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Author: Mike Celeste Editor: Tony Ponzo July Circulation: 8032

Stat Sheet Week Ending July 10th 2010

ChangesWeeklyJune2nd QuarterYear to Date
IndexesPointsPercentPointsPercentPointsPercentPointsPercent
Dow+512.0+5.3%-362.0-3.6%-1,083.0-10.0%-230.0-2.2%
S&P+55.0+5.4%-59.0-5.4%-139.0-11.9%-37.0-3.3%
NAS+104.0+5.0%-148.0-6.5%-289.0-12.0%-73.0-3.2%
Highlight of this past week: After making some key adjustments, the Momentum Strategy turns in a couple of very good weeks with this week posting 6 plays and 5 wins. And the Strategy year-to- date is posting 167% gain. Excellent Week

In this Issue---
SplitMaster Basic System---
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There is no doubt we had a bad loser in DHR as we closed it out this week. It just didn't have any move and we take the loss, as we know we can't win them all. The puzzler, tho, was DECK, a 3-1 splitter that we held for only a few days. It had a sudden down move and on the official sell day, it was at a loss. However, a number of our smart team members saw that the stock had a good record and decided not to sell that day. A good decision as the very next day the 10 point loss was wiped out and a small profit was available. What made it go down in the first place? We have no idea. What a crazy market, isn't it. At least most of our team managed to get out at a decent price, some at a little profit and some at a little loss.

What continues to be very noticeable is the fact that we are not getting more new split announcements. That confirms our belief that the economy is still not really doing much growing. Those companies that are doing well are holding out on making any new splits.

What is consoling to us is the nice profits we have been making by concentrating on daily trading on the Spy.

Options---
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Next week we have another expiration Friday, for options, Expiration week is usually a pretty good time for our day trading strategies, so we are looking forward to whatever comes up. Because there is a lesser time value on the options, we have to be very nimble in our entry and exit points, as the volatility is higher and that causes fast changes in the option prices. But that also becomes a good thing as we can buy in-the-money options inexpensively and when it goes in the expected direction we get to our profit target faster. Also, that means we can go for bigger profits. We look foward to this coming week.

There are other option trading opportunities that open for us during expiration week and here is one we use all the time. Some stocks that have a lot of activity in the options for various reasons, keep their premiums higher than normal. (Out-of-the Money Premium) So on Friday morning, if we see that a certain option still has an unusually high premium for expiration day, we might sell or short that option with the intention of letting it expire worthless at the end of the day. Here is an example of what we mean. Say XYZ stock is trading for $30.00. You have notice that the stock has an average trading range (ATR) of about $1.50. That means up and down. So it might trade at a low of $29.75 and a high of $30.75 for the day if it follows its pattern. Then you notice that the 32 Call (if they have them every dollar) is still going for .50 in the morning. This is a nice premium for the last trading when the stock is at $2.00 under the strike. So you sell/short the option, collect the premium and watch the stock during the day. If at the market close the stock is trading below $32, the Call will expire worthless and you keep the premium. If you sold 10 contracts, that's $500 in your pocket for about 6 1/2 hours of investment. That's a great return. The draw back is, you are going to want to keep a close eye on the stock for the day and make sure it doesn't threaten to go up to $32. If it closes at $32.01 it will be called out from you which means you will have to buy the stock at market price then hand it over for the call out for $32. Now if you had to buy it at $32.01 and then sell it for $32, you would still make a profit but what if it ended at $33? Then you lose. So watch it closely and if you get nervous because the price is getting too close, you can buy back the option to close which ends the position. But the other good thing is, as the trading day progresses, that option will start losing premium and even if you decide to buy it back, you might wind up buying it back for less than you shorted for giving you a profit anyway. With the above lesson in mind, take a look at VVUS on Friday. This stock is trading for about $11.40 as of Friday and its Call Options have a tremendous premium in them for that price of stock. The stock has some news coming out on Wednesday about an obesity drug approval so Wednesday could wipe out the premium. But if this strategy interest you keep an eye on it. It might be still worth the play. By the way, you can make this same type of trade shorting the Put too. We'll talk more about that another time though. Options are almost limitless in the creative way you can trade them.

Momentum Plays---
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Members know that the market has changed its complexion so much this year that it has had an effect on this strategy and we were struggling with it for awhile. Longer term members also know when we run into difficulty, we at SplitMaster always take action to make whatever adjustments we have to to get back on track. Well, we did just that with this strategy and for the last several weeks, we have been coming back to what we are used to with this week alone producing six plays and five wins! Now the adjustments we have made have caused us to make trades with slightly lower profits but smaller profits means 7% to 9% on investement as opposed to 10% to 12%. Think about that. A 7% profit on an investment that last about 10 minues on average, is one heck of a profit. While 7% on a $1,000 investment is only $70.00 we are still talking about 10 minutes worth of work. And if you are a more aggressive trader and invest $5,000 a trade for example, that 7% turns out to be $350 in 10 minutes. Where else can you do that. PLUS -- our earnings plays will start back in soon as the new earnings season gets started and those will produce bigger percentage profits.

If this interest some you who are not yet active members, check out the strategy by clicking on this link The Momentum Strategy

Or email us with questions at Contact Us

Indicator Play---
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The Indicator strategy is pretty well back in the groove too, and we have raised our win rate to 67% for the year thus far. It was a good week, and we would like to point out that we made profits on Puts, when the market had a retraction to the down side, in an otherwise very strong upward move.

It should also be noted that we have another signal for a play on Monday, so members be ready, if this is the strategy that appeals to you. If you are not a member, maybe you could look at a trial membership and see if this strategy (or one of the others) is something you might want to try. Check it out by clicking on this link The strategies

The Economy, The Markets & Commentary---
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We went from a yearly low last week to one of the strongest weeks in a long time. Of course the "experts" are back on the bullish side and most keep saying we have reason to be positive. In our opinion, which we have stated for quite a while, we are in a trading range. You don't go from a yearly low to a very strong week and think that all is rosy again.

Next week starts earnings reports season, and there are definitely mixed feelings about what is going to be reported. There are many that feel that it will be a good quarter, with many companies loaded with cash. To counterbalance that feeling, tho, is the fear that companies will report good earnings, but warn about the coming quarter. Then, too, they might not report earnings high enough to meet or beat estimates.

It has been pointed out that there aren't many government programs that are kicking in to help the situation. If anyone thinks that the stock market moves independent of government actions, they are sadly mistaken. Almost all of the new mortgages in residential real estate is funded thru government backed programs. Unemployment benefits are a major factor. Tax credits, and the lack of tax credits, rule the activity in this area. Bail outs are saving the financial system, both here and currently more so, in Europe. Lack of government oversight, where it should have been happening, has devastated certain areas.

Of notice this week, also, was an IPO that came out, by a Chinese bank. Many billions were raised to give the bank enough capital requirement because they had loaned so much for expansion in China. The fear is that many Chinese banks also did a tremendous amount of loaning for expansion, and if the demand doesn't match the expansion, there could be some serious trouble.

Just a quick note on one of my favorite topics--inflation. As you know, the "experts" keep saying there isn't any inflation to speak of. I wonder what this could be called----As you well know, California is one of the states hit hard by the real estate crash, with home values taking steep declines. OK, California is where we are based, and our home is no exception to what has been happening all over the state. My home-owners insurance policy came up for renewal, and guess what it showed? Yes, it showed that my insurance coverage appraisal was INCREASED and the premium was also increased. Now, the increase wasn't any small 2 or 3%, it was a whopping 27% increase over the previous year. This is without any claim or any other reason to explain such a violent raise in cost. This was just another in a long line of increases in living expenses and I keep wondering what kind of world these "experts" live in, who say there is no inflation. Then, did you see that car sales took a pretty hefty drop in sales volume last month. I guess it can't be that one of the main reasons is that car prices have gone up substantially, and that long term unemployment benefits were not extended. Yes, unemployed people can't be expected to buy many new cars, but it does drive fear deeper into the souls of those that worry that they might lose their jobs. Merck and Wells Fargo announced this week they are laying off many, many thousands of workers, as a result of a merger in Merck's case, and Wells is closing down a real estate loan division entirely.

In our opinion, we are not getting excited about a week of up markets, as the fundamentals of the economy do not warrant that much optimism. Years--and many years--have to go by before we get back to the level we were at before the greedy people of politics and Wall Street took us down the path of 100% loans with no proof of income, which resulted in a world wide calamity. You decide for yourselves if you think things are improving noticeably in your area. Again, in our area, a major discount chain is way down in sales--and it was told to me that they are down double digits in their daily sales---which includes good days on weekends still being down double digits from the year before.

Here at Splitmaster.com we continue to dwell on day trading, and looking to use our strategies to make profits whether the market goes up or down. Many times the market may end up with a big up move, yet we have made money trading a Put option successfully, when there is a reversal of direction, even if for just a short period. We like to think we adjust to the situation. At this time, the day trading is working well and while we know there are losses once in a while, the net figures seem to bear us out. Take a look at our Past Results under the Momentum Play and the Indicator Play as the strategies currently most active for us.

Just for kicks, how about you readers dropping us a line to let us know what the economy is like in your area. We'd like to hear that some areas are showing significant improvement, but let us know, either way. We will report what you send us in a later newsletter.

Today's Chuckle---
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A drunk was in front of a judge The judge says, "You've been brought here for drinking." The drunk says "Okay, let's get started."

Mike

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