - two SPX plays and finally, one very nice earnings play. We are happy to say that they were all winners and our winning streak continues at a 100% rate for this month. Momentum Past Plays Our profit in dollars now stands at over 100% for 2008 when comparing it to the average daily trade for this system. Again, that means if you started your account with a certain amount and made all these trades with us, you would have doubled your money in three weeks. Now we know most people have more money in their account than what they use for this "one trade at a time" system but, if that certain amount was isolated and used just for these Momentum trades you would have doubled that money and --- many of our members have done just that. So we continue to be very pleased with this system.

This week was not without some frustrations however. The play can be fast moving and members have to be ready to act when the signals come. We have gone mostly to SPX option plays and this week was so wild, we could not get into at least four SPX plays that we tried to get in. Each of those times, by the way, would have produced a nice win as we picked the correct direction the market was headed at that time. In each instance, by our calculations, our orders should have been taken. But as our members are quickly learning along with us, the market maker pretty much doesn't have to follow any particular formula and can do what they think is best. The market makers have definitely become much harder to deal with in the last several weeks as we see the volatility rising to near record highs. This is probably because the market makers are some what thrown off by all this volilitility as well.

So we discussed ways to combat this dilemma and have come up with an idea for next week. One problem is the widening spreads on the bid/ask of most these SPX options. We like a spread of about $1 which they usually are. We know just how to work them as members know. But lately, and most likely due to the high volatility, those spreads have widened substantially. We are seeing spreads over $2 in some cases and usually at least $1.50. Well -- we did some testing today and found that we need to become more aggressive in our prices. In other words, where we normally would go into a play at .30 for .40 above the market maker bid, it looks like we may need to go .50 to .70 above with these bigger spreads. That worked pretty well in the few tests we did today. So if the spreads are still as wide on Monday, we will use this more aggressive strategy but probably with less contracts -- at first. Members, keep this in mind. We'll talk a little more about this in the daily signals. But watch. As soon as we get this issue licked, the size of the spreads will change again. That's OK. We can quickly go back to our original strategy when the time comes.

The bottom line and the most important thing is, we are still having a lot of fun with this strategy.

The Economy, The Markets & Commentary---
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Talk about volatility !!! Every day this week saw triple digit changes in the Dow, and many, many changes in direction during the day. This indicates to us that day trading our strategies is the best way to go at this time. The economy has quickly shot up to the top of the list of concerns of the politicians running for President, but we always said it was the economy and the war. There is a sad theory that the war machine is what is driving a good part of the economy. If we drew down, there would be a lot of jobs lost in the economy---but lives saved--or other lives risked, if you believe terrorism would have room to do its dirty job, maybe here in the homeland. Either way, the economy is being helped by defense and related work.

We had a tremendous rally on Wednesday this week, with a 600 point swing in the Dow, ending up with about a 300 point gain for the day. The next day followed with a triple digit gain. Friday told another story, we think. It started out with another triple digit gain, but ended up with a triple digit loss. Fortunately for the week, the gains outweighed the losses, except for the Nas, which had a small weekly loss--all coming on Friday.

So, what happened on Friday? We think that the story to get out of it is that we are not out of the woods and maybe the bottom has not been reached yet. There seem to be too many people that don't believe the stimulus package put together by the President and Congress can do the job of turning this completely around. When tax refunds come along, how are they going to be spent. We think that many of the people will use the funds for fundamental costs and not discretionary spending. For crying out lout, there was an article about our area, showing gasoline wholesale dropped about 50 cents a gallon, but it wasn't being passed on to the consumer. More profits for the big boys. C'mon guys, give us a break. How much profit is enough?

The Fed dropped interest rates down 3/4 of a point. What does that mean? First and foremost, it helps the banks. Their borrowing cost will be substantially lower and they won't be in a hurry to pass on the savings. It will also mean a lower CD rate for people that need interest income. Mortgage rates are already low, so I don't know how much that will be affected. Many people can't get a loan to buy a house, anyway, as they have tightened up so much--maybe too much. Financial stocks may be a very good investment, as much as they have been hammered down. And this is different from the stimulus package. The estimate for the stimulus benefit reaching the receiver is about July. The Fed cut is immediate and the benefit to the financial group is immediate.

Re the bailout of the credit situation and mortgage insurance companies, we see there has been complaints that these people got themselves into this, and they shouldn't receive a bailout. We think that is a case of not looking at the broader picture. Hey, just on Tuesday, there was concern that the financial market was going to see a panic collapse, based on huge drops in overseas markets. We got thru that, with the Fed and stimulus package. We need to save the economy for the good of all concerned--the big picture. Heck, we did it many times before---the bailout of the Savings and Loans in the mid 1980's prevented a total collapse of the financial markets. The 1987 crash in the stocks was prevented from being total by a huge infusion of funds into the markets. Chrysler was bailed out as it was felt that it was best for the country if we kept Chrysler going, with all the employees, etc. The NY Central railroad--same thing, going back. Time and time again we have bailed out the weak sectors---and yes, some unscrupulous people got off Scot free--and a lot richer, but we saved the economy. There has been pretty strong assurances that the mortgage insurance big boys are going to be protected from bankruptcy, saving that industry from a collapse--and I mean a collapse. All for the better good of the country. Let's wait for another day to weed out the fat cats that are draining our money with stock options and golden handshake departures. When things go bad, why should the CEO and others around him get sent off with tens of millions of dollars. There should be no sad feelings for them if they left with just a handshake, and not the gold, for they had plenty of gold given to them when the times were showing good results. Merit pay---it works both ways--you have to earn it or you don't get it. For now, let's get this economy rolling again and do whatever it takes to get us pointed in the right direction.

 Today's Thought---
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When things get boring, a bit of trivia from high school typing class---I'll never forget a great typing teacher......Mike
The sentence: "The quick brown fox jumps over the lazy dog" uses every letter of the alphabet.


Mike

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