Sometimes we are still surprised at how often history repeats itself. Last week we went over possible expectations for January, and why--Let's take a look at what we said -- "The major indexes have started out the year doing very well---as expected. We are now at the danger point for several reasons. Our old theory of selling at the 10th day of Jan. is just about here (markets were closed until 1/3). The Nas is up for the 5th straight day, indicating a pullback. Last year the Nas was up for the first 7 days, to 1/11, and then pulled back--as expected." So what did we see happen this week? Nas took a dive, giving up a good portion of the gains it had sustained, having been up those 5 straight days. With the week shortened because of the M.L. King birthday holiday, we saw 3 straight down days, with the worst one-day decline in quite a while. Friday saw a minor uptick, but the week lost 2.1% in the Nas (see our stats above). Once again, January did its thing. We pointed this out so our readers might be able to take advantage. We had RG scheduled to close out on Wed., but because of the Jan. factors, we said that we would not be opposed to getting out one day earlier. We saw that some did--and it worked out well for them. The CALL option was able to be sold that one day early for $2 more (pre-split price) than the next day. The play still showed a 105% gain, but the day before selling resulted in the CALL showing a 250% gain. That's what the January Effect can do. We don't think it has anything in particular to do with the economy, but more to do with the mindset of investors coming off the Christmas period attitude. Most people are feeling good during this time--and we even have a term for this period--the Christmas rally. We think it extends into the new year--new expectations being mostly positive. Then the gift-giving bills start to come in and we come down to earth. That pendulum that we often talk about starts swinging the other way, as it always does--at some point. There is never a time of ever-increasing feelings about the market going in the same direction--up or down. The financial media starts talking about what they expect for the year ahead, and if it has been a good year before, there is always caution expressed by the "experts". Caution--not saying one way or the other, just caution--things won't be quite as good, but there are still good situations to be found, just less of them. Whatever the reasons, we seem to see similar results repeated. In 2006 we saw the markets go up for the first 7 days, then drop for the next 3 straight days and not recover the highs until sometime in March. Then, after a nice run-up into May, the markets took a real dive and didn't recover January's number (Nas) until into October. January is a powerful month and should not be ignored. Then, too, we know from history that the best 6 months in the market are the cold months. This year the economy has a lot going for it. The political factor can not be overlooked. The presidential race seems to heat up earlier and earlier and each party wants to put its best foot forward leading up to the election. Matters that hurt get done in the early part of the presidential 4 years. The reasoning is that people will forget tax increases, rising costs, etc., if they occur early. Then, they will remember the good things that happen closer to election time. We don't see any reason to change that outlook this upcoming time between now and the next election.

The investment houses seem to be directing their research "experts" into changing sectors that look appealing. There has been quite a bit of influence attempted to get the tech sector to be one of the hot areas for 2007, but so far, very mixed results. It seems good earnings are coming in from IBM and Apple, for instance, but the stock traders are saying they are not good enough. Both stocks did well in 2006, so maybe it is profit taking. Sometimes it just seems that you just can't do enough to please some people.

The two big sectors that we keep our eye on, Energy and Real Estate, continue to be fascinating to watch. They both are such a large part of the economy and in such a state of flux that we can't seem to let them go out of our radar. We will have more to say about them soon (naturally, I just can't let go), as the words being bandied about by the "experts" and the media just doesn't seem to want to challenge them, Really, simple logic says that a lot of that mumble-jumbo coming out just can't be--not if you apply it both ways. By that I mean, for just a quick example, the reasoning given by the oil industry for prices remaining high doesn't hold water. The reasons should be applied whether oil prices are going up or down, when you say how gasoline is priced. No, their statements don't hold water--in both Energy and also Real Estate. More on these another time.

Mike, along with his partners Tony Celeste and Tony & Patricia Ponzo, are the principals of SplitMaster. Situated in Southern California, the service started in 1997 as a joint venture to expand on a strategy the Celestes had developed based on stock splits - that splits do indeed produce short term gains in the price of the shares involved.

From this premise they created their first strategy, the SplitMaster Basic Strategy, which was released to the market after several years of exhaustive testing.

Not content to rest there, they developed another strategy called The Big Dipper which, while based on the Basic Strategy, focuses on stocks that have temporarily taken an unusually big dip in their price.

They started offering their Options Strategy in 2004 after having traded them personally for a number of years. The strategies, which are again based on the SplitMaster Basic Strategy, involve both buying calls and selling puts.

Recently they added another strategy called Pattern Plays, which targets stocks that have repetitive price patterns every year, allowing for predictable entry and exit dates. And in testing is yet another options strategy called Momentum Strategy, which will be available in the near future.