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Author: Mike Celeste Editor: Tony Ponzo May Circulation:

Stat Sheet Week Ending May 17th 2008

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+241.0+1.9%-278.0-2.1%
S&P+37.0+2.7%-43.0-2.9%
NAS+83.0+3.4%-127.0-4.8%

Highlight of this past week: SU runs for daylight and is still going up after a 21 point gain--thus far.

In this Issue---
SplitMaster Basic System---
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We all know the investing business is nerve-wracking---and it is so, no matter if a stock is down too far or if it is up a great deal. Fortunately we seem to be facing the nerve problem because of the upside move--SU in particular. The stock is up over 21 points from our buy date price and there is still quite a while to go before we get to sell date. What to do? We remember, painfully, watching nice profits go up in smoke because some bad news hit the market, etc. Sometimes we set a percent goal and go with that--but this time we have let the stock run. Of course, it is an energy stock and the bubble has not burst on this sector yet. It hits us hard in the pocketbook, but at least we are balancing the books a bit by joining when we can't beat them. Buying the stock takes some of the hurt away from our consumer expense side. WFT is another one that has a very nice profit running. Now that one hit a high of 91.00 on Friday before settling down to close at 88.60, nicely up from our 81.73 buy price.

 Big Dipper System---
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We learned an important lesson from one of our team members, Stan. Stan does very well on his own, as well as following SplitMaster. One indicator that is a bible to him is the 20 and 50 day moving averages. When one crosses the other, he is ready to jump on board. This week we saw, hopefully, the end to a long wait for a comeback---and the 20 day crossed the 50 day, to the upside. Therefore, we think there is more left in this stock, which came from a low of 46.05 in March to its present day price of 79.60. That's one heck of a ride and the stock taking that ride is FWLT. Our faith in the quality of the stock has been rewarded---and you can continue to watch the stock to see if those crossing averages are going to bring higher prices. DRYS did the same thing--and went from a low of 48.21 in Jan. to a current level of 110.74. That's what can happen when a splitter catches hold and does what it is capable of doing. There was no reason for the stock to drop to 48, when it was expected to earn 12.00 per share--come on, you don't have to be that financial guru to see that. One of the team has been holding the stock and writing calls all the way up on this stock, and still has it---now expecting to write June calls, since the May options expired today.

You chartists out there can look it up--go to April 21 and see the crossing of the averages at 74--and a short time later it is 110. Just one of the things that can be done in addition to our more formalized buy and sell dates.

Options---
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We are finding that it is sometimes difficult to get our timing down when alerting day trading team members to opportunities---but they are there. We use a variety of measurements to determine when to get in and out of options like the SPY group of puts and calls. First of all, you have to be on the computer when trading time is on. Then, you have to be nimble, changing orders or even canceling orders when you see a quick movement start--and it is against you. Quick movements in your favor are the real fun times, when you are in and out in sometimes a minute or less. BUT--the important thing is, the opportunities are there. Day trading and also the writing of covered calls and the writing of puts are also nice "dividend" incomes. This past week I wrote puts on an old splitter, CTSH, and they expired today worthless, so the money was 100% profit---and now I look forward to writing some for the June option expiration. We will be talking more about the opportunities in the near future. That also includes the possibility of mentioning non-splitters as well, if they seem to get out of line with reality. We did KSS recently on a short, as the price seemed to have run up too far, and it took a few days, but it ended up being a profitable trade.

Momentum Plays---
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There is not too much to talk about in this strategy for this week. We had a couple of potential plays but they turned out not to have much action so we passed on the plays. This seems to be a trend happening lately. The stocks might gap nicely but then trade in a small range after the gap making it uninviting to go in for a play. In some cases the stocks aren't even gapping much.

Many of these stocks are announcing their earnings in line and report lackluster outlooks - not too bad but not too good either. This is making for boring moves. One thing is for sure. Our strategies are always changing in their dynamics. But fortunately, when one strategy slows down, another picks up. That is the case with our Basic Strategy which is producing great profits at the moment.

So we can do two things when a strategy slows down. We can concentrate on one of the other strategy or we can look for variations in the play that may make a difference. That is what the SplitMaster team is doing now -- studying variations. And when we find a promising variation, the members will be the first to know.

Of course there is always the fact that things could heat up again automatically in the near future. We'll see what happens this week.

 Three Indicators---
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This is where we think a lot of readers are not taking advantage of a terrific grouping of Indicators that we give every day. There are 3 of them, and when all 3 are overbought or oversold, it has shown results to be extremely accurate. This past week, for example, we had all 3 showing overbought and that was for a play on Friday. Now you might take a look at the final numbers for the major indexes and think it wasn't much of a day. WRONG. The put on the spy, as an example---the May 143 put--opened the day at 43 cents and later saw a high of 1.39----more than triple before closing at 23 cents when the market made a strong move up to almost wipe out the day's deeper losses. If you had been following from the night before, when we posted the 3 Indicators and said they were definitely overbought, you could have bought at the open and sat back until you took your profit---100%?--or 200%--or until your nerves made you crack and you closed the position---never riding it all the way down again---because you weren't greedy, and you gave up some profit when it started sliding and decided that was it for the day. Those indicators are powerful---and we don't get much feedback on the use of this tool---Hint--The W Indicator (for team members) is especially accurate all by itself.

 Feedback---
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John writes in and says--"Have you guys noticed the new 52 week highs of the Splitmaster Active Picks??? That's strong!"

Yes, John, we noticed, but it got us so excited we forgot to cancel some buy orders on the Big Dipper because they were so far below the current prices and one of the stocks split on Fri (past our entry point)---and you team members pointed out our error. No harm, tho, and smiles on faces of those that have been in these nice winners.

 The Economy, The Markets & Commentary---
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I've come to the conclusion that our US society has developed to the point where I feel we are losing something that we are never going to see again. That dwindling group is the middle class, which made us different from most societies around the world. When I was growing up the majority of married women stayed at home and took care of the kids and the house. Dad earned the money. I clearly remember the point where over 50% of married women were now working. That was quite a while ago. It is almost unbelievable to think that we had a time when Dad's job brought in enough money to save for buying a house. Now we are facing record foreclosures because working families (often more than 2 jobs in the household) can't make the payments. Part of it, of course, is based on the fact that we should never have had 100% loans with no proof of income. That was a given disaster, as you long time readers know from reading years ago when we pointed this out. The crushing blow, in my opinion, is the oil situation. Just an opinion, but when there is an adequate supply of oil and the price keeps running up, it seems to me that there is something rotten going on. We had manipulation of electricity rates and there is no reason it couldn't happen to oil. I buy from you, raise the selling price and you buy it back, and then you raise the price and sell it to me again. I can't prove this, of course, but it did really happen to electricity and why can't something like this happen in oil. Another utility that is making major jumps in cost is water. Here in California we get conflicting reports about our water supply. The scientists reported that our snow back in the mountains was 120% of normal--great news, right? No, the administrators say that we are below normal and we need to conserve--and Los Angeles City is about to put into place a whole new set of rules on how much water you can use, when you can use it, and when you can't use it. A simple washing of your car is going to almost be a thing of the past--along with a nice grass lawn. I've only been to Europe once, when the family went to Italy and Greece. What stood out to me was the difference in houses. In the US we have individual houses, separated by yards and those yards are usually made up of nice grass lawns. In both Italy and Greece, most houses were built touching each other, and right out to the sidewalk, and I didn't see much grass. We're heading your way, let me tell you. Oh, by the way, water rates are going to have to go up to make up for the loss of income when we conserve water--willing conservation or not willing.

The rich are getting richer, and I mean very much richer, and the middle class is cutting every corner they can think of to make ends meet. Just look at what is happening in Dubai. They are creating a world renowned city in the desert---and a mind boggling fact--25% of the world's crane supply is in that one city !!! Amazing to me, simply amazing! Of course, many of our large companies have moved corporate headquarters to Dubai already. Money gets many allowances and dispensations, it seems. (Catholic annulments go to divorcing couples with 7 kids--and an annulment was supposed to be allowed when the marriage was never consummated--strange, but rich people got annulments.) Yes, the rich are getting a lot richer, and we are feeding them our dollars. We feel helpless. The cost of food in the latest report was up 28% (due mostly to energy costs)---Has your income gone up 28%? I don't think so. Surprisingly many companies are reporting good earnings. Those companies are probably those that have been able to pass on energy increases to us consumers. There will come a time, tho, and it will be soon, when it hits the consumer that they can't borrow any more, or increase the use of their credit card. They will have to make a decision on whether to eat, buy gas, or buy medication, etc., etc. Is there a company that has a major business in printing menus? If you know of one that is publicly traded, please let us know. We read that menus are being printed twice as fast as normal because the rising prices of food dictate that restaurant prices have to go up--or the business goes out. And if you can't keep the business when you raise prices, you go out anyway.

In the airline sector there has been so many fuel surcharges that it was reported that on short flights the cost of the surcharge was more than the regular cost of the flight. Every single person I know is cost conscious of gasoline prices--and acting accordingly--not just complaining about it. A leisurely drive, just for the enjoyment of it, is a thing of the past. And my bet is that we won't see those days again. There is a ray of hope, tho--and that is the fact that there are still going to be millionaires created from being almost broke. Why? Because we are a creative people, and opportunity is going to be there for a few of us--that gives the rest of us hope. In addition, we said above--if you can't beat them, join them. SU, on of our splitters, is an energy stock--and has a great profit at this point. That's another part of the hope that is there. But--it is going to be a tough battle.

Do some of you old timers remember back in the 1980's when we had a peanut freeze one year. Prices jumped sky high--ok, that is to be expected. However, we never saw prices go back to the original prices when the normal peanut crop came in. No, it seems to us that our standard of living is not going to revert back to what it was--and it is up to us to remind the coming generations of what it was like--history is very important, for you look back in order to look ahead and try not to make the same mistakes. Let's hope that all of us find our way out of this mess by using our blessed brains and continue to be creative and productive. We at SplitMaster are trying to help and it feels good when we can contribute.

Today's Thought---
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You are today where your thoughts have brought you:
You will be tomorrow where your thoughts take you.......James Allen, British philosophical writer.

Mike

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