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Author: Mike Celeste Editor: Tony Ponzo February Circulation:

Stat Sheet Week Ending February 20th 2010

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+303.0+3.0%-26.0-0.2%
S&P+34.0+3.2%-6.0-0.5%
NAS+60.0+2.7%-25.0-1.1%


Highlight of this past week: Momentum Strategy has a very good win with PCLN making a 16% win in about 5 minutes. Learn More

In this Issue---
SplitMaster Basic System---
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We had very good results on our last splitter, JST, and now we have a new one coming up for a buy on Monday. Team members have been notified and the website also shows the details. A bit of caution on the new one. It is at its yearly high, and with the market being up for 6 straight days, we might hold back or buy 1/2 of our normal investment. Of course, it is probably at its high because the company is doing well, as JST was and JST was a big winner for us. At any rate, we are glad to see the split announcements coming in just a teeny bit more often than they have for the last year.

Options---
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We can take note that covered calls can be another choice for some of the team members when buying a Basic splitter. A Call written above the current price is a sort of insurance or hedge on the play. It guarantees some income, but limits the profit. Normally, the income it produces is enough to come very close to a profit goal. The new splitter for Monday has a sell date in April, so the Call that might be looked at would be the April 55, which closed over $3.00 on Friday. The stock closed under $55 on Friday. The March Call is also a possibility---and another strategy could be to write the March Call and if it isn't exercised by expiration in March, then the April Call could be written. Just a thought.

Momentum Plays---
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The strategy is still a little slow concerning the number of plays but we did have two nice wins this week with one, PCLN, being a 16% gain in about 5 minutes. Our earnings plays seem to be trading more like we are used to now which is a good thing. That may have to do with the market going back to a positive mood based on this week's action. At any rate we liked this week much better. And our Straddle/Strangle test continues with very good results.

One great example of advantages of the Straddle is on an earnings play we made - FSLR. This stock is a very big mover on earnings day. Normally, we can expect the stock to move well over $20. So it is usually a pretty safe bet that playing the direction of its move, will be a winner. In the case of FSLR it gapped down so a Put play was in order. However, the stock only gapped about $9 down. Now that is still a big move but, after the open the stock never really made the momentum move we expecedt. In fact, it kind of just traded flatly. Then it started to drift up, probably along with the overall market. That means, had we gone in on a single directional Put play, we would have been stopped out. But because of the way it was trading we passed on the play with the members.

However, the staff at SplitMaster traded the Mar. 115 Call/Put Straddle on FSLR and made a .40 profit as the stock moved up later in the morning. So here again, we expected this to be a down play but it fooled us and went up - just a couple of dollars but that was all we needed. And we could have made as much as .60 profit if we had held awhile longer. So there is the advantage - your odds of a win are increased with this method.

Indicators---
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The momentum in the market is overpowering to the upside at this point, and our Indicator signals have been for down plays. In spite of all that we did see opportunities for profitable plays, but the entry point was hit and the bounce was so fast that we missed some. In addition, one saw the Put drop in price so fast that our buy price was too high in seconds and no one bought, except for a few Aggressive players--who averaged down and did end up with a small profit or even. We are going to be very cautious on this play, and there is one set for Monday, but we don't want to get caught fighting the "tape" and paying the price, so we might not make an entry unless things look very favorable.

 Feedback---
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Concerning that Indicator play mentioned above, here is an email from member Barney. It shows how some of our more experienced and aggressive players turn losing plays into wins.

tony
hung in, just closed @ .96
plus .09 for the play

barn

The Economy, The Markets & Commentary---
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On the first day of trading for the week, the Dow was up 170 points and the Nasdaq was relatively the same. That was the cue for CNBC to announce that the correction was over. It has proven to be right in the days following, few as they are, but up just the same. This momentum is so strong (the Nas up for 6 straight days, thru Friday) that it is again time when the swing of the pendulum is so strong that opposite news is disregarded. For example, after the close on Thursday, the Fed raised the discount rate. The after-market immediately headed south, with the futures showing the Dow down something over 100 points. The pre-market on Friday showed a recovery of more than 1/2 of that and while the market went down after the open, it fairly quickly recovered. At one point the Dow was up over 40 points. All that in the face of a rate increase, which normally is a negative for the market, as it raises costs to those paying more interest. The Dow ended up over 9 points higher for the day, but while it doesn't sound like much, it really shows the power of the up move, and after being strong all week, besides.

There have been a number of good earnings announcements and while there are also negative earnings reports, it would seem that there are more positive than negative earnings showing up. The tech sector seems to be especially positive and that is a good indicator of better times ahead. If tech suppliers are showing good results, it probably means that the buyers of their products are doing better, while also building inventory, and that bodes well for the future.

Employment and the real estate sector continue to be what is holding the economy down at this point. The unemployed rate did go down, but it wasn't felt to be a real full story of what is out there. I continue to believe that it will take years to get the labor market back on its feet. The same feeling applies to the real estate market. Here in our part of California, monthly housing prices fell for the first time in a while. The reason was that we went back to a heavy preponderance of foreclosure buying or short sales from the banks. That meant that a large part of sales went to first time buyers, and not buyers that were moving up to the next price level. It appears that there is a move to sell by short sale without going thru a full foreclosure. The banks could see that the time factor is better to get rid of a problem loan by a short sale than to go thru the longer process of foreclosure. Nationwide, to the plus side, it was announced that home equity is on the rise, when compared to the bottom. In addition it was reported that housing starts increased. Those reports are welcome news.

Wholesale prices increased far more than what was expected, 1.4% in Jan. (wait a minute, we don't have inflation we are told, but 1.4% for 1 month is equal to 16.8% if continued for a year), and consumer prices fell--but only when you exclude food and energy. Remember people, we don't want to count eating and getting to work as important---"they" say food and energy are excluded because they are so volatile up and down. We say we pay the bills and should not be excluded. Those pesky wholesale prices went up .4% in December and 1.5% in November. "For the 12 month period, the producer price index "soared" (words of the report) 4.6% in its third consecutive year-over-year increase. Energy price "rocketed" 5.1% last month, including an 11.5% surge in gasoline prices." Yet, leading indicators went up, but jobless claims also went up, so it is clear we have a mixed picture, and that can be very confusing. No inflation is just one huge joke, it seems to me---and yet we seem to be coping better than expected.

A personal note on real estate. I am from upstate NY originally, and my hometown area was in the news this past week because of real estate prices in the area. Of metropolitan areas around the county, our Binghamton, NY area showed the 2nd best rate of loans that are underwater, or where the property is worth less than the loan amount. The reasons given for these areas is that they never boomed far out of control in the first place. I saw prices of homes for sale at under $50,000, with many more under $100,000. Of course, there are other factors, too. The houses in these price ranges are pretty old, in old areas, and the economy is not good there, either. We had a shoe company, Endicott-Johnson, that used to have 20,000 employees making millions of pairs of shoes (2nd largest shoe company at the time) slow down, then close down. I tell you, it is a tremendously sad sight to see those factories empty and the windows broken out, etc. You used to have trouble walking down Main St. at lunchtime, there were so many people on the sidewalks--the factories were the block behind Main St. Now there are many empty stores and a good number of the ones that are there are not doing well. Also, we had IBM factories there, employing 18,000 workers. IBM now has 1,800 left working there--and IBM is doing well, but had to resort to outsourcing and cost cutting--and our area suffered. So---with the real estate underwater rate being pretty favorable, there are some major negative reasons for it.----A quick note on the outlying area of my hometown. We are in the Marcellus zone for natural gas, and farmers are becoming rich on natural gas leases. That is a really big boon to the economy there, if the money stays in the area, that is. These farmers, that have worked so hard all their lives, might just up and leave for retirement in sunnier climes (Binghamton has a reputation for seeing the sun about the fewest days of the year.). Whatever, I'm happy for them.

In general, it might be a good time to analyze the investment markets and try to see if we are getting ahead of ourselves in stock prices, or has the overall economy improved enough to justify this strong upward move????

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

Today's Thought---
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I was always told to respect my elders. Now I don't have anyone to respect--I am the elder -- George Burns ..............sad story of people my age (Mike)

Editors note - Mike is not nearly as old as George Burns was when he made that famous quote. - Tony

Mike

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