You may recall that I wrote about the Presidential Cycle in my essay of 12/30/05. It says, basically, that stock market performance is usually mediocre during the first two years of a President's term, but is quite good in the last two years of the term. We are now in the second year of President Bush's second term. Therefore, this indicator is saying that 2006 is likely to be only a so - so year for the stock market. This indicator was on the mark last year.

I wrote about the so-called "January Barometer" last year in my essay dated 01/21/05. This indicator, created by Mr. Yale Hirsch of Stock Market Almanac fame, says that the market's performance for the year will emulate January's performance. The Price of the VectorVest Composite fell $0.65 a share last January, so the market should have also gone down. The DJIA did, in fact, close down slightly last year, but the S&P 500 and NASDAQ composite were up slightly. The Price of the V V C was up 4.0%. I'd have to say that this indicator was also on the mark last year.

So both the Presidential cycle and the January Barometer worked last year. How are they doing so far this year? As of last night, the Price of the V V C was up 4.7%. Unless the market tanks over the next two days, the January Barometer is signaling an up market for 2006. The Presidential Cycle implies that 2006 won't be so hot, so it's not looking too good right now. But hold on a minute.

If one were to use 1998 and 2002 as examples, they would see that the market started off reasonably well in both of those years, then began to crumble in May and June. In both cases, the market bottomed in October and rallied strongly into the following year. If this market does the same thing, the early months will look pretty good, the summer months will be painful and the latter months will be those of recovery. In the end, the January Barometer will have done its thing early in the year and the Presidential Cycle should rule in the latter months.

If the Presidential Cycle works as it has in the past, the big rally which is expected to start late this year will last clear through January of 2008. So that's the story on Two Good Indicators.

THANK YOU VERY MUCH.
A new man, Dr. Ben Bernanke, will be taking over as Chairman of The Federal Reserve Board next Tuesday, January 31st. Many analysts are concerned about how well Dr. Bernanke will fill the very large shoes of current Chairman, Dr. Alan Greenspan. This was also the case 18 years ago when Dr. Greenspan took over from Mr. Paul Volcker.

The story of this transition was told in an excellent article, "Skepticism Greeted Greenspan, too," in yesterday's edition of USA Today. Mr. Volcker was a giant of a man, both physically and intellectually. He took office in 1979 when inflation was looking to go out of control. To make a long story short, Mr. Volcker took care of that.

What about Dr. Greenspan? How well did he do? There's a crowd in New York that doesn't think he did very well at all and criticize him at every turn. That's easy to do because anyone could allege that things would have gone much better had Dr. Greenspan done this or that. There is no way to know what might have happened had the geniuses had their way, so let's look at some facts:

Yes, there were three recessions and some economic slow-downs during his tenure. There were several financial crises, three bear markets and several market melt-downs, too. But through it all, Dr. Greenspan made the moves to right the problems and this country prevailed and prospered. Gross Domestic Product, for example, grew from $4.8 trillion in 1987 to $12.6 trillion in 2005 for a gain of 163%. Population rose 21.8%, from 243 million to 296 million, over this same period. So per capita spending is now greater than ever before. For investors, the S&P 500 went from 300 in August 1987 to 1,284 today, a gain of 328%. For that, I say nice job Dr. G., and Thank You Very Much.

If you haven't been trading in Canadian stocks, you have been missing out on some great money making opportunities. The Canadian market has performed very well and is likely to do so for several years to come. Why not? With a resurgent boom in demand for natural resources such as oil, gas, timber, diamonds and metals, many Canadian companies have prospered and are positioned to do so in the years to come. For investors, it gets even better than that.

On February 4, 2005, I wrote about Canadian Income Trusts. These entities are similar to U.S. Limited Partnerships, and they have delivered outstanding capital gains and dividend yields over the last several years. Some analysts were saying it was too late to buy these stocks last year when I wrote about them. So let's see how they have performed since then: The Industry Group, now called Investment Trust (TrstUnits), gained 2.59% compared to the Price of the VVC/CA which gained 8.62%. Well, that's not so hot, but it's not the end of the story either.

The top 20 stocks in the Investment Trust (TrstUnits) Industry Group ranked by VST-Vector gained 13.83% in less than a year. The top 10 stocks gained 31.40% and the top five stocks gained 59.01%. You might say these excellent results are just dumb luck, but they are not. While I can't say that the top five stocks will always outperform the top 10 and the top 10 will always outperform the top 20 stocks, I have done hundreds, if not thousands, of Quick Tests on the Canadian database, and I assure you that the top stocks ranked by VST-Vector will consistently make money and outperform the market in the Canadian database as the American stocks do in our American database. Moreover, anyone, including me, would have a hard time outsmarting the VectorVest system of ranking stocks by VST-Vector.

If you read my essay of 02/04/05, you would see that I cherry-picked five stocks I thought I would buy. I am pleased to say that four of them have gone up in price and the portfolio gained 14.59%. That's pretty good, but it's not nearly as good as the top five ranked by VST-Vector. Oh well, at least the portfolio gave a dividend yield of 9.90%.

Before closing, I must say a few words about mining stocks. For a number of years, I've been receiving a magazine called the Bull & Bear Financial Report. This magazine is chock full of articles about mining companies. While many of the articles were quite intriguing to me, I never felt that I had enough information to buy any of the stocks. With VectorVest Canada, however, I now have the confidence I need to make trades with these stocks. As with the stocks in the Investment Trust Industry Group, the top stocks in the Mining Industry Groups also have done quite well. For example, the top 20 stocks in the Mining (Gold\Silver) group are up an average of 301.04% since 02/04/05.

As a final note, we are now including a new WatchList in VectorVest Canada of the stocks the Standard & Poor's Income Trust Index.

Just how good can VectorVest get? I don't know, but I can tell you this: As long as you, our subscribers, keep sending in your suggestions, VectorVest will get better and better. Thanks to our talented Product Development Group, I'm pleased to present a summary of our latest improvements.

PORTFOLIOS. You may now view your Portfolios as an alphabetical list as well as by the traditional "Tree" configuration of Groups and Portfolios. This new feature makes it extremely easy to find any Portfolio and its Group location. It also provides a complete inventory of your Portfolios.

A new filter has been added to the "Buy from Search" and "Short from Search" functions which allows you to specify the maximum number of stocks to be selected from any Business Sector. This feature may be used alone or in conjunction with the Industry Group filter.

A new button labeled "News" has been added to the tool bar of the Portfolio screen, (all data screens, actually), which allows you to access Yahoo!Finance with a click of the mouse provided you are connected to the internet.

GRAPHS. A field labeled "Add to WatchList" has been added to every graph which allows you to add stocks to any existing or new WatchList while you are still viewing the graph. This feature makes it much easier and faster to build a WatchList of the stocks you want to track. You may also access Yahoo!Finance from a graph by clicking on the company name shown on the graph. Finally, the Default setting on Custom Graph Dates has been changed to start two years ago and end one year ago as compared to previously starting in 1996. This revision makes it much easier and convenient to study more recent graphical information.

UNISEARCH. As with Portfolio Manager, the alphabetical format for locating and viewing searches has been added. This feature solves a major problem in knowing exactly where your searches are located. Surprise, surprise. Green and red arrows are shown with the searches to signify whether a search is bullish or bearish. Yes, you can add this feature to your searches by using the Edit function.

A major improvement has been made to the UniSearch tool by adding a filter which allows you to specify the number of top or bottom stocks to find by any parameter or indicator. This feature may be used alone or in conjunction with other filters. Just think about what you can do with this feature. For example, you may wish to deal with only the top 20 RS stocks in the top 10 RT Business Sectors. This feature is used in today's "Strategy of the Week."

Finally, the "Save Search as" screen has been modified to allow you to enter the Name, Description and Group all at one time. Cool.

VECTORVEST VIEWS. The "Market Calls Viewer" and "Strategy of the Week Viewer" menu options have been moved from the Viewers Menu to the Views Menu. A new feature, the "Essay Viewer" has also been added to the Views Menu. This feature displays a chronological list of all the weekly essays which have appeared in VectorVest Views. Finally, the ability to search the Views by section as well as by date has been added.

While I have tried to be both brief and clear in describing these enhancements, the best way to see how they work is to visit the VectorVest University. Keeley Murphy does a wonderful job of describing how to use each of these VectorVest Enhancements. Simply click on http://www.vectorvest.com/vvuniversity/upgraderedir.aspx.

P.S. If you haven't already done so, take a few minutes to attend one of our new weekly classes on Market Timing and Strategy. They're really great. Simply click on For further demonstration of this strategy, please see VectorVest Univity.

I'm sure you've heard about the guy who repeatedly beat his head with a hammer because it felt so good when he stopped. After 13 consecutive interest rate increases, investors turned euphoric given the prospect of an end to the Fed's rate increases. But it isn't the first time they have undergone this experience.

Last June, Mr. Richard W. Fisher, a recently appointed President of the Federal Reserve Bank of Dallas, appeared on CNBC and said the Fed was in the "eighth inning" as far as interest rate hikes were concerned. Of course, the market rallied on the comment. In October, when the market was struggling, he said inflation was near the "upper end" of the Fed's comfort zone and the Fed can't "let the inflation virus infect the blood supply and poison the system." These remarks killed a nice rally and triggered a costly sell-off. Of course, Mr. Fisher's comments don't carry the same weight as the minutes of a Federal Open Market Committee, FOMC, meeting, but any news of the Fed's intentions sends the market a fluttering. When the minutes said the Fed was less worried about higher inflation and it thought the number of additional tightening "probably would not be large," the bulls stampeded.

Most analysts say that another rate increase of 25 basis points at the January 31st FOMC meeting is a slam-dunk. Futures contracts on the federal-funds rate put the odds on another rate increase at the March 28, 2006 FOMC meeting at 50%. The new Chairman of the Federal Reserve Board, Dr. Ben Bernanke, will run that meeting since Dr. Greenspan's tenure as Chairman will end on January 21, 2006. The big question is whether he will follow in Dr. Greenspan's footsteps or set out on a path of his own.

I happen to believe it is of the utmost importance that any Fed Chairman establish his or her credentials as an inflation fighter right from the get go. Therefore, I would be quite surprised if Dr. Bernanke did not do pretty much what Dr. Greenspan has done in the past. In other words, he will error on the side of raising interest rates in lieu of letting inflation run out of control. This means he will raise rates until he sees signs of a weakening economy. By then, as we know, it will be too late to prevent a recession. This is not what investors want to have happen, but it has happened more often than not.

Investors want to see a return to a Case 2, Goldi-Locks scenario of rising earnings and falling inflation and interest rates. I'm not saying it can't happen, but it's a highly unlikely occurrence. It won't make me mad, however, if it does happen and stock prices continue to go much higher. In fact the rally will keep running and we all will be Feeling Good.