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

Stat Sheet Week Ending December 19th 2009

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-143.0-1.4%+1,544.0+17.6%
S&P-4.0-0.4%+199.0+22.0%
NAS+22.0+1.0%+635.0+40.0%
Holiday Note: With the two weeks of holidays starting on this coming Monday, this will be our last newsletter until January 9, 2010. However, the staff at SplitMaster will still be working Monday through Wednesday of this coming week and then again Monday through Wednesday the following week. We will also be here to answer emails. The rest of the time will be spent enjoying the holidays with family and friends. The Staff of SplitMaster wishes all of you a very Merry Christmas or whatever great holiday you celebrate and a very happy New Year!

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Highlight of this past week: The Momentum Strategy is reaching for the stars. With four more plays this week - all wins - the strategy now sits on a 577% profit. Learn More

In this Issue---
Options---
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Trading options is a never-ending study. There are so many possible combinations available that it just about boggles the mind to try to pick a "best" method. There are different strike prices, different months to pick from and handling the range of bid/ask is daunting. Then, you can combine each of those and try to find the magic "recipe".

We are working on a test study to see how much our day-trading options vary in the course of a day. We know there is usually quite a large range from the daily high to the daily low. We are trying to zero in on what happens once we have made an entry point. Right now we don't have enough data to come to any conclusion, but we do see signs that we might be able to separate our planning into 2 plans---one we can call the Basic play and the other is the Aggressive play. We normally look for around a 10% profit point or .30 (depending on what kind of Momentum play it is) to exit the play. That has worked well this past year and we certainly don't want to lower the profit. We would like to see what happens if we stick around a little longer, for those willing to take a larger risk. A larger risk is there because it is possible to see the option make the 10% gain, but if held for a higher percentage profit, the option might end up being a loss. Here we have another consideration. We believe in stop losses. We ask ourselves to see if we should keep the original stop loss once we get to the 10% profit goal, or maybe raise the stop if the option has gone up in price. For instance, if we are shooting for a 30 cent profit and the Basic play hits it and then goes to 40 cents profit, do we raise our stop by 10 cents? Or we could have a sort of trailing stop so it follows the play keeping it at say .30 below the current price. That way if a play really takes off in the right direction, you can take advantage and never have a loss as the stop would eventually become higher than the entry price. I say a sort of trailing stop as a lot of brokers do not have an automatic trailing stop system for options. So one would have to manually up the stops. The jury is out yet, even in our preliminary results. So far, we have seen the raising of the stop gets the option taken out, leaving a small profit or break even, while leaving the original stop has shown that it didn't get hit and the option recovered and went to a higher price than the stop that was raised.

All or none is another question. Some traders sell 1/2 of their holding at the 10% (Basic Profit) gain point and keep the rest as an Aggressive play. There is a lot to be said about this method. Of course, if this is done and the option continues up, we would have a lesser profit gain than if we held all the options and went 100% Aggressive. However, if the stock drops after the 10% point, we protect some profit. Again, all sorts of combinations are possible, and that makes option trading so interesting.

Momentum Plays---
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This week was much better than last. I'm not sure what was going on last week but fortunately, we rarely have those kinds of weeks. This week wasn't loaded with a lot of plays but we did have 4 trades and ALL were wins. Although I have to say, a couple of them had some strange twists before they finally won. AND --- the Momentum Strategy has reached an all time high for this year of 577.29% profit. Will we hit 600%?! Well, there are not many trading days left this year so it might be hard to do but if we can get three or four good wins over the next two weeks --- maybe. Whatever the final results for 2009, we certainly have had a great success not to mention a lot of fun. Is it making anyone a millionaire like some strategies claim to do? No. BUT -- if you played along with us all year, you certainly have made enough to go on two or three great vacations if you played a smaller quantity of contracts. And if you have played a larger number of contracts, the winnings have been enough to buy a nice car, pay the mortgage and other expenses or helped build up your retirement fund. And all that for about two hours of work, three to five days a week. That's a hard program to beat and we know that our members have been thrilled with this year as well. We know because many of them email to tell us that. And for you readers who are not yet Momentum Strategy members, with our new Auto trading program and our 30 day trial program, why not give it a try? You have everything to gain and nothing to lose. Check it out at Learn More

Indicators---
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We had an odd happening in our one Indicator play this week. We sent out our exit price possibility and very shortly thereafter, the option hit the price, but not everyone was able to close their position. The option then went into a drop phase and ended up hitting the stop loss price. So, some had a profit and some had a stop loss. We decided to call it a wash and not report it as either a win or a loss. That's the first time we can remember that happening and let's hope that doesn't happen again in a very long time -- just let us get those profits all in for everyone before the option declines.

The Economy, The Markets & Commentary---
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Are we going to have a Santa rally this year? Did we already have a Santa rally for this year? Is the economy improving or is it still declining, or has it bottomed out and is flat-lining for now? We have been pointing out that a trend in the Dow has shown that in Sept., Oct. and November we saw the high point of the month in the first 1/2 of the month, and then a drop the 2nd half of each of those months. What has happened in December, so far? The high in the Dow thru Friday, 12/14 was 10,516, with a close of 10,466. The 2nd half of Dec., starting on Monday, 12/17 has shown the Dow going a bit over 10,500 twice, and once at 10,499, but closing on 12/19 at 10,325, or 144 points below the 1st half close. Are we wavering, or is this just a continuing trend? We shall see in the few remaining 2009 trading days. Keep in mind our old, long time trend of selling by the 10th of January, which, if it holds true for 2010, will be another monthly high in the 1st 1/2 of the month.

The economy seems to be changing almost day by day, according to our reporting "experts" and "analysts". There was a comment that many people have gone from long term trading to day trading (as we have done here at SplitMaster). The reason could well be that it is almost impossible to get a handle on what the best investment strategy is. Hardly anyone (except us, of course) wants to come out with an expectation and stick to it. I remain firm in my belief that any recovery is years in the making--and quite a few years at that. That expectation is based on the past history of economics and how long downtimes lasted. I feel we have been accurate thus far in our warnings about real estate price increases being impossible to sustain when you have 100% loans to people who don't have to confirm their income qualifications. That was the simple warning that we were going to have trouble, and big trouble. That warning was about 5 years ago. What is difficult, if not impossible to do, is to give exact dates for a crash. We say it like it is---we don't know when, but it will happen. Then, before that, we warned about the tech bubble, where prices were racing upward so fast on tech stocks that we made $25,000 on just 2 option Calls- on many of our split plays--in a very short time. Prices were running up on companies that not only didn't have any earnings, they had negligible or no sales. That brings up my ol' Dad's saying that prices run up more on expectations than on results---be it stock, real estate or other types of investments. Imagine stock prices doubling or more in a short time, just based on projections and hope? That's what happened and we could see that mathematically this could not continue without earnings coming soon, and good earnings, besides, to warrant very high price/earnings ratios.

This week saw "good" news come out in the real estate and employment sectors. We say "good" because we need to look closer at the figures. Real estate improved for November over October, but down from Nov. 2008. That is suspect because real estate slowed down in October 2009 due to the uncertainty over the $8,000 credit program being renewed. It was renewed and that was probably the most important reason for the November increase. Once it was renewed, residential building increased for new homes and resales.

In the employment area, our newspaper had the lead, front page headline saying "Employment on the rise". followed by the sub-headline "Area, county experience drop in number of jobless". The Los Angeles Times also did a story on this, but added the part that said the rate fell slightly "but only because thousands of discouraged workers have left the labor force or even moved out of state."

Then we had the report that Friday a number of banks were closed and taken over, due to bad real estate loans.

Getting out of this mess might be up to the tech area and business, rather than the consumer leading the way. Companies are looking for ways to increase production without having to increase employment. Several earnings reports from the tech sector are encouraging. It seems that retail sales are not going to be the salvation of the economy this Christmas season, as many had suspected, so tech now gets the call. In the end, though, we still insist that we cannot get out of this recession/depression without a whole lot more jobs being filled.

In Washington, there is the ongoing battle over the health plan. President Obama wants it on his desk before the end of December. Just like all the other major programs, there is a rush to get something done--without proper study. Many feel it's politics over common sense driving the rush to get things done. On top of that, we now see that plans are being formulated behind closed doors, so we, the public, don't have any idea what is being proposed. Again, we find out about major policies after they have been signed into law. What happened to the transparency promised during the election campaign? Other promises have also been reversed, with one TV report showing the campaign promise being exactly the opposite of the current position. What does seem apparent is that a big winner is going to be the insurance industry. With a universal health plan (sort of) going into affect, there will be millions more people being covered, and that means that people that could not afford to go to the doctor will go---under subsidy---and the insurance companies will get a tremendous increase in business. We see the word "subsidy" or "subsidized" in the reports. That means that the subsidy will have to be paid by people that are earning more money and had enough, or just enough, to pay for their own health plan. Whether the cost for their insurance goes up or not, they will have to pay the subsidy in some form or fashion. So whether you agree with these new policies or not, I think all of us can certainly agree that the best course of action is to slow down a bit and think things out to make sure we have the best possible plan with the least amount of deficit spending. And let the people have a chance to study and understand it and give input before it is finalized. We are intelligent beings and with all the information at our finger tips due to technology, we certainly are capable of giving inteligent input and that should be our right.

Stay tuned, lots more ahead in these very interesting times................

Today's Thought---
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You have inner peace
--If you can always be cheerful, while ignoring personal problems.............

Mike

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