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Author: Mike Celeste Editor: Tony Ponzo May Circulation: 6740

Stat Sheet Week Ending May 31st 2009

ChangesWeeklyAprilYear to Date
IndexesPointsPercentPointsPercentPointsPercent
Dow+226.0+2.7%+338.0+4.1%-273.0-3.1%
S&P+31.0+3.5%+45.0+5.2%+15.0+1.7%
NAS+77.0+4.6%+52.0+3.0%+192.0+12.2%

Highlight of this past week: The Indicator Strategy continues its success with another win and an 89% win rate year to date and the Momentum Strategy has another great week and now sits on a 318% profit margin for 2009!

In this Issue---
Options---
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There are times when options get out of whack in value and you can take advantage. Our broker, Ameritrade, just started a feature that the CBOE has had for years. You enter in the stock symbol, or the option symbol and it tells you what the historical value of the option is, compared to the present stock price. There are times, and frequently it seems, when the historical value is considerably different than the going price in the market. You can take advantage of those times. For instance, IBM had a June Put with a historical value of 20 cents, and it was quoted at 40 cents, bid. What can be done in a situation like that is to write/sell the Put to open the transaction, and wait for the option to work its way down to its historical value. Warning---if the stock has a good move in the direction you don't want, like dropping in price, you can easily see the price of the Put go up. Even if it adjusts to true value, you might end up losing, but you have 20 cents worth head start. Now 20 cents doesn't sound like much, but we like percentages, and if you write a Put at 40 cents and the stock price stays about the same, you can expect the Put to go down in price, back to its true value--and if time goes by, you gain by the loss of time value in the Put. In our example, we see that this could turn out to be a 50% move---nothing to dismiss. And by the way, the option on IBM did adjust itself the very same day. That means you could have made that 50% in a few hours. This is why it is always good to check the historical value of the option before you enter a position. You don't want to overpay if the option is too high in price compared to the historical value. It's good if you are writing the option, but not good if you are buying the option. For you option traders who were not aware of this fact, take some time and think about what we just discussed in this paragraph. Don't just read it fast and dismiss it. This one little fact is something that could make some real difference in your option trading success. Of course, we advise that no one enters into these kind of option plays without fully understanding the risks involved and talking to your financial advisor or broker.

Momentum Plays---
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Although we had less plays this month, we closed out May with a great winning record. In the month of May alone we see a 45% win profit rate. That makes the profit rate for the year at just over 318%. Where are you going to find these kind of numbers any place else? Sure, sometimes these plays are a little nerve wracking but let's face it. What kind of trade or investment in the stock market isn't nerve wracking these days? And in reality, most of the plays work very well and are more fun than anything else. A small percentage of the time we have to wrestle with a play for awhile before it does what it is supposed to or some of us miss a winning play by .05 etc.. And sometimes we get stopped out of a play only to see it immediately turn back in the correct direction. We actually had that situation occur on Friday with our W down play on RIMM. The stock was too wild at the beginning and it just did get stopped out before immediately turning back in the right direction. But for the year to date, we are looking at the fun plays being about 70% to 80% of the time and the not so fun plays only being about 20% of the time. So here again the question is, where else are you going to find this kind of success in the market at this time. For you readers who are interested in this strategy but have not yet subscribed to it, click on this link - Learn more. We have a full 30 day money back guarantee which is more than enough time to evaluate the strategy. You can try it out for those 30 days by paper trading. If you find it is not for you, just let us know - no questions asked. The bottom line is, you have nothing to lose from checking us out and profits to gain if you find the strategy is for you. While you are at it, click on this link and check out our record. Past Results

Indicators---
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Team members should get ready for Monday. We have another Indicator Play coming up, depending on the pre-market and opening on Monday. This past week we had a play on the first market day of the week, also, and it was a huge win for the aggressive players. As you may remember, we go for a 10% profit goal in this play, as we consider 10% per day a very nice return. Aggressive players go for more and sometimes they win big and sometimes they end up getting less than the 10% gain. We haven't calculated the difference, but our guess is that the aggressive wins outweigh the lesser prices received. The most recent big win was over $1 per option. That meant that if you bought 10 options at an investment cost of $1,520, you would have had a profit potential of over $1,200, which is a huge percentage win, at around 80%. We now have a record of 31 wins out of 35 plays this year-to-date, and looking for #32 on Monday. Stay tuned on this one............ Learn more

Feedback---
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Here is our favorite feedback from a member this week:

OMG You guys are soo good at forecasting the direction of the SPY and W plays. Today I got $.50 on the COFFT play and .22 on the SPY. I am a happy camper! Trish

The Economy, The Markets & Commentary---
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This past week looked at first like it might be trying to duplicate the week before. Two weeks ago we started off the week with a Dow gain of 235 points, followed by down days every day for the rest of the week. This past week we started out with a Dow gain of 196 points, followed by a down day of 173 points. Was it going to continue that repetition? No, it didn't. We ended the week with the last 2 days averaging up 100 points each day. This market, no matter what else is said, doesn't want to go down any considerable amount. Granted, it ignores negative or less negative news, but it is what it is. There are stocks that are doing very well in earnings---and some have announced splits, backing up once again our theory that splitters are companies doing well. We have Green Mountain Coffee on our Big Dipper target list and when you look at the details for earnings you see that the last quarter beat estimates by 39% (again showing how good the "analysts" are --- being sarcastic).

The markets continue to be controlled by the news that comes out of Washington. I can't remember ever seeing these officials on TV as much as they have been since the new administration took over. It appears that people are buying into the positive approach that is being given. Proof is the report on Consumer Confidence that came out at the beginning of the week, and is credited with the big jump in the market. People seem to believe that things are going to get better, and pretty soon, it would seem. Personally, I don't accept the fact that the recession is going to be over this year, as is the common thought at this point (the blowing wind is definitely in that direction once again). There are lots of troubles ahead, and to me they don't seem the type that can be cured in a few months. However, the rule is not to fight the tape, and that is as true a rule for the stock market as you will find. The pendulum will swing in that direction and overshoot and then correct itself and go the other way, and overshoot again. You don't fight it, you go with it. For us at SplitMaster, we will continue to try to take what the market gives us, day by day, and more often, hour by hour. We often make profits by buying Puts and the market ends the day with a nice gain. That's because of volatility. That's what gives us an edge, if we are correct in our interpretations of our indicators, etc. During the day, with volatility, there are swings in the market. Just take a look at a 5 minute chart of any day. You will usually see swings up and down. This kind of a market is good for us. What is not good is when the market opens and just keeps going in one direction for the rest of the day, with opposite moves not enough to make a profit.

Again and again we hear that there is little inflation. Gas continues it meteoric rise, and we can only come up with about 2 explanations. There is speculation in the contracts again, like there was last year before the bubble burst. Also, there is less production on the part of the refineries, so that prices can be jacked up. There is plenty of oil available--inventories, while down slightly lately because of less product being bought, are still at many year highs. It continues to be a fixed operation, in our opinion, and we are locked into it because we don't have officials that can do the right thing---like raising the margin requirement for oil contracts to the same level it is for stocks. The oil margin is about 1/7 as much as for stock---and we all know that when you don't have to put much down, you are asking for trouble. Just look at the mortgage debacle and you know what we mean.

Speaking of mortgages, we hear that foreclosures are far from being an old issue. Our report is that there is an alarming increase in foreclosure notices in the area of wealthier homes and homes that hadn't been affected up until now. That labor market will do it to anyone, once it gets rolling downhill. It isn't only the average worker that gets laid off, there are many higher level administrators looking for new jobs, and their high mortgage payments don't help the situation. As we said, we are a long way from recovery. Bottoming out is the best I can see, and that isn't a given--at least in a number of areas.

To counteract that, of course, is the old story of one person's misfortune is a gift to another person. With all those foreclosed homes, there is a big increase in work for maintenance on those homes as they are presented to the market, over even kept up while in inventory. Pool people have a landslide increase in business, as a pool turns green and full of bad things very quickly when it is left with no chemicals, etc. Seed companies are doing a bonanza of business as people try to fight the large increase in food prices (yeah, no inflation, right?) by going back to having gardens and growing their own wholesome foods. (I like hot peppers, for example, and make a great family recipe of Cumbosta, a mix of hot and sweet peppers, garlic and herbs, with good virgin olive oil). There is also a lot of satisfaction when you grow your own things--along with the great aroma of the herbs, for example--mmmnn, basil especially. Tomatoes actually have flavor when you grow your own---those store ones are terrible--and--very expensive. OK, enough on food, it makes me hungry. We need to concentrate on making some money so we can have some good food.

Our point is that you need to be selective in your life---in who you pick as a partner, and all phases of your life, including where you put your investment money. We try to give pointers, as we consider ourselves educators as well as investors. The older you get, the more careful you get, as you have gone thru adventures that didn't turn out well and you have had great times, too. You want to use the history of your life to benefit yourself. Don't make those same mistakes, but repeat and improve on those things that have worked out well for you. When teaching I used to hear kids saying all the time that studying history was a waste of time, it was something that happened in the past. Ah, but history repeats itself time and time again. To prove it, we studied certain historical events and compared them to something relative in our current lives. One was the Boston Tea Party, the great demonstration against taxes, especially without representation. Even today, we here about "Tea Parties" that are protesting the rapid increases in taxes that we are seeing (while they try to tell us there is no inflation). These ideas came from history. Don't ignore history--for you will pay a terrible price if you do. Use history to make your life, and your fellow humans' lives better.

Stay tuned..............we live in exciting times.

Today's Thought---
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Tell me and I forget.(Ask my wife--mc).
Teach me and I remember.
Involve me and I learn................Benjamin Franklin

Mike

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