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Author: Mike Celeste Editor: Tony Ponzo February Circulation: 13836

Stat Sheet Week Ending February 11th 2006

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+125.0+1.2%+201.0+1.9%
S&P+3.0+0.2%+19.0+1.5%
NAS-1.00.0%+57.0+2.6%
Splitmaster Strategies
Basic...............+4.7%
Big Dipper..............+10.8%
Option Calls..............+74.0%
Option Puts..............+81.0%

Highlight of this past week
AET made a new 52 week high this week, taking the option with it.

In this Issue---Auto-Trade Opportunity---
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If you have been watching SplitMaster and its trading action, and you would like to get involved but just do not have the time, consider auto trading. This is where a broker will actually follow the SplitMaster signals and trade your account for you according to the SplitMaster rules and according to your budget. We now have two great brokers to choose from and you may already have an account at one of these brokers. To find out more send us an email at contact@splitmaster.com

Testimonial---
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HI Mike
Great news!! I have been using TOS for over 2 1/2 years.Between my wife and myself we have 5 accounts with them, which we auto trade. Kurt Christopher who handles auto trade is sensational. He has helped me on numerous occasions. I was wondering how your autotrade is set up with them. For instance, can you set it up to buy just long option recommendations based on basic and dipper strategies? Can it be set up to sell naked put recommendations(in a non retirement account,of course)? Incidentally, I enjoy your weekly newsletter. It is very informative and written with great warmth.....Al (Note--We also promptly answered his questions, too)

SplitMaster Basic System---
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We see that we have a number of splitters from the energy sector. Energy stocks have taken a hit this week, but did seem to stabilize by the close on Friday. Jim Cramer has said, more than once, that energy stocks (and he gets to individual stocks in this field) are still going to make good profits, even if oil falls--and it is still above $60 as I write this. We saw this happen earlier in the year and they recovered to make new highs. Much of the profit in our systems depend on timing--is there enough time before sell date for prices to recover ? We never predict the future of stock and option prices, and we don't want to--but--we continue to repeat that historical studies show that stock splitters do better than the market indexes. This could be a good time to tie in with the Big Dipper on these.

Credibility--Too good to be true?
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Lately, we have had a number of emails from non-members asking if we post results in hind-sight. We can well understand how some people can feel that these results are too good to be true. We are not offended by these inquiries, as they are reasonable questions. We know of other sites that actually state they post in hind-sight, and they take the high of the day for their sell price and the low of the day for their buy price. We would like to make 2 points here---1. We offer the guarantee, to new members that after trying our system for the initial 30 day trial period, if you are not satisfied for any reason, we will refund your (fee) . Our only stipulation is that you email us your request for your money back no later than 3 days after the end of your 30 day trial." In this way, you can see that we do just what we say--we post 2 days in advance of the buy date, AT THE OPEN, on our plays. Every once in a while a split is announced that is a buy the very next day, at the open, and we send an alert to notify everyone.

Point #2--We use the opening price so that anyone can go back and check historical stock prices for a stock and see what it opened at that day--and it corresponds to our price. As a final comment, our testimonials are all from team members--and we fall back on the old saying, "Word of mouth is the best advertising." We certainly appreciate these comments, too. If you are not a team member, maybe this is a good time to give us a trial run. The markets have declined and there could well be some good buys out there. We never guarantee that we will match our past results in the future, but 31 straight years of a winning system does say something---now it is up to you.

Big Dipper System---
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Before an explanation, just let us point out that we currently have 4 Big Dippers and they all hit this week. Three of the four closed Friday showing a profit from the targeted buy price (but not closed out yet). One is still below that buy price. --Remember, look at past results--Now, on to the explanation.

There seems to be some confusion out there about this system. It is a completely separate system, based on our historical computer studies that show SOME splitters take a dip in price during the period they are in our system. Here is what we say on the site about BD's. "The Big Dipper system is based on stocks that are picked in much the same way as the Basic Strategy selects stock splits. In fact, most of the stock picks are on both the Basic Strategy and the Big Dipper. The difference is, that stocks on the Big Dipper have targeted lower or dipped prices that one would buy the stock only if and when it hit this lower targeted Big Dipper price. Our studies have shown that those that drop by a certain amount have a good tendency to come back up. Some don't, but by far, there are more winners than losers. Many people like this system as they can't afford to get into every stock split in the Basic Strategy. This way, the BD gives a lesser number of plays, while at the same time, the profits per stock seem to be much higher. We like options in these, if they are available and the premium is not too high, but we do not recommend getting into options unless you understand how they work. We like the leverage that options provide."

In some cases, our target sell price, after the dip price is hit, is lower than the buy price of that stock in the Basic System. Again, this is a different system. Many times the stock recovers and both systems make profits, the Basic and the Big Dipper. Not always, but it is nice to have a profit in at least one of the systems. In rare cases, both systems could end with a loss. However, we return to our statement--at the end of the year, past results in each system show profits--

Options---
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Weathering the storm---and batten down the hatches. Part of weathering the storm could involve the affect of the Big Dipper. Options on the energy sector have taken a hit this past week, along with the market indexes. No one likes to go through times like this, but they do come, and they do come every year. We keep repeating ourselves, but ---so far, every year when we report the final figures, there has been a profit in both the stocks and the options. That is the true strength of our systems, in our opinion. Will it continue? We don't know, but we do know that we are investing our own personal money in these systems, too. We don't invest in every single one, but we cover quite a few when you combine our plays.

Testimonial #2---
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Anyways...there are two days left in January, and I'm sitting at a 49.7% profit right now. I ran the numbers and figured out that if I get a profit of 49.7% every month of this year, I'll end up with $3,045,188 by the end of the year. I like to dream big. Besides I really like some of the splitters that are coming up. What irritates me though is how costly the time value is on some of the more volatile stocks.
JV
EDITOR'S NOTE---JV reported later that he ended January with a 64% profit, up from the 49.7% above

S+P 500 Options---
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There is a bit less than 1 week to go before the active plays in this system are set to expire. There are currently 2 plays going, and both are well into profits. It would take a drop of about 630-800 Dow points to get to break-even, otherwise they will expire worthless if such a drop does not happen. This system is all based on margin in your brokerage account and it does take quite a bit of margin to participate. Basically, depending on which strike price is used, the margin requirement can take from $10,000 on up, per contract written, to get into these. This is aimed more at members that have securities sitting in the account anyway, and want to put the margin to use--and no interest is involved, just the margin (at my brokerage house, anyway). We feel it is like receiving a dividend.

Chart Indicator---
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This past week the CI confirmed that it was definitely Negative. That was done early in the week, on 2/7. We hope it is short lived and temporary, of course.

Stock Split Comments---
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Because this past week was a rough one, we thought we would take a look back in time (as you know we like to do). How does this market mood compare to times in the recent past. We like to use monthly figures, as that tells us that there are a number of splitter stocks involved, not just 1 or 2. In 2005 we found that we had 1 month that was a loser in the Basic System (April). In 2004 there were 2 months that we saw losses in that system (May and October). Yet--at the end of the year, both years, we ended up with very nice percentage returns. Last year it was 49.25% and in 2004 it was an excellent 61% profit. We do go thru these things. Again, we can't guarantee that this year will show profits, but we look back at the past--for some wise people have taught us--history has a habit of repeating itself.

Pattern Play System---
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As we have stated in earlier newsletters, we don't have a long history to study in this system, and with the fast increasing supply of splitters that do have a history, we might want to concentrate on our Basic and Big Dipper Systems. Having said that, I would like to make a very personal comment about 1 of the stocks in the PP program--HSY. For no real special reason other that it is near Valentine's Day (and guys, you had better not forget that day) and lots of candy is purchased, I like HSY--and have doubled up on my CALLS on it. This is not to suggest that anyone else should do the same, but I'm just throwing out a personal feeling. (Maybe it's because I like their chocolate so much??)

SplitMaster request---
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As you probably know, we welcome questions, suggestions and comments and answer them as promptly as we can. This time, I would like to ask you a question, and ask that you take a moment to drop us a very short and quick note via our email. We like to know how our readers find us. Here is our question to you---Can you tell us what search words you used to find us on the net? That's all there is to it. It could be "stock splits" or "stock strategies" or "option strategies" -- as possible examples. Even if you can't remember back then, what search words would you use now, if you didn't know about us? We will really appreciate hearing from you. A repeat phrase---We all learn from each other.

The Economy---
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There isn't too much to say about the economy at this point. Most of the earnings have come in, and the market will have to find another major area to concentrate on. And--the markets will find something to concentrate on. We are keeping our eye on oil and real estate, two of our favorite subjects. Oil has come down this past week, and gasoline inventories took another jump--but I don't see gas prices dropping. In the area of real estate, I did see that in CA we had a 15% increase in foreclosure notices--that is just the first stage. Even so, that is quite a hefty jump and an ominous cloud that might get darker. Personally, I have said I think it will get darker and that prices will drop, not level off--and here again in CA we have a report this week that the pros are expecting only a 2% yearly drop in sales of existing homes, over 2006.

Today's Thought---
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These are the times that try men's souls-----Thomas Paine, 1776 (And still applicable at various times each year since.)


Mike

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