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Author: Mike Celeste Editor: Tony Ponzo January Circulation: 6879

Stat Sheet Week Ending January 16th 2010

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-8.00.0%+182.0+1.7%
S&P-8.0+0.7%+21.0+1.9%
NAS-27.0+1.2%+21.0+0.9%

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In this Issue---
Options---
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This past week we were able to gather more data on our Aggressive Play potential. However, it muddled up our thinking a bit as we gathered it. Our Support/Resistance strategy would have worked out fine if we were aggressive, but we would have had to reconsider the stop/loss angle---and that could be very dangerous. A Put in consideration on Thursday would have been losing, and opened Friday at 48 cents. As trading progressed we saw that same Put reach a high of 1.80, well above our potential buy price. That would have had to be done without a stop loss and that is a very dangerous decision to make. It also meant a ton of emotional control was needed and we have to figure out if that can actually be done. Amazon was another one that lost on the Basic or conservative Momentum play, but would have done very well if played Aggressively, as Tony has been telling team members. At any rate, these first two weeks of the year have been relatively quiet so we do not have any option tips for this week.

Momentum Plays---
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And talking about quiet, there has been a general lack of good plays to follow in the Momentum strategy. And the few plays we did get, lost. So we are a little frustrated in this strategy. I say a LITTLE frustrated as we go through these low periods every now and then in this Strategy and it always changes back to the up beat periods in short order. The new earnings season started in this last week and should be increasing starting this coming week and we look foward to that.

But the market in general has been a little unpredictable and the volume of trading is still quite low. A lot of traders are sitting on the sideline maybe waiting to see how things pan out in these first few weeks of the year. There seems to be a definite uncertaintly of whether we continiue this rally or start into a correction period. And the news and reports coming out seem to keep toeing the middle line - neither strongly negative or strongly positive. So we may be trading in this kind of uncertain mode until there are clearer signals of how things are. This is one reason we like earnings plays. They have a strong initial momentum to travel in the direction of their reporting. If the report is good, the stock tends to travel up at least in the first part of the trading day. And visa versa. In other words there is an immediate and strong reason for the stock to travel in one direction or the other. Of course, even with earnings plays the announcements are sometimes ambiguous or toeing the middle line too, but at least you can see in the pre-market how the traders are playing it and that usually gives us a pretty good clue. So we are ready for this week to come.

Indicators---
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We didn't make any Indicator plays this week, but there was a potential play that moved too quickly for us to make an entry point, and it was a big winner--if we could have made an entry buy. The good thing about this was that the signal was correct, and we are heartened to see that. We also are tracking the Aggressive potential for the Indicator and will have more on that in the weeks to come.

The Economy, The Markets & Commentary---
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There is a battle definitely developing between Washington and Wall St. By that I refer to President Obama coming on TV and stating that he wants the big banks to pay a tax on their suddenly huge profits and corresponding huge employee bonuses. CNBC keeps saying that the average American doesn't care about bonuses unless it affects them. The President said that the bonuses were "obscene" and if the banks can afford to give them out that should mean that they can afford to pay for TARP, and he wants every single penny paid back. The argument here is that many of those big banks have already paid back their TARP loans, and smaller banks that haven't paid back are potentially exempt from this tax--which is compared to the tax that banks pay for FDIC insurance. The government takes the position that the big boys wouldn't have been able to stay in existence if the government didn't bail them out in the first place. There seems to be some logic on both sides, but clearly the rub is the size of the bonuses. Every single person that I have personally talked to thinks the bonuses are too big, and are upset about it---no matter what CNBC says

CNBC went off on another tangent this week when discussing the state of the auto industry. Two statements were made. One was that smaller economy cars were not selling too well. The 2nd statement said that gas prices were now lower than they were a year ago, and gas would have to go to around $4/gallon to push people into buying more economy cars. How they can make these statements is beyond me. I went to the reporting site for the weekly figures on oil, gas, etc. The official report said that nationwide the price of gas 1 year ago was $1.81/gal and now the US average is $2.82, or $1.01 more than last year. That's a 55% increase. That was based on reformulated gas, and basic gas was up 96 cents/gallon less in the same time frame. If you want to see all kinds of figures related to oil, the site can be found by searching "This Week in Petroleum" and the info is put out by the US Energy Information System. Then, to check on vehicle sales, I searched for the leading vehicles sold in 2009. Lo and behold, the majority of them were economical cars or trucks. Why are these TV media people not held accountable for what they are saying ?!!! We have a massive overpricing of gas based on a decreasing use, and the reason is that the refiners cut back on the amount refined and thus the price stays high, - that along with the speculators that have tremendously small margin requirements, as we have discussed before.

No inflation---aren't you glad the government is telling you that there was no inflation last year? Yep, the government said that "last year the consumer price index fell 0.4% from 2008 and the last time the index dropped was in 1955 when Dwight Eisenhower was president and Ray Kroc opened his first McDonald's restaurant." I guess all the increases in our real consumer life are figments of our imagination.

There were hearings this week on the mortgage fiasco and again it seems the media doesn't want to do much comprehensive coverage. It was stated that the early questions were pretty tame and that was a relief to those being questioned. Years ago, this newsletter was absolutely hammering away about the fact that 100% loans to people that didn't have to prove income was a major disaster just waiting to happen. Really, folks, it doesn't take a rocket scientist to know that. Supposedly the questions were steered back to why this was allowed to happen. They said the requirements were understated. Really? All I know is that every time before this, everyone I knew that went to the bank for a loan of any kind had to show collateral and prove their income was enough to pay the loan. In fact, it is an old joke that the only ones that were able to get a loan from a bank were people that had so much that they didn't need a loan. Government reps got up and stated that at the time of the giving of these ridiculous loans, there was no danger in the mortgage loan program and, in fact, more people needed to be able to get loans in order to buy a house. Those people are still in Congress or working for the government and there are many places on YouTube, for example, where you can hear them saying these things. We allow them to continue to be our caretakers. And that always makes me wonder, the government can come down on and question business and the private sector about their errors and bad decisions, (which they should do) but how come we do not have a process to put government officials on the stand for their carelessness and bad agendas? And, with all this uproar, here in Southern California, we saw that every single incumbent that ran for re-election in the last major election were winners. It's something like that old commercial where the guy is in the bathroom in front of the mirror and gets slapped and says, "Thanks, I needed that." We must be masochists to take this kind of punishment. Whenever these programs stop being funded by the government, watch out---and then our kids and their kids had better prepare themselves for the day of reckoning when the deficits have to be paid. Our income tax rate has already been raised here in California--and huge deficits are already projected for the years ahead. Oh, I must be mistaken---we have no inflation--I guess raising so many tax rates and creating new taxes to go along with our commercial rate increases for most everything else is that figment of my imagination, again.

Let's take a look at the stock market for a minute. Last week I mentioned that 'ol Dad always said to get out of the market starting with the 10th of January. I can't remember if it was the actual date of Jan. 10th, or the 10th trading day of January. So, this week covered both time frames. For the week starting 1/11, we did see losses in the major indexes, altho nothing radical. However, looking at the 10th trading day of the year--we look at this past Friday, 1/15. Oops, a loss of 101 points on the Dow. Sort of a kickoff, but it was just that one day, and we need more time to run off before we have an answer to 'ol Dad's theory. We already know that the theory of the first 5 days of Jan. sets the tone for the whole year--and that was definitely a positive. It was wrong last year when we started down, as the rally started in March, and it was a great year for the averages by the end of the year. We now also watch to see how the total month of January goes, as that is the other theory--if up, the year will be up, and if down, the year will be down. So, of the 3 strategies, 2 are for gauging results by the end of the year, and Dad's runs to April, when you re-enter and sell again in May, coming back in Sept. Something more to keep our eyes on.

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

Today's Thought---
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A favorite------Suppose you were an idiot, and suppose you were a member of Congress;
but I repeat myself,,,,,,,,,,, Mark Twain.


Mike

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