Exactly four months ago, on October 19, 2009, the Price of the VectorVest Composite closed at $23.61 per share. Yesterday it closed at $23.64 per share. During this four month period it hit a low Price of $22.03 and a high Price of $24.45. How does one make money in a flat, herky-jerky market?

Last week I said one needs to "see through the market's daily gyrations and stay with the prevalent trend." I then described a method of doing this by using the Enhanced ProTrader Market Timing Graph, EPMTG, and the Daily Color Guard. We also gave a "Strategy of the Week," SOTW, presentation which illustrated the efficacy of the technique. We also used the technique in last Friday's Views to explain exactly what to do should the market move higher, as we expected, on Tuesday and we suggested five Strategies to use for your stock selections.

Indeed, the market did open higher on Tuesday, February 16, 2010, and the stocks in the Strategies we had suggested took off like birds. At the end of the day, QuickTest Portfolios of the top 10 stocks from each of the five suggested Strategies showed an average gain of 3.78% with 45 winners and five losers. As of 12:15PM, today, February 19, 2010, these same five Portfolios are showing an average gain of 6.21% for an annualized rate of return of over 300%. Fantastic!

So what are Derby Leaders and how does one find them? Derby Leaders are the five Strategies which are showing the highest cummulative percent gains from the day the Color Guard gives a Red or Green Light in the Price Column to the end of the current day. The Color Guard showed a Green Light in the Price column last Friday, February 12th, so we reported the five Strategies with the highest percent gains for that day. On Tuesday, February 16, 2010, we reported the five Strategies with highest total percent gains for the two day (Friday to Tuesday) period. On Wednesday, we reported the five Strategies showing the highest total percent gains for the three day (Friday to Wednesday) period, and so on.

These Strategies are extremely easy to find since we give them to you in the Strategy section of the Daily Color Guard Report shown on the Home Page of VectorVest U.S., and in the Views of both VectorVest U.S. and VectorVest RealTime. Subscribers to VectorVest RealTime who have the Derby Tool can also check them out during the day by using the Tote Board.

We call these Strategies Derby Leaders because we want to differentiate them from the Daily Derby Winners, i.e., the Strategies with the best single day gains. Daily Derby Winners are great to use for finding "hot poppers," but I like to find Strategies that are producing winners on a consistent basis, day after day. Logically, one would think that the Strategies that have performed the best from the onset of an upturn or downturn would be the ones which are consistently producing winners. So we have been illustrating methods of identifying these Strategies. For example, you may refer to the SOTW presentations of 10/09/09, 10/30/09, 11/06/09, 11/27/09 and 02/12/10 to see how this technique has developed.

The results shown in these SOTW presentations as well as those that you will see in this week's SOTW presentation should encourage you to bet your money on Derby Leaders.

HOW TO USE DERBY LEADERS WITH CONFIDENCE.
Mr. Todd Shaffer, Instructor and Product Support Consultant, will be giving a very special presentation this week which will show you how to use the Enhanced ProTrader Market Timing Graph and Color Guard to know exactly when to enter an upwave or downwave and use the Derby Leaders. So join Mr. Shaffer at the VectorVest University to see this week's extremely important "Strategy of the Week" presentation: "How to Use Derby Leaders with Confidence."

P.S. The techniques shown in this week's SOTW presentation are so good that we will be using them in our Daily Color Guard Report videos.

With triple digit up and down days becoming par for the course, the market has been herky-jerky lately, to say the least. So how can one survive these wild swings and still make some money? The best way I can think of, is to learn how to see through the market's daily gyrations and stay with its prevalent trend, the way to do this is to use the Enhanced ProTrader Market Timing Graph, EPMTG. I wrote about this graph on November 30, 2007 and an excellent "Strategy of the Week" presentation was given which showed what it is and how to use it.

Nowadays, we use the EPMTG regularly in our Daily Color Guard Report, but before I go too far, let me tell you more about the original ProTrader Market Timing Graph. It used three key indicators: A Detrended Price Oscillator, Envelopes and a 30-Day Weighted Moving Average. Many of our subscribers refer to it as the "DEW" system of Timing the Market. But make no mistake, the DEW system does not conflict with or replace our Standard Market Timing System. It serves as a compliment. All I did to create the EPMTG was to add the MACD to the DEW graph. The key to using it properly is to use the MACD crossovers to pinpoint meaningful changes in market direction.

To see the EPMTG, simply access the Standard Market Timing Graph; then click on ProTrader Graph in the box labeled Graph Type. (If you do not have ProTrader on your computer, you may visit our website, or click here, to sign up for a Free 2-week Trial). I usually set the graph up with a 3-month Period in order to clearly see the MACD crossovers. If you do this, you can easily see that the DEW indicators signaled the start of a rally on 12/11/09. The Color Guard flashed a green light on 12/14/09 and the day's "Five Best Performing Strategies," all Bullish, were listed. Which one would you have chosen to use?

According to the EPMTG, the rally lasted until 01/20/10, and the Color Guard coincidentally flashed a red light. The day's "Five Best Performing Strategies," all Bearish, were listed. Which one would you have chosen to use?

I observed an interesting phenomenon while preparing for this essay. The Total Gain column of the Totalizer, in the VectorVest RealTime Derby, showed a steady series of top performing Bullish Strategies, day after day, throughout the rally from 12/14/09 through 01/20/10. It did not flip-flop from Bullish to Bearish and back again according to the daily whims of the market. It also showed a steady series of top performing Bearish Strategies, day after day, throughout the downturn from 01/20/10 through to today. It did not flip-flop from Bearish to Bullish and back again even when the market rallied sharply.

What this tells me is that we should be able to use the EPMTG, the Color Guard and the Totalizer to see through the market's daily gyrations, stay with the prevailing trend and pick sure-fire, money making Strategies. What A Magnificent Combination.

P. S. From this time forward, we will report to you the Strategies with the best Total Gain as shown in the Totalizer from the onset of a new trend. We will call them Derby Leaders.

GOING TO THE BANK WITH DERBY LEADERS.
How well could you have done if you went long with one of the Derby Winners listed in the 12/14/09 Color Guard Report, and went short with one of the Derby Winners listed in the Color Guard Report of 01/20/10? Mr. Glenn Tompkins, Manager of Internal Training, has the answer. So visit the VectorVest University to see this week's very important "Strategy of the Week" presentation: "Going to the Bank with Derby Leaders."

Buried in the bowels of VectorVest Views is an extremely important, but mostly ignored, section called "The Investment Climate." The purpose of this section is to ascertain whether key economic factors are favorable or unfavorable for stock prices.

Since it is my belief that stock prices go up when inflation and interest rates go down and corporate earnings go up, we track and report two measures of inflation, three measures of interest rates and one measure of earnings. In addition, we track two independent measures of market direction and one measure of investment advisors' sentiment. Each of these data items are analyzed in terms of level and trend. All of the trend indicators are shown on a scale of 0.00 to 2.00, with values above 1.00 being favorable.

The big news last week was that the trend indicator for S&P 500 earnings rose to 1.01, meaning that S&P 500 earnings are in an uptrend. This analysis was called into question this week by a number of subscribers who observed that forecasted earnings, EPS, of the S&P 500, as shown on a summary graph of the S&P 500 WatchList, have been going lower since January 5, 2010. While this observation is true, it does not amount to a trend analysis for several reasons. First of all, we use smoothed data as shown by a 50-day moving average of EPS. Secondly, we analyze the entire one year data set, not just the last few weeks. Thirdly, we base our conclusion of trend on what our trend indicator tells us.

This information is shown graphically on our Market Climate Graph. The upper portion of the graph shows the weekly EPS as reflected by the 50-day MA and the lower portion shows the value of the Trend Indicator for each corresponding week. Note that the Trend Indicator fell below 1.00 on February 15, 2008. You may say that was way too late, the Bear market was called in my essay of November 2, 2007. Maybe so, but the EPS Trend Indicator allowed us to see the Bear market coming well before it happened, and I wrote about it many times.

Now the EPS Trend Indicator is above 1.00 and it says that better days are ahead for stock prices. The question is, "Will it continue to rise and stay above 1.00?" The current drawdown of S&P 500 forecasted earnings is not a good sign, but I do see that the rate of decent is lessening. I'm hopeful, if not confident, that S&P 500 EPS will begin rising again soon. This is vitally important, because it will ultimately determine the direction of stock prices.

Attendees, here at the Orlando World MoneyShow, are very concerned about the economy and I have received many questions about inflation and interest rates. They are shocked when I tell them that the Inflation Genie is out of the bottle and interest rates are rising even though Fed Chairman, Ben Bernanke, has not yet raised interest rates. With earnings, inflation and interest rates rising, we are now in a Case 4, Bull Market Scenario, climbing the classic "Wall of Worry." While you won't see it on CNBC, you can read all about it in The Investment Climate Report.

P.S. For more information on Stock Market Scenarios, read my essay of March 28, 2003.

BUYING NON-LEVERAGED CONTRA ETFS.
After a big down day like yesterday, you may want to play the market to the downside, but you may not want to increase the volatility of your portfolio un-necessarily. See how you can have your cake and eat it too by joining Ms. Angel Clark, Research Strategist, at the VectorVest University to see this week's very timely presentation: "Buying Non-Leveraged Contra ETFs."