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Author: Mike Celeste Editor: Tony Ponzo May Circulation:

Stat Sheet Week Ending May 16th 2009

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-295.0-3.4%-509.0-5.0%
S&P-45.0-4.8%-20.0-2.2%
NAS-56.0-3.2%+103.0+6.5%

Highlight of this past week: For the trading week ending 05/15/09 the Indicator Strategy has another win and the Momentum Strategy continues to move forward and with a 340% profit year to date!

In this Issue---
Options---
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Friday was expiration day and we finished another profitable month in writing options. Our previous splitter, ILMN, did not have a stock price higher than the strike price on the Call we wrote, so that was
a total profit. You can look at this as collecting rent on your property each month. As long as you still own the stock (your property) you can keeping writing Calls against it (Rent) Or, another way to look at it, the cost of the stock was reduced by the amount of all the written Calls you enter. Our IBM and CTSH did not get called out so we still own them and we are now looking to write the June options. CLX looked good on Thursday, but Friday's gain took the stock We are looking to apply our W technique to some stocks in order to determine a time to enter a written position, either with a Call or a Put.

Our Momentum strategies are working very well, so take a look at those. Earnings, W plays and Spy option trading continue to be good plays. Actually, we missed a few that ended up doing extremely well so those don't get posted to the site, but some of our team members did get in and are very happy.

As always, we advise that no one enters into these kind of option plays without fully understanding the risks involved and talking to your financial advisor.

Momentum Plays---
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We had another excellent week with four trades and three wins. This week a couple of the wins were substantial so the profit margin for this strategy now sits at an impressive 340%. Past Results Some of the trades did come with a little difficulty though. We found that when prices in the stock or option are changing pretty fast, some members are able to get the desired price and some members miss it. In one case, a member did some research with his broker and found that he missed his price by 1 hundredth of a second. We also found that things differ from broker to broker in these situations. Some members were executed with no problems while others, as just mentioned, just missed the play. It is hard to say what this is exactly due to but so far, we have not had a lot of these types of situation. Some options have bigger bid/ask spreads making the trading a little more wild. We will watch this closer and try to adjust accordingly the next time we see an option that is trading a little more erratically.

Members can adjust too for these situations. We have talked about this many times before but we will bring it up again. When we post that we at SplitMaster are entering a play we always say at "about" xx price. Members should watch how the option is trading and watch that bid/ask. If the "about" price we post looks doable, then try to get that price but --- if it has moved away from that "about" price adjust accordingly. Don't miss a play over .05 or .10 difference on a W play or an earnings play. You may want to pass however, if it gets over that .10 difference. On a SPY play, you would want to stay within .05 or less difference as the profit targets are smaller. Learn More

For you newsletter readers who are not yet subscribed members, you might be interested to know that we now have a website that independently tracks stock services such as SplitMaster. They have been tracking us for several weeks now and if you are interested in checking this service and see what they are saying about SplitMaster click on this link Result Tracking

Indicators---
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There was only 1 Indicator play this past week, but it was a huge winner for our aggressive players. We have a standing rule that our general goal is a 10% profit gain, with aggressive players determining their own comfort level. This time they were big winners. We feel that a 10% gain in 1 day is doing very well, but we have seen some of the options more than double during the day involved--that would apply to Spy options, also. Learn More

Feedback---
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Out of the email responses and comments we had this week, we would like to post two that we really enjoyed reading and very much appreciated.

Hello guys, Today after weeks of non activitiy I finally traded and was in profit within moments - very happy with $175. I'm trading small lots to start off, but it's good to begin and with a winner to boot. Thanks, Rosemayre

Tony, I just wanted to drop you a quick note and say that the commentary you guys offered on DPS today was absolutely superb. Even though it was a loser, the way you handled it was great. I know you won't always have the time to offer that "extra" commentary (say if we have two plays going at once), but it really is helpful. I did play DPS more aggressively - in at .65, doubled down at .15, and squeaked out at the end for .25. It didn't exactly work out, but I did at least manage to salvage a .3 loss out of it. Brian

The Economy, The Markets & Commentary---
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It is amusing to listen to the "experts" talk about the future direction of the market--especially on CNBC, where there is little accountability for what has been said in the recent past when compared to the situation today. Last week these people (grossly overpaid) were raving about the recession being over and if you hadn't gotten in, you missed large profits. As we have said, they ignore the fact that most people suffered tremendous losses and are only recouping from that position. Those that jumped ship long ago are the ones that are able to get in during these times because they have cash available. Those "experts" kept telling people to hold on for the long run---and if you did that you are still way behind. Meanwhile, the big boys that dumped millions of shares are laughing at the average investor who held on. The big boys snapped up stocks at the extreme low levels and road them up to big gains. OK, so we are led to believe last week that the worst was over. This week comes along and we have 2 down days in a row and all of a sudden you hear the "experts" talk about testing the bottoms again. It is ridiculous to us to see that whatever way the wind is blowing at the time, even if it is just a mere breeze, that is the way the "experts" are going to lean.

Yes, there have been a number of indications that some results are better--or rather, some results are not as bad as they were. On the other hand, we have had reversals in some sectors like retail, so it appears to us that we still have a long way to go. Friday there was a discussion on what it will take to get homebuilding going again. They had about 4 choices in a multiple test showing, as tho the person answering couldn't come up with his own answer. None of the answers seem what is obvious to us. That would be that the new homes inventory has to be worked down to the point where they actually need to build more homes. The same for house resales. We always say it is easy to play with numbers. There was great fanfare over the big volume of houses that were sold during the last reported month. Less emphasis was given to the fact that prices are still dropping, and that by far, most of the resales were from the foreclosure inventory. We have to work off all housing inventory to the point where there is more demand than supply. That isn't a rocket science theory, just facts. There are a couple of big negatives in the real estate area. One is that some of the relief for people facing foreclosure is coming to a close or tightening up. Therefore, there will be a surge in foreclosures again. The other area is just starting to get hit is commercial real estate. Rents are dropping, and worse than that, vacancy rates are shooting up. It is estimated that there is going to be a large increase in debts not being paid. It was stated that it is going to be large this year, and even larger in 2010 - so the banks and lending agencies will be hit again.

The auto industry is not recovering, either. Now, there is a large number of dealerships that are not going to have their franchises renewed or continued. New rules allow this to happen. Reasons for termination of a franchise is not being given, at least in cases that were shown on TV. We're talking about profitable dealerships that are losing their franchise---and they can't pick up another manufacturers' franchise as their area is already covered by the competitor. Layoffs will be coming if the appeals are unsuccessful.

Unemployment has been pushed aside, it seems. Because labor lags the economy, it is rather expected that unemployment will be bad. Here is another area where less bad is good---but each week a lot of people are losing jobs. Every job lost means "x" amount less that can be spent by the consumer, their families, and the people they buy from.

We welcome the good news about the economy, and there definitely is some good news. As investors we can zero in on the sectors that are either improving or even growing. We all know by now that during bad times, some businesses increase. People eat out less at fancy restaurants and more at fast food places with the dollar menu. And more eating at home, too, of course.

One danger area on the investor front that doesn't seem to be getting the attention it deserves is the treasury bill rate, especially for the 10 year bills. They were issued at a 2% interest rate and it has now risen to over a 3% return. If you were one of those that bought at 2%, and satisfied with getting 2% back, per year, over a 10 year period, you are almost automatically a loser---keeping in mind that not losing or losing less is sometimes good, when compared to losing 75% or more in a stock decline. Anyway, if you have to sell those 10 year bonds, it will be done at a price that yields 3.1% at current rates. So, for every bond where $1,000 was invested to yield 2% per year, we now would have to sell the bond at $645 to yield the same $20 in interest, which would be the 3.1% interest rate. That's a big loss in a very short time.

The federal government is continuing to become partners in a great many private institutions, and when some of them want to pay back the TARP money and be free of government control, they can't do it because of the rules. Well, what are the rules? It seems even the borrowing institutions don't really know what the rules are. It appears that there is a lot of interpretation of the rules, as they were written. What a mess !!! We don't know where all the money actually went and we don't know the rules, and we, the taxpayers just know that we are being stuck with the bill. The fingers are being pointed back and forth as having caused the problem, and continuing to cause the problem No matter who does it, they seem to have either left the scene with hundreds of millions in personal accounts thru bonuses or golden parachutes, or retired from the political scene. Those politicians that have stayed haven't been held totally accountable. How could you say they were held accountable, when about 100% of those that ran for re-election were voted in by their constituents? People blame the other politicians, not their own---just like in sports where the SF Giants disregarded Barry Bonds steroid record as long as he hit home runs, and now Manny Rodriquez is being supported by Dodger fans who want him to come back where they expect him to lead the Dodgers to a pennant and maybe the World Series. Never mind that these people have violated our trust--they have violated laws, and they have violated any minimum ethic standard. WE let it happen, WE have lowered our standards, and WE are getting what we deserve.

In the area of inflation, we are ready to throw stones at our TV screen as we continue to hear that there is no or very little inflation. And they keep wanting to take out core sectors, like energy, food, etc. Taxes and fees are not considered, either. We don't know about you, but we are seeing our gas rising day by day, even tho there is more than ample inventory, and we see increases all around us for the costs that we just have to pay. Our real cost of living shows quite a bit of inflation--on top of a weak economy. Don't let these pundits fool you into believing there isn't inflation.

Having said all that, we remain confident that somehow we are going to work our way out of this---we came back from a depression that was many times worse than it is now--and I was alive during the depression and while very young, do remember what it was like. It took World War II to get us out of it, but we did, and we did overcome the tremendous dollars cost that the war brought to us. We then went on a run of prosperity that the world had never seen before. As before - post WWII, there will be many inventions to come that will lower the cost of life and will bring good things. When that will be, I do not know--but it will come.

Finally, a comment about the stock market. We saw an end to the run of straight weekly gains in the Nas that had reached 9 weeks. The Dow and S&P also lost, and they had a weekly gain in 8 of the 9 weeks.
The last time the Nas was up in a streak like that was in 1999, when it was up 11 straight weeks. That was back just prior to the tech bubble breaking, and history showed us how painful that was---and we came back from that stronger than ever, too. Stay tuned.............exciting times ahead. (And we at Splitmaster still believe our day trading strategies are the way to go---check the results to date and see. Profits in markets that go up and profits in markets that go down. We are trying to do our share to help build up bank accounts.)

Today's Thought---
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If you change the way you look at things,
the things you look at change.....Dr. Wayne Dyer........Self-development author

Mike

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