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Author: Mike Celeste Editor: Tony Ponzo March Circulation:

Stat Sheet Week Ending March 7th 2009

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-436.0-6.2%-2,149.0-24.5%
S&P-52.0-7.1%-220.0-24.4%
NAS-84.0-6.1%-283.0-17.9%

Highlight of this past week: During the week of 03-02-09, the SplitMaster Day trading Strategies continue to shine while the stock markets keeps tumbling. The Indicator Strategy sits on an 89% win rate and the Momentum Strategy had another 6 plays this week with 5 wins. Its profit margin sits at an amazing 199.11% year to date.

In this Issue---
Options---
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There were some great opportunities this past week when it came to writing some options, as we have been discussing. Going over some---the GE March 5.00 Puts I wrote at 22 cents went to 66 cents during the week and ended the week at 16 cents. GE re-assured the markets that they were not in serious trouble. Even if an investor wrote them at 50 cents and covered at 16 cents on Friday, that 34 cents profit would have been great, when considering 1%/month comes to 5 cents. The gain would have been 6.8% in a matter of a few days, not even a month. Monday we bought back the 20.00 March Calls on CTSH. We wrote them at 75 cents and bought back at 25 cents, thus a gain of 50 cents, about 2.5% for less than a month. Now I'm looking for another entry point on same stock.

Here is another idea for a hedge against further declines in the market. We have been talking about getting "insurance" by buying a long term Put on the Spy. The Dec. 09 strike price of 50 was $1.30 on 1/2/09, then $1.67 on Feb. 9 and on Friday, March 6, it was 3.40. We will keep track of it and report on it periodically, or you can follow it by its symbol FYSXX.

Note: If you trade options, especially when selling an option to open (naked), make sure that you understand all the possible consequenes of the trade you have entered. Options can be risky and you should have a good understanding of the nature options before making an actual trade.

 Momentum Plays Another Winning Week-
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While the stock market keeps crashing, this strategy keeps cranking out the profits. We had another six trades this week with five wins and one loss. And the one loss we had was a small one so the profits keep mounting. You might have noticed that the profit margin percentage dropped a little from 227% to 199%. This is because one of the plays was on a stock in which the cost to trade is much higher than options. But the profit in dollars continue to rise as that one stock play was a pretty big winner. Past Results

The bottom line is, this strategy keeps cranking out the profits and anyone who is trading in this market should be taking a serious look at this strategy. Where else can you generate these kind of profits in this market environment? Learn more

Indicators---
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After 15 straight wins on the Indicator play we saw 2 losses, but then we got back on track with a win and a play that won even tho we held off on it because of the multi-year low in the Dow. We have become very cautious in this market but perhaps we were being too cautious when we decided to make this Friday's play. But, as one of our members said, in this market caution is the better part of valor. Learn more

Feedback---
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We continue to receive emails from members who are venturing out on some of their own trades every now and then. Many of these trades have been very successful ones. This week we received a great account of such a play from member Ronald who simply stated:

bought 10 3/72 puts @ 3.10 yesterday at close sold same @ 3.95 this morning [SPY]

Keep up the great work members and by all means let us know when you make a great trade by either beating one of the posted trades on the site or making a separate play on your own.

The Economy, The Markets & Commentary---
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This past week we saw more of the same--down. We made new multi-year lows in just about everything. Friday was another very volatile day, opening up, settling back a bit, then up over 155 points on the Dow, followed by a drop to over 100 points down (that's a 250 point swing) and then furiously rallying to see the Dow end up 33 points. While this volatility gave us some opportunities for day trading, we have to admit it is stressful. The market still looks down to us. Cramer on CNBC calculated a worst case scenario of about 5320 on the Dow, so we will see how accurate he is. Also on CNBC, Dylan Ratigan really started raving against what he termed fraud on the parts of the people that got us into this mess. I sent him an email to encourage him to keep it up, as we totally agree that no one seems to want to do anything to these people. We were introduced to the many tax increases facing us as a result of all of this and the programs that the administration is introducing to fight the economic collapse.

The President said he was going to have people go thru the budget line by line to wipe out the pork, but that didn't last long, as it was held in when the final count came. He also said lobbyists couldn't be in his administration if certain criteria was there---they were allowed in.

There was another report in the paper on Friday, where the nuclear waste storage facility being built in California was going to be abandoned. Get this--If this report is accurate and it most likely is---the facility is not finished and there has already been $13.5 BILLION spent on it. Now it's going to be abandoned and something else is going to replace it as an answer to the storage of nuclear waste. The administration said it is going in a different direction--but there was no mention of what that direction was going to be, and how much new money the new direction is going to cost. Does that really show we are getting the best use of our tax money? I don't think so!

How long is this recession/depression going to last? They were saying that we would be coming out of it in the last 1/2 of 2009. Now it seems that "they" have pushed it into 2010. Let me give you a couple of comparisons. While we are not at the level of the Great Depression, we can compare it relatively speaking (and who knows how low we do go) to our present times. The stock market crash of the Great Depression was in 1929. However, our research shows that the economy was bad at least 2 years before that, or 1927. We came out of the depression starting in 1942, after WW II started in Dec. 1941. That's 15 years before it even started getting better. The government programs, while not bringing back a robust economy, did provide families with enough income to survive--the WPA, etc. Now let's say that this doesn't end up as bad. If it is 2/3 as bad, that could be a 10 year recovery period needed.

OK, now on to another comparison. In 1989 we saw the peak of a real estate boom in CA (and elsewhere, too). It was 1999, or 10 years later that we saw housing prices recover to the same level they were in 1989. It took about 5 years of going down and then 5 years to get back up, from where we were in 1989. That housing crunch of 10 years was nothing compared to what is happening now, due to the greed of our politicians and Wall St. So, we could say that it will take more than 10 years to get back to the higher price levels we saw about 2 years ago. Folks, with all the costs involved and a look back at history, my guess is that we are in for a long, long test. The hope most of us hold is that the programs the government are implementing will eventually work and help expidite this recovery. At this point though there is still a lot of skepticism about that too. Time will tell.

The answer to solving this problem is often stated that we need people to spend money. My question there is, "Where do they get the money to spend?" Credit card debt is astronomical and that would have to be paid down, way down, before people can qualify to be able to afford to charge again. Hey, I want to see a silver lining in all this, but it is difficult to do when I look at the reality of the situation. Cars are being advertised at 0 interest rates (to qualified buyers, of course--a difficult thing when existing consumer debt is calculated. So, what's happened to car sales with zero interest rates. They are at a 28 year low--and that includes terrible results for foreign car makers, too.

All in all, we say that you should buckle your seat belts, it's going to be a rough ride. In the meantime, if you want to see how we are combating these bad times, take a look at our trading results, showing how we make profits no matter if the market goes up or down. (And our conservative income producing strategy of writing options seems to far exceed what dividends or banks are paying.)

 Today's Thought---
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The difference between death and taxes is death doesn't get worse every time Congress meets..............Will Rogers...............(And Congress is getting ready to do it again.)


Mike

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