mailogo:: Newsletter
Home :: Strategies :: Membership :: Past Results
Author: Mike Celeste Editor: Tony Ponzo October Circulation: 13247

STAT SHEET WEEK ENDING Oct. 28, 2005


******************* Percent / Points
Dow Weekly Change + 1.8% +188
S&P Weekly Change+ 1.5 % + 18
Nas Weekly Change + 0.4 % + 8
**************************

Highlight of this past week
SBUX closes out with a great gain of 135% in the
call options and 74% (out of a possible 100%) in the puts. The stock had a nice run, up 114% annualized..

In this Issue---
AUTO-TRADING - A new service coming
**************************************************
GREAT NEWS! Because you requested it, we are adding a fantastic new beneficial program to our service. Many of our members have been asking if we are going to ever make a deal with a brokerage firm that offers Auto Trading. We promised we would look into the matter and consider setting up such a program. Well, for those who have been waiting, here it is!. For those who haven't thought about it, maybe it is time to do so. Here is what is coming down. We have just made an arrangement with AOS Brokers to provide this Auto Trading service for us. If you start an account with them, they will trade the SplitMaster strategies automatically for you. That's right, they will trade for you according to your instructions. That means, once you establish an account with them, you can instruct them, for example, to trade 25 shares of every SplitMaster Basic play, or trade 3 contracts of every Call play in the SplitMaster Option Strategy or do both or any other combination of trades you what them to make for you. Get the idea?? So you no longer will have to worry about missing a play that makes a great gain. They will do it for you while you are at work or busy doing something else and they will trade it like a machine never missing a beat and based on your instructions. And here is a bonus. Their commission fees are going to be hard to beat from any other broker. You can start an account with them very easily and we can send you the paper work to get started. We should be ready to roll out in the next week or two but let us know now if you are interested. Send your emails to contact us and we'll answer your questions and send you information so you can prepare. Hope to hear from you.

SplitMaster Basic System---
***************************************
Many investors fear the month of October. Here at SplitMaster we feel a sort of indifference about the month, as we have looked back at the results for past years and it really isn't too bad. In our Basic System we have closed out all plays with a sell date during October. It was a good month--with net results showing a 53% annualized rate of profit on the 6 splitter stocks that we listed. There was one that sort of irritated me, CHRWD, which was closed out on 10/21. Shortly before sell date it got in a funk and declined from its high for the year. Right after the sell it took off again, rising almost every day this past week, and surpassed the old high and made a new one. We made a small profit on it, but extra gain was left on the table. Oh, well--move forward, as there is always something else to take its place, as we always say. This time we could of had extra gain, another time the SplitMaster sell date saved us from losing. Over the year, it all works out well.

Big Dipper System---
************************
We see 2 Big Dippers currently on the active list and one, ZNT is closing out on Monday. Both are showing profits, and while the profit isn't something to jump up and down about, a nice steady rate of gain is nothing to sneeze at. The 2nd Dipper, RYN, closes out next Friday.
Keep your eye (actually, use both eyes) on them for final closing prices. Past Results will have them posted as soon as they are closed.

Options---
************
We were very pleased with the option results for the month. We have none left in October, so the final score was 7 wins out of 8 plays. The lone loss was on the call in the above-mentioned CHRWD (it still burns me), which didn't lose much anyway--just 12 cents. By the end of this past week it would have had a great gain---but you win some and you lose some--let's concentrate on the winners. For the month, the net results showed a 63% gain on the calls and a 76% gain on the puts. Remember that the maximum you can make on the written puts is 100%--and that occurs when the price goes to zero. Starbucks was our personal favorite play and it didn't disappoint. The interesting thing, too, is that the split was announced when Starbucks' stock price was near its 52 week low. That was a great sign. I learned a long time ago--don't bet against Starbucks.

S+P 500 Options---
*********************
How about that play? We made a 50% gain in one day, and that is something to write home about. This system uses the written Put as its main emphasis. To get a good feel for the power of time in options, watching the put prices deteriorate is a great example. It was very evident this past week. On Thursday the S+P 500 was the same as it was the week earlier---BUT--the price of the put on Thursday was less than 50% of what it was the week before. That was because the time value on the Put was dropping each day it gets closer to expiration. We make our profit when the value of the written Put goes down. Isn't it great when the price stays the same and you still make a profit? We definitely think so. Of course, on Friday, the markets exploded to the upside and the SP 500 zoomed up to be 18 points higher than when we sold the put. Actually we listed 2 different puts into the system, the Nov. 1085 and the Nov. 1065 puts. The goal is to see them at zero by expiration date on 11/17. Of course---we never object to taking profits early, as we want our team members to be comfortable in their plays, so no argument about closing the books on it after a 50% gain in one day.

The Quest---
*************
Looking for something to develop in this system very soon, as we have been waiting for November to roll around, and here we go.

Chart Indicator---
*******************
The Indicator has been flirting with going positive, but backs down just as it gets to our break point between Positive and Negative.This indicator is more of an intermediate term sign, while we use the S+P 500 as a short term sign. We posted a positive signal on that when the SP hit 1180. It immediately bounced up to 1205 during the past week, dropped back to 1179 on Thursday, but held there and raced back up to 1198 on Friday. This has been a great signal during 2005, being correct 8 out of 9 times, so we will see how this time works out. It is really another system, if one wants to look at it that way. We will keep you posted when it turns again.

Stock Split Comments---
****************************
As we predicted, there were more new split announcements this past week. Earning report season also brings stock splits to some of those companies that have done well. At this point, for those that like to plan ahead a bit, there is one more new split hitting Buy Date for Oct 31, and 7 that have qualified to be on our list for November. The exciting part of all this is that November starts that period of time,historically, that is the best time of the year for profits in the stock market. Since 1950, November, December and January have made up the market's strongest three-month stretch of the year, according to Stock Trader's Almanac. We like to point out that January has some particular characteristics, but more about that at another time.

New Option Testing---
*************************
We remain excited about this new system and are testing what I hope will be the last Beta test. This should be a good test, too, because right now this test is at a slight loss. We plan on closing it no later than Friday of next week, and while a profit or loss won't dictate the final decision, it will give us more insight into how the plan works. Let me just say to keep your eye on FAST this coming week. Just keep in mind that this system can show a gain with a move up or down--it just doesn't like the price to be the same. Since the system deals with splitters, the logic is that over the long run, splitters make gains, so if there is "x" gain, there is a profit. The play is exciting. While it may have a somewhat limited up side, it can make profit if the stock goes up or down and it greatly limits ones loss. It's sort of a conservative approach with an extra bonus if the stock goes down a lot. After all, making a profit if the stock goes up or down is an incentive in itself. A 2nd new system, based on Pattern Periods of stocks is also being tested, and we told you about some that we were studying. 2 of them would have closed out at nice gains--both in the stock and the call options (puts, too, if written). TGT and COST make their target sell prices, which were 3.5 points profit on TGT and 5 points on COST. Remaining is WMT, which has just Monday before it closes out. It hasn't hit the target price, but is up for the month, so far. These were plays that looked for prices changes between Oct. 1 and Oct. 31. Next, keep watching EBAY until the end of the year.

Tip of the Week---
*******************
Short interest figures are something that many investors could benefit from--possibly. The higher the short interest goes in a stock, the more shares have to be bought back at a future date, to cover the short position. Many times you will see a stock jump dramatically and one of the reasons is not only that some good news has come out, but the fact that the good news is forcing the shorts to cover, and to cover by placing their orders at the market, which feeds on itself.

The Economy---
*****************
Another volatile week in the markets and mostly caused by different economic reports. Friday saved the week when the report came out that the US growth rate was stronger than expected, especially after the 2 major hurricanes. Of course the results would have been even better without the effects of the hurricanes, but by being strong anyway, the markets reacted favorably. The Dow had 3 of the 5 days with changes of over 100 points--up on Monday, down Thurs. and back up on Friday. Company earnings have been coming in strong, yet there is concern by some about the next quarter. More than a handful of companies that had excellent 3rd quarters are warning about expecting too much from the 4th quarter. Microsoft was one of those, but the stock reacted the opposite of what usually happens with an announcement like that. Many "experts" discounted the warning, saying Microsoft could be playing the game of saying that and then surprising with better-than-expected results. There were a couple of things that bothered me about the economy. These "experts" keep saying that inflation is still on the low side. I don't consider the increases I have to pay for so many things to be increases on the low side. Exxon sales topped a billion dollars a day--a day--and had record profits of 9.9 billion for the QUARTER ! Their sales were $100.7 billion--the most by any company in history. We all helped these energy companies make these obscene profits. Oh, there are studies, demands, requests, etc. on what to do about it, but I can guarantee you that no government intervention will occur that will help us ordinary people. Another concern of mine is a report in the real estate sector. Mortgage defaults in CA are on the rise, and a bottom seems to have been reached on how few are in default. This rise was the first in more than 3 years. Also, inventories of unsold new homes nationwide rose to a record--a record for what period ot time was not mentioned. I've mentioned before that all hot markets come to an end and the only question always is, how far in the opposite direction does it go? To those that keep saying that real estate will not fall, just level out, I say--Keep dreaming. When you have interest rates rising, which they are, and you combine that with interest only mortgages, you are putting a match too near gasoline. If these people can't refinance for a longer term interest-only loan, there is going to be some real trouble in River City (as The Music Man used to say). Nationwide, the median new home price fell 5.7%, the biggest decline since Jan 2003. New home inventory is at a supply record that would take 4.9 months to sell, based on current trends. What happened to those days when it took less than a week to sell and in some areas, at prices above the listed price? Gone.
In Calilfornia it took about 10 years to get back to the price level of 1989-1990. Yes, it took off again, but I believe we are at the point where the pendulum starts swinging in the other direction. I just hope it does't do too much damage to the economy. I keep saying that you can always find negative reasons why you shouldn't invest--always--but for all that said, we like to dwell on the positive and over all these years that we have been personally investing, the net move is up. And--we repeat--we are entering historically good months.

Today's Thought---
**********************
Life's Journey is not to arrive at the grave safely in a well preserved body, but rather to skid in sideways, totally worn out, shouting..Holy Moly!! What a Ride!!"

Mike


The Splitmaster.com information system delivers email to addresses provided by subscribers. To Subscribe or Un-Subscribe go to our Newsletter page.