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Author: Mike Celeste Editor: Tony Ponzo July Circulation: 8032

Stat Sheet Week Ending July 17th 2010

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-100.0-1.0%-330.0-3.2%
S&P-11.0-1.0%-48.0-4.3%
NAS-17.0-0.8%-90.0-4.0%

Highlight of this past week: The Momentum Strategy continues to accumulate wins with 7 plays this week and 6 wins. The strategy now sits on over 188% profit year-to-date. And two aggressive plays were huge winners with over a 63% profit. Keep your eye on this strategy. Check it out at Detailed Results

In this Issue---
SplitMaster Basic System---
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What continues to tell us that corporations are not really doing as well as people think? Yes, the continued lack of split announcements tells us that and we see no reason why it should be any different, at this point. We wish it were, but our analysis says otherwise. The enigma is that so far, many companies have announced very good results and see an improving future. Now the question is, which will prove to be the better indicator.

Options---
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This expiration week for options proved to be very, very exciting. In fact, our day trading strategies did very well when using the Spy. We expect that expiration week will show action, and this week it was action galore. Read below for further comment, in the Economy section.

Remember in last week's newsletter we told you about the premium in VVUS? We said that because VVUS was going through an approval process on a new obesity drug, that story was causing a lot of excitement. So the premium on the options was in the stratosphere. With the stock trading on Wednesday at about $12.20, the 12 strike CALL was still selling at an unbelievable $3.30 with over a 1,000% volatility. Even the 15 strike Calls and higher were going for unbelievable premiums.The stock actually stopped trading on Thursday as a panel reviewed the drug and gave an opinion on whether or not the drug should be approved by the FDA in October. Long story short -- the panel voted against the drug and the result was the stock opened up for trading again on Friday down nearly $7 to $5.25 or so. The result of the premium on those 12 Calls??? They went to zero and if a trader had sold those options to open (short the option) they would have received $3.30 or $330 per contract that would have gone directly into their account. On Friday with the stock down so much, those options became worthless meaning the trader would keep the entire $330 per contract free and clear and within two days of entering the trade. If 10 contracts were traded that would be $3,300 profit in two days.

CAUTION: These kinds of plays are not a recommendation by us. And please be aware that only experienced option traders should attempt such plays. We are an option education service first and foremost and we want to teach about the vast possibilities for trading options. We mainly give this as an example of what can be done when an option is overpriced especially on expiration day. VVUS was a special case with the review by a panel of a very important potential obesity drug. Only the most informed and aggressive traders would make this play. A trader would have to really read up on the background on the testing of the drug and would have to know that there were some serious negatives about the drug with bad side effects. They would also need to know that in most cases during such reviews in which the drug has only been tested for 1 year, the drug would most likely not be approved the first time around. But even knowing that, making this particular trade is taking a chance. If the panel's opinion came back that the drug should be approved, the stock could have gone up to $18 and then you would be having to buy back the stock to close for $6 or more and that would have produced about a $3 loss. But as it turned out for those well informed and aggressive traders, they made a great play. Also, there are many such plays to be made with much less risk involved. The premium would not be that high but still good. We'll discuss more on this another time.

Momentum Plays---
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This strategy is going through a period in which it is improving every week. Last week we had 6 plays with 5 wins and this week we had 7 plays with 6 wins. The profits keep mounting and now the strategy is sitting on a very healthy 188.71% profit for the year. And we are back to nearly an 80% win rate for the month - meaning 80% of the time the play won. To add to these great results, we had a couple of aggressive trades this week. One made a 63% profit and the other made a 78% profit on that one trade alone. The market has definitely gone back to a pattern that is giving us much more predictable swings and we look forward to that to continue. Check out the action at Detailed Results

Since we are on this good roll it seems like a good time test out the action for yourself if you not already doing so. Drop us an email if you have any questions about the strategy or would like to give it a test drive. Emails us at Contact Us

Indicator Play---
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Our Indicator signals were right on target this week. We had a signal for every day of the week, and every signal was correct The signals each day called for a play looking for the market to go down. Remember, earlier in the week, the market continued to be strong to the upside and we were calling for down plays. Each one made it because we were correct in picking when the momentum swung to the downside, even for just a short period. Also, we appreciated the feedback from members who were pleased to be able to take advantage of the moves. This and the Support/Resistance Strategies (SR Play) are really hot right now.

The Economy, The Markets & Commentary---
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Remember, it was just one quick week ago that the market had the best single week in a year--and we said that the experts were again calling for rosy times ahead. We also said that we felt we were just at the upper end of the trading range--and ---BAM ! --Friday of this week came along and put them in their place---so much for that, as usual, those "experts" swung right around and went back to the fears in the market. How can anyone be paid for the drivel they put out to convince us that they know what they are talking about. There is the one exception that we keep talking about, tho, and that exception is the word of the floor traders. They have a much better grasp of the current situation. Don't be fooled by those from funds, etc,, talking about how good they have been doing. Keep track of what they say, just for kicks, and you will see what I mean. (CNBC)

Earnings have been coming in better than estimates--but we all know that estimates are being set low so the companies look good when they beat them. In addition, what isn't mentioned much is that estimates were lowered on many stocks, so that made the actual report look even better. Next week there is a large part of the S+P 500 stocks that will be reporting. So, what happened with these "good" earnings reports? The markets absorbed them, thought about them, and then moved on to something else, and that something else was negative--evidenced by the large drop on Friday. Fear is back in the market--that is, back until there is another rally, and the big boys will tell us how well we can expect things for the rest of the year, etc. I will keep repeating---It is going to be multiple years before we get back to a decent economy. Too much damage was done by the greedy politicians, mortgage brokers, and Wall St. powers in the finance area. It hurt people all over the world and so many job losses just have to be recovered before we see real progress.

Does all of this say to give up? A huge NO to that. If we put the pressure on the people that depend on our vote and on our buying their products, we can have some worthy influence. Write to your representatives--we advised long ago to pick one per week and one subject per week and let them have it.

We don't give up on the markets, either. We continue to show that we can make money in both up and down markets and our signals lately have been just outstanding. This was option expiration week, and we know that the week can be generally volatile and profitable. This week in particular, tho, was too exciting. I say too exciting, because we had trouble getting our orders off, due to the speed that the option prices on the Spy changed. We have to type up the order and indicate which of our member groups get it---those seconds cost us about at least 5 profitable plays because the markets moved in our direction so fast. We don't care if it is an up or down market, we have strategies that cover each direction. It is just too bad that they moved as fast as they did, causing us to miss plays because by the time we got the order ready, we were almost at our profit goal. A mention-- We have one section for Aggressive players. We give the general entry point and they then play to their own comfort level. This Friday we had 2 plays I would like to mention. One called for an entry around $1.01-1.05 and aggressive players saw that option go to $2.57. The other one was called at an entry point of $1.04 and it went as high as $3.52. You realize that an investment of $1,000 saw one go to a top value of $2,570 and the other one go from $1,000 to a top vaule of $3,520----all in 1 day ! Of course, we know that we can't get the very top and we can't enter at the very bottom, but look at the room we had in between. That is exciting to us. Is this something of interest for your possible investing strategy? And--to humble us--we point out that we have members that do even better than we do. It is a savvy group we deal with, let me tell you.

A quick mention of the request we made last week about what is happening to costs around the country, etc. We did hear from those that are facing very similar situations to us here in California. Prices are being raised all over, and not just a couple of percent, either. Huge increases of 20 to over 30%. Our readers are showing that they are not hoodwinked by the people that are trying to convince us that there is no noticeable inflation.

There are a sizable number of topics we would like to mention, but it would make the newsletter too long, and your eyes would definitely glaze over. However, we will get to them a little at a time, as I think they are important. For now, my first grand-daughter is getting married in a couple of hours and we want to make sure we get there on time (we really like who she picked), so I'm signing off for now.

In addition--This coming week we have lots of economic information coming, along with government reports and policymaking, so don't go away.

These are interesting times.....very interesting.

Today's Chuckle---
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How bad is it? The economy is so bad that................
I got a pre-declined credit card in the mail.

Mike

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