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Author: Mike Celeste Editor: Tony Ponzo November Circulation: 6760

Stat Sheet Week Ending November 8th 2008

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-381.0-4.1%-4,321.0-32.6%
S&P-38.0-3.9%-537.0-36.6%
NAS-74.0-4.3%-1,005.0-37.9%
IMPORTANT NOTICE Last week we gave a temporary email address because we were having problems with our site host. This week you can start sending email to Staff@splitmaster.com which is the old address.

HOWEVER our site host was sold to another company lately and they have been doing a horrible job of transitioning to the new company. The worst part has been their lack of service and notification to us. They have made things extremely difficult for us and seem to not be very concerned about our complaints. We have done a good job, we believe, of keeping this mess transparent to our members but we have decided to move our service to a new and much better host. This will take a number of steps to accomplish but we will be able to do it with little disruption to our services. We are going to start this weekend and we thought it best if we postponed any plays on the Momentum strategy through Tuesday. All other services will remain in tact. There are no plays for Monday anyway so we will not be missing much.

Highlight of this past week: Another winning week in the Momentum Strategy which is now up 88% for 2008

In this Issue---
SplitMaster Basic System---
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Just when we got close to closing out some plays, wham, bam, the worst 2 day total drop ever in the Dow, hit on Wednesday and Thursday. We feel that the splitters that were in that position continue to be good stocks and were recognized as such when they rallied in the days before Wednesday. Now we wait again.

 Big Dipper System---
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We seem to go a step ahead and then a step back, sometimes one is faster than the other, but the results seem to go in that direction. Therefore, as in the Basic splitters, we will
continue to wait to sell because we feel these are good stocks.

 Options---
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We would like to point out that altho we haven't had options on splitters for quite a while, we have had many opportunities to make option plays. Besides our Indicator and Momentum plays, we have been making option plays right along in our personal accounts. Tony has been doing exceptionally well on a previously announced splitter, DRYS--and we have mentioned this before. It is mentioned again because Tony has continued to enter and exit option plays on this stock. The play may consist of buying Puts or Calls by watching the movement and the peaks and valleys of the stock. When the stock has been down several days and it looks to be going up on an overall up market day, Calls are bought. When it has gone up a few days and looks to be turning down on a down market day Puts are bought. Obviously, the Puts have been the big winners and the plays are very short - one to four days depending on the market. It is what we have mentioned before---get to know one stock real well, and you can trade it in and out. He had two great plays on this stock just this week. Then, I have been concentrating on the SPY options, namely the Put side. Because the economy is so bad, and that is confirmed by most the of the economic news that comes out, my SPY options concentrate on the Puts. What I do is to chart the support and resistance points and when the market rallies I look for that resistance point and try to get a Put order in at that level. You readers can do the same thing. We're sure most of you follow one stock a lot closer than others. Just on Friday I made 2 profitable SPY Put trades, both on the same Put--getting in at a resistance point and exiting at a support level. In fact, the entry points changed and I was able to get the same Put at a lower price and then waited for a good exit point--and it worked again. Doing this with the Indicator plays and the support/resistance levels has continued to show good returns all through October and now into November. Volatility is what has made splitter options undesirable, as it means the time value is very high, and thus it is very difficult to overcome that if calls are purchased. On the other hand, the volatility has made it difficult to write Puts on splitters, as the prices have dropped so far that history is thrown out the window when trying to judge entry levels.

Another interesting play we did this week was to set up a straddle on GM. GM announced Friday so we bought the Nov. 5 Call and the 5 Put towards the close on Thursday. The straddle is entered to take advantage of a move up or down in the stock whichever way it may go. Since the stock is so cheap each option was less than $1. All we needed was a .75 move or more in the stock to have one option outweigh the other to make a profit. It was anticipated that GM would report really bad numbers and move to the down side and that is exactly what they did. It dropped about .80 and the Put went up enough to give us about .30 profit after we sold both sides. So, it was not a big score but it was almost a sure thing for a small profit and as we always say, we'll take it. By the way, we got the idea for GM from the show Fast Money that comes on after the market closes on CNBC.

So in these volatile times, there are creative things you can do to take advantage. It just takes some creative thinking and a watchful eye on the market and the futures to see which direction things are going - which is mostly down.

 Momentum Plays---
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We had another winning week in this strategy although it was only one play that we got in. But the play made a nice 15% profit in less thatn 10 minutes so it was very nice indeed. That brings the yearly profit total for this strategy to 88%. Check it out Momentum Strategy We tried for three other plays but they were not looking good in the morning so we passed on the plays. However, each of them went on to be good plays later in the day. We did not go in, as the strategy calls for a morning trade, but if this pattern keeps up we may make some modifications. For now, we'll take the less number of plays if they keep giving us these kinds of profits.

Three Indicators---
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This continues to be a strong strategy, along with the Momentum plays. This past week we had 2 of our Indicators reach very high levels on Wed., 11/4. That meant we might expect downward moves in the indexes. So, what happened--the aforementioned worst 2 day drop in the Dow. Most stocks tumbled, also. If you were a believer in these Indicators, as we are, you could have made considerable gains in the market. Team members, be watchful for the W and the Nas Indicators to be pointing to down moves--because that is the trend right now. We seem to have bounces from down moves, but then we fall back again. These could be opportunities, and when things move the other way, we will be watchful for the W and Nas hinting to us that we should buy on down moves when the momentum is up. For those of you that are not subscribers, you might consider this very, very reasonable cost for our Indicator strategy.

The Economy, The Markets & Commentary---
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OK, folks, let's see what happens. We have a new President-Elect Obama, who promises that he will get the job done--when, he's not sure, but it will get done. Quite historic and we were here to see it. (One thing that puzzles me, though. If you had a piece of paper that was 2 colors, 1/2 black and 1/2 white --would we describe the paper as only black?) At any rate, with any amount of black blood, it is historic and whether you voted for Obama or not, I think most of us will admit this presidency is fascinating. In the meantime, the economy continues to head south. The Nas was up 6 straight days, and in the face of negative news. We couldn't understand that, and it appears that it was in anticipation of the election, because after the election, we woke up to reality, with that huge drop. The plan is to have another stimulus plan of some sort. This is going to be difficult, even if some plan is put to work. Why is it going to be difficult? If any other states are like California, here is what we are facing. Out here we had all kinds of bond issues proposed. Our economy has been hit especially hard because of foreclosures being greater here than in many other states. There are several states facing this problem, but we are one of them. Prices are down approaching 40% here--and that means that the government real estate taxes will be a lot lower. Our taxes are based on house value, so if values go down, taxes go down. Politicians rarely bank extra money when times are good, and when times go bad, the state is left in the hole. Then, in the election, with this economy, besides passing many bond issues, which need to be paid back by the taxpayers, California voters, to my total amazement, passed an increase in our sales tax--and it needed a 2/3 approval at that. It got it, almost on the button, but that completely throws my brain into the garbage can. To add to this, our Governor saw fit to wait until after the election to come out with a plan to increase the sales tax ANOTHER 1 1/2%, on top of other increases in taxes--and cuts in programs, including schools. Isn't that a typical politician? And they wonder why they are so disliked. Anyway, let's say there is a stimulus package put forth and there is another effort made by President Elect Obama to fulfill his pledge to help schools improve. With the states facing bad economic conditions and proposing tax increases, what benefit can be gained by a stimulus package? At best it would probably be a wash--meaning that conditions would not improve. We said it before--and others have, too--whoever is in the Oval Office as President is going to have an extremely difficult job.

Have you been hearing about the uproar over the bailout program? We pointed it out earlier, but now it is getting major attention on CNBC. It seems that the banks that received the money are still not lending it out--but they are using it. Bonuses are one use, and other beneficial uses to the bank are taking a good deal of the money--but little benefit to us, the taxpayers. We kept pointing out that when we were not getting specific details we could not judge properly as to whether to support a bailout or not. Now that the details are emerging we are seeing things that do not make sense to us, the people that are furnishing this money. Ah, politics as usual. Boy, we sure need that hope that everyone is talking about since the election. Now General Motors is lining up to make points that if there was a bailout for the banks, there should be a bailout for them because they affect so many jobs not only nationally, but internationally. Where does this all end?

Talk about ending, one final comment about the markets--PE Obama spoke and the rally collapsed quickly--only to make a major run back up the last 1/2 hour of trading. Volatility--the name of the game these days. Stay tuned.

 Today's Thought---
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About a college professor that just passed away--"A wonderful teacher! I also recall he told us we would be graded as much for good grammar and punctuation as knowledge of the subject and he used the following example to demonstrate that. He pointed out punctuation is important in the following sentence: "I saw her behind all of it." I've used that example for others ever since." ...............Floyd K. (Rogersville, TN) Teachers mean a lot and are not forgotten.


Mike

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