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Author: Mike Celeste Editor: Tony Ponzo December Circulation: 6711

Stat Sheet Week Ending December 5th 2009

ChangesWeeklyNovemberYear to Date
IndexesPointsPercentPointsPercentPointsPercent
Dow+79.0+0.8%+632.0+6.5%+1,613.0+18.4%
S&P+15.0+1.4%+61.0+5.9%+203.0+22.5%
NAS+56.0+2.6%+100.0+4.9%+617.0+39.1%

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Facebook: We recently started a Facebook page and invited all of you to join in to check out the stock/option talk. We post our action for the day, give a few stock and option tips here and there and welcome comments. This is also a good place to exchange ideas with other friends and chat about the market. Many of you have signed up to be friends to our profile but we would like you to join as a fan on our SplitMaster page. Click on this link and become a fan SplitMaster Facebook Page

Highlight of this past week: Even after a light week of trading the Momentum Strategy still sits at a 553% year to day profit and The Indicators has a 79% win rate.

In this Issue---
Options---
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We had some feedback from an old member that shook us up pretty good. He had been trading just in stocks and not options. In a conversation we had, I mentioned he might want to look into options as a way to increase his leverage, especially in relation to the amount of investment money he is working with. Now this is a person that had never traded options before, so all the terminology etc. was new to him.

He was approved for options trading so he traded options the next day. When he told me he traded twice that day I was surprised. I was scared to death when he told me how many contracts he worked with. He started with 20 on his first trade of the day and then 100 contracts on the 2nd trade of the day. Both trades were in/out the same day. I thought he made a mistake and was saying he did 10 contracts, controlling 100 shares on each. No, I was wrong. He traded 100 contracts---that's controlling 10,000 shares. He made profits on both trades. In fact, he told me he had his most profitable day since he started investing. Wait now, we are not done, not by a long shot. On Friday he got caught up in the rising market, which then sold off, and closed to the upside at the close. He made another 2 trades in/out for the day. The first one was a trade for 50 Calls, in at 2.79 and out at 2.94. Nice profit. His 2nd trade--- He bought Calls (he hasn't traded Puts yet) and the price dropped, so he doubled up, it dropped some more, he bought more---I think he bought more 3 different times. Anyway, he ended up with 160 contracts. That made my hair stand up----and he doesn't work with any stops, I found out. So how did he do--the rising market the latter part of the day brought his average up for a small profit on each contract. If I understand correctly, he broke his daily profit record set earlier in the week, putting the 2 Friday trades together.

Why did I go into so much detail on this? Because we think that he did exactly what he was NOT supposed to do, based on his option trading experience and his capital investment amount--and on good trading rules. Now, let me say he has been very successful up to now, trading in stocks, mostly 100 shares at a time. We are the first to say that it is very difficult to knock success. But, really, to jump in like that boggles our minds and we are fearful that the day will come when that type of strategy will backfire, and it could be for a substantial sum. He was working with a previous splitter that he feels has good value and that value will rule out in the end. However, my comeback is that plenty of value stocks got hammered in the recent crash, and not all of them have come back anywhere near where they were. In options we have another powerful factor involved---the time frame, with expiration dates coming up at some point. Unless you are trading long term options, you could be wiped out if there is a drop ih price running past your expiration day.

That's quite a tale, and I know it is true, as he showed me his statement----Brrrrrr, shivers running thru me again.

Now for the tip of the week. It is EBIX again. We have sold the 50 Put on EBIX and plan to buy it back for less than we sold it for to make a profit - that same strategy we have been talking about. Expiration day is two Fridays from now and the premium will start to drop fast which is what we want but it still has to stay above 50. So we'll watch it closely and may even let it expire if the stock continues up this week. As of the end of this week, it was still going for about .90. So if a trader sold it to open for .90 then bought it back to close at say .50, that would be a nice .40 profit. Here is a kicker on the stock. It splits Dec. 10th and usually going into a split, a stock has a nice run up -- usually. And, it splits 3 for 1. We'll see but if it appears to stagnate, then we'll play it cautiously and buy it back to close for whatever profit we can get. So there you go but remember, never attempt this type of play unless you are experienced and have a full understanding of the risks involved. You may want to consult your financial advisor first.

Momentum Plays---
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We had a light week of trading in this strategy. We only had 3 plays and only 1 was a winner but --- that one winner was enough to still give us an overall profit and the strategy now sits on a 553.40% profit year to date. We have a had a great year to say the least.

The two plays we lost on were SR SPY plays and as members know, these are usually smaller profit plays which means smaller losses as well. The one winner was a W play and those are usually bigger profit plays and that is what created our net profit for the week. But, these SR SPY plays have been harder to get into and when we do get in one, they have been harder to deal with lately. The reason -- it is December and traders start to take off for the holidays meaning the market is controlled by smaller volume and that makes things less predictable. Usually the smaller volume seems to start in around the 15th of the month but this first week was pretty light. And with December also comes the end of earnings season which means little earnings plays to go after. We'll get a few here and there but we certainly like it better when we have earnings plays everday. The'll be back in the second week or so of January. So we'll keep working to find plays this week and look to make some profits.

Now with Auto Trading available on the Momentum Strategy, it makes more sense than ever to take a closer look at it. And with trading a little lighter this month, it is an excellent time to get in and take a test drive. Remember, we have a full 30 day money back guarentee if you find the strategy is not for you so you have nothing to lose. Check it out at
Learn more

Indicators---
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There were no plays this past week. We did have one signal, but could not find the right entry point, so we passed on it.

The Economy, The Markets & Commentary---
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Our earlier letters pointed out that November is usually a good month for stocks. We also pointed out that this year, since August, the first half of the month did the best and we were wondering how November would do. Well, November did just fine---and it did make it's biggest move the first 1/2 of the month, so both points did occur.

The Dow was up 6.5% for the month. That is an amount that would be a decent return if we saw it happen over the entire year. Now that savings accounts are making less than 1/2 of 1%, a 6.5% return is even more outstanding. In looking closer, we see that the first 1/2 of November saw a 7.5% return, with the 2nd half of the month falling back a little from that point, ending with that 6.5% gain for the total month.

In 2 weeks, we saw enough profit to make a whole year's investing worthwhile. We have been saying right along that this market just does not want to go down, and so far we are seeing that hold up. While Dec. shows the Dow going from 10,363 to Friday's close at 10,386, with a gain of "just" 23 points, we should also point out that the Dow was up to a high of 10,516---also on Friday. That was due to good economic news. It appeared that the drop from 10,516 was due to profit taking and related points about the level of the US dollar.

On the economic news front, the sector that seemed to draw the most attention was the labor market. We saw first time unemployment claims drop for the week and that was followed by a monthly drop in unemployment (Friday) to a level that was far, far better than what the analysts expected. On top of that, prior figures were recalculated to better numbers than first reported. Some people might say that the Christmas season usually has lots of temporary job hires, but you would also have to assume that the expectations for the month would have taken that into consideration---and the miss in the estimate was great news. The markets reacted nicely to open the day on Friday, but couldn't hold a gain that at one point reached over 150 points. The Dow went from that level all the way back down and then into negative territory before recovering some and ended the day up 23 points.

The sector that was disappointing was the retail sector. Since last November was so bad, there were expectations that we would see quite an improvement this November. That did not happen. We still have the busiest days for Christmas shopping to come, and maybe consumers will end up buying a noticeable amount more than last year. We will know shortly.

Some "experts" feel that we have reached the bottom and will start a recovery. That remains to be seen, but the market continues strong and as long as Washington keeps pumping money out in order to prop this up, we would not short the market, that's for sure. Will a recovery be fairly quick or drag out over quite a bit of time? We feel that it will not be quick--but we will take a recovery in any form. Jobs are the key. It's pretty hard to spend if you don't have a job, and conversely, it is a lot easier to spend when you do have a job. Washington says they are working on this as a top priority, and we agree it is a top priority.

Stay tuned................these are interesting times.

Today's Thought---
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Smile Time---One woman to another-------Men are all the same, they just have different faces so we can tell them apart.

Mike

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