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Author: Mike Celeste Editor: Tony Ponzo May Circulation:

Stat Sheet Week Ending May 23rd 2009

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+10.0+0.1%-499.0-5.7%
S&P+4.0+0.5%-16.0-1.8%
NAS+12.0+0.7%+115.0+7.3%
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Highlight of this past week: The trading week ending 05/22/09 was a slow week in the Momentum Strategy but we did manage one very nice win in an up play for SHLD and we still stand at a 312% profit year to date.

In this Issue---
Big Dipper System---
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Hey, after a long wait, we have some new Big Dipper considerations. We had to wait since last September to get a new split announcement and this week we see two more new splitters announced and they will be added to our Big Dipper page for team members to consider. This may be a signal that more are coming and split activity is always welcome to us.

Options---
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We have our first week of the June option period past us and we think it is a good time to be writing some Puts, to go along with Calls we are considering. Team members will receive an email on our picks for ourselves. The Calls are still an attractive pick, also, and we did cover a Call on CTSH this past week, at a decent profit. The stock is doing well and during a dip we like to take some profits and wait for the stock to move up again, where we will write the Calls once more. Remember, if you like a stock and wouldn't mind owning it at a lower price, you can write the Put around the price you would like to buy it, and if it goes down and you get the stock Put to you, you've accomplished your goal. Think of it this way. If you like XYZ stock and think it is a good buy at it's present price of say $43, it will be even a better buy at $40. So if you write the Put and receive say $1.20 a share and on expiration date it is at 39.85, the stock will get put to you for $40. So you already received $1.20 for writing the put and that makes it the equivilent of buying the stock at $38.80. ($40.00- $1.20 premium = $38.80) If the stock does not go down and get Put to you, you should still be happy, with that as well because you keep the premium from the written amount - sort of like a dividend. And --- you never invested a dime. It looks to be a win, win situation. 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 or broker.

Momentum Plays---
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It was a slow week without much action. We had three plays with only one win but the winning play was a very nice one so the week basically broke even on profits. The slow week we believe was due to a number of things. The market traded in such a way that not many W plays showed up that met our criteria. Also, as the quarter nears the third month, earnings plays have dwindled. We'll definitely get more in the weeks to come but they are harder to come by. Then too, we have the market trading in such a manner that it is hard to get off any decent SR SPY plays. This has been going on for a number of weeks now for the SR SPY plays but it will eventually change. Lastly, with the Memorial weekend ahead, the volume in the general market was much less causing less action. On Friday, the DOW ended down only 14 points. But, this strategy is still sitting on 312% profit for the year and that is something definintely to be happy about. Momentum Strategy

Indicators----
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Our Indicator results for the year-to-date continue to be excellent, with our record being 30 wins out of 34 plays. May has been a bit slow compared to other months, but mostly because we have been cautious in our decisions to enter situations. However, that being said, we do want to point out to team members that we do have a play scheduled for the first trading day next week, Tuesday (holiday on Monday). As usual, we will send out an email reminder along with a final decision after we see the pre-market and open on that day. Learn more

The Economy, The Markets & Commentary---
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Just a word of caution to point out this week. We don't want to get too exuberant about the strength of the market. It is noted that the trailing earnings of the S&P 500 stocks is above 20 for the first time since the 4th quarter of 2003. So, we have returned to levels that weren't this high for about 5 1/2 years. Something to think about. This past week started out fine, with a Dow gain of 235 points, but it couldn't hold and lost ground each of the next 4 days. It did manage to end the week at a very slight gain, as did the other 2 major indexes, but there is concern about at least a temporary fatigue factor in the market after the recent large gains. Just be careful out there.

Another bit of good news that most media people don't look at. Stock splits definitely reflect the economy, as we see things. It took from last September to get a new stock split announcement. That alone tells you that conditions have been bad for company earnings. We finally got one split announcement and now this past week we see 2 more new announcements. That is encouraging news. We always say that what is bad for one sector is good for another, and companies do not split unless they are doing well---by far the greatest reason for stock splits. We remain conservative and want splitters at this time only if they take a dip, so we are entering them into our Big Dipper program. You can get an idea of our thinking by looking at our comments above in the Options section, where we talk about writing Puts at attractive strike prices. If that is not done, we can wait to see if the stock dips lower and then buy the stock outright.

One of our long time team members, Fidel, wrote in with some questions and comments, and we thought we would share them with you, as they seem to apply to all of us. Here's what he said---

"Hey, what happens if GM files?? how many more people would go to the unemployment lines? even if they don't file, how many dealers are they closing? also, your governor (California) was after Obama...for what? what's going on with California? they say even the prisoners might come out... I just don't see how the market keeps going up. when I see the jobs from china coming back to the USA...that's when I will start to buy stocks long and hold. if that ever happens. when I see "Made in the USA" signs all over again, that's when we can go long."

My answer to the above went like this---

"Today's news says that the Fed was a bit overoptimistic about the economy and now they are adjusting lower.
The ripple effect will take place when GM and the industry dealers that lose their franchises shake the dust. It is not going to be pretty. Re California, we have let prisoners go early before, so that isn't too new. Not a good thing, but we've survived it before. We are in bad shape financially, and have been hoodwinked by the politicians---as usual. The voters stunned me by passing a sales tax increase last year for a rail system--and it required a 2/3 vote to pass--and that was on top of an increase of 1/2% put on by the legislature. The worst thing is the rail system will take 30 years to build, so many people, like me, won't be around to see it. Then--to make matters even worse, voters in certain cities voted to increase the sales tax in their city---all the while knowing how bad the economy is. What were they thinking? And it keeps being said there is no inflation.

Now, this week, CA defeated 5 propositions that would have increased taxes. All the bigwigs, including the LA Times backed the increase. Now, the voters finally got fed up and said to the pols--you must spend within the limits of income. Yes, it will be painful, but so is being laid off your job. We haven't seen the pols cutting back on their pay, and we haven't seen them eliminate jobs that pay well over $100,000 per year to people that attend one meeting a month for something that doesn't even exist anymore. The reasoning is that eliminating those jobs (assigned to the pols' friends and supporters) won't mean much in the total budget. That's the kind of logic used by these people.

Re the market--I agree. Monday's big jump was a surprise--and now we are seeing it all taken away during the rest of the week. Reality eventually takes control. A global economy is so entrenched that is isn't too likely we will see anything like what we had before in manufacturing and jobs. I just pray that we can innovate once more and show the world it can be done. But, it sure won't be easy. There will be opportunities, but they may be more international than national. I just saw Erin from CNBC speaking from Nigeria. They have hardly any bathrooms over there. Now, one company controls all the mobile toilets and has a lock on increasing business many times over--if they can get people that need them to be able to afford them--more tourists or international business people. Those that can recognize something needed are going to make out all right--if they have the capital to do it. I went to Europe once, and immediately saw lots of US tourists, and very little ice for drinks. I said that you could make a fortune with ice making machines. I never was able to follow up, but I know our group and most Americans want cold drinks. One person told me that the way to find a need is to look in the phone book and look thru the yellow pages. Whatever isn't in there and might be popular would be something to get into. The example used was again international--looking in a phone book in a large Mexican city, it was noted that there weren't many paint places to either make or sell paint--I can't remember which it was. Someone came in, filled the need, and got pretty rich. It's funny, tho, as the one time I took a trip to Mexico City, back in the late 1960's, I couldn’t find a public pay phone and was told there were less than 5 in the city--if that is believable. I couldn't find one, that's for sure. Big hotels had them, but not public. Now we have cell phones, but back then, it was a major need--lots of US citizens go to Mexico, too. (Or did before swine flue hit just now.)

In the US, there will still be opportunities--Bad times create good times for someone. My father made a good living running a restaurant during the depression. People would hang out at the restaurant and buy coffee, or play the pinball machine, or the jukebox. All 3 cost 5 cents each---and that was a lot to spend when you were making $4-5/day, if you had a job. Penny candy gave us a big portion, and we picked up pennies off the street if we found one. Now most people won't bend over to pick one up--I still do. My father gave me a penny a day to get something at the store by our school, and when I was brave I asked for 2 cents, so I could treat a friend. I can't remember ever being denied, either. My folks were great---hard working immigrants--and recognized that ambition and knowledge from education was the way to get ahead. They were put in school in a grade guessed on, and they either learned English or they didn't. No foreign languages were spoken in school--unless you took a foreign language class in high school to meet college requirements."

We remain optimistic, while cautious, that there will continue to be progress. As always, nothing is always done by going in one direction. As long as we can face the problems and come up with solutions, we will move ahead. There are a lot of smart people in this world, lots smarter than me, that's for sure, and we have to rely on them to lead us out of this mess. Mistakes will be made, they always have. Undeserving people will reap large benefits, they always have. What we have to do is to make sure the middle class survives and goes up in numbers, not down, as has been the direction we are still in now. If we don't have a large middle class, we will be no different than many other countries around the world that do not have a middle class to speak of. When there is only rich or poor, the masses suffer, as there certainly are many fewer in numbers in that rich class. The vote is power, and people had better realize that the best way to change things for their betterment is to elect people that will actually do things that will make life better for the middle class--The poor people are large in numbers, but they don't have buying power. Rich people are small in numbers and they are the ones with buying power (less so these days, but still more than us). It's the middle class that was the consumer base, being large in numbers and having buying power. If we lose that, woe to us----let's make sure that doesn't happen. Make our elected officials accountable---and make companies accountable, too. With companies, we have the power of the dollar---we don't buy from companies we don't like. Hit them where it hurts, as they say, right in the pocketbook.

Stay tuned......................

Today's Thought---
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I cannot always control what goes on outside.
But I can always control what goes on inside..................Dr. Wayne Dyer.......Author

Mike

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