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Author: Mike Celeste Editor: Tony Ponzo June Circulation:

Stat Sheet Week Ending June 12th 2010

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+279.0+2.8%-217.0-2.1%
S&P+28.0+2.6%-23.0-2.1%
NAS+25.0+1.1%-25.0-1.1%

Highlight of this past week: CLB a splitter, goes up about 6 points in 1 day after buy date and almost 9 in 2 days. CLB (Click on Last Mo Detail)


In this Issue---
SplitMaster Basic System---
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This week's rally was a welcome sight for the splitters, too. As you can see by the highlight, CLB went wild on us, and we closed it out early and hope to buy it back at a lower price before the split run is over. It is already up over 23 points since the split was announced--but that was way back in the dark days of Feb. when prices were a lot lower. At any rate, it again shows the power of stock splits which appear to be coming back strongly after being dormant for nearly two years. Hopefully that is a sign that the overall market is recovering.

Options---
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With high premiums in options, we are looking for some good spreads. If we don't want to invest the money in the stock that is splitting or another bullish stock that has high option premiums, we could buy a deep in the money Call on that stock and write a Call with a strike price that is higher than the current stock price. That way you are taking a stock position for a price that is a lot less than the actual stock price, when you buy the deep in the money Call. If it is a splitter and if it goes according to plan, the stock price could go up, increasing the value of that deep money Call. It also increases the price of the Call that you wrote at the higher price, of course. Your profit there is the difference between that stock's price at the time of writing and the strike price. Example-- XYZ stock is $53. You buy the 45 strike Call for say $10 and you write the 55 Call for say $2.50 leaving you a total debit of $7.50. ($10 debit - $2.50 credit = $7.50) Now let's say the stock goes to 56 on expiration day. Remember this is stock split so we are expecting it to go up. Your long Call position on expiration day would then be worth $11 and the written 55 Call is worth $1. The time premium is almost all gone on expiration day. So you sell the 45 long Call for $11 and buy back the 55 written Call for $1 leaving a $10 credit. Now you subtract your orignial investment of $7.50 and you wind up with a $2.50 profit which of course is a decent profit for about 30 to 45 days or less. Put another way, that is a 33% return on your money.

Momentum Plays---
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This strategy is still going slowly with the market continuing to be so unpredicatable. But we did manage to get one good Indicator play off on Thursday with our aggressive members holding on to that play longer to really rake in the profit. That Indicator play was a Call play and if you remember Thursday, was a big up day with the DOW ending up 287 points. So that was a good day. If we can get some follow through on the rally this week perhaps we'll get some action going.

Indicator Play---
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We were happy with the Indicator results, as we have had only 2 plays lately, and won on both of them. As mentioned above, the biggest part of the news is that aggressive players potentially ended up with huge profits on each of the plays. Aggressive players go for their own comfort level as far as exiting the play, and the gains were excellent.

The Economy, The Markets & Commentary---
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Yes, we were very happy to see the nice gains for this week, but it still seems to me that we are going to see some more downward moves in the general market. New stock split announcements have dried up again, and that tells us that companies are being more conservative, even if they are in a great cash position and sales are improving, even slightly. On Friday the retail sales report was worse than expected and the market opened down, but fairly quickly recovered and ended up for the day. We are still down for the year, but not nearly as much as the week before. Maybe we are in a trading range--and if we are, that is something we like, as we feel our strategies do best in a trading range.

Here at the ports around Los Angeles, we saw trade rise sharply. Imports were up 12.5% and exports up 5% from May of this year over May of last year. So, while the stock market had its worst May in many years, the trade report had a good month. We have to be careful about how much we read into these trade figures, as many companies are still restocking from low inventories earlier. It remains to be seen if sales will show results like this. So far, sales are not much more than the same time last year, altho there are some better results in individual companies.

The future is still very cloudy and we all know that the stock market does not like uncertainty. The global financial situation is still a major concern. Then, we have the national debt situation that is going to come more to the forefront in the near future, when more people will be asking how we are going to handle this tremendous debt. States are still in precarious positions and cities, also. The bail outs certainly did not reach our neck of the woods, as most cities are announcing layoffs because income is nowhere near expenses. The all important education front is being hammered pretty severely, too. One local district is laying off 70 teachers---teachers, not clerical, but clerical is being hit, too, naturally. Their only hope is that teachers vote to take furlough days with no pay, or major increases in the average classroom size. The number of school days is also being reduced in some places. Whatever course is being taken is a reduction in the quality of the education that will result. If our educational quality goes down, that is a real tragedy for the future.

The next few months are going to be critical and then we have the elections in November. The primaries are just a prelim to the big battles to come, and we don't think either party knows what to expect, because many people are very bitter about how our battered economy got to be this way--and they are blaming both parties, as neither one has done much to make things better.

Just one point of interest---Meg Whitman spent $71 million of her own money JUST to get the nomination for governor here in CA. That was a record, and now we will see how much she spends to attempt to win the Nov. election. That's for a job that pays $206,500 per year. You can guess why.

Stay tuned, these are very interesting times................................

Today's Thought---
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Life isn't tied with a bow, but it's still a gift.


Mike

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