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| Author: Mike Celeste | Editor: Tony Ponzo | August Circulation: 13041 |
STAT SHEET WEEK ENDING Aug. 27/ 05
**************** Percent / Points
Dow Weekly Change - 1/5 % - 162
S&P Weekly Change - 1.2 % - 15
Nas Weekly Change - 0.7 % - 15
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Comments:
Only 3 more business days in August, thank goodness. So much for that--how about we look at Bad News, Good News? While August is the 2nd worst month of the year in the markets, September is the worst month of the year. That is the bad news. The good news is that the worst time is the best time to buy, so we may be looking at some opportunities during September. There, that's out of the way.
In the economy, earnings season is mostly over, so more emphasis was put on economic reports and they weren't all that good--but not all that bad, either. By that I mean Consumer Confidence went down, but for the given reason of high gasoline prices. One of my favorite subjects to rail on, and this week is no different. I wonder when we can believe what we hear/see on TV and read in the printed media??? Below I am going to show 3 news reports from a very respected service, Associated Press (AP). All 3 stories are on the subject of oil and were released within 2 hrs. of each other, on 8/24, the day the inventory report was released--here are the key quotes, in order of time released, earliest to last:
1. Oil prices dropped after the Energy Department's inventory report, which showed a drawdown in crude oil stock but gains in heating oil ahead of the winter heating season.
2. Oil prices rose Wednesday after the release of a U.S. supply report that showed shrinking gasoline stocks and rising inventories of crude oil and distillate fuel.
3.Wall Street welcomed the Energy Department's inventory report, although it showed a drawdown in crude oil and gasoline. But the increasing stock of heating oil ahead of the winter heating season was encouraging.
Note that #1 said oil inventory was down--#2 said oil inventories were the opposite, up--#3 said oil inventory was down.
There you have it--all 3 of them can't be correct, as they are saying opposite things about inventory. Which one do you believe? What if you didn't see all 3, but just one of the reports? If you go to "This Week in Petroleum", you will see the government report shows another increase in oil inventory. They also say that gasoline inventory went down, and that is attributable, again, to less refining of gasoline.
Then, there are the reports that continue to "throw gas on the fire", when report after report says that demand hasn't decreased. When you look at "This W in Pet" there is a demand chart for gasoline. While there is a slight increase over last year (not as much as population increase), the last 4 weeks of this year show demand going down, not the same and not higher. I have kept asking everyone I meet if they are cutting back on gas and every single one says yes. We are being fed these lies, or misinformation---can it be on purpose? For what reason are they misquoting the facts?
As a sidelight to gas, but still on the subject of not telling the truth, there was a very small news item in the Los Angeles Times. This was about a previous front page story that I'm sure you recognize-8/23 LA Times "London police acknowledged that a Brazilian shot to death had not run into a subway station, had not vaulted a gate and was not wearing a heavy jacket that could conceal a bomb." No reason was given for saying the opposite at the time of the shooting, so we don't have the full story, but that seems quite a bit in itself.
The question looms large--When can we believe what the media and government tell us, and when can't we? When one is young and full of ideals taught to us, we seem to believe everything. As we get old it appears that we get cynical because we have been exposed to one untruth after another--and some get to disbelieve everything--and that is not good--not good for the person and not good for society.
On to the markets. Not mincing any words, some of the splitters appear to be heading for a close at a loss. While some positive news could come out, we expect to see them down because sell date is the early part of the week. On the other hand---we see the power of positive news in PCP, one of our splitters that jumped a whopping 6.76 points on Friday. You can just imagine how much the call options gained and how much the written puts decreased (good thing). It can happen and we have to have faith in the system.
You probably remember my warning the first week of August when I said that because of August, we might want to cut back on the number of shares bought in the Basic System, or concentrate on waiting for the Big Dippers to hit, or a combination of both. I think that it is worth bringing up at this point, because it turned out to be a very good prognosis of what was to come. We have had no lack of action in the Big Dipper, either, and that was expected with a decline in the major markets. We currently have 7 Big Dippers working. Some are down, but the worst is only about $1 down, and the rest, less than that. And don't forget--we sent out a notice to team members when our Chart Indicator turned negative. I really like that indicator for the general market. How did your portfolio outside of SplitMaster do over this period of time? Keep track of our closing splitters on Past Results on the web site, www.SplitMaster.com and you can further compare. I know it is not fun, but we believe we did give a proper warning and hope you were able to take advantage of it--even if it just means a smaller loss. Every little bit helps. Our given goal is to publish and educate--with the further, final goal of showing that splitters are a great investment---over the course of a year. While we have done it for a long time, we don't rest on our laurels and we are always looking for new strategies within our programs. Right now we are looking mostly at splitters, or recent splitters, and how they react during 2 stages---1. Support/Resistance levels and 2. Earnings announcement days. The latter would be designed for quick plays, most likely in options, but even a possible profitable play in the stocks themselves. For #2 there has to be volatility, and we have encouraging findings in our early studies. Unfortunately, this requires manual analysis, as we don't have a database (yet) for this. An example of this can be seen by taking a look at ARO, which split last year. Look at the volatility on 8/19. The earnings came out after the close on 8/18. The strategy involves taking positions on 8/18, the day before earnings affect the stock price. That date is known in advance, by the way.
The stock closed at 23.75 on 8/18 and on 8/19 it saw a high of 26.48, a full 2.73 points difference--or put another way, a huge 11.6% change. And--two days later, the stock was back down to show a close at 23.57. You can see you have to be nimble, but you can also see that there was a great profit potential if handled in the right way.There is a large list to look at, and we are even looking at just earnings for stocks that might be volatile. One of those would be AACE, which was affected on Friday. It closed Thurs. at 24.76 and after the close the earnings were released. The next day the low on the stock was 22.35, or 10% down. The funny thing on these 2 stocks is that the earnings on ARO were bad, with a lowered future forecast, while AACE had a record earnings report. ARO went up and AACE went down---so--we are trying to take positions to make a profit no matter which way the market drives the price, as long as there is volatility. More to come on this. In the meantime, keep your eye on AACE to see if it quickly recovers to a higher price. Oh, I should mention that our favorite friends, the "analysts" also took a part in each stock. ARO was upgraded on the negative report and AACE was downgraded on the record earnings report.
Announcements----
We are pleased to announce that we now have the FAQ page fully up for your reading. We hope we have answered many of your questions. We had said it would be up sometime in Sept., but we put some extra effort in to get it out this past week.
Also, team members can see that we have added a new feature for your benefit. After you have logged in, you will see at the top "Edit Member Login/Email"--You can click on that to change your login code and/or to change your email address. You do not need to notify us, it is all automatic.
We keep trying---
Today's Thought---
(We-need-a-smile-week)
Did you hear about the fellow that tried computer dating? He didn't get dumped anymore, he got deleted.
Mike
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