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Author: Mike Celeste Editor: Tony Ponzo November Circulation: 6760

Stat Sheet Week Ending November 22nd 2008

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-451.0-5.3%-5,219.0-39.3%
S&P-73.0-8.4%-668.0-45.5%
NAS-133.0-8.8%-1,268.0-47.8%

Highlight of this past week: Indicators Strategy has more wins even in this crazy market this week and keeps November all wins and no losses.

In this Issue---
SplitMaster Basic System---
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It looks like splitters are actually telling the story of the economy. We always say that splitters come from companies that are doing well. To prove the case, we look at how many companies have announced splits lately. The last 2-1 split that was announced was on Sept. 6, with one 3-2 split announced Sept. 16, 2008. That's over 2 months ago--and simply says that companies are not doing well, so no new splits are announced. We will be looking for a turnaround in the market when new splits manage to come thru. We can't wait. HOWEVER, in the meantime, our day trading strategy on the Indicators and Support/Resistance continues to roll along. See below.

 Momentum Plays---
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It was another quiet week although we did manage to get one official play in. I say official because we did have a nice day on Thursday with two plays making nice profits. The only thing is, we at SplitMaster did not actually make the plays as they were up plays and the market was terribly down that day with the pre-market future looking very bad. We had a number of members make the plays anyway even though we said we were passing and they did very well. So congrats to those members who were more perspicacious then us.

On Friday we did go into one play - UTHR. Everything looked good about this stock being an up play and the market certainly cooperated with its nearly 500 point rally. However, we held the stock all day and nearly got stopped out twice and that was with a $2 stop. In the end, the stock did finally come up and we got a profit though it was very small. Still, this strategy stands a 74% profit rate. That's good in any market but it is especially good in this brutal year. Check out the Momentum Plays

Three Indicators---
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This past week we had two more wins and no losses in the Indicator System, continuing the win streak for November to 5 wins and 0 losses. It's nice to see something related to the markets that keeps hitting on all cylinders. We also had our personal account show continued success using the Support/Resistance points during the trading days. The Indicators remain a most accurate showing of what is going on in the markets for a 1 day play. The strategy basically follows the momentum of the market and with such great swings, it is doing a very good job of predicting the markets next move.

In such a volatile market, this is one of the few strategies out there that is consistantly doing well. It's a very simple strategy to follow and at $19.95 a month, it is certainy worth looking into. For those readers who are not yet following this strategy, send us your questions to Staff@splitmaster.com. We will be happy to tell you more about it.

The Economy, The Markets & Commentary---
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Stay tuned....Boy, the national news re the economy is full of contradictions coming from the "experts" and "analysts", especially on CNBC. Everyone there seems all mixed up, with opposing sides sure that their point of view is the right one to fix this economy. We said awhile back that we feel sorry for whoever wins the election because the fix is going to be so hard to accomplish. The two months before the president-elect comes into office seems like a very long time. It is understandable to us that the present administration might want to keep the situation on hold as much as possible so that the new people don't have to come in and completely reverse directions. I really do feel sorry for these people that we put our "trust" (if that can be used at this time, when talking about politicians) in. Let's keep our fingers crossed that they do make some very good decisions.

The markets did what we were looking for--they went up on Friday. Why were we expecting a nice up move? There are a couple of reasons. One--our indicators pointed in that direction, and they have been very good to us. Two--the last three times the Dow had 2 big down days in a row, the 3rd day showed a big rally. On 11/12 and 11/13 the Dow dropped 588 points, with the 3rd day almost wiping out all of that loss, with a gain of 553 points. On 11/5 and 11/6 we had down moves totaling over 900 points, with the 3rd day showing a jump of 248 points. Earlier, on 10/24 and 10/27 we had 2 days down totaling 515 points, with the 3rd day showing a whopping gain of 889 points. People often ask why it is good to study history. This is one of the many, many reasons we need to study history--we either want to avoid past mistakes or take advantage of good things that happened in the past and could well happen again.

Let's be careful to point out that we have continued to feel that the economy is in such straits that the momentum is still down. These up moves have been showing that they are opportunities to either short the market or to buy puts. On our end, we have been buying puts and day trading them for nice profits---Day trading them because we feel the volatility calls for day trading. On the other hand, if you feel the down momentum will continue, a longer term hold on puts has also proven to be very successful. We saw puts we held on the SPY go from 2.64 on 11/10 to a high of 17.22 by expiration day on 11/21, just 11 days later. That means that an investment in 10 puts at a total cost of $2,640 went to a value of $17,220 in those 11 days---with plenty of chances to get out at 16 or 15. It does take nerves of steel to do this, but if you go with the trend and are correct, this is what is possible using our signals. Now, to be truthful, I don't have those nerves of steel to hold through the tremendous volatility that is presently in the markets. Yes, I did make the plays and make a decent profit on our signals, but have to admit that there were many ups and downs during those 11 days. That volatility is what we have to use, tho, when stability is something that seems in the far distant past. There are opportunities to make profits in these moves, using both calls and puts. For myself, I tend to favor the downside more than the upside and make my goals greater for puts than for calls--because of the down momentum.

Are we going to give bailout money to the US auto industry? That has been the main issue this past week and the arguments are long and strong on both sides. To throw my 2 cents worth in, I feel that eventually there will be some money for them. Not trusting politicians as I do not, my guess is that they already know they are going to do something, but they want to rake these auto people over the coals to make it look like they are really opposed to it--to appease the taxpayers. There will probably be some tight conditions on the money, but I tend to lean toward some sort of financial help given to the industry. What really made my blood boil, tho, was having my intelligence greatly insulted listening to the union official saying that a bankruptcy would be a Chapter 7 bankruptcy, with complete dissolution of assets and the loss of 3 million jobs. I would bet my mortgage-free house that if there was a bankruptcy it would be a Chapter 11 method, with the company continuing to operate while in this condition--just like the airlines did. The professors teaching bankruptcy all said that is how it would be--with a couple of main concerns about the public buying cars. Hey, if the company can't cut it, with the top officials of the company flying here and and there in the company jet, then they don't belong. In all places I've worked, if you can't do the job, you are let go, and without a big golden parachute. Believe me, there will still be cars made there, whether they are managed by someone else or by the same group, only reformed. The other auto producers in the US, like Toyota, Honda, Volkswagen, etc. just don't have the capacity to make that many more cars, if the Big 3 US makers can't cut it. As far as the question of people buying cars from a company in BK, that has been sufficiently explained, also. A warranty guarantee can easily be set up---but I ask you--if the warranty is a question, then why are people still buying cars from GM, Ford and Chrysler, if they believe the companies are on the verge of closing up completely? Why wouldn't they think that the warranty would be worthless when buying it now? True, the car market is slow, but it is slow for all the makers, and it is because of the economy, not from fear that the auto company won't be in business.

Pres.-elect Obama got millions in campaign donations from unions and they feel he is beholden to them for their support, so that is another reason to expect that support, in some form, will come. And don't get me wrong--unions have done much good, but as in all areas, that ol' pendulum swings to excesses and has to swing back the other way, at some point. Concessions need to be made by every single person in this country--and some are conceding a lot more than others.

A quick mention about the continuing drop in oil prices---going from $147/barrel to $50/barrel. That is a drop of 66%. Out here in California, our area saw a top of $4.60/gallon for gas at the discount stations. If you use the same percentage to calculate what you would expect to be paying now, you would see a price of $1.56/gallon. In my neck of the woods, the current price is $2.17/gallon, far from what you would expect, if done fairly. But, we all know that the oil industry doesn't treat us fairly. They raised the prices immediately when oil was shooting up in price, but were very slow in reducing the gas price when oil fell. That procedure has just continued on to the present. They will catch up, but in the meantime they are squeezing every cent of profit that they can from us. (But it does feel good when pulling up to the pump, doesn't it?)

 Today's Thought---
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Why is it that at class reunions you feel younger than everyone else looks? (And I've been to many reunions; it's always the same feeling)


Mike

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