What will the market do in 2010? Nobody knows for sure, but I'm pleased to say that although analysts are mostly bullish, their forecasts are tempered by a healthy dose of skepticism. This is a good sign since advisor sentiment is a contrary indicator.

The Investors Intelligence Percent Bullish Advisors Sentiment Indicator, shown in the Climate section of these Views, is at 51.1%. It peaked at 62.0% when the Mighty Dow hit its all-time high on 10/19/07, and it bottomed at 21.3% on 10/31/08, two weeks after I wrote an essay entitled, "Time to Buy." Given today's mid-range reading of 51.1%, I think there's still room for this market to move higher. But stock selection will be the key to making money.

In this regard, I want to further develop some of the ideas we have been exploring for stock selection and position entry. In particular, I like the idea of buying selected stocks when they have gone above the previous day's high. We demonstrated how this technique helps you pick winners and avoid losers in the "Strategy of the Week" presentations of 11/27/09 and 12/18/09. We even went so far in last week's SOTW presentation as to illustrate how the Buy-Stop-Limit order works for those of you who cannot watch the market during the day.

I liked this technique enough to consider using it to manage our Model Portfolios in 2010, but before deciding to do that, I did some additional testing. I ran some tests in which I combined the Green Light Buyer idea with the Daily Double idea using top VST stocks. Mr. Paul McCann, one of our whiz-bang developers, created a neat little search for me that looks at the top five VST stocks and finds those that went at least 1% above the previous day's high. I call it "Higher Ups" and we put it into the Strategies - Price-Volume Group of the UniSearch tool.

In a typical test, I ran a 10 stock portfolio in which I ran the search only when the Color Guard showed a green light in the Price column to buy stocks as needed the next day, and sold stocks that received 'S' Recs on three consecutive days. From 03/17/09 to 10/19/09, this portfolio was up 99.22%, but it took a hard hit over the next 10 days, down to 42.20%. Nevertheless, it ended the year up 67.88%. Not bad for such a simple strategy.

There are a lot of variations to this system and I plan to try some of them out. So beginning Monday, January 4, 2010, we'll be using them in managing our Model Portfolios of which there will be four: The Yellow Brick Road, Riding-the-Wave, Premier Growth Stocks and High Income Stocks.

This means that while we will continue to buy rising stocks in rising markets, we will no longer be using the 1% rule to enter the market. It's a good rule, but it misses too many good buying opportunities. Moreover, we will no longer feel obligated to buy baskets of stocks. We will be using selected Strategies to buy a few selected stocks, i.e., 1 to 3 at a time, that have risen at least 1% above their previous day's high.

My goal is to help you learn an end-of-day stock selection and portfolio management system that will be easy to do and consistently generate profits. That's what I want to accomplish in The Year Ahead.

THE MIDAS TOUCH.
If you've seen one TV commercial exhorting you to buy gold, I'll bet you've seen a hundred of them. I'll also bet you know that the price of gold has been on a multi-year tear and is projected to go much, much higher. But you also know that gold prices are very volatile and you have to know when to get in and when to get out. So how should you play this trade? Ms. Angel Clark, Research Strategist, knows and she's going to show you some of her innermost secrets on how to go for the gold. So join Ms. Clark at the VectorVest University to see this week's esoteric "Strategy of the Week" presentation: "The Midas Touch."

Last week's essay and "Strategy of the Week" presentation unleashed a flood of phone calls. Customers were asking questions ranging from the concept's versatility to exactly how to place the trades.

As a reminder, the concept we're talking about is that of placing successful trades before the market opens. The technique involves three basic steps, stock selection, order preparation and order placement. Here's how it's done:

STOCK SELECTION.
1. You should consider buying stocks only when the Primary Wave is Up, and preferably when a green light is showing in the Price column of the Color Guard. All of this information is on your home page.

2. The technique, i.e., buying rising stocks in rising markets, works with all kinds of stocks. Therefore, you should select stocks that are consistent with your investment style. See Chapter 11 of "Stocks, Strategies & Common Sense." If nothing else, you can buy high VST 'B' rated stocks whenever the Color Guard says it's OK to buy stocks. Regardless of what Strategy you use to find your stocks, I suggest that you always study the stock graphs and favor the stocks with smooth, rising Price patterns.

3. Once you have identified some stocks you would like to buy, it's time to prepare your order.

ORDER PREPARATION.
1. The whole idea is to place your order in such a way that you know the stock's price is rising when you buy it. The Buy-Stop-Limit is designed to do this for you. In last week's essay I suggested that you place your order to buy when the price of the stock has gone a small amount above the prior day's High. For low-priced stocks, this could be as little as a penny. For higher priced stocks, it's typically 1/8 of a point or more.

2. The Buy-Stop-Limit Order instructs the broker to enter a Buy Limit order when your Buy trigger price is hit. This order has two parts: the Buy price and the Limit price. When a trade has occurred at or through the Buy price, the order becomes executable and enters the market as a Limit order at the Limit price.

3. Once the Buy-Stop-Limit order has been prepared, you should prepare a "One-Triggers-Other," OTO, order to exit the trade. This order will execute a specified exit trade when a specified price is hit. This price can be higher than your purchase price to capture a gain or lower than your purchase price to protect a profit, depending upon how you want to play the game. Typically, I prefer to let my profits run and use a Trailing Stop in the order of 5% to 10% to protect profits.

ORDER PLACEMENT.
1. As a final precaution, always check the Stock Futures, if you can, before placing a pre-market order. The closer you are to the market's Open, the better you can judge the market's likely direction. A lot of game changing news comes out at 8:30 AM, so wait until after that news comes out before placing your trades if you can. If the Futures markets are up, go ahead and place your orders. If the Futures are down, wait for another day.

Consider the following example: Let's suppose it is 10:00 PM last night and the Color Guard is "somewhat Bullish" with two green lights and an UpUp situation. You're tired and feeling lazy, so simply click on Stock Viewer. Immediately, you can see that Medifast, MED, is the top VST ranked stock once again. The graph makes you wonder why you didn't buy it months ago. So you finally decide to give it a try. It closed at $33.84 per share and hit a High of $33.89. So now it's time to prepare your Buy-Stop-Limit order. Enter your Buy trigger price as $34.14, ($33.89 plus 0.250 = $34.14 per share). Set the Limit Price at $34.27, ($34.14 plus 0.125 = $34.265); then prepare an OTO with a 10% Trailing Stop.

Medifast opened at $34.30 today and traded as low as $34.21 and as high as $34.49 in the first minute of trading with a volume of 46,978 shares. Theoretically, the trade should have gone through and I would have purchased 100 shares of MED at $34.27 per share, but I don't think it would have happened. So I learned that I could miss a trade by the price not going high enough or by the price going too high too fast. In either case, I'll take what I can get within my specified price range.

You may have observed that many of the methods used in this technique, such as buying rising stocks in rising markets, are similar to what we do in Riding-the-Wave, but there are significant differences. Most of all, this technique is far more flexible than the strict rules we've created for Riding-the-Wave. This technique does not entail buying a basket of stocks and it doesn't depend upon the Major Indexes to perform in a certain way to signal a time to buy. It is a single stock system and simply depends upon the performance of the stock in question. I like it and I'm looking forward to Executing the Daily Double.

EXECUTING THE DAILY DOUBLE.
We are fortunate this evening to have Mr. Steve Chappell, Director of Educational Services, show us how to do all the things cited above. So join Steve at the VectorVest University to see this week's "Strategy of the Week" presentation: "Executing the Daily Double."

The daily double is a term used in racing circles when betting on more than one winner. Originally, it was defined as picking the winner of two consecutive races. Because picking two straight winners is so difficult, many tracks pre-designate non-consecutive races for a particular day, but the payoffs are still very high.

Well, I don't go to the track very much anymore, but I sure would like to pick more than one winning stock a day and I like big winners. I also like to watch the market open with the VectorVest RealTime Derby Tool. For me, it's exciting to see which strategies are breaking out of the gate and I like to place bets as the day goes on. Thrilling as it is, my goal is not only to have fun, but to make money, lots of money. And I want you to do the same.

I know that most of you have jobs and don't use VectorVest RealTime. So we began reporting the top five best performing strategies each day as determined by the RealTime Derby. We were hoping it would help you hone in on finding hot stocks that were off to the races, so to speak. In this regard, we presented a Strategy of the Week, SOTW, on October 9th which used Derby winners to find winning stocks. We called it "Winning with Weekly Winners." On October 30th, we provided another SOTW presentation which utilized the "Tote Board" to find the "Best Performing Strategies" over any time period of your choice. Then two more SOTW presentations based upon utilizing Derby results were given on 11/06/09 and 11/27/09.

The SOTW presentation of 11/27/09 was particularly interesting to me because it involved "Cherry Picking" and it used a neat technique for dramatically improving the odds of picking winners. The technique is very simple. You buy a stock long only when its price goes above the previous day's High. For low-priced stocks, this trigger could be as little as a penny, and the beauty of this technique is that it can be set-up at night and placed before the market opens.

Here's how it works: Let's suppose the market had an up day and the Daily Color Guard Report said it was OK to buy stocks. All you need to do is read or watch the Color Guard Report, note the top performing Strategy, access it in the UniSearch Tool and run it. Study the graphs of the top 10 stocks that are returned and do some cherry-picking. I prefer to bet on stocks that have relatively smooth rising price patterns. Select two to four stocks you like and set-up your orders to buy, good for the day, if the price goes a small amount above the High of the previous day. If your Broker allows it, set-up your order so that any buys that are triggered would trigger another order to place a Trailing Stop of, say 5%. It is also advisable, but not necessary, to check the Futures activity before entering your orders. You're chances of making money are better if you buy in a rising market.

So how well might this system work? I went back and tested this process from last Friday night through yesterday's Close. Of the forty stocks returned, 18 would have triggered buy orders with 14 winners and 4 losers. Some of the winners, such as ROIAK found on 12/11/09, look real good. What is most impressive to me is that 22 of the stocks were not triggered. Some of those bad boys could have caused a lot of pain in your portfolio.

There are a lot of things I like about this system. First of all, I can do my homework at night. Second, I don't have to guess when to buy or which Strategies to use. Third, I enjoy cherry-picking stocks. Fourth, I don't have to worry about getting crushed if the market goes against me. Fifth, I could get used to coming home from work and finding I hit some big winners.

If you want to see how easy this is to do, join Mr. Dan Misch, Product Consultant and Instructor, at the VectorVest University to see this week's wonderful "Strategy of the Week" presentation: "The Daily Double."

I've been getting a lot of email lately, complaining that our Market Timing System needs to be fixed. I can understand why someone would say that because the market's behavior this year has been, "a riddle wrapped in a mystery inside an enigma." (Apologies to Prime Minister Churchill.)

Yes, we've had three Confirmed signal reversals so far this year, the most ever, and we are still in the midst of an incredible string of seven two-week trend reversals. We have never seen anything like this before. Moreover, the Color Guard has produced a virtual kaleidoscope of red, yellow and green lights and the Primary Wave has been Up and Dn like a yo-yo. What's going on?

We track the market on a day-to-day and week-to-week basis using the Price of the VectorVest Composite as our primary indicator. It is an arithmetic index of all of the stocks in our database, which I believe is better than anything else out there. For example, the Price of the V V C increased by only $0.047 per share yesterday, a change of 0.2%. Yet the headlines, based upon the DJI and SPX, reported that the market was strong...the DJI went up 0.67% and the SPX was up 0.58%. They also misrepresented the overall market's performance by reporting that the number of advancing stocks on the NYSE far exceeded the number of declining stocks.

In last night's Daily Color Guard Report, Mr. Shaffer showed that the number of advancing stocks, 3,456, in our database was only slightly higher than the number of declining stocks, 3,417. Mr. Shaffer also illustrated the sensitivity of the Price of the V V C by noting that the Primary Wave changed yesterday from Dn to Up on the strength of a $0.005 per share week-over-week change in the Price of the V V C. If you listen to the talking heads on TV, you'd think the market is soaring higher and higher, but the Price of the V V C closed yesterday only $0.04 per share higher than it did on 11/09/09. The high since 11/09/09 was $23.45 and the low was $22.83 for a range of $0.62, or about 3%. Now that's a flat market if I ever saw one.

When the market is as flat as it has been recently, small but erratic changes in the Price of the V V C can cause numerous and seemingly inconsistent color changes in the Color Guard, which cause confusion if one does not look at the Market Timing Graph. Even better, it pays to watch the video of the Daily Color Guard Report for a complete analysis of the market's action.

Last night, Mr. Shaffer also pointed out that the percentages of both the Buys and Sells had gone up for the last three days. He then explained that this type of rotation is what we call "Focusing." I've seen this happen before and wrote about it in my essay of 12/10/99. In observing that incredible rally, I said "money is focusing on high-fliers when the percentage of Buys and Sells are both going up. The BSR is telling us that we have a highly selective, momentum driven market...a dangerous market. This may not be what you want to hear, but it's an important part of Understanding the BSR."

If you understand our Market Timing System, you'll see that it accurately reflects what the market is doing. It doesn't predict the market, but it provides timely analysis and Valuable Insight.

PROFITING IN A FLAT MARKET.
Yes, you can make money in a flat market. No, it doesn't require sleight of hand and it's not all that hard to do. Mr. Todd Shaffer, Product Consultant and Instructor, will show us several ways of achieving this nearly magical feat. So visit the VectorVest University to see this week's nifty "Strategy of the Week" presentation: "Profiting in a Flat Market."

PREMIER GROWTH STOCKS.
Last week I said I was going to start a Premier Growth Stock Portfolio, but didn't say when. Well, I plan to do it around the beginning of next year. I've been working on ways of coping with extended, severe downturns and still have some work to do. I have several options in mind, but I'm hoping that Santa will put the answer in my Christmas stocking.