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Author: Mike Celeste Editor: Tony Ponzo April Circulation: 7523

Stat Sheet Week Ending April 17th 2010

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+22.0+0.2%+591.0+5.7%
S&P-1.00.0%+78.0+7.0%
NAS+27.0+1.1%+212.0+9.3%

In this Issue---
SplitMaster Basic System---
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As mentioned previously, we haven't had many split announcements in the past year. However, this may be changing. Recently we have seen 5 new split announcements come thru since March 24, with a ratio of 3-2 or better. In addition the stock prices of those have been going up An additional splitter that was announced way back in Oct. 2009, far in advance of its split date, has just closed out with a big gain, going from 53.74 to 66.86, We did exit earlier when the stock made a very quick profit from buy day, but the computer sell date worked out very well. The other splitters currently active show nice gains. We keep saying that stock splits come from companies that are doing well, and with the increase in earnings being reported by so many companies, we are optimistic that more split announcements will be coming.

Big Dipper System---
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We wanted to give an explanation as to why it appears that we haven't had a splitter dip down to the Big Dipper buy price. Keep in mind that the market has had such a strong steady increase, we haven't seen any type of meaningful correction to the downside. We need some downside move to get there, but we are perfectly content to let the Basic splitters make the profits.

Options---
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There were some electrifying option movements on Friday. When the news hit that Goldman Sachs was going to be charged by the SEC with fraud, there was an immediate and huge move in the options. The stock dropped almost 30 points, from around 184 to a low of 155.55 and the May 170 Puts went from about 2.50 to 19.00. What a Strangle that would have been! Incredible--and the news came out while the market was open, which seemed a bit unusual, in that many times major news announcements are done after the close or before the open. In addition, it needs to be pointed out that if options were written instead of bought, there was a huge loss in the play, depending on how fast an investor reacted to the news. If he didn't see the news until after the market closed, there was a real downer delivered for the weekend. If the long Strangle were played, it was party time for the weekend because of the huge gain. This type of news is what can keep you on your toes as to the possibilities when there is a major news event.

Momentum Plays---
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The Momentum strategy continued to be light in action this week but we did have 3 plays -two of which were very nice wins and one was a small loss. Week's Results We are still in the unofficial mode as we have been discussing but that did not stop quite a few members to make the trades we posted and make nice profits. In fact some made more profit than we posted and as we always say we love to see it. The number of plays were light mainly because earnings plays just started to show up mid week for the new season. They will start increasing this week and become a steady stream. So the earnings season has begun. We had no other plays due to the very low volatility in the market that still persists except for ----- FRIDAY. Boy that was quite a move down after the GS fiasco was announced. Traders started selling out and taking the profits as if they could be expecting a big crash. But by the end of the day, the market gained its composure and ended only 125 points down on the DOW. That's a pretty good one day move down but we needed some down move to keep things healthy. Now the question is, how much more down do we have? Will traders still be in a selling mood or will things go back to normal - a little down or a little up? We'll have to wait and see.

One thing is for sure though. The volatility for the day spiked up quite a bit. Those traders who were alert to the fact that sooner or later we were going to have such a day, could have and probably did ,take advantage of the dropping market in a big way. Buying some SPY puts for example and riding the wave would have made a trader a tidy profit.

Indicators---
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We have been on the sidelines with this play, as the market has not wanted to go down--only up (until Friday). We feel this sideline has kept us from losing quite a bit. We wish we could have had something to get us into Spy Puts, but this move was unprecedented since a long time ago.

The Economy, The Markets & Commentary---
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On Friday, as stated above, we had our first substantial down day in a long time. The major reason given for the drop was the news that the SEC is charging Goldman Sachs with fraud. Sachs strongly denies the charges and it remains to be seen how it plays out. In addition, Sachs has an earnings release scheduled for nest week. The estimates call for about a very nice 18% increase in earnings. The stock dropped as many as about 29 points before recovering to lose about 23 points. Monday will be a very interesting day because of the earnings coming up, plus the possibility of more big volatility in the stock. Just imagine what it must have felt like for option holders of the April Calls and Puts, which were expiring the same day as this fraud charge was released. A real eye opener.

Now the question comes up--again--are we about to see a possible correction? The "experts" have been calling for a correction for quite a while. It's the same old story---if you keep saying it, inevitably you will be correct. Then, these people are treated like magical predictors and given lots of media play. They have been wrong for a long time, but that won't be remembered. We at SplitMaster have felt the market was overbought, but we have had no idea when there would be a correction. While we know that nothing goes up or down forever, predicting a top or bottom is a very tough thing to do. We called the almost continuous ride to the upside a comparison to a runaway freight train. Has it slowed down and will it come to a halt?--We don't know, but it will be interesting to see--whatever happens. In the meantime, we saw the major averages reach new recovery highs, right up until Friday, with the Dow rising every day of the week until Friday, and Nas was up 6 straight days going into Friday.

Unemployment made a turn for the worse the last couple of weeks, but earnings have been good. Retail spending has increased. Higher unemployment and increased spending are combinations that are somewhat difficult to explain. Earnings can go up with a lower work force if productivity remains stable or even increases. It seems a cloudy picture, with more time needed to see if the early Easter and temporary help will be factors that will change the outlook.

Government intervention into the economy is another ongoing situation. When the government aids are reduced or eliminated (like the housing tax credit), will that result in a negative turn in the economy? If things are improving, the gradual withdrawal of government aid can be offset by the improving economy---or not. The old saying that the market moves 6 months ahead of the economy is going to be tested here. The very strong up move in the markets says that better days are ahead, but there is also the knowledge that markets overreact, both up and down---so again we need to wait and see. Boy, the CNBC guests are really on both sides of the prediction game, so you listen, do some research on their previous comments and maybe you can come up with 1 or 2 that seem to be consistently close to the mark.

One interesting comment on financial pay for the top people. Many banks have doubled the pay for their CEO's, again provoking the thought that they are paid too much. The one that especially caught my attention was the 32.5% increase for a bank CEO---and the bank had lower profits than the year before. Other top executives also received increases. The report said that there was a challenging economic environment.
It would seem to me that if there was a profit, the pay would most likely have been doubled instead of "only" a raise of 32.5%. I guess I'm too old fashioned in believing that you give rewards when results are better and you take away when results are worse. Ah, life at the top.........we see it, but it is unattainable to the vast majority of us.

Stay tuned............next week should be VERY interesting...............

Today's Thought---
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My reading of history convinces me that most bad government results from too much government..............Thomas Jefferson

Mike

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