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Author: Mike Celeste Editor: Tony Ponzo September Circulation:

Stat Sheet Week Ending September 5th 2009

ChangesWeeklyAugustYear to Date
IndexesPointsPercentPointsPercentPointsPercent
Dow-103.0-1.1%+324.0+3.5%+665.0+7.8%
S&P-15.0-1.5%+33.0+3.3%+111.0+12.3%
NAS-10.0-0.5%+30.0+1.5%+442.0+28.0%

Highlight of this past week: We had three more wins in the SPY this week. The Momentum Strategy is now showing a year to date profit of over 341%.

In this Issue---
Big Dipper System---
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After seeing only 2 split announcements since 1 year ago, we have a new one this past week. We have added it to the Big Dipper and team members can see it on the site. Look for UTHR.

Options---
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We thought it was about time to get back to one of our other winning strategies that we haven't used much this year. That is writing options, either Puts or Covered Calls. This strategy is one that can bring in extra money or enable the purchase of stock at a lower price, such as at or below the Big Dipper price. For instance, if a written Put does not hit the strike price, we get to keep the money received from writing the Put. If the strike price is reached, the stock is Put to us at a price that is at or lower than what we would buy it for, anyway, at the Big Dipper level.

We have been writing Calls on stocks we have and have done very well, bringing in extra money we like to term "extra dividends". Doing this can bring in over 12% on a yearly basis. We write at a strike price that is a ways above the current price and one that we would be happy to see hit, as it should bring us a profit if Called away. We can also buy back the option to close if we do not want the stock called away and then look to write it the next month - perhaps at a higher strike.

Also---See our option discussion in the Commentary section below.

Remember - the above is just a discussion on the different types plays you can make with options and in no way is a recommendation to make such plays. Before attempting any such option trade, you should have a complete understanding of the possible risks involved.

Momentum Plays---
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The strategy is still a little slow going during these last weeks of summer. However, we did manage to get three trades in this week and all were wins. It is interesting to note that all the plays we made were SPY option plays. We have been having a hard time getting into these plays of late but just as our other plays taper off in numbers, these pick up. We'll see if that continues but take a look at our Past Results. This strategy now has a 341% profit year to date.

Indicators---
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There was an Indicator play this past week, but we didn't see the right movement in the market and we cancelled. A good thing, as we saved ourselves a stop loss. This way we keep our same capital and can come back another day for an investment play---Not losing is good.

Feedback---
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We appreciate the feedback from our team members and it is gratifying to hear that SplitMaster strategies are being used profitably. Keep the comments coming in.

The Economy, The Markets & Commentary---
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This past week was a rather strange one. Just when it appeared that the markets had run out of rallies on dips, we went and had one at the close on Thursday, then saw a dip shortly after the open on Friday (where we had an excellent and quick Spy option play), followed by a rally to end the week moving to the upside, altho it wasn't enough to cover the losses earlier in the week, Monday thru Wednesday. Earlier the markets couldn’t seem to decide which way they wanted to go, and settled on going down. On Friday, the big news was the unemployment report and it was definitely mixed. The market went up quickly right after the report, faded quickly, and then later decided to go up again. Our belief is that the pendulum just about reached its final move in the up direction, and now we will have to see more positive news. Employment is the big drag---and while it lags, it is extremely important during this cycle because we need spending to move the economy in the right direction. Without a job, tho, or with the threat of a loss of a job, we just don't have the money to spend---the "experts" seem to think that we consumers just don't want to spend. Show me a person that has a good supply of money and doesn't want to spend some and I will show you a person that is probably in the 1% level of the population.

Something to keep in mind--if you like to play the odds. September is historically the worst month of the year for the market. Conversely that should mean that it could also be the best month to buy. Let's see how this thinking works out--it's early in the month, but we can keep it in mind as the year rolls on.

A quick comment on strange actions in the Spy options. On Wed., Thursday and Friday, we saw something that was a great bother to us. When the market opens in the morning, the options usually are priced more or less than the normal value. That is because there is a buildup of orders overnight and that can skew the market prices. OK, we have come to expect that and we hardly ever place an order right at the open. We let it settle down for a bit. All that happened in the 3 days mentioned. The market was rolling along, up and down and the options went accordingly. All of a sudden, about mid morning, the option prices changed. What I mean is, early on the Spy was at a certain price and the option was "x" amount. Later, the Spy was at that same certain price, but the option was priced 7-10 cents lower than it was earlier. If the Spy is 100.10 and the option is 1.16, then later on that same day we would expect that if the Spy comes back to 100.10, the option would be around the same 1.16 level it was before. This is with over 2 weeks to go until expiration day, and it was not near the end of the day, either. That is disturbing to us, as we calculate our actions based on the price of the Spy. The best thing that can happen to our play is for the movement we expect, does so in a short period of time. That is what happened on 2 of our 3 plays this week, and they worked out very well. Holding for a longer time in that same day was a costly proposition and cut into profit or created a loss. Fortunately we didn't have that happen. Therefore, we have to be very aware of this happening again, and be ready for it.

Tthere was another report that came out this week---executive pay levels. Long time readers know that this is one of my favorite subjects. I have no problem compensating a person that does a good job. A generation ago, the ratio of average executive pay to regular workers' pay was 30-1. The report for 2007 was 344-1. It said that in Europe executive pay is considered very high at 100-1. Basically, the executive pay in the US has gone up 10 times what the workers' pay has risen.

Now, it is important to remember that the word "average" is used. That means that low executive pay is mixed with high executive pay to get a 30-1 ratio, back in the good old days. A good CEO that produced outstanding results for a company might have had a 40 or 50-1 ratio---and then the CEO that did a bad job and received only a 20-1 ratio "averaged" out to that 30-1 ratio. It is estimated that this year the executive pay is going to go up--and considerably, in the hundreds of millions. Why is that? It is because most executive pay these days is based on stock options and many options were granted back in the early part of the year, when stock prices were at their lows. We have had an incredibly strong move up since that time, and the executives stand to benefit the most from that. And--it was shown in the report that bad results in a company did little to bring down executive pay. I'll bet those people aren't worrying about their healthcare plan--and neither are our elected officials, who receive an unbelievable benefit package. Oh, by the way, those government regulators that are supposed to protect us, do very little. Why? Because those regulators are hired as executives into those companies that they used to regulate--if you can call it regulation. It is a joke, that's what it is. .

Oil prices slid a bit this week, which was good news to us, but for some unexplained reason, the markets have been going up on oil price increases and down on oil price decreases. No one can convince me that it is better for stock companies' (that are not oil related) earnings when oil prices increase. In fact, there was a news report that airlines are again considering a surcharge because of the high oil prices. Many airlines have hedged their fuel prices and if their hedge time runs out and the fuel price is way up there, bang, surcharge to us fliers---the few that are left, that is. Air travel is off big time, but the planes are still full---why?--because the airline cuts down on the number of flights they send out.

The healthcare issue is still red-hot, but it still remains that no one can seem to explain it properly. We just have to wait and see what the politicians work out for us--and then ramrod it thru before we can react.

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

Today's Thought---
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Beliefs have the power to create and the power to destroy...................Tony Robbins......Motivator, author and former student of Mike


Mike

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